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October 4, 2007

DiNapoli: Inadequate Oversight and Lack of Bids
More Than Doubled Dresden Sewer Project Costs

Audit Recommends Corrective Action for Town Officials

Cost overruns amounting to more than twice the original estimate on a town of Dresden sewer construction project could have been avoided if Dresden town officials had done a better job advertising for construction bids or tracking project expenses, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“There’s a reason why laws were put into place requiring competitive bids, and why good, sound bookkeeping is important: so public officials can contain and track costs,” said DiNapoli. “Local governments are being forced to do more with less. The need for strict accountability has never been more important.”

In 2002, Dresden town board members authorized the establishment of the Frederick’s Point Sewer District #2, estimating the cost to be about $362,000. However, the project is now expected to cost more than $800,000 when it’s completed, largely because town officials did not properly plan and manage the project, auditors found.

Town officials did not foster competition for the project and they didn’t do enough to encourage potential contractors to submit bids. For example, in 2003 they placed a fine-print legal notice for only one day in a local publication, giving prospective bidders less than two weeks to review the bid specifications and submit a bid for board consideration. Moreover, the ad did not indicate the scope of the work required. As a consequence, the town received only one bid for $630,600, more than double the original cost estimate. Rather than re-advertise for bids, town officials negotiated with the contractor to do only a portion of the project.

In 2005, the town advertised for contracts to complete the rest of the project. And, while the winning $306,000 bid was within $2,000 of the engineer’s estimate of project costs, the contractor submitted a nearly $42,000 change order – for which he was paid without board approval.

Auditors also found that:

  • Contrary to town policy, board members failed to issue requests for proposals for legal and engineering services. They originally estimated that engineering services would cost $37,410 and legal services, about $5,000. Ultimately, the town spent $75,000 and $36,000 for these services – and without the benefit of a contract;
  • Town officials failed to keep adequate accounting records, which resulted in their failure to record $18,000 in project expenditures;
  • The supervisor did not provide the board with monthly capital budget progress reports. If they had the information, they might have been able to control project costs; and
  • For the majority of $720,220 in capital expenditures, records were unavailable, missing or did not include necessary paperwork to prove that expenses were legitimate.

To avoid these kinds of expensive missteps in the future, DiNapoli recommended that the board:

  • Ensure that bids for future projects are properly advertised;
  • Require officials to maintain complete and accurate project records;
  • Ensure that officials and employees comply with the town’s professional service procurement policy;
  • Establish effective oversight to ensure capital projects are property planned, monitored and accounted for;
  • Ensure that accounting records are properly maintained in an effort to contain expenses; and
  • Conduct a thorough audit of bills submitted to the town as required by law.

Town Supervisor Robert S. Banks indicated officials generally agreed with DiNapoli’s recommendations, and that they would take corrective action. The town’s full response is included in the audit report.

Click here for a copy of the audit or visit.



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