4fii Other Offices: Crowiey, LA <337) 783-5693 Opclousas, LA. (337) 942-5217 AbbeviUe,LA (337) S98-1497 New Iberia, LA (337)364-4554 Church Point, LA (337) 684-2855 Frank A. Stagno, CPA* Scott J. Broussard, CPA* L. Charles AbBhire, CPA* P. John Blanchet, m , CPA* Martha B. Wyatt, CPA* MaryA.Castine,CPA* Joey L. Brcaux, CPA* CndgJ. Viator, CPA* Stac^ E. Singleton, CPA* John L. Istre, CPA* Tricia D. Lyons, CPA* Mary T.Miner, CPA* Elizabeth J. Moreau, CPA* Frank D. Beigcron, CPA* Retired: Sidney L. Browsard, CPA 1925-2005 Leon K. Pochi, CPA 1984 James H. Breaux, CPA 1987 Erma R. Walton, CPA 1988 George A. Lewis, CPA 1992 Geraldinc J. Wimberlcy, CPA 1995 Lawrence A. Cramer, CPA 1999 Ralph Friend, CPA 2002 Donald W. Eelley, CPA 2005 George J. Trappey, IH, CPA 2007 Terrel P. Dressd, CPA 2007 Herbert Lemoine II, CPA 2008 BROUSSARD, PQCHE, LEWIS & BREAUX, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS 4112 West Congress P.O. Box 61400 Lafayette, Louisiana 70596-1400 pbone: (337) 988-4930 . fkx: (337) 984-4574 www.bplb.com To the Board of Commissioners of the Port of Iberia District 4611 South Lewis St. New Iberia, Louisiana 70560 We have performed certain procedures enumerated below, in order to accomplish specific objectives, which were agreed to by Port of Iberia District, (the "Port'O pertaining to a construction project known as the '^Dynamic Warehouse and Pipe Fabrication Expansion Construction Project." The nature of our procedures was limited to this project only, consequently issues may exist in other projects which would not be identified in this report. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. The objective of our engagement as set forth in the engagement letter dated May 6,2009 was to perform an investigation regarding potential irregularities or errors in the accounting and expenditures of the capital improvement project referred to above. This engagement was conducted in accordance with attestation standards of the American Institute of Certified Public Accountants. The sufficiency oftiieprocedures is solely the responsibility of the Port. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. IntrodnctJon to Assignment, Assessment and Oblectives In late April 2009, we had a meeting with the Executive Director of the Port in which he expressed concems over the "Dynamic" construction project. This project is a construction project fijnded under the Port Priority Program and is administered by the Louisiana Department of Transportation and Development (DOTD). Specifically, there were concems over amounts billed to the Port for aggregate material used on the project. Allegedly, there was an over charge of $100,000 representing 1,377.41 cubic yards of limestone. This over charge had occurred on a previous application for payment submitted to the Commission and subsequently paid. The Port became aware of this item when the contractor reported the discrepancy to the Port. Upon discussion with the engineer, he confirmed that there had been an over charge of this amount. In order to make the Port whole again, a credit was subsequently included on a later application for payment submitted to tiie Commission. Members ofAsnericMtt Institute of Certified Public Accourjtantt Society ofLomBianm Ctfrtified Public Accountants * A Professional Accounting Corporation Under provisions of state law, this report is a public document. Acopy of the report has been submitted to the entity and other appropriate public officials. The report is available for public inspection at the Baton Rouge office of the Legislative Auditor and, where appropriate, at the office of the parish c!eri< of court Release Date. /^l^/n'?
Transcript
4fii
Other Offices: Crowiey, LA <337) 783-5693 Opclousas, LA. (337) 942-5217 AbbeviUe,LA (337) S98-1497 New Iberia, LA (337)364-4554 Church Point, LA (337) 684-2855
Frank A. Stagno, CPA* Scott J. Broussard, CPA* L. Charles AbBhire, CPA* P. John Blanchet, m , CPA* Martha B. Wyatt, CPA* MaryA.Castine,CPA* Joey L. Brcaux, CPA* CndgJ. Viator, CPA* Stac^ E. Singleton, CPA* John L. Istre, CPA* Tricia D. Lyons, CPA* Mary T.Miner, CPA* Elizabeth J. Moreau, CPA* Frank D. Beigcron, CPA*
R e t i r e d :
Sidney L. Browsard, CPA 1925-2005 Leon K. Pochi, CPA 1984 James H. Breaux, CPA 1987 Erma R. Walton, CPA 1988 George A. Lewis, CPA 1992 Geraldinc J. Wimberlcy, CPA 1995 Lawrence A. Cramer, CPA 1999 Ralph Friend, CPA 2002 Donald W. Eelley, CPA 2005 George J. Trappey, IH, CPA 2007 Terrel P. Dressd, CPA 2007 Herbert Lemoine II, CPA 2008
BROUSSARD, PQCHE, LEWIS & BREAUX, L.L.P. C E R T I F I E D P U B L I C A C C O U N T A N T S
4112 West Congress P.O. Box 61400 Lafayette, Louisiana 70596-1400 pbone: (337) 988-4930 . fkx: (337) 984-4574 www.bplb.com
To the Board of Commissioners of the Port of Iberia District
4611 South Lewis St. New Iberia, Louisiana 70560
We have performed certain procedures enumerated below, in order to accomplish specific objectives, which were agreed to by Port of Iberia District, (the "Port'O pertaining to a construction project known as the ' Dynamic Warehouse and Pipe Fabrication Expansion Construction Project." The nature of our procedures was limited to this project only, consequently issues may exist in other projects which would not be identified in this report. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
The objective of our engagement as set forth in the engagement letter dated May 6,2009 was to perform an investigation regarding potential irregularities or errors in the accounting and expenditures of the capital improvement project referred to above. This engagement was conducted in accordance with attestation standards of the American Institute of Certified Public Accountants. The sufficiency of tiie procedures is solely the responsibility of the Port. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.
IntrodnctJon to Assignment, Assessment and Oblectives
In late April 2009, we had a meeting with the Executive Director of the Port in which he expressed concems over the "Dynamic" construction project. This project is a construction project fijnded under the Port Priority Program and is administered by the Louisiana Department of Transportation and Development (DOTD).
Specifically, there were concems over amounts billed to the Port for aggregate material used on the project. Allegedly, there was an over charge of $100,000 representing 1,377.41 cubic yards of limestone. This over charge had occurred on a previous application for payment submitted to the Commission and subsequently paid. The Port became aware of this item when the contractor reported the discrepancy to the Port. Upon discussion with the engineer, he confirmed that there had been an over charge of this amount. In order to make the Port whole again, a credit was subsequently included on a later application for payment submitted to tiie Commission.
Members ofAsnericMtt Institute of Certified Public Accourjtantt Society ofLomBianm Ctfrtified Public Accountants
* A Professional Accounting Corporation
Under provisions of state law, this report is a public document. Acopy of the report has been submitted to the entity and other appropriate public officials. The report is available for public inspection at the Baton Rouge office of the Legislative Auditor and, where appropriate, at the office of the parish c!eri< of court
To the Board of Commissioners Of the Port of Iberia District
June 30, 2009
In addition, the engineer had requested an additional fee fi^om the Port in order to be compensated for extra work his firm performed on the project which was not in the original fee quote. Specifically, the engineer claimed that the project had taken much longer than originally anticipated and required additional efforts by the engineer to complete.
As such, the Port requested that we perform procedures to assist them in the determination of the following:
a) If any additional discrepancies existed within the construction project identified which might indicate that the Port had paid for items which they did not receive.
b) Verify that the engineer*s claim that additional work was required, is accurate and to attempt to quantify the additional amount.
In order to accon^lish objective (a) above, we examined the underlying documents of the project including, but not limited to, the contracts with the contractor and engineer, bids, applications for payment submitted and other correspondence in order to gain an understanding of events and facts. Based upon these preliminary assessments, we determined that the risk of irregularities was higher in certain areas of the project. Specifically, the per unit line item portion of the contract (aggregate), as well as the change orders approved on the contract. As a result, we concentrated our efforts in these areas of the contract. The procedures we performed, as well as the results of our investigation, are as follows.
Aggregate
In attempting to determine that the Port had only paid for aggregate which was delivered to the site and used on the project, we reviewed all applications for payments presented to the Port and paid. From these applications, we determined the total dollar amoimt paid for the aggregate line item on both the Warehouse and Pipe Fabrication Extension portions of the contract. Based on our review of the bids received and review of the contract with the contractor, it was determined that the aggregate used was to be billed to the Port at a price of $72.60 per cubic yard. The aggregate used on this project consisted of #610 limestone. Once we had determined the total amount paid for aggregate, we divided price per cubic yard and arrived at a preliminary estimate of limestone used in the project of 7,209.03 cubic yards.
To substantiate this amount, we requested certain information fi-om the engineer, contractor and supplier. We were able to obtain firom the engineer load tickets for each load delivered to the site along with a "reconciliation" worksheet which itemized all items billed through the aggregate line item on the project. The engineer represented to us that, in preparing the applications for payment, he utilized the load tickets which he had received and added additional aggregate to pay for the extra work performed on the project. Upon examination of this reconciliation, it was noted that some amounts, billed as aggregate to the Port, were not actually aggregate.
Some of these non-aggregate items were for additional work allegedly done on the project. However, this additional work was paid for through the aggregate line item. No change orders were ever requested or approved by the Port or the State for this additional work, which should have been the case. The dollar amounts of these additional items charged through the aggregate line item are listed in Exhibit A. Furthermore, it appears that there were two charges, included in the aggregate line item, where no additional work had been done on this project. One was for 1,375 cubic yards of limestone which amounted to $99,825 (item (a) on the Exhibit A). This charge was subsequently reversed by a credit issued on a later application for payment reducing the amount requested. The second charge for 317 cubic
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To the Board of Commissioners Of the Port of Iberia District
June 30, 2009
yards of limestone was allegedly for work performed on an earlier project at the Port for Dynamic Industries (item (c) on the Exhibit A), performed by the supplier of the limestone.
We requested support for the additional work performed fi-om the contractor. They provided us with support in the form of proposals fi-om sub-contractors for the work for some of the items. They did not provide support for those items described below.
With respect to item (a) above, an additional amount was added to the aggregate line item on application for payment number 4. This additional amount was not for work performed or aggregate. The Port paid this application on October 22, 2008, via check nimiber 2004, to the contractor. On March 24, 2009, the engineer submitted to the contractor an invoice for $ 100,000 which was identified as "fee" on another project. Shortly thereafter, the contractor contacted the Port and informed them of the discrepancy. The Port subsequently took a credit on application for payment number 6 in the amount of $99,825 (which represents the 1,375 cubic yards). We have been unable to make a determination of all of the parties originally involved due to limited information obtained.
Items marked as (b) in Exhibit A do not appear to be actual aggregate, but rather simply a reconciling item. Based on the information we have been provided, we do not believe that the Port owes this money. Total dollars associated with these items amounted to $4,247.83. This amount would need to be taken as a credit on the final payment to the contractor.
For those items noted as (c) and (e) in Exhibit A, we were unable to obtain support fi-om the contractor except that we did find an email dated February 26,2008 fi-om the contractor to the engineer for a request for payment number 1. Attached to this email, and referenced as such, was a worksheet which detailed out the contractors work to date. This worksheet included a reference to "317 tons" in the aggregate line item. Writing on this worksheet, allegedly by the engineer's office, changed 317 tons to 317 cubic yards.
Based on explanations provided by the engineer, the 317 cubic yards of aggregate added were for work performed on a previous project at the Dynamic site that had been completed and paid. This work was done by the supplier of the aggregate. The previous project ran out of fimding before it could be conpleted, and this was to allegedly reimburse for work done previously. The Port paid for this additional charge and the fimds were sent to the contractor. However, as previously stated, we were unable to get support for this item fi-om the contractor and do not know if these funds were ever sent to the supplier.
With respect to the other items noted as (e), we did not receive anything fi-om the contractor supporting this work. However, we did visually inspect the site and it appears that some stabilization and excavation work was done in a pit near the canal on the site. We were unable to determine when this was done or if this was in the original scope of work. Also, we examined the three doors on the pipe fabrication extension. Allegedly under the original plans, only one door was on the extension. Two additional doors were later added due to fire marshal request. We did observe a photo of the pipe fabrication extension and at one time it appears that only one door existed where three now exist.
For all of the non aggregate items in Exhibit A which involved actual work, we attempted to verify that the work had been done. As such, we toured the job site and examined the work performed. Our site inspection was performed with the independent inspector hired by the Port. The inspector pointed out specific items which represented the work performed. The inspector consulted with the engineer, prior to our tour, to assist in him in identifying the specific items. We did not make a determination as to whether or not these items were in the original scope of work. We also
To the Board of Commissioners Of the Port of Iberia District
June 30,2009
considered the amount charged above for the work cited, and consulted with the site inspector regarding the reasonableness of some of the items.
As a result of our inspection, one item required additional work to determine the reasonableness of the amount charged. This item is noted as (d) in Exhibit A. The scope of this work included the upgrade of eight welding racks each of which originally had (3) 30 amp plugs. All eight welding racks were to be retro-fitted with (1) 60 amp plug and (2) 30 amp plugs. As such the scope of the work in the proposal was as follows:
Rework the newly installed welding racks in order to accommodate a 60 amp welding outlet. Currently, the racks are to have (3) 30amp welding receptacles. The rework will have (2) 30 amp receptacles and (1) 60 amp receptacle. The details are:
1) Upsize (8) 30 amp receptacle firom 30 amps to 60 amps. 2) Upsize (8) 30 amp receptacle junction boxes to 60 amp receptacle junction boxes. 3) Replace the conduit and wiring for each of the welding receptacles fi-om 1" to 1 W. 4) Upgrade the wiring fi-om the breaker panels to each of the eight welding racks fi-om
#3 copper wire to #1 copper wire. 5) Upgrade the main switchgear with the necessary components to accept the bigger
breakers necessary to acconmiodate the increase in load. 6) Replace the 90 amp breakers that are currently feeding each rack to 125 anq)s each. 7) Replace one of the 30 anqj fiisible disconnect switch and fiises to 60 amp fiisible
disconnect switches and fiises for each of the racks, 8) All additional fabrication necessary to fit the new equipment.
NOTE: 90% of this cost is the increase in material cost for the switchgear upgrade, wiring, and receptacles.
The total quote for this woik was $67,598.61 fi-om the subcontractor. This proposal was dated October 21, 2008. Ailer a contractor markup of 10%, total costs was estimated at $74,358.47. In order to pay for this charge aggregate was increased by 1,032.76 cubic yards resulting in additional costs charged to the Port of $74,978.38. The costs per rack conversion in this quote amounted to $9,372.30 (after contractor markup) and $8,449.83 (subcontractor alone).
However, we noticed that on September 11, 2008, a proposal was received fi-om the same subcontractor with the following scope of work;
Rework the newly installed welding racks in order to accommodate a 60 amp welding outlet. Currently, the racks are to have or have three, 30 ampere welding receptacles. The rework will have two, 30 ampere receptacles and one, 60 ampere receptacle. The details are:
junction boxes. 3) Replace the conduit and wiring for each welding receptacle fix)m 1" to I 1/4".
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To the Board of Commissioners Of the Port of Iberia District
June 30,2009
4) Upgrade the wiring fi-om the breaker panels to each of the fifteen (15) welding racks fi-om #3 copper wire to #1 copper wire.
5) Upgrade the main switchgear with the necessary components to accept the bigger breakers necessary to accommodate the increase in load.
6) Replace the 90 amp breakers that are currently feeding each rack to 125 amps to each.
7) Replace one of the 30 amp fusible disconnect switch and fuses to 60 amp fiisible disconnect switches and fiises for each of the racks.
8) All additional fabrication necessary to fit the new equipment.
NOTE: 90% of this cost is the increase in material cost for the switchgear upgrade, wiring, and receptacles.
Total proposed costs for the work above, which included 15 rack conversions, was $53,662.45. This amounted to $3,577.50 (subcontractor only) per rack conversion.
We were unable to determine from discussions with the engineer or contractor the reason for the increase in costs. The Port may wish to further investigate this item and determine the reasonableness of the costs.
Next, we obtained firom the supplier invoices detailing the loads delivered to the site. These invoices included dates, load ticket numbers, and net weights. Exhibit B provides a listing of invoices fi-om the supplier billed to the contractor.
In reconciling the load tickets provided by the engineer to the invoices provided by the supplier, we noted that approximately 846.71 cubic yards of material was invoiced to the contractor, however, the engineer did not have any of these load tickets. The engineer represented to us that he was able to verify approximately 181.74 cubic yards by site inspection and field measurements. In addition, invoices representing approximately 322.48 cubic yards were also considered by the engineer, of which he only approved 75.79 cubic yards based again on field measurements. This left approximately 342.47 cubic yards remaining. This amount appears to be made up of three invoices as shown in Exhibit B. The total of these invoices fi-om the supplier to the contractor amounted to $19,381.06.
We subsequentiy obtained firom the supplier the load tickets for the invoices for which the engineer had no load tickets. The loads in question occurred on February 28*; March 11*; May 16*, 21", and 30* ; June 3"*, 4*, and 18* 2008. Copies provided to us were copies of the original ticket. Upon examination we noted that all of these tickets had a driver signature, but no customer signature. All tickets provided by the engineer had both the driver and customer signatures. The tickets provided by the engineer were carbon copies and most signatures had a carbon imprint. After inquiry with the engineer he was unable to offer an explanation for these additional invoices as his office was unaware of the loads. We were not able to obtain an explanation fi-om the contractor for these invoices.
Exhibit C details the amounts paid by the Port for aggregate on both the Warehouse and Pipe Fabrication portions of the project. The total paid after credit is carried forward to Exhibit A.
To the Board of Commissioners Of the Port of Iberia District
June 30,2009
Change Orders
This project included two change orders which altered the contract amount. All other change orders simply extended the days to complete the project. These two change orders were as follows:
Change order number 1 requested a 45 day extension as well as an increase in contract price for additional security lighting improvements. We obtained and observed a proposal fit)m a subcontractor in the amount of $153,800.00 for the additional work. Contractor markup of 10% amounted to $15,380.00. As such, the total price of the change order was $169,180.00. During our tour of the site, we did observe extensive security lighting throughout the yard. However, we were unable to determine the exact work performed.
Change order number 3 increased the total contract price by $725,919.78. This was composed of $805,076.02 for additional work, including the construction of restrooms in the yard, electrical stations and supplemental wiring, surveillance cameras, site work, and site wiring. This amoimt was partially offset by the removal of the "borrow" line item within the contract, the security fencing line item, and an adjustment against aggregate quantities. Total reductions amounted to $79,256.22. Components of this change order are detailed fiirther in Exhibits D and E.
As previously stated, the additional work proposed on this change order included various items. Two of the largest items included in the change order were construction of two restrooms and the addition of four stationary and eight removable distribution racks out in the yard.
During our tour of the site, we viewed the two restrooms which were pointed out to us by the inspector representing the work performed. It was noted that the restrooms were constructed of cinder block construction and had metal roofs. Upon subsequent discussion with the engineer, we inquired as to the square footage of the restrooms. The engineer indicated that each restroom was about 500 square feet. These restrooms were constructed by the contractor with the electrical work subcontracted. Based upon this, we estimated construction costs for these restrooms to be approximately $230 per square foot. It was also noted that a proposal fi-om the contractor on September 16, 2008 quoted a price of approximately $ 194 per square foot. We were unable to obtain fi-om the contractor support for the construction other than the quoted price or the reason for the increase from September to October.
Also, during our tour, we sited some of the distribution racks out in the yard. Work for these additional racks was subcontracted and represent $435,507.90 of the total additions. The total make-up of all additions, including the two items just discussed, is presented in detail further in Exhibit E.
For all additional work on this change order we attempted to view actual work during our tour of the site. For items such as restrooms and electrical racks these were readily sited. However, in some instances we were unable to specifically identify the work performed. For example, in the change order, $27,000 is included for site work. We assumed this additional site work was for construction of the restrooms and addition of electrical stations. It is clear that site preparation -work would have been needed in these instances; however, we cannot determine the extent or reasonableness of costs associated with this work.
During our tour, we did not inspect the surveillance camera work, which amounted to $61,242.50, nor were we able to identify specifically the additional site wiring and transformers added. We did note that there was extensive electrical work performed and we did site some transformers on the yard.
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To the Board of Commissioners Of the Port of Iberia District
June 30, 2009
Engineer Time and Effort
In order to accomplish objective (b) stated on page 2, we obtained from the engineer reports from the firm's time and billing software. We also reviewed the engineering contract on the project. The procedures we performed, as well as the results of our investigation, are as follows.
We reviewed the contract between the engineer and the Port to determine the fee quoted in the contract and to determine houriy billing rates. Next, we obtained from the engineer his records regarding time required on this project The engineering firm had employees track time on a daily basis by job and billing codes. The engineer supplied us with reports generated from the time and billing software at the firm. We reviewed these reports and did not note anything that would lead us to believe the documents were not accurate. We noted that time for each employee was scattered out over certain time periods and that the work performed appeared to be consistent with the stage of the project at the particular date. We did not examine actual time sheets or interview employees at the engineering firm.
Exhibit F recaps these time reports by position and billing code. The total amount allowed as a fee for engineering services based on the contract with the Port dated August 3,2007 amounted to $334,430.00. Based on review of the records provided to us, it appears that considerable effort in excess of this amount was required by the engineer to complete the project. These findings are consistent with expectations and seem logical given that the project has taken much more time than originally anticipated. Additionally, the engineer represented to us that much of the additional time required by his firm was due to work typically performed by the contractor. Specifically, he mentioned that the engineering firm was required to prepare requests for payment and other tasks usually performed by the contractor. In our opinion, the Port should consider all facts and circumstances known to date surrounding this project when deciding if additional compensation is warranted.
Summary and Conclnsjon
Aggregate
Non aggregate items were charged to the aggregate line item and paid for by the Port. The total amount of the items was $212,684.60. Of this amount $185,422.59 was charged for additional work which should have had approved change orders. Thcreniainingamountchargedof$27,262.01 did not pertain to work on this project. This is net of the $100,000.00 credit for the addition to aggregate on application 4 (warehouse portion of the project). As previously stated we were unable to obtain support for all of the items charged as aggregate. One of the items for which we did not obtain support was a charge for $23,014.20, which allegedly represents work on aprior project. These funds were paid to the contractor however we were unable to determine if the money had been paid to the supplier. In addition, for items in which work was performed, the Port may wish to further investigate pricing on these items as some seemed to be excessive in relation to the work described.
Change Orders
We were unable to visually inspect or obtain support for all work performed in the change order. We were able to inspect two of the larger items in the change order which were the restrooms and the electrical distribution racks out in the yard. The cost of some of the items in the change order seemed high. For example, the restrooms appear to have cost of approximately $230 per square foot. These restrooms are of cinder block construction with metal roofs. The Port may wish to fiirther investigate costs associated with these items. In the fiiture the Port may wish to consider
To the Board of Commissioners Of tiie Port of Iberia District
June 30, 2009
requesting bids on significant change orders prior to approval. We do realize, however, that this may not always be feasible given the circumstances.
Engineer Time and Effort
Based on our review of records provided to us by the engineer, it appears that a significant amount of additional time was required over the course of the project. One cause appeared to be the fact that the project took much longer than anticipated. The engineer fiarther represented to us that his firm was required to do "administrative" type work which traditionally would be done by the contractor. An example cited was the preparation of requests for payments usually submitted by the contractor and approved by the engineer. In our opinion, the Port should consider all known facts and circumstances surrounding this project in approving any additional compensation to be paid.
Although this report will become a matter of public record, it is intended solely for the information of the Port of Iberia District and is not intended to be and should not be used by anyone other than the specified party.
/ ^ . . ^e^ / ^ . ^ ^ ' / ^ - V ur Lafayette, Louisiana June 30,2009
EXHIBIT A
Aggregate"^ Warehouse
Pipe fabrication extension Less: Un-verified by engineer (invoices 5/16 - 6/4) not paid based
on field measurements
Actual aggregate on job
Warehouse Additional aggregate added to request 4 Credit issued on request 6 Quantity adjustment - Change order 4 Quantity adjustment - Change order 6 Culverts for ditch CTOSsings Shaping of stabilized areas Soil disposal - excavated material - stabilization - Tract C Galvanize exterior stair Insulated crane hooks Warehouse lift station Tract E Parking (work allegedly performed on an earlier project)
Pipe Fabrication Extension Sk> ights on lean-to New passenger doors on lean-to Upgrade welding racks
Total paid for items other than aggregate within aggregate line item
Total paid by Port after credits *
Difference, unknown
Cubic Yards
2,906.91 $ 256.43
(246.69)
2,916.65
1,375.00 • (1,375.00) •
56.10 ^ 2.41 "
330.56 89.54 '
137.74 34.41
572.13 176.31
317.00 '•'
111.13
69.45 ' 1,032.76 •>
2,929.54
5,846.19
5.834.03
12.16 J
Dollars
211,041.67 18,616.82
07.909.69)
211,748.80
99,825.00 (99,825.00)
4,07286 174.97
23,998.66 6,50060 9,999.92 2,498.17
41,536.64
12,80011 23,014.20
8,068.04 5,042.07
74,978.38
212,684.62
424,433.42
423,550.88
882.54
'* Actual aggregate based on signed load tickets, field measurements, and confirmation per engineer representations. Aggregate charged to Port at $72.60 per cubic yard.
P) Actual paid by Port after credits - See Exhibit C.
Additional amount added by the engineer, credited on later request (see previous discussions).
Quantity adjustments on reconciliation provided by engineer, however, all aggregate accounted for in section above.
We believe that the Port does not owe for these quantities. Additional aggregate added by engineer to allegedly reimburse supplier for work performed on earlier project at
Dynamic Industries. This charge should not be included on this contract. Charges for work performed seemed higji. Port may wish to fiirther investigate this item. We were unable to obtain from the contractor support for these items, except we did obtain from the engineer files an email dated February 26, 2008 from the contractor to the engineer detailing the aggregate to be billed and specifically nofing "317 tons - supplier".
'* Engineer did not have signed load tickets for these invoices. Subsequently, obtained load tickets from supplier, however, no customer signature on load ticket.
* Total aggregate used here is the sum of the loads for the Warehouse and Pipe Fabrication extension without regard for disallowance by engineer.
Broussard, Poche, Lewis and Breaux, L.L.P. 4112 West Congress Street Lafayette, Louisiana 70506
Re: Management Response to Special Engagement Report Dated: June 30,2009 - Concerning the Dynamic Warehouse and Pipe Fabrication Construction Projects - State Projects #578-23-0016(322) (Pipe Fabrication Extension) and 578-23-0016(323) (Warehouse Building).
The Port received information from Southern Industrial Contractors, Inc., on or about April 14,2009, concerning alleged irregularities in the payment requests submitted by the engineer on the captioned projects. The Port compiled information from its files, and on April 20, 2009, met with the District Attorney to report its preliminary findings and discuss the manner in which the Port should proceed.
On May .1, 2009, the Port hired an independent construction inspector to oversee the completion of the projects on behalf of the Port.
On May 6, 2009 the Port of Iberia contracted with an independent accounting firm to examine transactions and payments made under the captioned projects and provided the auditor with all information in its possession. As part of the examination the auditor interviewed personnel involved in the project and examined supporting documents as well as work performed. In its report to the Port, dated June 30,2009, the auditor noted certain transactions which are questionable under the contract. Below is a list of the specific findings provided to the Port by the auditor, based on its report (hereinafter referred to as the "Audit Report"), and the Port's responses to those findings.
Finding 1: At the request of the Port's tenant, certain additional work, outside of the scope of the original contract, was performed on the project. Rather than submitting a change order for each additional item of work performed, the cost of that item was submitted for payment and paid for through the "Aggregate" line item in the contract. (Note that the word "Aggregate" as it is used here refers to limestone used for foundation
P.O.Box 9986 • New Iberia LA 70562-9986 • Roy A . Pontiff, Executive Director • Phone:(337)364-1065 • Fax; (337) 364-3136
Louisiana Legislative Auditor Office Broussard, Poche, Lewis and Breaux, L.L.P. November 19, 2009 - Page 2
and ground stabilization.) The dollar amounts of these additional items charged through the "Aggregate" line item are listed in Exhibit A of the Audit Report. It appears that there were two charges, included in the Aggregate line item, for which no additional work had been done on this project. One was for 1,375 cubic yards of limestone, amounting to a charge of $99,825.00 (Item (a) on Exhibit A - Audit Report). This charge was subsequently reversed by a credit issued on a later application for payment by reducing the amount requested. The second charge for 317 cubic yards of limestone, amounting to $23,014.20, was allegedly for work performed on an earlier project at the Port for Dynamic Industries (Item (c) on Exhibit A), performed by the supplier of the limestone.
Response 1: Item (a) on Exhibit A of the Audit Report, amounting to $99,825.00 was recovered by reducing a subsequent payment request. Payment request #6 was prepared by the engineer after the Port was made aware of the contractor's allegations, and following consultation with the contractor and the engineer. With respect to the additional 317 cubic yards included in aggregate (Item (c) on Exhibit A) the port has sent a request (see attached copy of Port Attorney's letter to Contractor dated July 23, 2009) for additional information to the contractor, requesting explanations and support for all transactions in question. The port has withheld from final payment under the contracts amounts it believes are sufficient to cover the questionable costs identified in the report. Attorneys for both parties have agreed to meet after the public release of all audit reports to discuss what adjustments in the final payment are appropriate.
Finding 2: Items marked as (b) in Exhibit A do not appear to be actual aggregate (limestone), but rather simply a reconciling item. Based on the information we have been provided, we do not believe that the Port owes this money. Total dollars associated with these items amounted to $4,247.83. This amount would need to be taken as a credit on the final payment to the contractor.
Response 2: This item will be the subject of negotiations with the Contractor in connection with the final payment against amounts withheld by the Port.
Finding 3: The auditor raised questions about the reasonableness of the amount charged for the work listed in Item (d) in Exhibit A. The scope of this work included the upgrade of eight welding racks each of which originally had (3) 30 amp plugs. All eight welding racks were to be retro-fitted with (1) 60 amp plug and (2) 30 amp plugs. The total quote for this work was $67,598.61 from the subcontractor. This proposal was dated October 21, 2008. After a contractor markup of 10%, total costs were estimated at $74,358.47. In order to pay for this charge aggregate was increased by 1,032.76 cubic yards resulting in additional costs charged to the Port. The costs per rack conversion in this quote amounted to $9,372.30 (after contractor markup) and
Louisiana Legislative Auditor Office Broussard, Poche, Lewis and Breaux, L.L.P. November 19, 2009 - Page3
$8,449.83 (subcontractor alone). However, we noticed that on September 11,2008, a proposal was received to upgrade fifteen welding racks with total costs of $53,662.45. This amounted to $3,577.50 (subcontractor only) per rack conversion.
Response 3: The subcontractor who performed the work described in the above finding was copied with the Port Attorney's letter dated July 23, 2009 to the Contractor. The Subcontractor met with Port officials and provided additional information which explains a portion of the difference between the original quotes and the actual costs. The subcontractor has agreed to reduce a portion of its charges for this work amounting to $18,663.50. This will reduce the amount owed to the contractor by a total of $20,529.85. These adjustments will be made in the final negotiations with the Contractor.
Finding 4: During our tour of the site, we viewed two restrooms which were pointed out to us by the inspector representing the additional work performed and approved in change order number 3. It was noted that the restrooms were constructed of cinder block construction and had metal roofs. Upon subsequent discussion with the engineer, we inquired as to the square footage of the restrooms. The engineer indicated that each restroom was about 500 square feet. These restrooms were constructed by the contractor with the electrical work subcontracted. Based upon this, we estimated construction costs for these restrooms to be approximately $230 per square foot. It was also noted that a proposal from the contractor on September 16, 2008 quoted a price of approximately $ 194 per square foot. We were unable to obtain from the contractor support for the construction other than the quoted price or the reason for the increase from September to October.
Response 4: This item will be the subject of negotiations with the Contractor in connection with the final payment against amounts withheld by the Port.
Finding 5: Non aggregate items were charged to the aggregate line item and paid for by the Port. The total amount of the items was $212,684.60. Of this amount $185,422.59 was charged for additional work which should have had approved change orders. The remaining amount charged of $27,262.01 does not appear to pertain to work on this project.
Response 5: The Port has adopted language in all future engineering and contractor contracts enabling the port (or its designee) to examine any and all supporting documents pertaining to costs incurred or amounts billed under ftiture contracts. It is anticipated that this will allow the port to better monitor amounts charged under these contracts and to ensure that all changes to the scope of work under the contract have been properly approved with appropriate change orders. The Port also intends to ensure
Louisiana Legislative Auditor Office Broussard, Poche, Lewis and Breaux, L.L.P. November 19, 2009 - Page 4
that all engineers on future projects understand that they will be expected to submit change orders for any work outside the scope of the original contract. The $27,262.01 will be the subject of negotiations with the Contractor in connection with the final payment against amounts withheld by the Port.
Finding 6: One of the items for which we did not obtain support was a charge for $23,014.20, which allegedly represents work on a prior project. These fiinds were paid to the contractor however we were unable to determine anything further with respect to this charge.
Response 6: This item will be the subject of negotiations with the Contractor in connection with the final payment against amounts withheld by the Port.
Although this was not mentioned by the Auditor in the findings provided for this response, the Port also asked the auditor to examine payments made to the engineer in connection with the project to ensure that fees approved by the Port under the projects were justified. Based on the review of records by the auditor, they found that "...it appears that considerable effort in excess of this amount (the amount billed by the engineer) was required by the engineer to complete the project." The Port is satisfied that the amount billed by the engineer is not in excess of a reasonable fee for the services rendered. However, it is possible that the amounts due the engineer may be subject to deductions for the costs of the audit and the independent inspector hired by the Port to oversee completion of the project.
The Audit Report was provided to the District Attorney for the 16 ^ Judicial District. These responses, together with the Legislative Auditor's report, and the Port's responses thereto, will also be provided to the District Attorney for action deemed appropriate by that office.
Subsequent meetings with the Contractor and Aggregate Subcontractor will be held to determine the disposition of the funds currently held by the Port on the final payment for the projects.
Sincerely,
Roy Pontiff, Execd^ve Director Port of Iberia
EXHIBIT A
Aggregate'''
Warehouse
Pipe fabrication extension
Less: Un-verified by engineer (invoices 5/16 - 6/4) not paid based
on field measurements
Actual aggregate on job
Warehouse
Additional aggregate added to request 4
Credit issued on request 6
Quantity adjustment - Change order 4
Quantity adjustment - Change order 6
Culverts for ditch crossings
Shaping of stabilized areas
Soil disposal - excavated material - stabilization - Tract C
Galvanize exterior stair
Insulated crane hooks
Warehouse lift station
Tract E Parking (work allegedly performed on an earlier project)
Pipe Fabrication Extension
Skylights on lean-to
New passenger doors on lean-to
Upgrade welding racks
Total paid for items other than aggregate within aggregate line item
Total paid by Port after credits ' '
Difference, unknown
Cubic Yards
2,906.91
256.43
(246.69)
2,916.65
1,375.00 '
(1,375.00) ' 56.10 "
2.41 ^
330.56
89.54 =
137.74
34.41
572.13
176.31
317.00 '•'
111.13
69.45 ' 1,032.76 '
2,929.54
5,846.19
5,834.03
12.16
Dollars
S 211,041.67
18,616.82
ri7.909.69)
211,748.80
99,825.00
(99,825.00) 4,072.86
174.97
23,998.66
6,500.60
9,999.92
2,498.17
41,536.64
12,800.11
23,014.20
8,068.04
5,042.07
74,978.38
212,684.62
424,433.42
423,550.88
$ 882.54
Actual aggregate based on signed load tickets, field measurements, and confirmation per engineer representations. Aggregate charged to Port at $72.60 per cubic yard.
(2) Actual paid by Port after credits - See Exhibit C.
(c)
Additional amount added by the engineer, credited on later request (see previous discussions).
Quantity adjustments on reconciliation provided by engineer, however, all aggregate accounted for in section above
We believe that the Port does not owe for these quantities.
Additional aggregate added by engineer to allegedly reimburse supplier for work performed on earlier project at
Dynamic Industries. This charge should not be included on this contract.
Charges for work performed seemed high. Port may wish to fiirther investigate this item.
We were unable to obtain from the contractor support for these items, except we did obtain from the engineer files
an email dated February 26, 2008 from the contractor to the engineer detailing the aggregate to be billed and
specifically noting "317 tons - supplier".
-9
ALLAIN AND BELLEFONTAINE ATTORNEYS AND COUNSELORS AT LAW
P. O. BOX 467 JEANERETTE, LOUISIANA 70544-0467
Wilbur L. Allain, Sr. (1913-1993) 1701 MAIN STREET
Raymond E. Allain, Sr. Telephone (337) 276-5004 John F. Bellefontaine Facsimile (337) 276-4734
Mr. Steven B. Loeb Breazeale, Sachse& Wilson, L.L.P. One American Place Suite2300, P.O. Box 3197 Baton Rouge, Louisiana 70821-3197
Re; Port of Iberia - Southern Industrial Contractors, Inc. - Dynamic Warehouse and Pipe Fabrication Expansion Construction Project - Audit Issues
Dear Steven:
As you are aware, the Port of Iberia Board of Commissioners recently retained an auditor to perform certain procedures in connection with the captioned project, primarily related to charges for aggregate supplied to the project site. In the course of the work, certain other questions were raised by the auditor. These questions are detailed below.
1. The auditor examined aggregate delivery tickets provided by the engineer on the project. He also requested copies of tickets from the supplier, and then reconciled all delivery tickets with the amounts billed to the Port on the job. The reconciliation showed that the Port was billed, and paid for, 318.33 cubic yards of material that was not delivered to the job. Pay Application No. 1 (copy enclosed) shows a billing for "317 tons for Matt Durand", this was changed by the engineer to "317 cubic yards and 618.15 tons". The application obtained from the engineer shows that 300 tons were "delivered", and 317 tons were for "Matt". Three invoices for aggregate were submitted to Southern Industrial Contractors, Inc. ("Southern") by Diversified Materials, L.L.C. These invoices were Nos. 17353,17515, and 18626, dated February 28^ March l l ^ and JunelSth, 2008, respectively, (copies of the invoices are enclosed) The auditor was unable to match these invoices with delivery tickejs^ and found no customer signatures verifying the delivery of the material.f^Vhen;he!in^uired
about these invoices, he reports that neither the engineer, nor the contractor's attorney provided any information about them. The material supplier advised that he had not been paid for the invoices. The auditor was told by the engineer that the billing for 317 cubic yards was submitted for the purpose of reimbursing Diversified for aggregate provided to a previous project on the Dynamic site, for which they were not able to bill at the time. There was reportedly an understanding between the contractor and the engineer that they would "catch it up on the next job". We have been instructed to collect the facts relating to this issue so that we can resolve this question to the satisfaction of the Commission. We request that your client answer the following questions:
a) Did his company receive the invoices listed above and enclosed? b) Did his company issue payment to the supplier for these invoices? c) If the answer to b) is no, please explain why? d)What is your client's understanding of the billing on pay application No. 1 which itemizes 317 tons or cubic yards "for Matt Durand"? e) Was your client aware of the promised reimbursement to Matt Durand to be made in pay application No. 1?
Since the payment for 317 cubic yards was made for material never received, the Port is required to obtain reimbursement of the payment made for aggregate which was not delivered in the amount of $23,014,20.
2. There were quantity adjustments made by the engineer on Change Order No. 4 and Change Order No. 6 in the amount of 56.10, and 2.41 cubic yards of aggregate. The auditor found however that all aggregate was accounted for and the adjustment was an error. He concluded that the Port did not owe for these adjustments. The amoimt of the adjustments was $4,247.83. The Port is required to obtain reimbursement of the payment made for aggregate which was not delivered in this amount.
3. During the course of the project, there was additional work performed which became necessary for some reason, or was requested by the tenant. Instead of presenting this work in a change order to the Port, the engineer added the amount of aggregate necessary to cover the cost of this additional work to the pay applications and the Port paid the contractor these amounts. The auditor examined the documentation which was available concerning this additional work, and visited the site with the Port's inspector to verify that the work was actually performed. One portion of this work involved electrical work performed on certain welding racks. Apparently the tenant had requested that certain welding racks, wired with 30 amp receptacles, be upgraded to 60 amp receptacles. A quotation for this work, dated September 11, 2008, was found in the project file which proposed to upgrade fifteen (15) 30amp receptacles to 60 amp at a cost of $53,662.45, or $3,577.50 each. Another quotation, dated October 21, 2008, was found in the project file proposing to perform the same work
JUL 2 7 Z0Q9
Mr. Steven B. Loeb July 23, 2009 Page 3
on only eight (8) receptacles, at a cost of $67,598.61 or $8,449.83 each. (Copies of the two quotations referred to in this paragraph are enclosed.)
The work performed was on eight (8) racks, and the Port was billed $74,978.3 8 for this work based on 1,032.76 cubic yards of aggregate. The auditor has independently questioned several electrical contractors about the cost of such work, and was told that $3,000.00 to $3,500.00 was a reasonable charge for the work described in the quotations. Basing the work on the first estimate of $3,577.50, the cost of upgrading 8 receptacles, including the contractor's override of 10%, should have been $31,482.00. We are requesting that the electrical subcontractor provide an explanation of the difference between the two quotes. Absent a satisfactory explanation, it has been recommended that the Port obtain a reduction in the price or reimbursement for the difference between the two quotes. We calculate that difference to be $43,496.38.
4. One of the portions of the work examined by the auditor was the work performed under Change Order No. 3. One of the items described on the change order was the construction of two free standing restrooms, each measuring 500 square feet. The auditor concluded that the Port was billed $231,021.63 for the construction of these two bathrooms, a sum equal to about $231.00 per square foot. He found a quotation from the contractor, dated September 16, 2008, provided to the engineer, which quoted the work at a price of $194,221.62, or about $194.22 per square foot. The difference in overall cost is $36.78 per square foot for a total of 1,000 square feet, or $36,780.00. The Port requests an explanation for the difference in cost. We find the cost to construct these building exceedingly high, even at the original quoted figure of $ 194.22 per square foot. Absent a satisfactory explanation, it has been recommended that the Port seek a deduction or reimbursement for this difference.
The total of the items listed above is $107,538.41. Because tiie retainage on the project is currently only $59,000.00, the Port has decided to withhold this amount, in addition to the retainage, from the next payment, authorized by the Commission at its meeting of July 21,2009. A check will be made by the Port for the amount shown on the pay application, less the above amount. Until these issues have been resolved, the Port will hold these funds to offset the improper or excessive charges itemized above.
We request that your client provide all available documentary evidence which shows that the electrical subcontractor was paid for the work described in Item No. 3, above. However, we will need for your client to resolve this item with the subcontractor. If payment in full has not yet been made to that subcontractor, your client can deduct the amount of the deduction noted above from future payments. If payment in full has been made, then we would expect your client to recover the overpayment from the subcontractor.
Call me if you have any questions about the foregoing. We would Uke to resolve this matter^
JUL 2 7 2009
Mr. Steven B. Loeb July 23, 2009 Page 4
as soon as possible, so do not hesitate to call on me if you need to do so,
With kind regards, I am
Very truly yours.
/? 'cf 'Mk^ RAYIJ40ND E. ALLAIN Port Attorney
REA/rea
Enclosures
xc: Roy Pontiff Dixie Electric John Istre Phil Haney Jim Supple
