A Utah state agency made nearly $700,000 in unnecessary payments after a former employee made fraudulent contract changes and was unable to recover almost $300,000 of the funds, according to a new audit released this week.

The overpayment was included in an audit of the state’s Division of Facilities Construction and Management, which oversees thousands of state-owned and state-leased buildings and construction projects.

The division needs to strengthen oversight practices across the board, the audit released Tuesday by the Office of the Legislative Auditor General concluded. It pointed to the overpayment as one example.

“After a former employee was placed on leave for falsifying procurement documents, a program manager took over the employee’s duties and discovered additional problems,” the audit reads.

The employee, the audit said, made “inappropriate contract modifications” that resulted in the overpayment for janitorial services at the Taylorsville State Office Building. The former employee had been siloed, the audit’s authors wrote, which allowed the fraudulent changes to go unnoticed.

The department couldn’t give law enforcement enough information to determine whether the employee personally benefited, the authors added.

In total, they concluded, the agency paid $677,669 more than it should have. The state recovered a significant portion of that overpayment but was unable to recover $291,650 in payments resulting from “inappropriate contract amendments.”

The legislative auditor’s office recommended that DFCM implement periodic reviews “to verify compliance with contract amendment, invoice approval, and procurement requirements.”

The oversight is emblematic of a larger issue, the audit authors added.

“This situation demonstrates a failure by prior leadership to establish monitoring and oversight mechanisms sufficient to detect errors,” they wrote. “The same leadership weakness identified here is reflected in the division’s approach to capital project oversight, where known or knowable compliance risks were not consistently monitored, evaluated, or acted upon.”

The auditors reviewed 17 construction projects by state entities that had no DFCM oversight. Some of those, they wrote, “had building-code violations that could affect long-term building performance and occupant safety.”

“DFCM knew or should have known about many of these projects,” the audit supervisor, Jake Davis, told state lawmakers Tuesday evening at an audit review meeting.

The agency was also unaware of a longstanding state law passed in 1992 requiring that they report costs to the Legislature within 30 days of a project’s completion.

“Without complete cost information and required project reporting, the Legislature cannot determine whether additional expenditures are justified or delivering value to the state,” the audit reads.

At Tuesday’s meeting, DFCM leaders said they appreciated the audit and understood they need to increase regulation, but added that the agency oversees thousands of structures.

“Keeping in mind that DFCM has responsibility for about 4,000 structures or buildings in the state of Utah, it is possible for a few things to get by us,” Marvin Dodge, the commissioner of the Utah Department of Government Operations, told lawmakers.

In particular, he said, the agency has struggled to regulate construction and code violations at state parks, calling it a “perennial challenge” that staff is working with the Utah Department of Natural Resources to address.

Going forward, DFCM director Andy Marr said at the committee meeting, the agency will also work to bring more detailed and flexible project cost estimates to the Legislature for state-managed projects.

“We can spell those things out so the Legislature has options; they’re not just provided with one number, and that dialog continues,” he said. “So we have a much more robust process.”