State Auditor Mike Foley says the Nebraska Department of Administrative Services failed to collect more than $60,000 owed to the state through its paper recycling contract.
Foley said Thursday that Lincoln-based Shredding Solutions, Inc. should have paid market-rate value for the paper, which it gathered from state offices, shredded, and sold for other uses.
Specifically, the contracts provide that Shredding Solutions, Inc. is to pay the state a monthly fee "based on the price per pound [of recycled paper] for the Chicago Market, at the beginning of each month, multiplied by the total number of pounds shredded for that month."
The State Auditor's Office found during the audit that Shredding Solutions, Inc. had been paying the state a flat rate of $25 per ton, which was often well under the actual market price. Foley says that at times the company was obligated to pay $55 to $100 per ton of paper.
The audit also shows that over time Shredding Solutions, Inc.'s payments began to come in late or not at all, but according to Foley, the DAS did not demand the payments.
Following an inquiry by the State Auditor's Office, DAS informed the company that they were in breach of contract. The company then paid roughly $27,000 to the state in November of 2012.
DAS says representatives of Shredding Solutions, Inc. claimed to have a verbal agreement for the flat rate of $25 per ton, but the DAS has not provided further information about the agreement.
DAS director Carlos Castillo says agency officials believe they were properly reimbursed.
In response to the situation Foley said, "I find the State's relationship with this contractor to be highly peculiar."
"First, DAS received insufficient payments from its contractor, then very late insufficient payments, and then no payments whatsoever – all without DAS taking any action," said Foley. "When notified by auditors of the discrepancy, DAS let the contractor off the hook, forcing Nebraska taxpayers to eat most of the problem. Something is just not right here, and DAS and the contractor have replied with nothing but empty excuses."