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Auditor general’s report finds flaws in handling of construction complaints

BlueprintsA performance audit by the state Auditor General’s Office highlighted several problems in the Registrar of Contractors system designed to ensure quality work from licensed contractors to consumers.

The report, which was released in July, highlighted the agency’s process of assessing and resolving complaints and found its ability to compensate eligible consumers through the Residential Contractors Recovery Fund to be flawed.

The Recovery Fund was established to reimburse homeowners who had experienced financial loss due to poor work performed by a licensed contractor, according to the report. The fund’s main source of money comes from contractors’ licensing and renewal fees.

Problems cited in the report from 2010 data showed fund claims not being reviewed for approximately 11 months. The report states that claims were being processed within two months of being received as of July 2012.

Tyler Palmer, chief of staff at the Registrar of Contractors, said this problem stated in the report, like many of the others listed, is from old data and has already been resolved.

He said the agency has since reduced the turn-around for these claims through a new system that requires more information from the complainant up front and by adding an eligibility step in the review process.

The recovery fund is only for “owner-occupied residential property,” 

Palmer said.  So by first assessing whether the claim meets that criteria and whether it demonstrates actual harm caused by the contractor, the agency has been able to eliminate the previously wasted time spent on assessing the amount of damages in claims that wouldn’t end up being eligible to receive money from the fund anyway.

The more efficient process was made possible by requiring more information in the initial complaint, which eliminated the back and forth “ping pong” element between the agency and complainant, Palmer said.

Another problem cited in the auditor general’s report was insufficient money in the Recovery Fund to repay homeowners with approved claims.

The lack of funds resulted from a significant amount of money being transferred by the Legislature to the general fund according to the report. Initially $6.6 million was transferred in 2009, and additional money totaling more than $1.8 million was transferred over the next three years, according to the report.

After these cuts, the agency has continued to pay approved claimants by delaying the payments until sufficient money is available and by paying them in the order the claims were approved, according to the report. This has resulted in homeowners not receiving payments for 12 to 13 months as of January 2013, the report said, and could result in possible financial hardships for those who are owed money.

Palmer said because of recent restoration of some of the funds in the budget the agency has already begun paying back these people, reducing wait times.

“The data they used wasn’t very recent, which also makes it not very relevant,” Palmer said, adding that “since 2011 the agency has already made a lot of improvements.”

The issue addressed by the report of the agency taking too long to resolve complaints, for example, had already been addressed and led to improvements before the report was released, he said In respect to complaints being closed without adequate assurance that they were resolved, Palmer said the agency believes these claims are handled appropriately.

The agency allows for complaints to be settled before going to court, Palmer said. In the past, however, the complaining party has been allowed to call and simply say the problem has been resolved, and that’s why such cases were closed, he said.

After the recommendation from the auditor general, the agency agrees there may be a need for more documentation and is looking into whether compliance should be required in writing as opposed to just verbally, he said.

“We think that there are certain complaints, certain types of situations where more documentation would be beneficial,” Palmer said, but, “it won’t be every type.”

The agency still plans to make continued improvements in conjunction with the recommendations of the report, he said.

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