Contracting problems plague General Land Office, state auditor says

The General Land Office made big mistakes in how it handled nearly $6 million in contracts over the last few years, such as failing to address conflicts of interest, using untrained contract managers, throwing away invoices and vastly underestimating project costs, according to a report released Tuesday by the State Auditor’s Office.

The 45-page audit details “significant weaknesses” in three contracts ranging from $1 million to $2.8 million between 2010 and 2015. Managers overseeing those contracts — which were for technology, environmental and audit services — failed to carefully scrutinize the agency’s needs before entering into deals, which might have saved the state hundreds of thousands of dollars, according to the audit.

In one case, the land office didn’t consider how much it would cost to hire full-time employees to audit oil and gas royalties instead of using contractors. The State Auditor’s Office estimates that hiring four state employees for the work would have cost $426,000 — far less than the $1,028,000 contract it now has with Grant Thornton.

All three contracts were signed during former Land Commissioner Jerry Patterson’s tenure.

Since taking office in January, Commissioner George P. Bush has created a compliance and ethics division, has required all contract managers to complete the comptroller’s contract management training and is updating the agency’s contracting processes to comply with new safeguards recently adopted by the Legislature, spokesman Bryan Preston said.

The changes have “already addressed a number of the findings, and he will ensure that the recommendations highlighted in the audit are fully adopted,” Preston said.

State Sen. Jane Nelson — the Flower Mound Republican who authored the legislation calling for more stringent oversight and tougher contracting requirements — praised Bush’s work on the issue and said legislators will be closely monitoring compliance with the new law.

“Sound contracting practices are essential to delivering state services efficiently and in accordance with the highest ethical standards,” she said.

The auditor’s review is the latest report to spotlight significant state contracting flaws. The most high-profile of those deals in recent months was the Health and Human Services Commission’s questionable handling of multimillion-dollar no-bid deals with Austin tech company 21CT to detect Medicaid fraud, which spurred the legislative reforms. Those deals were uncovered by the American-Statesman late last year. Four top officials in the health agency have since resigned.

Also, in December, the state auditor released a report saying a $105 million Health and Human Services contract with AT&T Global Services was so badly managed that the state didn’t even didn’t know how much money it had paid the company. A few months later, another audit found that efforts to privatize Terrell State Hospital had been rushed, broke contracting rules and failed to prove it was a good deal for taxpayers.

The General Land Office audit echoes some of the same types of problems as in those previous cases: poor project planning, weak contracting processes and faulty documentation. The agency didn’t keep all of its invoices and other documentation, the report states. Officials incorrectly paid one company more than $15,000 in unallowable travel costs.

Meanwhile, the former director of financial subsidiary operations steered a contract to two former land office employees, one of whom she owed money to. Even though the office had received a complaint about the conflict of interest, officials allowed the woman to continue working on the contract for several more months.

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