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OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR Deborah K. Nichols Letter Report: Sole Source Agreements Issues by the Executive Office of the Mayor and Office of the City Administrator Failed to Comply with Procurement Law and RegulationsOFFICE OF THE DISTRICT OF COLUMBIA AUDITOR 717 14TH STREET N.W., Suite 900 WASHINGTON, D.C. 20005 TEL. 202-727-3600 • Fax: 202-724-8814 Deborah K. Nichols June 3, 2005 The Honorable Vincent Orange, Sr.
Dear Councilmember Orange: Pursuant to your request of March 18, 2005, and the authority vested in the District of Columbia Auditor ("Auditor") by Section 455 of the District of Columbia Home Rule Act, as amended,1 I am presenting my findings regarding sole source agreements issued by the Executive Office of the Mayor ("EOM"), including the Office of the City Administrator ("OCA"). Work concerning certain other contractors is ongoing and when completed a report of our findings will be submitted to you. This letter report sets forth findings and recommendations regarding oral agreements and payments to Lily Hu/Lily Hu & Associates and Melinda Yee-Franklin/The Siena Group, both located in Oakland, California, and payments to Mr. Ira Sockowitz/the Phoenix Consulting Group for work performed on the Mayor's "trade mission" to China/Thailand on October 14 - 25, 2004. Also included in this report are findings regarding a sole source non-competitive contract awarded by the City Administrator (Mr. Robert C. Bobb) to Ms. Jane Brunner, a lawyer and member of the city council in Oakland, California. On Friday, May 6, 2005, the District of Columbia Auditor and Legal Advisor to the Office of the District of Columbia Auditor met with the City Administrator to present the Auditor's findings regarding this examination and to obtain his views. On May 17, 2005, a draft of this letter report was submitted to Mayor Anthony A. Williams, the City Administrator, Ms. Sherryl Hobbs Newman, Secretary of the District of Columbia ("Secretary"), Mr. Herbert R. Tillery, Deputy Mayor for Operations and Interim Chief Procurement Officer ("CPO"), and Mr. Edward D. Reiskin, Deputy Mayor for Public Safety and Justice for their review and comments. Comments, which are appended in their entirety to this report, were received from the City Administrator and the Secretary on May 20, 2005. Where appropriate, changes were made to the report based on the comments received. Moreover, the comments did not result in any substantive changes in the Auditor's findings and recommendations. This examination was conducted in accordance with generally accepted government auditing standards (GAGAS), effective January 1, 2004. Specifically, GAGAS states in relevant part the following: The concept of accountability for public resources is key in our nation's governing process and a critical element for a healthy democracy. Legislators, government officials, and the public want to know whether government services are being provided efficiently, effectively, economically, and in compliance with laws and regulations. They also want to know whether government programs are achieving their objectives and desired outcome, and at what cost. Government managers are accountable to legislative bodies and the public for their activities and related results. [Auditor's Emphasis] Government auditing is a key element in fulfilling the government's duty to be accountable to the people ....These standards are broad statements of auditors' responsibilities.2 Chapter 8 of GAGAS entitled, Reporting Standards for Performance Audits, states in relevant part the following:
FINDINGSI. Services Improperly Procured From Lily Hu/Lily Hu and Associates and Melinda Yee-Franklin/The Siena GroupThe Auditor found that the EOM's transactions with Lily Hu/Lily Hu and Associates and Melinda Yee Franklin/The Siena Group appear to have been established at $25,000 under a sole source non-competitive oral agreement. The Auditor has been unable to conclusively determine whether the $25,000 arrangement included expenses incurred by the consultants in connection with their work or whether their expenses were paid separately by the District government. The Auditor found that the consultants were recommended to the Secretary by the City Administrator as individuals who were experienced and knowledgeable in planning and executing trade missions, and therefore could assist the Secretary with the China/Thailand "trade mission." The Auditor found no contract authorizing the work performed or payments made to these consultants. However, it appears that, beginning in late August 2004, the Office of the Secretary of the District of Columbia ("OSEC") attempted to put a contract in place to cover these services. For example, the Auditor found the following emails which contain relevant statements:
For reasons unexplained to the Auditor, a contract was not put into place before these individuals began work pursuant to the verbal agreement. Although the Auditor was recently provided an example of a contract developed for consultants working on the China/Thailand "trade mission," it was not executed by any of the parties. Nevertheless, the consultants began work without a valid written contract or an underlying purchase order encumbering funds to pay for services rendered. According to documentation provided by the EOM, the City Administrator authorized these individuals to begin rendering services to the-District government based only on a verbal agreement. The Auditor found only an. unsigned, undated document entitled, "Statement of Work," ("SOW") which described work to be performed. (See Appendix I for Statement of Work) No contract administrator or contracting officer was identified, no total cost, or payment terms and conditions were set forth in this document. The SOW indicated that the "contract" covered the period September 6, 2004 to November 1, 2004, however as previously noted, the consultants began work in August 2004. Section 1006.1 of Title 27 of the District of Columbia Municipal Regulations ("DCMR") states, in relevant part, the following: "The procurement business of the District shall be conducted in a manner above reproach and, except as authorized by law, with complete impartiality and with preferential treatment for none. "4 The District's procurement law specifically and clearly states that: "...No District employee shall enter into an oral agreement with a vendor to provide goods or services to the District government without a valid written contract," and further states that "[a]ny violation ....shall be cause for termination of employment of the District employee."5 Further, as stated in Chapter 10 of Title 27 of the DCMR, the contracting officer is the only District official authorized to sign contract documents and to contractually bind the District.6 The Auditor found that the EOM's advance planning was inadequate regarding the type and potential sources of contractual services that would be needed to plan and execute the China/Thailand "trade mission." Even though the decision was made in May 2004 to take the China/Thailand trip, it does not appear that any significant advance planning was undertaken. There was no apparent involvement of OCP or an authorized contracting officer in this transaction until several months later when a requisition was finally entered into the PASS system for OCP to process a procurement covering only $15,000 of the $25,000 verbal agreement with these consultants -- well after they had begun rendering services.7 When OCP's staff services were requested, their job was primarily to rectify a transaction that did not conform to procurement law or regulations from its inception. The device ultimately used by OCP to give these transactions the appearance of legitimacy (after the fact) was the preparation of a Determination and Findings ("D&F") Statement for a Single Available Source procurement. (See Appendix IIA and JIB for Determination and Findings Statement) The process used by OCP did not comply with the spirit or intent of the procurement law and regulations. In addition to the $15,000 covered by the D&F created in early October 2004, the Auditor found that each of the consultants had submitted a $10,000 invoice dated 9/30/2004, for services rendered without a contract. (See Appendix MA and IIIB for Consultants' 9/30/04 invoices) These invoices did not detail the specific services rendered and could not be paid because there was no authorized contractual basis to justify and support any payments to these individuals. Further, no funds had been encumbered to pay for the services. Paying these invoices created significant problems in that the services were rendered on the basis of a prohibited verbal agreement, or without a valid written contract, and thus were an unauthorized commitment of the District government. The District's procurement law specifically and clearly states that: "No District employee shall authorize payment for the value of supplies and services received without a valid written contract."8 Thus, approval to pay the $10,000 invoices first had to be obtained from the District's Interim CPO through the ratification process. The Auditor found that a nearly complete Ratification Request was submitted by the EOM and considered by OCP's Ratification Request Committee on December 16, 2004. (See Appendix N for Ratification Request9) Until a complete ratification request was submitted by the EOM, the Ratification Review Committee could not render a decision and the Interim CPO could not approve payments to the consultants. In comments to this report, the EOM states that: "In November 2004, the analyst submitted a ratification package to OCP to justify the FY 2004 costs of $10,000 each. A ratification hearing was held on December 16, 2004, and a conditional approval was granted, pending additional documentation." The Auditor found that the "conditional approval" granted by OCP's Ratification Request Committee specifically did not authorize EOM to make any payments to the consultants. In fact, the December 16, 2004 Ratification Request Committee Recommendation Form, which recommended conditional approval, clearly and unequivocally states: "Please note that payment is not authorized until the Committee has received the requested changes, and an approval letter has been issued by the Chief Procurement Officer." [Auditor's Emphasis] Contrary to this directive, the Auditor found that $10,000 payments were improperly processed through the District's financial system by direct payment on December 14, 2004 and $10,000 checks were issued on December 16, 2004. (See Appendix V for $10,000 Payments Issued to Lily Hu and Melinda Yee-Franklin) The processing of these payments preceded the Ratification Request Committee's December 16, 2004 meeting and the Interim CPO's January 6, 2005 authorization to pay the invoices. (See Appendix VIA and VIB for Memorandum from Chief Procurement Officer). Payments to the consultants, particularly through the direct payment process before approval of the ratification request by the CPO, were highly improper. These payments circumvented the ratification process and may have escaped OCP's knowledge. Further, they violated policies issued by the Chief Financial Officer ("CFO") of the District of Columbia regarding the use of the direct payment process. Specifically, the CFO's Resource Management Guidance No. 96-02 states, in relevant part, the following:
The $10,000 payments made to Lily Hu/Lily Hu Associates and Melinda Yee-Franklin/The Siena Group through the direct payment process did not qualify as one of the exceptions listed above. Transactions such as these are examples of how the direct payment process is misused to circumvent internal controls and other legal and regulatory requirements. II. Services Improperly Procured From the Phoenix Consulting Group/ Ira SockowitzThe Phoenix Consulting Group/Ira Sockowitz was issued three purchase orders during fiscal year 2004 (on 9/2/2004, 9/28/2004, and 10/8/2004) totaling $26,500 to perform services in connection with the Mayor's "trade mission" to China/Thailand. The Auditor found that the purchase orders issued to the Phoenix Consulting Group and the SOW were considered contracts. In fact, there was no contract setting forth the scope of work with regard to consulting services, total cost, payment terms and conditions, contract administrator, or contracting officer. The purchase orders were simply underlying financial instruments used to encumber, or set aside, funds to cover the cost of services. In the absence of a valid written contract, the total projected cost of these services were split to avoid the $25,000 threshold which required at least three written quotations from other vendors. The Auditor found no proposal from the contractor outlining tasks and their projected costs, and no D&F Statement justifying the award of sole source non-competitive work to this contractor. The practice used to procure these services failed to meet the spirit, intent, and requirements of the District's procurement law and regulations. The Auditor also found that the SOW developed for the services of Lily Hu and Melinda Yee-Franklin was nearly identical to the SOW used to support payments made to the Phoenix Consulting Group. (See Appendix VIIA and VIIB for the Phoenix Consulting Group's SOW) However, the Phoenix Consulting Group's SOW included the following additional tasks:
The Auditor also found that the $9,900 requisition (RQ166471) and purchase order (P0133007) created for Phoenix stated: "Purchase order for oversight work of other consultants for China trip." The SOW was unsigned, undated with no contract administrator or contracting officer identified, and no payment terms and conditions set forth therein. In addition to the three purchase orders noted above, EOM issued the Phoenix Consulting Group a $75,000 purchase order on October 22, 2004 for consulting services. The work to be performed appears to have been related to the Executive Branch's "war room," baseball legislative strategy, and other priorities handled through "the war room." The contractor was paid the entire $75,000 through three checks as follows: $45,000 by check dated November 26, 2004, $15,000 by check dated December 21, 2004, and $15,000 by check dated February 3, 2005. All invoices for payment were approved by the Mayor's Chief of Staff.10 In April 2005, the City Administrator stated that: "OCP has advised me that a D&F Statement was not required for the purchase order awarded to Phoenix Consulting Group (P0134886) as the contract was competitively bid."11 The Auditor found this statement to be inaccurate in that contract records do not demonstrate that a credible competitive process was used to obtain these services. The Auditor again found that this contract was awarded under a competitive practice that failed to meet the spirit, intent, and requirements of the District's procurement law and regulations. The record provided for the Auditor's review indicated that on October 18, 2004, OCP received information from at least two individuals and a proposal from a third. There was no evidence that the Phoenix Consulting Group submitted a written proposal in response to OCP's solicitation. In fact, an October 14, 2004 email from an Executive Assistant in the EOM to an OCP employee indicates that a decision had already been made to hire the Phoenix Consulting Group at that time. The October 14, 2004, email message stated: ". . . I have enclosed the Statement of Work for Phoenix Consulting for the "War Room" functions." This appears to have been the same SOW used by OCP to subsequently solicit bids from other individuals and companies. The record of this competitive process failed to demonstrate that any credible level of competition was sought in the award of the $75,000 contract to the Phoenix Consulting Group. Instead, it demonstrated that Phoenix Consulting Group had already been selected before the socalled "competitive procurement process" was even initiated. III. Services Improperly Procured From Jane BrunnerMs. Jane Brunner, a resident of Oakland, California, was also identified by the City Administrator as a person qualified and experienced to provide contractual services to the Department of Employment Services ("DOES").12 (See Appendix VIII) In early June 2004, a sole source non-competitive contract, with an option to extend the contract for one year, was awarded to Ms. Brunner by the City Administrator. (See Appendix IX for copy of Brunner contract). The contractor was to perform work ostensibly for DOES. The scope of work under the contract required Ms. Brunner to establish and implement an overall strategy for meeting the Mayor's objectives of increasing the number of pre-apprenticeship and apprenticeship opportunities available to District of Columbia residents and enlarging the universe of qualified apprenticeship applicants in the District. The contract was not to exceed $90,000. The hourly rate established under the contract was $185 per hour plus expenses. It was expected that Ms. Brunner would bill the District as much as $7,500 per month during the one-year contract period. (See Appendix X) A March 29, 2005 requisition for $25,000, which was created for Ms. Jane Brunner by the OCA, states: "Statement of work and sole source justification is attached ... See contract file for price analysis and Statement of Work. The rates for these services were compared to similar prices for labor category and labor rates on various schedules. The prices offered by this contractor is [sic] deemed fair and reasonable when compared to these schedules." (See Appendix XI for RQ185555) The EOM and OCP have withheld or failed to provide the Auditor any evidence of a price comparison, price analysis, market survey, or a sole source D&F Statement for the Brunner contract. The Auditor found that this procurement was not initially handled by the OCP and did not comply with applicable policies and procedures set forth in the District's procurement law and regulations. The contract was not executed on behalf, of the District by a contracting officer delegated the necessary written contracting authority to bind the District. The Auditor found that the City Administrator's contracting authority is limited to $25,000 and the City Administrator's Chief of Staff, who signed on behalf of the City Administrator, had no contracting authority. (See Appendix XII for Delegation of Contracting Authority to the City Administrator, which was provided to the Auditor by the Office of the City Administrator) Moreover, it appears that neither of these individuals sought to determine whether they possessed sufficient contracting authority to execute a $90,000 contract on behalf of the District of Columbia government. As previously noted, the Auditor has seen no evidence that either a market survey or a price analysis was performed to determine whether the $185 hourly rate established for work under this contract was fair and reasonable.13 Further, no D&F Statement was prepared to justify a sole source or single available source non-competitive contract award to Ms. Brunner as required by Title 27 of the DCMR.14 In July 2004, Jane Brunner began submitting invoices that included charges for work related to the development and negotiation of a project labor agreement ("PLA"). This work appeared to be well outside the scope of Ms. Brunner's contract to establish an overall strategy for meeting the Mayor's objectives of increasing the number of pre-apprenticeship and apprenticeship opportunities available to District of Columbia residents and enlarging the universe of qualified apprenticeship applicants in the District. The development and negotiation of a PLA appears to be in connection with the baseball stadium construction project and as such would not involve DOES. The Auditor has been advised that DOES would not be a party to a PLA applicable to the baseball stadium construction project. Although the PLA may include some requirements regarding apprenticeship programs, it is unrelated to the scope of services set forth in the Brunner contract. As of May 9, 2005, DOES had paid Ms. Brunner approximately $8,667 for work performed between June 2004 and September 2004. In March 2005, a Memorandum of Understanding ("MOU") was prepared for execution by and between the OCA and the DOES Director. (See Appendix XIIIA and XIIIB for copy of the MOU provided by the OCA on April 27, 2005 and a copy of the MOU provided by DOES on May 16, 2005) This MOU was developed to enable DOES to transfer funds to the OCA "to underwrite the services of Jane Brunner." On March 22, 2005, this undated MOU was signed only by the Director of DOES, and was accompanied by an Intra-District Request Form executed by DOES's CFO for the transfer of $60,000 to the OCA. The Auditor's review revealed that only $25,000 of the $60,000 transfer had actually been encumbered by the OCA. Moreover, as of May 9, 2005, there was no evidence available to the Auditor that these funds had been used to pay approximately $29,000 in outstanding invoices submitted by Ms. Brunner principally for work related to the PLA. If paid, the Auditor was not provided any documentation regarding payments made to the contractor in fiscal year 2005. The Auditor further notes that, although this contract ostensibly involves services to be provided to DOES, DOES was not the party executing the contract, the contract does not designate a DOES employee or official as the contract's administrator, and by transferring funds to underwrite the cost of the Brunner work DOES has further distanced itself from this transaction.15 Subsequent to the release of this report to the EOM for review and comment, the Auditor was provided documentation indicating that on April 19, 2005 the EOM submitted a ratification request to OCP to approve $28,517 in payments to this vendor. The reason given as to why the procurement action was not authorized states, in relevant part, the following:
SUMMARY OF DEFICIENCIESSection 1800.1 of the District Personnel Manual ("DPM") states that "Employees of the District government shall at all times maintain a high level of ethical conduct in connection with the performance of official duties, and shall refrain from taking, ordering, or participating in any official action which would adversely affect the confidence of the public in the integrity of the District government."17 Further, Section 1800.2 of the DPM states that: "The maintenance of unusually high standards of honesty, integrity, impartiality, and conduct by employees is essential to assure the proper performance of government business and the maintenance of confidence by citizens in their government." The transactions discussed above undermine these basic policies and principles. The Auditor's review revealed that the deviations noted in this report occurred, in part, due to the following reasons:
RECOMMENDATIONS
CONCLUSIONThe Auditor's review of sole source agreements issued to four individuals by the Executive Office of the Mayor and Office of the City Administrator revealed a failure to follow sound procurement policies and procedures and to comply with the spirit, intent, and letter of the Procurement Practices Act of 1985, as amended, and procurement regulations. Moreover, public officials entrusted with responsibilities to ensure that public funds are used efficiently, effectively, economically, and in a way that complies with applicable laws and regulations did not adequately discharge these critical obligations. The transactions examined in this report reflected management behaviors that did not conform to the high ethical and professional standards expected of government officials and employees in the performance of their official duties. The District's procurement regulations state: "The procurement business of the District shall be conducted in a manner above reproach and, except as authorized by law, with complete impartiality and with preferential treatment for none." The City Administrator's action of identifying friends and associates, principally from Oakland, California, for non-competitive, sole source "deals" with the District government resulted in transactions that were not; above reproach, "arms length," completely impartial, and free from the appearance of preferential treatment. The manner in which the Hu, Yee-Franklin, and Brunner transactions were handled increased the risk of fraud, waste, and abuse of District government resources. These transactions, or business opportunities, were not publicly disclosed or subjected to a credible competitive procurement process. The transactions examined by the Auditor were financed with public funds, and thus should not escape or be exempt from public scrutiny and complete accountability. The Auditor found that the OCA bypassed OCP in the initial phases of the Hu, Yee- Franklin, and Brunner transactions. Further, authorizing vendors to begin performing services without a contract is prohibited by District law. Any District employee who enters into an oral agreement with a vendor to provide goods or services should be subjected to appropriate disciplinary action. To the Auditor's knowledge, no District employee in the OCA or EOM has been properly held accountable for entering into oral agreements with Yee-Franklin and Hu or the improperly awarded $90,000 contract with Jane Brunner. This Brunner contract exceeded the City Administrator's $2,5,000 delegation of contracting authority by $65,000 and was improperly executed (signed) on behalf of the City Administrator by his then-chief of staff who lacked any duly delegated contracting authority. Title 27, Chapter 10, Section 1004 of the District's procurement regulations set forth the guidelines and procedures for delegating contracting authority and requires an agency head to use the system established by the CPO and criteria set forth in the procurement regulations to delegate, modify, and terminate contracting authority. Essentially, the regulations require all delegations, modifications, and terminations of contracting authority to be in writing. The current City Administrator, in comments submitted to the Auditor, suggests that verbal delegations of contracting authority should be a legitimate and acceptable method of conveying this authority.18 In fact, oral delegations of contracting authority are a high risk, imprudent deviation from best practices and longstanding rules in this area. The Auditor found a lack of employees within the OCA and EOM with critical skill sets and professional acumen necessary to guide, support, and aid officials and managers in both offices in complying with applicable rules, regulations and laws pertaining to finance and procurement. Inexperience and lack of knowledge has played a significant role in giving rise to these and other deviations from applicable laws, rules, regulations, and standards of public stewardship within the executive branch. The poor example set by this shortcoming is conveyed to and is evident within many other agencies and offices of the District government. The transactions reviewed by the Auditor for this report were indicative of management pressures and lapses that resulted in inadequate separation of duties, irregular procurement and financial transactions, inadequate management oversight, decision-making lacking transparency, and a lack of honest, straightforward and complete disclosure of public information. The weaknesses discussed in this report are acknowledged longstanding deficiencies.19 For example, the Center for Innovation and Reform, which is within the OCA, Executive Office of the Mayor, issued a report on procurement and contracting on September 30, 2004 in which it states:
The Auditor's examination revealed that over the years the Procurement Practices Act of 1985 has been amended to increase the small purchase ceiling from $10,000 to $100,000, however, the small purchase procurement regulations generally have not kept pace with changes in the District's procurement law and the implementation of PASS.21 The Auditor further found that increasing the small purchase ceiling has paved the way for the award of single available source and sole source non-competitive agreements of as much as $100,000 each under questionable and widely varied interpretations of the procurement regulations. Moreover, current sole source contracting policies and procedures lack controls designed to minimize, if not eliminate, the potential cost, misuse, and abuse of the $100,000 small purchase ceiling, especially in the award of consulting and personal services contracts. The Center for Innovation and Reform, in its September 30, 2004 report on procurement and contracting, also stated:22
With the introduction of the new PASS system, the position has been adopted by OCP contracting officers and other procurement and program managers and staff that a statement of work coupled with an approved purchase order are all that is required to award a sole source or single available source non-competitive consulting contract up to $100,000. The use of purchase orders as an offer by the District to buy "certain ... services, or other items from commercial sources, upon specified terms and conditions has been extended to non-competitive sole source consulting and personal services contracts. No longer is a written contract executed by a District contracting officer and the contractor required for non-competitive sole source or single available source transactions up to $100,000. There is presently only one potential control on the proliferation and abuse of these contracting methods, and that control is the amount of budget authority available to the agency. It is evident that the EOM has not learned any lessons from past procurement debacles involving the misuse and mismanagement of purchase cards, poor oversight, and lack of accountability for District owned and leased real estate, real estate purchase, mismanagement of the procurement of services for renovation projects and their costs while under the supervision and control of the Office of Property Management, and the longstanding mismanagement of the District's procurement and contracting function and responsibilities. This and other examinations have repeatedly revealed that there have been no discernible improvements in the integrity of the District's procurement and contracting operations. Respectfully submitted, AGENCY COMMENTSGOVERNMENT OF THE DISTRICT OF COLUMBIA Office of the City Administrator May 20, 2005 BY HARD COPY. FAX AND E-MAIL Deborah K. Nichols
Dear Ms. Nichols: On behalf of the Executive Office of the Mayor, we are pleased to respond to your letters dated May 17, 2005, addressed to the City Administrator and the Secretary of the District of Columbia government, and in each case enclosing a draft report concerning contracts awarded by the Executive Office of the Mayor (the `EOM") and the Office of the City Administrator (the "OCA"). Speaking on behalf of the constituent units within the EOM, including for this purpose the OCA, we welcome the opportunity to respond to the draft report. At the outset, we wish to reiterate the Mayor's public expression of disapproval that you chose to present your allegations of impropriety to the Council's Committee on Government Operations in the first instance on May 9, 2005, without advance notice to the Executive Branch of your intent to testify and in disregard of settled rules of procedure in conducting the auditing function. We remain of the view that you first should have presented a draft written report to the persons alleged to have acted improperly, so that they might have an opportunity to comment on the allegations, to correct factual errors, and to prepare a timely and effective response. Testifying in public first and then providing a confidential draft report for review and comment is not in keeping with the best practices of those who perform the auditor's function. We also wish to note at the outset that neither your testimony before the Council Committee nor your draft written report establishes any waste, fraud, or abuse on the part of the contracting process as administered in the EOM. In each instance that you have discussed, the contractor provided good value to the government at competitive rates. In the main, we submit, you have uncovered a handful of instances of technical noncompliance with the procurement rules. Jane BrunnerMs. Brunner has a demonstrated expertise in the field of employment policy. In March 2004, the Department of Employment Services ("DOES") met with Ms. Brunner, was impressed with her background and experience, and began to prepare a statement of work to enlist her services in developing strategies to increase the number of District residents employed as apprentices. In April 2004, after the City Administrator was advised of DOES' interest in retaining Ms. Brunner, he authorized a program analyst in the OCA to assist DOES in the effort by finalizing her statement of work and developing an accompanying contract. The then chief of staff in the OCA approved the documentation in June 2004. On June 4, 2004, the OCA sent copies of the statement of work and contract to DOES so that that agency could initiate a requisition. The contract signed with Ms. Brunner provided that the District would pay her up to $30,000 in FY 2004 and $60,000 in FY 2005. In fact, DOES encumbered less than $10,000 in FY 2004, and for work done in that FY, Ms. Brunner was paid less than $9,000 on the basis of a purchase order issued by OCP, valid from September 1 through September 30, 2004, the end of FY 2004. Ms. Brunner continued to provide services from October 2004 through March 2005. We acknowledge that a valid purchase order was not in place during this period. In March 2005, the OCA became aware that DOES had failed to request the issuance of a new purchase order for FY .2005. Several steps were taken to rectify this situation. First, DOES transferred $60,000 to the OCA to provide FY 2005 funding for the consultant's services. Second, the OCA submitted a ratification request to OCP in the amount of $28,517.19 in payment for services rendered without a purchase order. The ratification hearing for this request is scheduled for May 25, 2005. Finally, OCP executed a purchase order on March 30, 2005 in the amount of $25,000 for services to be performed from April 2005 to September 2005. As for your comment that no D&F was prepared for Ms. Brunner's consultancy work (Rept. at 6), OCP informed the OCA that a D&F statement was not needed in FY 2004, because the purchase order that ultimately was issued amounted to less than $10,000. Also, you state that only $25,000 of a $60,000 MOU has been transferred from DOES to the OCA (Rept. at 7). This is incorrect. The full $60,000 has been transferred, although only $25,000 has been encumbered on a purchase order. Again, we acknowledge that the OCA made technical errors in procuring Ms. Brunner's consulting services. The chief of staff did not have the requisite written authorization to sign the contract with Ms. Brunner, although he had the City Administrator's oral authority to do so. OCA staff proceeded on the assumption that OCP would review and approve the Brunner contract because the OCA had sent it to DOES in order to create a requisition that eventually would require OCP approval. Because DOES was funding the request, the OCA left it to that agency to work with OCP to finalize this action. In hindsight, the OCA should have taken a more proactive stance to ensure that DOES and OCP would interact correctly in FY 2004 and 2005. In addition, Ms. Brunner should not have worked in FY 2005 without a purchase order. However, once the OCA became aware of the procurement issues, the office took steps immediately to rectify the situation. We also take issue with your assertion that staff responded to "apparent pressure from upper management to accomplish certain objectives" (Rept. at 8). No evidence of such "pressure" is presented in your factual findings. We ask: Which "upper management"? Which contracts? Who was pressured? What did the "pressure" consist of? Was the pressure proper or legitimate? It is impossible to address such issues without such basic information. That said, we acknowledge that your survey has uncovered instances in which EOM personnel acted inconsistently with pertinent requirements of the District government's procurement statutes and rules. We have learned from this experience that we must take greater care to adhere to the requirements of the procurement law and to reform our internal processes accordingly. We will now address in turn each of the contracts that you have discussed in your draft report. Lily Hu and Melinda Yee FranklinIn mid-2004, the Secretary asked the OCA to assist in finding outside contractors who could work with the Secretary's office in planning the Mayor's trade mission to China and Thailand. The Secretary also requested that the OCA identify funding to support contracts far Ms. Lily Hu and Ms. Melinda Yee-Franklin, whom we had identified as knowledgeable consultants. Work with the consultants began on August 27, 2004, not August 6, as stated in your report (Rept. at 3). A program analyst in the OCA entered requisitions in the computerized procurement system, PASS, for the projected costs of $10,000 in FY 2004 for each of the two consultants. OCP denied the requests in September 2004, on the ground that the consultants already had begun to provide services. (Your statement that OCP did not become involved in this matter until October 2004, Rept. at 3, is incorrect.) In early October 2004, the OCA analyst entered requisitions in PASS for the FY 2005 costs, amounting to $15,000 for each of the two contractors. After D&F's were prepared for these contracts, OCP promptly approved these requests. Although it is correct that e-mail traffic early on October 1, 2004 reflects uncertainty whether the Secretary could proceed with the two consultants, by midday on that date OCP was in position to advise that it could issue a purchase order with BOM's certificate of Pending, a D&F sole-source justification, and a statement of work (M. Robinson 10/1/04 e-mail to S. Newman at 11:59 am). In November 2004, the analyst submitted a ratification package to OCP to justify the FY 2004 costs of $10,000 each. A ratification hearing was held on December 16, 2004, and a conditional approval was granted, pending additional documentation. On January 6, 2005, OCP received the additional documentation, approved the ratification request, and authorized payment in the amount of $10,000 to each consultant. You state that you found no executed contracts for the two consultants. The OCA was advised that statements of work and purchase orders for the consultants would constitute the required documents. OCP has confirmed that for small purchases, under the $100,000 threshold for most District government agencies (including the EOM and the OCA), a purchase order is deemed a form of contract. We acknowledge that the OCA made technical errors in relation to procuring the services of the two consultants. Specifically, the consultants began work without authorized purchase orders. The OCA rectified this problem by submitting a ratification request, which OCP approved. In support of that ratification, the EOM submitted biographical data for each of the two consultants that amply demonstrated their qualifications. The total amount subject to ratification cause to $10,000 for each of the two contractors. In addition, OFRM processed the ratification payments before the Chief Procurement Officer approved the payments. Ira Sockowitz/Phoenix ConsultingIra Sockowitz has served the District government ably as a consultant, including the planning and coordination of the Mayor's trade mission to Asia in October 2004. Mr. Sockowitz previously had assisted the District government in planning for a similar but less complex mission to Brussels, Belgium in the summer of 2003. He had gained considerable experience in such planning when he worked for the late Ronald Brown, Secretary of Commerce in the Clinton Administration. After the successful experience with the Brussels trip, the District's Secretary enlisted Mr. Sockowitz to assist again, this time on the Mayor's trade mission to China and Thailand. Mr. Sockowitz assisted in making introductory contacts with Chinese officials, in dealing with the Chinese Embassy here in Washington, and in undertaking other preplanning functions. These preplanning tasks amounted to $2500 and were covered by purchase orders issued on September 2, 2004. You suggest alternatively - and somewhat inconsistently - that Mr. Sockowitz was retained to supervise Ms. Hu and Ms. Yee Franklin, or that he was duplicating the work that they performed. Neither statement is correct. All three consultants undertook specific. assignments and areas of responsibility based on the overall needs outlined in the statement of work. Mr. Sockowitz coordinated the consultants' efforts. He did not function as a supervisor for Ms. Hu or Ms. Yee Franklin, nor did he oversee their work. Because the three consultants were functioning as a team on a common project, because time was pressing, and because OCP agreed that the consultants could share common statements of work, they did so. The Secretary developed three purchase orders for Mr. Sockowitz. Contrary to your allegation, these orders were not arbitrarily divided in order to circumvent a $25,000 limit on contracting authority. The first purchase order, totaling $2500, was issued for planning activities. The second, for the advance trip to China, totaled $9900. Both of these purchase orders fell in FY 2004. The third purchase order - for the trip itself- fell in FY 2005. The third was placed at $15,000, but was reduced to $7500 because it was ultimately determined that Mr. Sockowitz would not accompany the delegation on the trade mission. The first and second purchase orders were required to be handled separately from the third because they related to FY 2004, whereas the third related to FY 2005. The three purchase orders came to $19,900 - below the $25,000 limit. Hence, the division of purchase orders was occasioned by the fact that the services in question straddled two Fiscal Years, not because of concern for the $25,000 limit. Because we disagree with many of the factual assertions in your draft report, we likewise disagree with your findings and recommendations set forth at the end of the report. Even if your individual findings were correct - which, in many instances, they are not -- they would not warrant the sweeping indictment that you have presented at the end of your draft report. In particular, we dispute the need to transform the OCP into an independent agency. The issues you have raised do not present questions of EOM senior management's seeking to coerce or distort the judgment of contracting personnel or otherwise exercising inappropriate leverage over an agency subordinate to the Mayor. We do, however, concur in your recommendation that personnel in the EOM dealing with consultants and other contractors to the District government should receive periodic training on procurement procedures and requirements organized by the OCP. We appreciate the opportunity to comment on your draft report. We request that this letter be made a part of your final Report, to assist the reading public in assessing your findings and recommendations. Appendices are available online in the PDF version of this report. 1. See the District of Columbia Home Rule Act, as amended, 87 Stat. 790, approved December 24, 1973, Pub. L. No. 93-198, section 455 (b), D.C. Official Code § 1-204.55 (b): "The District of Columbia Auditor shall each year conduct a thorough audit of the accounts and operations of the government of the District in accordance with such principles and procedures and under such rules and regulations as he [she] may prescribe." See also, the District of Columbia Home Rule Act, as amended, Pub. L. No. 93-198, section 455 (c), D.C. Official Code §1-204.55 (c): "The Auditor shall have access to all books, accounts, records, reports, findings and all other things, or property belonging to or in use by any department, agency, or other instrumentality of the District government and necessary to facilitate the audit." 2. See Government Auditing Standards, 2003 Revision at 1. 3. Ibid. at 99. 4. See 27 DCMR § 1006.1 (2005). 5. See D.C. Official Code § 2-301.05 (d)(2) (2004 Supp.). 6. See specifically 27 DCMR § 1003.1 (2005). 7. Although the EOM states in comments to this report (at page 3) that: "A program analyst in the OCA entered a requisition in the computerized procurement system, PASS, for the projected costs of $10,000 in FY 2004 for. each of the consultants, OCP denied the requests in September 2004 on the ground that the consultants already had begun to provide services." The EOM fails to state that the requisition was entered on September 20, 2004 and denied by an OCP contract specialist with the following comment: ". . . Contractor authorized to begin work by the City Administrator ...[Auditor's Emphasis] This documentation does not have any significant bearing on the Auditor's findings except to the extent that it demonstrates the EOM's lack of cooperation in timely providing all documentation relevant to this and other transactions presented in this report. Over a period of several months, the Auditor requested this kind of information from the EOM, however, this and some other information that should have been submitted previously is now being made available. 8. See D.C. Official Code § 2-301.05 (d)(1)(2004 Supp.). 9. A separate identical ratification request was submitted for Melinda Yee-Franklin. 10. Ms. Alfreda Davis was the Mayor's Chief of Staff approving these payments. 11. See Letter dated April 6, 2005 to Councilmember Vincent B. Orange, Sr., Chairman, Committee on Government Operations, from Robert C. Bobb, City Administrator. 12. Ms. Jane Brunner is Vice Mayor of Oakland and a member of the Oakland City Council representing District 1. Ms. Brunner is also an attorney specializing in employment issues with the Oakland based firm Siegel & Yee. 13. See 27 DCMR § 1705 generally; see 27 DCMR § 1705.2 (h) (2005). 14. See 27 DCMR § 1206 generally; see 27 DCMR § 1705.1 (2005). 15. Moreover, questions should be raised regarding whether this is an improper reprogramming of funds, under the guise of an MOU, and DOES's transfer of appropriated funds for work under a contract that DOES is not managing or administering. 16. See Agency Director Ratification Request and Certification (for Jane Bruuner in amount of $28,517.19), signed by Dana Bryson, OCA Chief of Staff dated April 5, 2005 at 2. 17. See D.C. Official Code § 1-618.01 (a) which states: "Each employee of the District government must at all times maintain a high level of ethical conduct in connection with the performance of official duties, and shall refrain from taking, ordering, or participating in any official action which would adversely affect the confidence of the public in the integrity of the District government." 18. See letter dated May 20, 2005 from Robert C. Bobb, City Administrator and Sherryl Hobbs Newman, Secretary, District of Columbia to Deborah K. Nichols, District of Columbia Auditor at 2. 19. See Office of the Inspector General, Management Implication Report (MIR 02-A-01), dated September 26, 2002. The report issued by the Office of the Inspector General examined consistent and pervasive problems that audits have disclosed concerning the District's procurement practices. See also Office of the Inspector General Report, "Audit of the Office of Contracting and Procurement Training Program," June 28, 2002; and see Office of the Inspector General, "Audit of Contracting Actions for the District's Administrative Services Modernization Program," dated May 3, 2005. 20. See Center for Innovation and Reform (CIR) Government of the District of Columbia, Office of the City Administrator, Executive Office of the Mayor, Contracting and Procurement Continuous Improvement Initiative, Recommendations for Reform, dated September 30, 2004, at 8. 21. The Metropolitan Police Department's Small Purchase ceiling was increased to $500,000. See Chapter 18 of Title 27 of the DCMR. 22. See Center for Innovation and Reform (CIR) Government of the District of Columbia, Office of the City Administrator, Executive Office of the Mayor, Contracting and Procurement Continuous Improvement Initiative, Recommendations for Reform, dated September 30, 2004. |
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