KARE 11 Investigates: Antiquated purchasing system blamed for overbilling

KARE 11 Investigates: Antiquated purchasing system blamed for overbilling

MINNEAPOLIS - Months before a KARE 11 investigation exposed how Minnesota taxpayers were being double-billed by hundreds of thousands of dollars for police cars, officials had warned lawmakers about weaknesses in the state’s purchasing system that allowed some overcharges to go undetected.

Despite the warning, the Minnesota Legislature has so far failed to approve additional funding for requested upgrades.

Police car double-billing

In April, KARE 11 reported that a Fergus Falls auto dealership which held the state contract for specially-equipped police SUV’s had repeatedly double-billed local police and sheriff departments across the state over the course of several years.

RELATED LINK: KARE 11 Investigates: Double-billing the badge

Officials at Nelson Auto Center said they launched an internal audit and had identified nearly three-quarters of a million dollars in possible overcharges.  Owner Brent Nelson said the dealership "terminated" the manager in charge of the administering the contract and would be offering refunds.

Meanwhile, state officials launched an ongoing criminal investigation.  The Legislative Auditor has also begun an inquiry.

But records show that the head of the agency in charge of overseeing state contracts had been sounding the alarm about Minnesota's antiquated purchasing system months earlier, saying it lacked checks and balances.

Outdated system

Minnesota Department of Administration Commissioner Matt Massman described major gaps in the state's ability to oversee contracts when he testified before the House Budget Committee in March.

"We essentially can't always verify that we are always getting the low price," Massman told lawmakers, according to an audio recording of the hearing reviewed by KARE 11.

"There's no check or balances in the system to make sure you're actually getting the negotiated low price," Massman said.

That warning proved to be all too true when KARE 11's investigation revealed that local police agencies purchasing vehicles through the master state contract had been double-billed since 2013 on features such as spotlights on squad cars.

Those items were supposed to be included in the base price of the contract.  But when KARE 11 reviewed the SUV purchases of 20 different police and sheriff's departments, we discovered examples of double billing at every location.

"Certainly some of the things you've uncovered – this is widespread," Maplewood Police Chief Paul Schnell said after reviewing KARE 11's findings.

The Department of Administration says all their contracts are on paper, limiting their ability to identify pricing inaccuracies.

Commissioner Massman argues his department needs a massive upgrade.  He's requested a $10 million 'eProcurement' system to provide better oversight of state contracts.  The department says it would also allow the state to automate system checks to ensure correct prices are charged by vendors.

Massman likened the state's current paper-driven system to old-fashioned printed catalogues.

"Minnesotans expect us to have the Amazon experience. Our service is more in line with Montgomery Ward's mail order catalogue," he told lawmakers.  He pointed out that Montgomery Ward is now out of business.

Whistleblower warnings

Critics say the lack of modern technology does not explain why the Department did little or nothing to protect and recoup tax dollars after they were specifically warned about overbilling on the police car contracts.

Whistleblower Steve Kleiber told KARE 11 he warned officials at the department about the problem in 2015.  But, he says, they failed to follow up.

RELATED LINK: KARE 11 Investigates: State officials failed to stop double billing

"Nothing was done to make sure the cities and counties that were overcharged got their money back," Kleiber said in an interview.

GOP lawmakers tweeting about KARE 11's investigation pointed to that failure by the Department of Administration as a reason to deny the $10 million 'eProcurement' upgrade.

Earlier this week, Governor Mark Dayton issued a statement saying he will veto the legislature's omnibus spending bills. That means the eProcurement issue could still be part of ongoing negotiations with lawmakers.

 

© 2017 KARE-TV


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