Fraud, waste found in Haywood DOT operation
Numerous problems within the N.C. Department of Transportation operations in Haywood County were uncovered in a state audit that stemmed from observant taxpayers speaking out in December 2010.
The N.C. Office of State Auditor investigated allegations within the Division 14, which encompasses Haywood County, concerning conflicts of interest, preferential treatment for contractors, inappropriate and excessive equipment purchases and excessive overtime.
The allegations were reported in The Mountaineer shortly after an anonymous letter surfaced naming five DOT employees, along with two local contractors, as being part of mismanagement and fraudulent activities.
There was an internal investigation within the department, the State Bureau of Investigation was called in, and the State Auditor’s Hotline received a call, as well.
The state auditor’s report made public late last week concluded the District 2 engineer (a position covering Haywood, Jackson and Swain counties) authorized the use of fully operated rental equipment for a road projects in the Wild Acres subdivision in Maggie Valley.
The project was originally funded at $1.8 million, but there was a $3.7 million cost overrun during an eight-month period.
The Haywood County Maintenance Department did not follow DOT policies and procedures for rental equipment contracts, the report noted. Equipment was improperly added to purchase orders and contractor invoices were not properly approved prior to payment.
Between 2008-10, about $8.5 million was paid to Caroline-A-Contracting for rental equipment contracts. The next highest-paid vendor was WNC Paving, which was paid about $1 million for rental equipment, J Owen Trucking received just under $1 million, and three other contractors, WNC White Corporation, James Lowe Inc. and Phillips and Jordan were paid less than half a million. During the same time period, a total of 44 other vendors were paid about $4 million by DOT for contract equipment rental.
Several of the findings focused on the Haywood County maintenance engineer, who has since transferred to another location, for failing “to detect unauthorized and wasteful spending.” In addition to delegating approval authority for purchase card transactions to the office assistant, he told employees to make purchases they need, and if they didn’t he bought items for them.
“I try to help them out,” the report said. “I’m kind-hearted and … some people view me as Santa Claus.” He told investigators all the items were used for DOT purposes, but if he could do it over again, he wouldn't have purchased or allowed the purchase of as many items.
The report found three employees were doing most of the purchasing. Some of the items charged to DOT included 14 flashlights costing between $177 and $184, 18 cordless drills, wrenches and screwdrivers ranging in price from $159 to $555; eight battery booster packs costing between $219 and $279. An anonymous complaint letter, and an internal review led to most purchase cards being revoked in Haywood County. It was found some of the tools purchased had never been used and some hadn’t even been removed from the box.
Many tools were purchased from a truck vendor who wasn’t part of the state purchasing contract. If the $47,354 in tool purchases between July 2009 and December 2010 had been made from an approved vendor, a 35 percent discount would have applied, thus saving $16,574, the report said.
The county maintenance engineer and two transportation workers were unable to account for nearly $2,000 purchased from the tool truck vendor. One said the items were taken during a summer break-in at the maintenance yard, but the initial incident report filed with the sheriff’s office didn’t list the missing items as stolen. After state inquires and more than a year after the theft, a second incident report was filed that listed the unaccounted for items.
The Division 14 contract proposal engineer was the sole coordinator for selecting rental equipment contracts, and this engineer had a second job with the predominant rental equipment contractor.
“This conflict of interest seriously diminished the integrity of the division’s contracting process,” the report stated.
Two employees in Haywood County maintenance department were the only hourly workers who routinely received overtime payments. Between Jan. 1, 2008 and Dec. 31, 2010, the two employees reported 26 percent more working hours than the other county maintenance department employees. Their overtime payments totaled $107,000, which represented nearly half of their compensation. In addition, the county maintenance engineer was a first cousin to a transportation worker and approved the worker’s timesheets and purchases.
In a response to the audit findings, DOT Transportation Secretary Eugene Conti concurred with many of the findings and indicated appropriate followup actions would be taken, including possible disciplinary measures. Conti further stated while the rental equipment policy wasn’t followed, part of the project’s multi-million dollar cost overrun was due to unique construction conditions, as well.
Click here to see full audit report.