Richmond ends streetlight maintenance contract, considers disbarment after $1.2 million in potential fraud

RICHMOND, Va. (WRIC) -- The City of Richmond has terminated its streetlight maintenance contract and is considering disbarring the involved contractor after an audit revealed at least $1.2 million in billing discrepancies, including unallowable costs, overbilling and questionable charges.

Phase 1 of this audit, which was performed by the Office of the City Auditor (OCA), was shared by the Richmond City Council on Tuesday, Dec. 3. In its 41 pages of findings, the office said this potential fraud was caused -- at least, in part -- by management failures by city staff, who said involved employees "essentially [paid] whatever the Contractor billed the City" indiscriminately.

Richmond's Streetlight Division -- which, among other things, operates and maintains the city's approximately 37,000 streetlights -- had a total of 18 vacancies as of Nov. 7. According to the office, it has not been fully staffed since 2014. The city has used a combination of internal staff and contractors to complete its general operations.

The contract in question primarily dealt with two projects: a streetlight count project and streetlight maintenance. According to the office, throughout the duration of this contract, at least $1.2 million in city funds have been spent in potentially fraudulent ways, including:

• About $754,614 in unallowable costs, including expenses for an assistant project manager and consulting services that should not have been payable to the city
• About $161,272 in overbilled costs, including vehicles, equipment and labor that was not actually purchased/completed
• About $289,405 in questionable equipment costs

“Our assessment of internal controls found that the contract was not properly administered or
managed by City staff to ensure services were rendered in accordance with the contract and to
verify the accuracy of the billed labor hours and equipment,” the office said, adding that it believed these discrepancies could have been prevented through "proper contract management and oversight by City staff."

MORE: City of Richmond ‘mismanaged’ streetlight project, resulting in at least $1.2 million in discrepancies, audit finds

The City of Richmond provided a statement to 8News regarding this audit on Wednesday, Dec. 4. In that statement, a city spokesperson said its decision to staff the Streetlight Division with other city staffers and contractors was made for two reasons: 50% vacancy rates and an "inability to hire qualified powerline specialists" due to both a highly-competitive job market and the effects of COVID-19.

"The vendor provided up to six contracted employees who were embedded into the Streetlight staff," the spokesperson said. "These employees provided support for day and night operations along with augmenting staff during emergencies and special events."

The city also included an update on actions it has taken and plans to take following these findings. Several of these actions reflect recommendations made by the office in its audit.

The city has terminated its contract with the involved contractor. According to the spokesperson, this termination will be effective as of Dec. 16, to "allow for transition of work to other service providers." Disbarment of the contractor is being considered, but a decision has not been made as of Wednesday.

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According to the spokesperson, "appropriate disciplinary actions" have been taken against the city employees identified in the audit. The city is also exploring overpayment recoup options with the City Attorney's Office.

The office, in its audit, recommended that the city bolster its training and oversight in related areas. According to the spokesperson, steps have been taken in this area. Contract administration training is ongoing and additional classes are scheduled to begin in 2025. Additionally, the city is "reviewing and enhancing internal controls to minimize such risks and establish a more robust contract oversight process."

Regarding next steps, the city said it plans to employ a full-time inspector or inspectors dedicated to contract oversight and review. It also plans to allocate resources for difficult-to-recruit positions, such as offering competitive pay scales, that will reduce the need for shifting city staff into contracting positions. Finally, the city wants to add additional staffing to support these kinds of projects.

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The city's statement reads, in part:

"We applaud the Office of the City Auditor for their work and collaboration in uncovering these inflated invoice discrepancies by a streetlights maintenance contractor that has resulted in at least $1.2 million in unallowable charges billed to the City. City staff will continue to work with the City Auditor, Inspector General and City Attorney to pursue the repayment of these fraudulent charges.

The City regards this matter as serious and is taking steps both to ensure accountability for the vendor, as well as accountability for city staff who did not follow established policies for contract administration. The city has an ongoing initiative to strengthen internal controls that will help to further reduce the possibility of this occurring in the future." Spokesperson for the City of Richmond

8News is working to learn more about any potential legal consequences for the involved contractor. No additional information is available at this time.

This is a developing story, stay with 8News for updates.