PROVIDENCE — With state Department of Transportation spending under a microscope, the highway-building industry’s new $4,000 a month spokesman and Governor Carcieri’s newest DOT director appear in agreement on how to eliminate a backlog in auditing the “overhead” rates of up to 210 percent the agency has been paying its contractors.

At least once every two years, the DOT is supposed to do an interim audit of contract billings. They also do audits at the beginning and end of each contract. Those that have come to light in recent days show in-house auditors saying no-way to reimbursements for booze and bonuses, directors fees, DOT-paid loans for personal cars and “unauthorized” travel expenses.

In an interview yesterday, Michael Doyle, the new spokesman for the Rhode Island Consulting Engineers Association, cited the DOT’s admitted lag in auditing the rates charged by its fleet of engineering and design consultants as an argument for either hiring more auditors — or relying on the “independent” audits commissioned by the companies themselves.

Doyle said the DOT could then do what the Internal Revenue Service does: periodically audit a sample.

As it stands, he said, some of the larger engineering companies — such as Beta Engineering — have not had their rates adjusted in a decade. He said Beta’s markup remains: 124.61 percent. While that might “benefit the taxpayer,” he said, it “hurts” the industry and penalizes individual companies.

His argument: “Because Rhode Island uniquely withholds [3 percent] until an audit is performed after the conclusion of a job, timely audits are critical to an industry that is limited to a 10-percent profit margin. Most other states accept audits performed by independent CPA firms and rely on state auditors to review and test those findings.”

“In Rhode Island, the division of audits normally does not rely on such outside audits and performs the entire audit itself. While one can argue that the state is better protected by such a system, it is beyond the capacity of the current staff to do this in a timely way. That has resulted in many of the overhead rates… that are being used today being based on data that, in some [cases], is more than 10 years old.”

“It would be in all parties’ interest to have these kept current,” he said.

There was no immediate response yesterday from the DOT to Doyle’s arguments.

But a day earlier, DOT Director Jerome F. Williams indicated that he, too, saw possible merit in relying on what he called “the external audits” commissioned by the consulting firm, adjusting rates accordingly and monitoring compliance with the many state and federal dos-and-don’ts after the fact.

While he did not say where the idea emanated, he said: “The fact that audits need to be done on a regular basis is very important.”

It was not immediately clear, however, how industry-commissioned audits would handle some of the findings of the DOT’s own in-house auditors, and how much faster they would reduce the sometimes inflated rates the DOT pays its consultants for an array of federally allowed overhead expenses, from rent to advertising to professional fees.

In one well-publicized case, DOT lag time allowed one major DOT contractor — the Plexus Corp. — to continue, until this past spring, charging rates that in-house auditors sought to reduce after finding evidence that the 2004 business expenses the company presented for a pre-award audit, on a new contract, included “gifts,” “loan payments for personal cars,” and “alcohol at a Christmas party.” The auditors “disallowed” $240,554 of $953,426 in expenses.

Documents trickling out of the DOT in recent days, in response to a public-information request, indicate the Plexus audit was not an isolated case. Some examples:

After taking an after-the-fact look at the 2000 expenses presented by Crossman Engineering as justification for its overhead rate, the auditors disallowed $266,092 of $1.2 million. That included $157,205 in “bonuses,” $36,737 in “automobile expenses,” $25,000 in “directors’ fees” and $572.44 for “employee activities” that involved alcohol, according to the disallowance code.

Another such after-the-fact look at the 2004 expenses of Cataldo Associates rejected a total of $60,257 for reimbursement, including $18,024 in what were described as unsupported “travel expenses.”

In each case, the auditors recommended a reduced — and in some cases, substantially reduced — overhead rate. The auditors recommended, for example, knocking Crossman’s markup — over and above its direct labor costs — down from 116 percent to 92.43 percent.

The DOT has thus far been unable to document when and if the rates were reduced, and how much, if anything, the agency recouped from each of the companies.

But Doyle yesterday sought to dispel the notion the current overhead rates are “outrageous,” as Carcieri himself suggested when it came to light that the DOT was paying a 145-percent markup to staff a traffic-monitoring center in a state-owned building, including the equivalent of $102,858 for a typist.

Doyle began the day by touting a state-by-state survey by PSMJ Resources, which bills itself as a strategy, marketing and consulting arm of the architectural and engineering industry. His suggested headline: “RI DOT pays lowest rates in the country according to a national study.”

The survey pegged the average overhead rate paid here at a nationwide low of 173 percent.

But when contacted yesterday, the survey’s author, William Fanning, said: “The headline… is probably a bit misleading.” He said the survey was not limited to the DOT rates and how they compare. Rather, they represent an amalgam of income and expenses on private and state, county and local jobs.

“A fair reading is that firms doing business in Rhode Island … are below the national average, and below almost all other states,” he said.

Doyle’s argument: “If the state wants the best firms competing for its business — which should be the goal since they are designing bridges and roads upon which we all depend — then paying a competitive rate is in everyone’s interest. Now, we’re just the cheapest.”

kgregg@projo.com