State Auditor Makes Four Findings in CHHS Review
Brian Coddington, Communications Director, 509.625.6740
Monday, April 19, 2021 at 12:32 p.m.
A review by the State Auditor’s Office (SAO) conducted at the request of Mayor Nadine Woodward to examine employee concerns related to work with the community organizations that operate public and human services has revealed four findings.
The audit, conducted over the past year, flagged concerns related to policies and practices governing procurement, sub-recipient agreements, conflict of interest, and gifting of public funds. The final report includes the City’s response that details specific actions to improve training, service delivery, oversight, and accountability.
“Our employees raised questions about some of our processes and procedures that we felt required outside review,” Woodward said. “The State Auditor’s Office conducted a thorough examination of the concerns and provided us with excellent guidance and recommendations to avoid a repeat of this situation.”
Community, Housing, and Human Services staff raised questions related to work convened and overseen by the department. The questions focused on process, including how processes are implemented, followed, and improved.
Woodward reported the concerns to the state auditor and requested the agency investigate. The employees and elected official noted in the final report all left City employment prior to 2020.
The SAO reported findings in these areas:
- Procurement – The department did not comply with City policy and procedure for two contracts awarded in 2019. The department could not provide documentation to demonstrate it performed informal solicitations as required by City policy, according to the finding. The contracts were for flooring repairs of $11,400 and $13,300.
- Sub-recipient agreements – The department follows an informal practice to award sub-recipient services rather than relying on adopted polices and written procedures. The state reviewed three contracts and the department could not provide evidence it followed its practice and solicited an RFP or performed a competitive bidding process for sub-recipient agreements approved in 2019 of $881,482, $740,000, and $495,841 for warming center shelter operations.
- Conflict of interest – In review of the sub-recipient agreements, the auditor found two of the three contracts referenced in the previous finding had an appearance of a conflict of interest. In one instance, a former City Council member participated in a sub-recipient award process that included an organization whose founders contributed to the member’s mayoral election campaign. In the second instance, a department director responsible for the shelter and warming center programs participated in awarding the agreement and then left the City for employment with the sub-recipient. No documentation existed to evidence the department or City resolved the potential conflicts of interest.
- Gifting of public funds – The department reimbursed a consulting agency for two mortgage payments and one car loan payment for one of the agency’s employees in 2017 totaling $2,453, which are personal, non-business expenses. According to department staff, a department director approved making the payments to the consulting agency as an alternative form of compensation for the employee’s service hours worked under the agreement.
The SAO attributed the cause of the conditions to, “Department staff felt pressure and influence from Department directors and those Department directors felt pressure and influence from a City Council member to approve projects, contracts, agreements and transactions that bypassed established internal controls, Department practices and the City’s adopted policies and procedures.”
“I commend the Mayor and the CHHS Department for formalizing new procurement rules that should prevent future questions,” said Council President Breean Beggs. “I believe that even the appearance of a potential conflict is concerning and will work to ensure that RFP respondents are confident that they have an equal playing field.”
The CHHS department is part of the Neighborhoods, Housing, and Human Services division. Woodward appointed Cupid Alexander to oversee the division in November and he has already taken steps to tighten policies, procedures, and practices.
“We have already begun learning from this and making changes to protect taxpayer resources and our employees,” Alexander said.
The City committed in its response the state auditor to:
- Establish protocol and implement a training program related to purchasing
- Provide additional training on Personnel Policies and Procedures regarding how to report fraud, waste, abuse, and whistleblower protections
- Embed procurement training into the onboarding of future department employees
- Review and update policies and procedures
- Require employees to use a consistent and equitable process to evaluate, select, and award agreements to sub-recipients
- Require all selection committee members to acknowledge having reviewed conflict of interest policies and procedures
- Ensure consultants are reimbursed for actual and appropriate business expenses
- Embed conflict of interest training into the onboarding process
- Provide ongoing education and review of conflict policies
- Require all employees to attend and complete the Gifting of Public Funds training
- Provide department staff training for a detailed process to use if an invoice or document is in question
The full audit is published on the SAO website.
