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Downey Is Considering an Overhaul of Billing

May 29, 1988|RICHARD HOLGUIN | Times Staff Writer

DOWNEY — The city manager is studying whether municipal accounting procedures should be strengthened after a contractor admitted overcharging Downey more than $11,000 during the last three years. The excessive billing went undetected until a local businessman alerted city officials.

"I will be talking to department heads and see what type of monitoring program they have," City Manager Don Davis said last week. "I'm sure this will prompt, possibly, some changes in the process."

Downey officials are continuing to investigate allegations, by a competitor, that Weatherite Service Corp. may have overcharged the city by another $14,000.

A Weatherite spokesman denied the allegations. Weatherite is based in the City of Industry. Mayor Diane P. Boggs said she would await a report from Davis before deciding whether the city should change its accounting procedures.

"It went undetected, and we can't have that," she said.

Weatherite has admitted overcharging Downey $11,195.74 since 1985 for materials to service heating and air-conditioning equipment at the Civic Center. A Weatherite official said a computer error was responsible for the excessive billing.

The firm has offered a $13,000 settlement to Downey to cover the excess charges and costs of the city's investigation. But the City Council declined last week to accept the money and directed Davis to investigate the matter further. The council is scheduled to reconsider the issue at its June 28 meeting.

Lee Powell, director of administrative services and the city's chief financial officer, said individual departments are responsible for monitoring contracts. Powell said all charges should be checked before the department head or responsible employee approves payment, but there is no citywide backup system to detect whether Downey is being overcharged.

"It should have been done, but it wasn't done correctly, obviously," Powell said. "I think the city should have had a system in place to make sure the contract was complied with, and it's unfortunate we didn't have that."

A spokesman for the firm that audited Downey's books the last three years said the city's method of monitoring contracts met industry standards.

Ken Aliman, audit manager for Conrad & Associates, said a city could demand that a contractor provide itemized bills of material costs and markups, but many do not.

"It's a judgment call," Aliman said.

The city was warned of possible overcharges last year by Robert Henderson, who owns Hendey Engineering Inc., a heating and air conditioning firm that held the Civic Center maintenance contract before Weatherite.

In response, public works director Bill Ralph said he contacted Weatherite and spot-checked invoices.

In February, Weatherite regional manager James J. Barnings admitted in a letter to Ralph that his firm charged the city too much. Barnings said a computer error led the firm to overcharge Downey for new parts and materials to maintain heating and cooling systems.

Ralph said the city's contract with Weatherite allowed the firm to mark up materials 25% over cost for overhead and profit. Those materials include filters, belts and more expensive items, such as pumps.

Weatherite had billed the city 70% to 80% over cost for some materials, Ralph said.

But attorney Richard C. Henderson, who represents Robert Henderson, alleged that billing documents indicate that the city may have been overcharged another $14,000 by Weatherite. Richard Henderson is Robert Henderson's son.

Since 1985, the city has paid Weatherite $160,038 for materials and labor, Powell said.

"They're covering it up," Richard Henderson said about Weatherite officials. "I think that's pretty clear."

Weatherite spokesman Steve Smith said the overcharge did not exceed $11,195.74 and accused the Hendersons of a "two-man vendetta against us and the city of Downey."

"I'm admitting we made a mistake," Smith said. "But $11,000 over a period of three-plus years does not amount to a significant amount of money."

Richard Henderson has criticized Ralph's investigation but said he has "no evidence of wrongful intent" by city staff members.

Ralph declined to comment on Henderson's allegations but did say: "The man (Robert Henderson) did the city a favor. We're spread thin."

Robert Henderson found the overcharging while reviewing Weatherite's billings in a bid to win back the contract, Richard Henderson said. Weatherite's original two-year contract ran from December, 1984, to September, 1986, when Downey renewed it for three years.

In a May 24 letter to the council, the Hendersons asked the city to call for a district attorney's investigation. They also want the city to strip Weatherite of the contract and award it to Hendey Engineering, which had the second-lowest bid on the 1986 contract.

"There's no question of our bias," Richard Henderson said. "But . . . I want to do the right thing."

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