Modesto officials have found 11 instances in which the city has spent more for goods and services than what the contracts had authorized.
Acting Finance Director DeAnna Christensen revealed this at Tuesday’s council meeting as the council approved correcting one of these problems and as the city works to fix lax oversight in the Finance Department and its purchasing division regarding how the city administers contracts.
Christensen said city officials found these problems during a review of the 80 contracts in its financial system for goods and services. (She initially told council members there were 10 instances but revised the number to 11 in an interview after the meeting.)
Officials reviewed contracts in which at least $50,000 had been spent. That level of spending requires council approval. Christensen called these annual contracts and said they typically are for five years. This is part of a bigger review of city contracts that is expected to be concluded by the end of the year. The city will make the review and its findings public.
Ken Masasso — who worked for Modesto as a senior buyer for 14 years before leaving in March 2016 for another job — told The Bee that on some occasions he increased the amounts of contracts or extended them without authorization. “There was no fraud on my part,” he said. “It was just to have the services continued and the invoices paid.”
He said he did this because departments were using the goods and services at a faster rate than spelled out in the contracts and to get more time to issue new contracts. He described a hectic work environment and said he made these decisions on his own. “For me,” he said, “it was the volume of the work. It was hard to stay on top of all that work. The volume was extremely difficult to manage.”
The purchasing division has been short staffed. The city hired a purchasing manager in September to replace the one who left in February 2016 for another job. It has a staff of three, down from four after the council eliminated a position in last year’s budget. Two temporary workers are helping purchasing get caught up on its work.
While Christensen said there were 11 instances in which the city paid more than what the contracts had authorized, interim City Manager Joe Lopez said the city is not yet ready to release details about this overspending.
The problem addressed Tuesday was for a contract for generating, printing and mailing city utility bills, business licenses and other city business. The council in September 2011 approved paying Modesto-based ABS Direct $146,270 annually over five years for this service, for a total of $731,350.
But Modesto continued to use ABS Direct after the contract ended in September 2016 and did not seek council approval to extend it. Modesto has paid the company $113,554 in the year since the contract expired and owes the company an additional $7,262 for work it has done but not been paid for.
The council approved extending the contract through Feb. 28, 2018, until a new contract is in place and paying ABS Direct what it is owed. It also retroactively approved the $113,554 in spending.
Pamela Bizzini — one of the owners of ABS Direct — told council members her company did speak with the city as the contract was ending and the city was working on a new one. She said ABS Direct has produced the city’s utility bills for more than 20 years, has worked hard on behalf of the city, and wanted to ensure the public that ABS Direct did not in any way take advantage of the city.
City officials revealed about a month ago that there were problems with its contract administration when they reported Modesto had paid three contractors $9 million for asphalt patch work to streets, though the council had authorized $6.8 million worth of work.
Christensen said Modesto is putting safeguards in place to prevent problems from happening again. For instance, she said, the city now is entering electronic copies of council resolutions and contracts into its financial system to make it easier to verify that the amounts and terms entered by employees match the resolutions and contracts.
Kevin Valine: 209-578-2316