COLUMBIA, S.C. - An exclusive contract with a company that provided carpeting and other flooring for state buildings is under investigation by the attorney general's office.

Trey Walker, a spokesman for Attorney General Henry McMaster, said the office is "conducting a preliminary review of the state carpet contract to determine if any action is warranted."

The investigation follows an audit that found state government may have misspent millions of dollars on the contract with Columbia-based Bonitz Flooring Group. The state paid Bonitz $35 million from 1998 to 2003.

The company said it made some pricing mistakes, but issued refunds when they were found.

The state recently ended that contract under which Bonitz was state government's sole supplier for carpet and other flooring. School systems and local governments also used that contract to buy carpet and flooring.

The 2004 audit found that Bonitz overcharged state agencies $128,000 - money the company later refunded - on 150 of 285 projects from February 1998 through December 2003. Bonitz was paid an estimated $9 million for work on state projects that was not competitively bid.

The audit also showed that carpet manufacturers jacked up prices on state jobs, quoting up to $7 a square yard higher than they charged private customers.

The audit did not say whether Bonitz acted improperly, but said there was room for improvement from almost everyone involved in the state's carpet contract.

In a written response to the audit, Bonitz said the problems have been corrected. The company is employee-owned with 800 workers in seven Southern states and Colorado.

In a statement to The (Columbia) State newspaper, Bonitz senior vice president Larry Hutton said the company "stands behind our performance on the statewide contract. The state of South Carolina has received excellent quality in both products and services at a competitive price."

The audit said the state could have saved money if it had competitively bid the contracts.

The State Budget and Control Board, which oversees the carpet contract, said it did not know how many other exclusive contracts the state has. The state uses sole-source contracts to buy many goods and services, ranging from mops to gasoline.

"Obviously, there are serious problems with the way the situation has been managed," said Will Folks, a spokesman for Gov. Mark Sanford.

Budget and Control spokesman Michael Sponhour said the agency would conduct similar audits if "we receive such concerns about another line of work."

"We want to make sure that taxpayers get the most for their money," Sponhour said, adding all state contracts are subject to regular audits.

Sanford has proposed restructuring the Budget and Control Board and putting much of its responsibilities into a new Department of Administration that would report to him.

The board is overseen by executive director Frank Fusco, but ultimate responsibility lies with five of the state's top financial leaders: Sanford, the heads of the House Ways and Means and Senate Finance committees, state Treasurer Grady Patterson and Comptroller General Richard Eckstrom.

"It goes back to what the governor said all along about the Budget and Control Board: When you've got a five-headed monster that's accountable to no one, this is what you end up with," Folks said. "It's not something that would have been tolerated in a cabinet-level administration."

For more than three years, a group of carpet dealers complained the contract with Bonitz was costing the state money. The dealers argued the state should scrap the statewide, five-year contract and bid each project on a competitive basis.

That is what the state plans to do, Sponhour said. He said the decision to end Bonitz's contract in June was not related to last year's audit.

One of the carpet dealers who complained was Chip Salak, director of new business development for McWaters Inc. of Columbia. Since the Budget and Control Board ended the contract with Bonitz, McWaters has won a carpeting job.

The audit "showed everything we had been talking about to the State Budget and Control office ... legislators and other people we have met with over these last few years," Salak said. The state "fell asleep at the wheel on this contract.

"It is clear that the end-users' trust in the supplier was taken advantage of. It is clear that the taxpayers of South Carolina have been taken advantage of."

Clemson University director of facilities Bob Wells said he was surprised when he learned Bonitz had overcharged his school more than $116,000 on a carpeting job.

"They do a lot of carpet over here," Wells said. "For us, Bonitz has been a very responsive company and have done a lot of work. They always seem to do good work."