State Auditor Hector Balderas
A former N.M. Corrections Department official is already under indictment for taking bribes from one company; now, a newly released audit indicates that the problems extend beyond that company.
State Auditor Hector Balderas released the audit today that finds issues with the department’s relationships with three contractors – Advantage Asphalt Seal and Coating, HEI Inc., and Omni Development Corporation, the company at the heart of the pending federal bribery case against former Corrections Facilities Manager Laurie Chapman.
Advantage Asphalt, according to The Santa Fe New Mexican, has also been at the center of a road-paving controversy in Santa Fe County that is the subject of its own pending criminal investigation.
In the situation with the Corrections Department, which involves problems that occurred during the administration of former Gov. Bill Richardson, Balderas said the Corrections Department’s lack of procurement protections created a “high-risk environment for abusive overbilling and preferential treatment towards certain vendors.”
“During this fiscal crisis, I am appalled that New Mexico’s taxpayers were victimized and that adequate protections did not exist to prevent these abuses from occurring,” Balderas said in a news release.
At the same time, he praised Corrections Department officials for reporting the issues when they became aware of them and for working with his office during the audit.
You can read the full audit here.
The findings
More details, from the news release:
“The special audit found that certain contractors overbilled NMCD and misrepresented the actual costs of certain construction projects. Additionally, the special audit revealed that certain vendors appeared to receive preferential treatment during NMCD’s procurement of certain projects for its facilities. Overall, the special audit found that NMCD’s oversight controls related to its transactions with Omni, Advantage Asphalt and HEI were ineffective or completely nonexistent.”
Among the findings, which looked at $9.5 million in payments to the three companies between 2007 and 2010, according to the release:
• “NMCD paid at least $3.7 million in unsupported costs to the three contractors. For these payments, auditors found that the invoices were not descriptive enough to determine what goods and services NMCD received, or that the contract did not allow NMCD to pay for the goods and services. These payments include:
– “$1,294,458 in unsupported costs to Omni, including $860,619 in payments for materials costs even though materials costs were not included in the price agreement, and payments of $190,000 for ‘contingencies’ without any support that detailed what constituted the contingencies; and
– “Approximately $2 million in payments to HEI where the invoices were not descriptive enough to identify the goods or services provided to NMCD, including $1,331,406 in payments to HEI under one price agreement for equipment purchases that appeared to be unallowed by the price agreement’s terms;
– “Advantage Asphalt overbilled NMCD $48,000 for one project. Advantage Asphalt notified NMCD’s former Facilities Manager of the overbilling, but there is no record that NMCD was repaid for the overbilling;
• “NMCD made payments totaling $193,970 to HEI for certain goods and services, but auditors found no evidence that NMCD inspected the goods and services prior to making payment;
• “HEI charged NMCD $10,036.85 for services and indicated on the invoice that the services occurred on August 12, 2008, but auditors found that HEI’s own records show that HEI performed the work on September 14, 2008 and January 25, 2009 and only incurred labor costs of $532.28 for the services. HEI did not provide auditors any records that supported the remaining charges invoiced to NMCD;
• “The New Mexico General Services Department violated record retention requirements by destroying a premise price agreement and HEI’s response to the RFP for the agreement; and
• “HEI subcontracted work under one price agreement without NMCD’s approval, which was required by the price agreement.”
In the case of Omni, Chapman is facing 30 felony counts alleging that, between February 2007 and August 2009, she solicited and accepted $237,080 in bribes in exchange for the company getting $4 million in construction and maintenance jobs at Corrections Department facilities.
Whether the U.S. attorney and FBI are still investigating or plan to take action related to the other companies isn’t clear.
Working together
Gov. Susana Martinez released a statement pointing to her May 20 executive order that disallows government contracting with companies involved in illegal activity, and a second that establishes a task force that will recommend changes to the procurement process. She said she’s asked Balderas to present the audit’s findings to the task force.
“Working together, we have an important opportunity to learn from the mistakes made in the past to continue our collective efforts to restore confidence and accountability in state government,” Martinez said.
Balderas also talked about working together.
“I will recommend additional audits of other state agencies that focus on the risk areas identified by the special audit,” he said. “I look forward to working with the governor to protect public assets and pursue recovery of public funds.”