I hadn’t been expecting this. Last night, City Council discussed a proposal by the Administration to hire an accounting firm to provide a Forensic Audit of several City departments.
Now, this isn’t a full audit of City Hall, as I had discussed and called for in a few columns last July. After a scathing State audit of some Trenton School District programs was released last summer, I posed the rhetorical question: “[I]f an audit of some of the School district programs found this kind of mess, how dependable are the accounting numbers that City Hall is working with? What stories lie hidden in those books? We need to examine the City’s books. We need an Audit.”
To its credit, the Administration issued a Request for Proposal (RFP) in January requesting proposals from qualified accounting firms. The RFP can be found here (thanks, Jim Carlucci). Rather than a comprehensive audit of all non-school City Departments, the RFP calls for services to be provided to examine the Trenton Parking Authority, Trenton City Home (worth a column in its own right, this is a city-owned corporation created to buy City-owned properties and funnel them into productive development via private developers. Don’t ask me how it works; I don’t know either!), the Department of Public Works, the Water and Sewer Utilities, and the Department of Housing and Economic Development.
Not all city departments, to be sure, but certainly many of the bigger ones and certainly ones worth a close look.
The RFP is rather brief, and only gives a very cursory and kind of vague description of the goals of the projected audit: “…a detailed review and critique to Develop for the City a comprehensive analysis and review of the structure, organizational Design, policies and procedures, revenue and revenue opportunities, costs and cost containment, and provide recommendations for efficiency improvement and cost savings to obtain maximum utilization the City’s assets and resources to enhance revenues and control Expenses…”
Don’t ask me to diagram that sentence! I don’t even know what this means! Regarding looking for revenue and revenue opportunities, policies and procedures, etc. I would suggest that is what we have elected our Mayor and Council to provide us. What a forensic Audit needs to do is to shine light on how well – or not – our existing policies and controls are working, and whether we will find the same kinds of shenanigans the State found in the Trenton School System last summer. The image I have here is the Forensic Auditor as Bloodhound and Detective, not Management Consultant.
In any case, there are not very many other criteria for the job given or asked for in the RFP. The duration of the job is given as “one year,” but no other reference to time is included. No indication whether that year is intended to be fulltime equivalent for one person, halftime, or whatever. The RFP asks responding companies to provide organizational information, but it does not ask the respondents to provide a detailed breakdown of their estimate of time and resources for the job, simply a “contract proposal amount.”
Perhaps that is why most of the respondents – and there were six (once again, thanks to Mr. Carlucci) – failed to provide an estimate of the time required to do the job. Out of the six, four responded by providing hourly rates for their services, ranging from $88 per hour to $375. The fifth bid a flat fee of $300,000, while estimating 30 days of work for each of the City departments to be examined.
The sixth bid a flat fee of $190,000, without estimating hours. Mr. Carlucci estimates that this $190,000 might cover about 1200 hours – 30 fulltime weeks – at the rate of some of the other five firms averaged. It isn’t clear whether this estimate will be sufficient to do the job, whether it’s too high, or whether it hits the Goldilocks spot of being just right.
To me, the rather open-ended way the RFP was written almost guaranteed that responding bids would be written in such a way that comparing them apples-to-apples would be hard to do. And this is where we ended up.
Last night, the Administration presented its recommendation to hire Friedman LLP of Marlton, the sole firm to bid a flat amount – even though, remember, there are no criteria to evaluate the sufficiency of the flat rate. But, according to the Recommendation memo submitted – as required by state law – by the Administration to Council, the City uses the fact of the flat rate as the main justification to select Friedman. The memo says: “Four of the six respondents quoted ‘hourly rates’ regarding their costs for conducting the forensic accounting and consulting service. This subjected the City to an unspecified amount for professional services rendered.” [Emphasis in the original.]
Well, of course it does! The City could well have, and should have, included its own estimate of time, for the sole purpose of allowing each respondent to be evaluated on a fair and equal basis. In the event that the actual job might take longer than originally planned (and that would be the first time that sort of thing happened, right?), the City would know whose original bid was lowest, and who could be extended the least expensively. Seems pretty straightforward, right?
Perhaps it won’t come as a surprise that the Recommendation memo to hire Friedman was written by Mayoral Aide (and current nominee for Assistant Business Administrator) Anthony Roberts. Mr. Roberts was just in the news for having been savagely criticized by Mercer Judge Linda Feinberg for his role in another aborted City contract, the one for Information Technology services that had been awarded to Lynx Technology Partners. The Judge said, “Anthony Roberts is completely unqualified to evaluate any bid,” among other pungent things.
Council has apparently taken Judge Feinberg’s words to heart. Some members of Council question the process under which the contract is being awarded, and they have questions about the winning firm not answered in the recommendation memo.
Good! Any recommendation coming from Mr. Roberts needs to be scrubbed and vetted. Apart from his role in the Lynx IT Contract, Mr. Roberts previous work as Tony Mack’s campaign treasurer raises questions about his financial chops. Council will be well advised to look at his recommendation very, very closely.
There are too many questions about how the City does business. Many of these questions extend a lot further back than nine months, to be fair. The City’s policies and procedures and controls – and how closely they are followed – are big black holes to most of its citizens. When the State looked at our schools, they found many severe problems. An audit of the rest of the City is desperately needed to clear the air, identify past and current problems and recommend Best Practices for going forward.
I am glad the City has made moves to finally get this process moving forward. I will feel better knowing that the City has picked the right firm to do the work and made the right deal. I can’t say that right now. The City has made a good couple of steps in the right direction by beginning this process. The way they have run this process to date is at the very least a step sideways.
I hope Council gets this going forward again.
Kevin, Myra and I have been asking for a Forensic Audit for months also, but my feeling is letting city hall have anything to do with it other than picking up the bill, is like putting the fox in charge of the hen house. A forensic audit is just that,you don’t get to pick and choose what and how they audit, who and what should be left up to council.Thats my humble veiw anyhow.When I worked no one ever told me how to do an audit,aything I didn’t like or had questions about had to be answered to my satifaction,it didnt go anywhere until it was.If I didn’t like your answer I would start investigating it and you really didn’t want me to do that. For my money you hire the people,tell them you want to know if we’ve been robbed and by,who ,what,when and where.
Thanks for the note, Marge. I don’t have a problem with the Administration selecting which agencies and departments to audit. But apart from that, I agree that the City should step back and say, “Here’s your office, here are the files, here are the copy machines. Good luck.”
Every audit that I have participated in (as a client, always being audited) works that way. The auditors pick what to look at and ask questions or look for explanations why certain things are done certain ways. You answer the questions and provide the explanations.
The City’s RFP was just a confused document. After trying to parse the grammar, one is left with the initial statement that the City is asking for a “forensic audit,” followed by requests for Management Consulting.
These are different things, as Dan Dodson reminds us. My take is that the City asked for responding companies to do the work that the City should first do.
When we get to the point – now far, far away – of needing management consultants, the City should be prepared to say, “This is our destination. Help us get there.” With this RFP, the City is asking, “Tell us where we should be going.”