A former Roseville Electric supervisor allegedly handed out inflated city contracts to poorly qualified family and friends, according to interviews and documents obtained by The Press Tribune.

The fiscal impact, an outside auditor’s report found, amounted to “less than $400,000,” and the employee involved was fired when the suspected improprieties were discovered in 2006.

But officials said they aren’t sure exactly how much money was involved because the transactions were complex.

And a probe completed after the discovery found significant problems with the way the city paid vendors across multiple departments. In some cases, staffers failed to obtain written contracts for projects. In others, supervisors weren’t verifying whether work that was paid for was ever completed.

 ‘Limited qualifications’

It’s unclear exactly how long the suspected improprieties were ongoing, though officials said it was likely several years. The activity went unnoticed until an anonymous tipster told employees, said Russ Branson, the city’s finance director since 2000.

An internal investigation found evidence that the supervisor at the city-owned electric company had given contracts to family members and friends who were performing substandard work, Branson said. He declined to release the supervisor’s name, citing personnel privacy laws.

“We strive to have proper processes for everything,” Branson said. “This is an exception to the rule that someone was trying to exploit.”

Maze & Company, the city’s auditing firm, wrote in a memo on the city's internal controls that year that the employee was suspected of “charges in excess of the market cost for certain vendor services and the use of vendors with limited qualifications.”

Those allegations appear to violate the city’s municipal code, which requires major city purchases to be made from lowest-cost providers that meet minimum standards.

But the city did not receive restitution. While the Roseville Police Department was asked to investigate, Branson said detectives found no evidence that the activity rose to criminal wrongdoing and no charges were filed.

“It’s not that people were given money for nothing, but the quality of their work wasn’t very good,” Branson said.

Lax oversight cited

In response to the incident, the city commissioned a full probe from Maze and Associates to determine where breakdowns in controls occurred, according to city documents. The resulting report, obtained though a Public Records Act request, detailed shortcomings in payment and purchasing processes in many departments, including:

• In Central Services, some employees said they hired vendors without first getting written contracts – a weakness that could have led to overcharges.

• In the Purchasing Department, some staffers were not verifying whether all vendors had a business license even though the city requires one.

•  In the same department, some payment requests were “misused” in order to avoid council approval.

• In the Electric, Environmental Utilities, Fire, and IT departments, individuals were able to choose vendors, request service agreements and approve invoices without getting another employee to sign off.

•  And in at least two departments, invoices were approved without verifying services were ever completed or materials delivered.

For instance, even though city policy stated that all Electric Department invoices must be reviewed by a project manager as well as a higher-ranking department official, the audit found that “there have been instances where Purchasing has approved invoices for the Electric Department without verifying with even the Project Manager that the service has been received.”

“The procedures being maintained by the City of Roseville with regard to purchasing have not all been formally adopted by the City nor do they appear to be adequate,” auditors wrote in a summary.

‘Shortcuts’ and tightening controls

Though the probe turned up failings in the city’s purchasing process, Branson said it was not widespread and no other instances of suspected improprieties were found.

He said part of the reason for the failings might have been the amount of work staffers were being asked to do during the boom years.

“My impression was that shortcuts were being taken to get things done because a ton of growth was going on,” he said.

Officials said they acted to repair the procedures immediately.

For instance, all payments now require two signatures, Branson said, and payment requests must go through either the Purchasing or Accounts Payable departments.

“We really take seriously how we treat the public’s money, whether it be the tax money or user charges,” Branson said. “And so this is a very upsetting event to us.”

Taxpayers feel ‘violated’

That’s not good enough, one taxpayer advocate said.

Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association, said local governments need to set an example that they are being good stewards of the public’s money – especially during a recession.

He said that means going aggressively after those suspected of wrongdoing, whether it be through criminal or civil channels.

“You can’t watch everything, so one of the ways you get an honest work force is to let people know that there are severe punishments,” he said. “If all an official thinks is that they’re going to at worst lose their jobs if they’re intentionally misusing or stealing taxpayers’ money, that may be an encouragement.

“When people see this kind of frivolous misuse of taxpayer dollars, they feel violated, because it’s their money,” he said.