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  • Council Initiated Investigation

    CDM Contract Compliance Report

    Felton Financial Forensics, LLC

    5200 Tifton Drive, Minneapolis, MN 55439 Phone: 612.490.1940

    www.feltonforensics.com

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

    Table of Contents

    I. Executive Summary ............................................................................................................................... 1

    II. Background ........................................................................................................................................... 2

    III. CDM Noncompliant Contract Findings ............................................................................................. 3

    A. Non-Allowable Expenses ................................................................................................................... 3

    IV. Conclusion ....................................................................................................................................... 12

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

    Page | 1

    I. Executive Summary

    The Honorable Jannquell Peters, Mayor

    The Honorable Sharon Shropshire, Council Member, Ward A At Large

    The Honorable Alexander Gothard, Council Member, Ward A

    The Honorable Karen Ren, Council Member, Ward B At Large

    The Honorable Lance Rhodes, Council Member, Ward B

    The Honorable Nanette Saucier, Council Member, Ward C At Large

    The Honorable Myron B. Cook, Council Member, Ward C

    The Honorable Deana Holiday-Ingraham, Council Member, Ward D At Large

    The Honorable LaTonya Martin, Council Member, Ward D

    Dear Honorable Mayor and Council Members:

    The City Council retained me to prepare a report on the results of the following Council Initiated

    Investigation Phase II Tasks:

    1. Test CDM Smiths Capital Project Program Billings Compliance with Contract Terms.

    2. Test the 59 Missing Boxes Containing Paid Vendor Invoices for Compliance with the Citys

    Procurement Code and Policies.

    Detailed findings are in the report body. I prepared a separate report for the missing boxes, due to

    the length of the report. This report dated May 12, 2014 and titled Council Initiated Investigation

    Missing Boxes Report was previously submitted.

    I would like to thank the current mayor and council members, as well as the former mayor

    Earnestine D. Pittman, and former council members Sharonda D. Hubbard, Pat Langford, Marcel

    L. Reed, and Jackie Slaughter-Gibbons, for this opportunity to serve them and the East Point

    residents.

    I would also like to thank senior management, the City Attorneys Office, the Procurement

    Office, the East Point staff, and the Citys outside legal counsel, Randy Turner, for their help and

    support during Phases I and II of the Council Initiated Investigation.

    Respectfully,

    Mark A. Felton, CPA, CFE, MAFF, CVA, MBA

    Felton Financial Forensics and Valuations, LLC

    cc: Ellis Mitchell, Interim City Manager

    Brad Bowman, Acting City Attorney

    Randy Turner, Esq., Turner & Ross, LLC.

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

    Page | 2

    II. Background

    In late summer 2012, a City of East Point employee contacted the new city attorney, Corliss

    Lawson, and alleged certain improprieties in the City of East Points bidding and procurement

    process. Based upon this initial allegation an investigation was conducted, which included

    reviews of relevant records and interviews of appropriate personnel.

    In a report dated June 3, 2013, I provided my results to the Mayor, City Council and City

    Attorney. I also presented the results at the July 1, 2013 City Council Meeting. Based on these

    report results, the Council in its July 1, 2013 Executive Session authorized Phase II of the Council

    Initiated Investigation, and directed the City Attorney to negotiate the scope and agreement terms

    with my firm, Felton Financial Forensics.

    Former City Attorney Corliss Lawson and I agreed my firm would perform the following:

    1. Examine and validate the accuracy of all Camp, Dresser & McKee, Inc. (herein referred to as CDM Smith) billings related to the Capital Improvement Program.

    2. Examine and report on the contents of 59 missing boxes paid vendor invoices located July 9, 2013 by city staff.

    My CDM Smith billings finding summary is:

    Based on my reading of the contract between the City of East Point and CDM dated

    September 6, 2006, non-allowable contract expenses appeared on CDM Smith billing

    invoices to the City of East Point. In the almost seven-year contract period, these non-

    allowable expenses totaled $5,390.88.

    My findings of the 59 missing boxes of paid vendor invoices contents are: (Note: See my

    separate confidential report on the missing boxes dated May 12, 2014.)

    1. Prohibited Capital Expenditures.

    2. Travel and Other Expenditures without Proper Documented Justification.

    3. Citys Credit Card Used for Personal Purchases.

    4. Miscellaneous Purchase with Incomplete or No Documented Business Purpose.

    My detailed findings are presented in the body of this report.

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

    Page | 3

    III. CDM Noncompliant Contract Findings

    A. Non-Allowable Expenses

    Per Page 14 of the contract between the City of East Point and CDM dated September 6, 2006, CDM

    Smith represented it had secured or would secure, at its own expense, all equipment necessary to

    complete the contract. In addition, the contract explicitly stated computer hardware and software

    expenses, and continuing education conferences and seminar expenses, unless requested by the

    Department of Public Works and approved in writing, are not allowed.

    Table 1 details non-allowable contract expenses, which appeared on CDM Smith billing invoices to the

    City of East Point. In the almost seven-year contract period, these non-allowable expenses totaled

    $5,390.88.

    CDM Smiths response to Finding 1: Written approval for these purchases are contained within files

    turned over to the City of East Point.

    Non-Allowable Expenses

    Expense Description Cost Invoice

    Number

    Invoice

    Date

    Firm

    Name

    Supporting

    Document

    Computer 1 $1,947.08 10 06-26-07 CDM Page 4

    Computer 2 $2,636.25 11 07-24-07 CDM Page 5

    Field Equipment $177.25 14 10-30-07 CDM Page 6

    Traffic Safety Cones $32.36 20 05-21-08 BenchMark Page 7

    DLODE Gen3 Surface Mount

    Lights $59.95 21 07-02-08 BenchMark Page 8

    Hawk Dash Light-48 LEDS $52.99 21 07-02-08 BenchMark Page 8

    Certification Training Class $250.00 22 07-28-08 BenchMark Page 9

    Field Equipment 2 $66.00 24 09-25-08 CDM Page 10

    Computer 3 $169.00 44 05-13-10 CDM Page 11

    Total Non-Allowable

    Expenses $5,390.88

    Table 1 - Non-Allowable Expenses per Contract

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

    Page | 4

    Document 1

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

    Page | 5

    Document 2

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

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    Document 3

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

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    Document 4

  • Council Initiated Investigation CDM Contract Compliance Report

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    Document 5

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

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    Document 6

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

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    Document 7

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

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    Document 8

  • Council Initiated Investigation CDM Contract Compliance Report

    August 5, 2014

    Page | 12

    IV. Conclusion

    I have concluded my work on Phases I and II of the Council Initiated Investigation.

    Summary findings for both phases are listed below.

    Phase I Summary Findings of the Council Initiated Investigation:

    1. Invoices were paid without properly approved requisitions and purchase orders.

    2. Artificial division of invoices was used to circumvent procurement purchasing

    threshold requirements.

    3. Field purchase orders were improperly used.

    4. Vendor payments were under reported.

    5. Some invoices were paid twice.

    Phase II Summary Findings of the Council Initiated Investigation:

    1. Non-allowable expenses, as defined by the contract dated September 6, 2006

    between the City of East Point and CDM Smith, appeared on CDM Smith invoice

    billings to the City of East Point.

    I thank the management and City Staff for their assistance and courtesies extended throughout

    this Council Initiated Investigation.