LINCOLN -- State Auditor Mike Foley criticized the state purchasing agency Thursday for failing to properly monitor its contract with the state’s paper recycling contractor.
As a result, the Department of Administrative Services failed to properly collect more than $60,000 owed to the state.
About $33,000 of that amount has still not been collected and, Foley said, probably will never be received.
“For almost a year, DAS was totally oblivious to the fact that not a dime of the monthly payments owed to the state by Shredding Solutions Inc. had been received,” he said. “How long would this have gone on if it had not been detected by the audit team?”
DAS Director Carlos Castillo said agency officials do not believe the state was short-changed. He said the agency disagrees with Foley about the price that the vendor should have paid.
He also disputed Foley’s claim that the audit staff discovered the lapse in payments. He said there had been personnel changes in his office but his staff had found the problem before auditors pointed it out.
Foley’s office detailed the issue in an audit management letter released Thursday.
In the letter, DAS officials said the agency’s materiel division “is currently and will continue” reviewing its practices, policies and procedures.
“We will place special emphasis on contract management; stressing the importance of contract monitoring, contract compliance and vendor compliance with all our employees,” agency officials said.
According to the letter, the state government has had a contract with Shredding Solutions to provide on-site secure document shredding since August 2006.
The contract calls for Shredding Solutions to recycle the paper and pay the state for its value on the recycling market. Payments were to be made monthly.
Foley said some 400 tons of paper are collected, shredded and sold annually.
But audit staff found that Shredding Solutions paid less than the amount specified in the contract and payments became sporadic and eventually stopped in July.
After the problem was pointed out, DAS did its own checking and required Shredding Solutions to bring its payments up to date.
However, Foley said the corrective payment of $25,800, received on Nov. 27, did not fully reimburse the state for the difference between original payments made from May 2010 through October 2011 and the market price for recycled paper during those months.
The original payments were based on a price per ton of $25, which agency officials told Foley the company claimed was based on a verbal agreement with the state.
Castillo said the state was paying a price “based on” Chicago market prices, adjusted with regional differences.