State audit uncovers contract irregularities

CARSON CITY -- A legislative audit of government contracts with current and former state employees has uncovered possible sweetheart deals that one lawmaker says suggest "criminal activity."

Sen. Sheila Leslie, D-Reno, said that the irregularities -- such as one employee billing the state for working 25 hours a day and another receiving payment of $350 an hour -- should be reviewed for possible criminal prosecution by the Nevada attorney general.

The legislative review focused on state contracts with 250 current and former state employees, who were paid $11.2 million in 2008 and 2009. Legislative auditors said they didn't know how many of those contracts were suspected of irregularities and could not estimate how much the alleged abuse had cost the state.

In many cases, the current and former employees did contract work for the state though state agencies had not executed official contracts specifying their pay and hours of work. In numerous cases, the audit found that current state employees billed the state for the contract work they performed at times when they were supposed to be at their regular state jobs.

The audit, released during a meeting of the Legislature's Audit Subcommittee chaired by Leslie, comes at a time when the state is facing record budget shortfalls.

Legislative audits often uncover problems in state agencies, but rarely are turned over to the attorney general. One notable exception was an audit three years ago that raised questions about how Lt. Gov. Brian Krolicki handled college trust funds when he was state treasurer.

Attorney General Catherine Cortez Masto prosecuted Krolicki, but ultimately a judge threw out the charges an Krolicki was re-elected.

"We found some instances when an individual performed similar duties at a significantly higher hourly rate," the latest audit states. "For example, one agency contracted with a former employee at a rate of $350 per hour versus the $65 per hour cost to the state as an employee."

Frequently, the audit found former employees were hired back through temporary employment services at excessive pay rates.

One employee had earned $60 a hour, but retired and was hired back as a temporary employee at $121 an hour.

In another case, a state employee billed the state $1,360 for 11.5 hours of contract work, including travel time, at a rural location. The employee did not seek annual leave, and the work was done during regular state work hours.

Paul Townsend, the chief legislative auditor, said the audit does not identify the people suspected of questionable behavior, but their names will be given to Masto if she requests them.

State Budget Director Andrew Clinger agreed with the audit findings and said he and several state agency directors will set up a task force and take steps to watch spending on contracts. "We can do a better job," he said.

"Certainly there was some sloppiness," added Mike Willden, director of the Department of Health and Human Services. "I don't think there was any fraud."

Willden's agency had about half of the contracts with former and current employees. In many cases, he said, the contracts were with physicians, psychologists and psychiatrists who performed work on weekends and after normal working hours. Often they did not submit documentation that clearly showed the hours when they were doing contract work, he said.

State contracts are approved by the state Board of Examiners, which is chaired by Gov. Jim Gibbons. Masto and Secretary of State Ross Miller are the other board members.

The board meets about once a month and typically approves more than 100 contracts in a matter of minutes.

Daniel Burns, Gibbons' spokesman, said the governor will review the audit and that he has problems with current state employees who have contracts to perform other work for the state.

"That deserves a close look," he said.

Burns said the oversight of contracts rests not with the Board of Examiners, but with the heads of the state agencies for whom the work is performed.

"When an audit finds things are done wrong, you stop the wrong behavior," Burns said. "You mitigate the damage and then move on."

The 2009 Legislature passed a bill that required most contracts the state makes with current or former employees to be approved by the Legislature's Interim Finance Committee before they could go forward.

But the audit found that hardly any contracts have been forwarded to the committee of 21 legislators that meets between regular legislative sessions.

Clinger said the Gibbons administration went to the attorney general's office and secured an opinion that having a legislative committee approve executive branch contracts would be a violation of the "separation of powers doctrine."

Throughout his nearly four years as governor, Gibbons has fought what he considered legislative intrusions into his duties as head of the executive branch of government.

Clinger, who has been reappointed to his job by Gov.-elect Brian Sandoval, agreed that things got out of hand.

Leslie said another bill will be introduced at the 2011 Legislature that attempts to give legislators more oversight over state contracts.

The audit results are a clear indication that the "executive branch controls over contracts were insufficient," she said.

Contact Capital Bureau Chief Ed Vogel at evogel@ reviewjournal.com or 775-687-3901.