The Portland city auditor’s office says staff at the Water Bureau have not been abiding by city rules — and may have even violated state law.

In a report out Thursday, the auditor’s office says investigators followed up on a tip to their fraud hotline and found evidence that a Portland Water Bureau staff member tried to circumvent the city-mandated competitive procurement process. 

Whenever city staff plans on spending more than $10,000 on services or goods, officials are supposed to begin a procurement process where vendors are invited to come in and compete for city dollars. 

But the auditor says staff at the Water Bureau skipped that process by routinely making purchases just under that $10,000 threshold.

Between January 2018 and June 2019, Ron Drath, a meters supervisor for the Bureau, made 18 purchases of just under $10,000 for water meter equipment, according to a memo sent to the Water Bureau from the auditor’s office. (Drath had previously been the subject of a $20,000 sexual discrimination lawsuit.)

Despite there never being a competitive process, more than $182,000 went toward an equipment company called Consolidated Supply Co.

The practice has a name. It’s called “fragmenting” — and it’s illegal, according to Deborah Scroggin, the lead investigator for the city auditor’s office. She said they’ve forwarded their investigation to the Water Bureau and the matter’s now in their hands. 

The office of City Commissioner Amanda Fritz, who oversees the bureau, said the Water Bureau did their own investigation with the Bureau of Human Resources and found “no evidence of fraud or illegal personal gain.” As a result, no disciplinary action will be taken against the Water Bureau staff members named in the investigation. 

The auditors’ investigation turned up one possible reason why the supervisor might want to avoid the competitive procurement process. 

According to the report, Kathy Koch, who oversaw the equipment purchases for the Water Bureau, is married to a salesperson at the equipment company. The auditors’ report points out her husband receives commissions based on how much he sells. 

This is the kind of conflict-of-interest that the manager would need to disclose to the city. But, according to the report, this never happened. 

The auditor’s office pins part of the blame on a messy procurement process within the Water Bureau. 

“Folks were not clear on what part of the process they were at when they were purchasing equipment,” said Scroggin. “And so we just recommended that they really put into place more clear procedures and go through some procurement training, especially people at all levels of the bureau who are engaged in purchasing decisions.”

In a statement, Mike Stuhr, the director of the Water Bureau, said the bureau has since signed all the conflict of interest forms, received “procurement training,” and signed a new contract through the procurement process for meter equipment - though the auditors’ report points out this happened after their investigation began.