District Dodges Spending Laws

"We have to manage a badly functioning bureaucracy to get it to provide badly needed services," he said. "The problems all come to my doorstep."

Gandhi has independent authority granted by Congress over every dollar spent by the District. But he said if he strictly enforced financial laws, many services would stop.

"I will be damned if a child is without textbooks or an AIDS patient is without medicine just because some bureaucrat did not file the paperwork right."

City officials also spent about $200 million last year through no-bid contracts that are intended to be used only when bidding is impossible. A loophole approved in 2002 by the D.C. Council greatly expanded their use, allowing the contracts to go to any company that agrees to charge according to a published schedule of prices. Studies of no-bid contracts nationally have found that the lack of competition drives up costs by as much as 39 percent.

The spending problems have drawn little attention, in part because city income has grown dramatically with rising property values. Mayor Anthony A. Williams (D) has been credited with transforming the financial health of the nation's capital, bringing it from near bankruptcy a decade ago to a $320 million surplus this year. But even as the city has balanced its books, records indicate it is violating its own rules.

National contracting experts said the District's spending policies are unique among cities and states across the country. Other cities do not allow their buyers to use direct vouchers. And experts said the city is also unusual in creating a loophole that allows no-competition contracts even when many companies could bid for the job.

That combination wastes taxpayer money and opens the door to misspending and fraud, said Kirby Behre, a former federal corruption prosecutor, who called it a "breeding ground for the District to be taken advantage of."

City leaders were aware of the abuse of direct vouchers at least a decade ago, although any efforts to stop them failed. When he was chief financial officer in the mid-1990s, Williams issued two memos banning the payments for standard purchases. "Agency controllers are required to adhere to these instructions carefully," he wrote in 1995 and again the following year.

Still, some of the spending problems have worsened with the city's streamlining efforts over the past three years, which reduced layers of approval and expanded the number of no-bid contracts. Those changes led to a vast increase in discretion for agency employees in charge of buying.

In response to The Post's findings, Gandhi's office said it would try to eliminate the improper use of direct vouchers through a new monitoring system that began last month.

Williams's spokesman, Vince Morris, in response to two requests over the past month for an interview, said the mayor was not available.

D.C. Auditor Deborah K. Nichols said that, although she believes financial management in the District is less troublesome than it was a decade ago, employees are still allowed to bend the rules.