Lot of stuff mentioned and it got off topic at times, but the the gist of it is that internal auditor Richard Walls and his team found no financial wrongdoings in the audit. That's not to say everything's perfect and that the County Commission won't make policy changes or whatever, but no one was stealing stuff.
On a side note, here's my good deed for the day.
During the meeting, Merit Construction Senior Vice President Steve Heatherly lamented that his business has built a gazillion schools in the area and that the county's investigation into the Hardin Valley project (Merit was the construction manager for it) has created a “dark cloud” (or maybe it was “black cloud”) over his business.
He said he wanted the audit committee do do something – maybe put something in writing – so he can show his clients that he's a good guy and there was nothing wrong on Merit's part. Oddly enough, the committee didn't really seem like they wanted to do it. (Not that they had a problem with it, but I think it caught them by surprise.)
At one point, someone said the Press was here and they could do it. I pointed out that he could just use the minutes from the meeting. But, because I'm a nice guy, I'll say it here: No one found anything wrong with Merit and no one is saying it did anything wrong.
It's now in writing.
I think the real issue with this – if I'm understanding it correctly – is that the county had $50 million in folding paper it could play with to build the west Knoxville high school. The County Commission allocated the money or signed off on its use or whatever. That means if a certain former mayor wanted to add on to the project – like a field house, for example – then he didn't need to ask the board for approval.
And yeah, that's what apparently happened.
And right or wrong, that's policy. Whether it gets changed (probably not) remains to be seen.
Now, all of this (re: the audit) pretty much started after local builder Sandy Loy started calling out the PBA.
After the meeting Loy sent Walls (he's the internal auditor) the following:
Richard,OK, I'm out. The main story on the meeting will run in tomorrow's paper. I didn't get a lot of room, so there's not much details. (Hence, the reason for this long rambling entry.)
I was a little dumbfounded today to find out during your presentation that you had originally issued an initial report and then withdrew it after the PBA reviewed it and negotiated revisions with you.
I have never seen that happen before in an audit.
You also didn’t cover several key elements I gave you such as the TBD contracts. (I wrote about this right smack here - Mike)
I also don’t understand how you can state you had no way to verify cost for labor, benefits, workers comp etc. and then turn around and say there is no material project management weaknesses?
You stated that there was a lot of give and take during the process? Since when did an audit become a negotiation? How can these findings be considered independent when you altered the results at the direction of the entity being audited?
Overall I think you guys gave them a pass which is frustrating after the hundreds of man hours and personal expense I have gone through trying to demonstrate the lack of project management controls present which is costing our county millions of dollars every year.
I do think the dialogue, which the commissioners present heard, should have clearly demonstrated that there were funds diverted to new scopes of work outside the original scope approved by the Commission for the original budget. For example, one line item in the first change order issued November 19, 2008, (several months after the school opened) was for a concession stand for $545,000 (see attachment) . New to the scope of work written in as a change order with no discussion in a public venue by any governing body. There are several other instances but this one example demonstrates the issue which must be addressed.
The County procurement code would have required that such an expenditure be brought before the Commission or School Board for approval and then bid out. At HVA it was approved, reportedly in a verbal exchange by the Mayor. That was in violation of County regulations…unless they considered it as being allowed under the PBA state statute which empowers a PBA to ignore local laws.
In either case it shouldn’t have happened the way it did. The County Law Director’s opinion that the PBA has such authority is in error in my opinion. I believe the Commission needs to ask the new Law Director to opine about this. State Statute 49-2-203(a)(3)(c) clearly says that schools built by subcontractors working for a CM must be competitively bid. There seems to be some confusion about what law take precedent.
Accordingly I believe there needs to be a Charter Amendment considered by the Charter review committee to be placed on the ballot with other Charter Amendments making it mandatory that all agencies using tax dollars for expenditures for capital improvements above $10,000 be required to follow county procurement codes.
That one sentence would cure a lot of wasteful spending.
Sanford C. Loy CCM
President, Construction Plus Inc.
Again, the commission is expected to address this during next week's work session.