County to seek new internal auditor

The Knox County Audit Committee on Tuesday in a 4-0 vote recommended to the Knox County Commission that the county should hire a new internal auditor and not outsource the position to a private company.

The move comes a couple of weeks after officials offered former auditor Richard Walls a severance package that included about $31,000 and medical coverage for 18 months. Walls’s last day on the job was Sept. 3.

The commission is expected to talk more about the audit committee’s recommendation later this month. Officials then are expected to advertise the job posting. From there, the county’s human resources department will select three candidates who will interview before the audit committee.

The county commission will make the final decision.

Officials during Tuesday’s meeting talked briefly about the position, but said they still want to collect more data.

For now, though, officials said they would like someone who has at least six years of experience, a college degree, and “appropriate certification.”

Additionally, Commissioner Amy Broyles, a committee member, said officials will “still need to talk about what expectations we want in place and whether they staff the office to meet those expectations.”

The internal audit department, which reports directly to the County Commission, operates on $257,000 a year and has three employees, although it’s short-staffed by one since Walls stepped down.

Commission Chairman Brad Anders said the two employees will keep their jobs, and help run the office.

Anders added that he also wants officials to annually review the new internal auditor, something that wasn’t done with Walls.

“I want a more clear path for the incoming auditor, so we don’t get where we are today,” he said

Audit Committee Chairman Joe Carcello also suggested that county increase the pay for the position. Walls earned $92,700 annually.

The Audit Committee, in a 4-1 vote, on July 9 initially recommended firing Walls. Only Mary Kiser, who resined in the wake of the decision, dissented.

Committee members called Wall’s work “limited” and said he only conducted three audits last year. Kiser, though, said the accusations were unfair and that Walls was never given a chance to defend himself. She also pointed out that his last review came in 2009, so the panel held some culpability, since it didn't provide him better feedback.

Last month the County Commission opted not to fire Walls and instead offer him a buy-out package, so long as he didn’t seek legal action against the county.

Employees gather for Walls' send-off

Knox County employees on Tuesday said goodbye to Richard Walls, who served as the county’s internal auditor for more than a decade. Here’s a couple of pictures that were sent to me.

To the upper left, Jim Sams, who works in the PBA, shakes hands with Walls. The guy on the other side is Shane Weaver, a  former employee who came back to see him off.

Left, Karen Briggs, a city of Knoxville worker, talks to Walls.

As you might recall, the Knox County Commission worked out a deal with Walls, letting him retire with a $31K severance check. The board will have to decide later this month whether to replace him or outsource the gig.

My guess is that they'll at least take applications for the job. Then they'll probably hire one of their buddies. Kidding. Heh.

Auditor: outsourcing vs. in-house

The Knox County Commission has drawn up retirement plans for county internal auditor Richard Walls, but the fate and costs of the operation that he oversaw for more than a decade still remain in limbo.
The board, though, hopes to work something out within the next month or so.

In the meantime, commissioners on Monday will more than likely approve a severance package for Walls that gives him almost $31,000 and provides insurance coverage for 18 months. It would take effect Sept. 3.

They'll then shift focus toward his old office and determine whether to outsource the operation or keep it in-house.

"Should it be a contract employee or a county employee? There are pros and cons, good and bad to both circumstances," said Commissioner Dave Wright, who also serves on the county's Audit Committee. "Costs are going to be an issue. If there's going to be a lot done, then it will probably be better to have a county employee, but if we're only occasionally going to do something, I think we're better off to contract by engagement."

You can read the entire bad a$$ story, right smack here.

It should be noted that the key to who will eventually take over will mostly hinge on the price tag.

KPMG, which the county would probably use if it outsourced the service, charges between $92 and $288 an hour per worker, depending on what that person does, according to the paperwork the company submitted to the county's purchasing department.

By comparison, the county pays Walls, who earns $92,700 annually and is the highest paid employee in his office, roughly $44.50 per hour.

During the bidding process, the county asked firms how much auditors would charge to perform a financial analysis of the county, and the school activity funds and to look into the Beck Cultural Exchange Center, the Hardin Valley Academy construction project and the medical examiner.

The internal audit department, which has a $257,000 a year budget, turned in reports for most of these and some others during 2012. It did outsource part of the Hardin Valley project, which cost $14,500, but that money was included in its annual spending plan.

KPMG, according to records, would charge $171,500 to oversee the five initiatives. Officials with the company could not be reached for comment Wednesday.

Walls' deal to cover 4 months pay

The Knox County Commission on Monday agreed not to fire long-time county internal auditor Richard Walls, and instead agreed to wait until next week to talk about whether to offer him a severance package that would cover four months of salary.

The retirement proposal, if approved, would take effect Sept. 3 and also include single insurance coverage for 18 months.

In addition, Walls could receive a payout of all unused vacation leave he accrued during his career, as well as any unused sick leave he has left at the rate of $100 per day.

Walls, a county employee for almost 13 years, makes $92,700 annually. His severance pay would amount to almost $31,000.

If he and the board do sign the proposal, then Walls also could not pursue legal action against the county due to his termination.

The board during Monday's work session forwarded the proposal on without recommendation to next week's voting meeting; however, officials said they expect to approve the contract next week.

"He has agreed to retirement and my feeling is that we should let him be, let him go into retirement," said Commissioner Mike Hammond. "But we need to have a separate discussion about the future of the department and what direction to take it."

Click right smack here for the complete bad a$$ story.

Commish not expected to fire Walls

The Knox County Commission will more than likely NOT fire the county's internal auditor, Richard Walls.

The commission was expected to talk about the Audit Committee's recommendation to terminate Walls during its work session on Monday. However, board Chairman Tony Norman said they removed the matter from the agenda.

Instead, he said, the board will talk about offering Walls a deal which officials (the law department) have worked out with the auditor. Norman declined to talk about the details (this was at Walls' request), saying officials would make them public during Monday's hearing.

My guess is that they'll give him a severance package to walk away. Now, that said, they better not call it a severance package. Cause, you know, Knox County Mayor Tim "Cheapskate" Burchett doesn't like severances.

Call it a buyout or something.

Kiser officially submits letter

Yesterday we broke the story about Knox County Audit Committee member Mary Kiser stepping down from the panel, a month after members decided they wanted to get rid of county internal auditor Richard Walls. (Right smack here for that bad boy.)

This morning, Mary sent over her official resignation letter. Committee members after the meeting tried to persuade her from quitting, but she wasn't having any of that. Right smack here for her letter.

Personally, and as a taxpayer, I was kind of hoping she would reconsider.

Anyhoo, the letter contains much of what we reported yesterday. Kiser was upset that committee chairman Joe Carcello didn't meet with her to discuss the proposed termination, and that he didn't give Walls enough warning.

County officials more than likely will move to fill her spot on the 5-member panel in the coming weeks. They'll solicit the East Tennessee Chapter of the Institute of Internal Auditors for a recommendation, and then probably take it to the committee from there.

In the meantime, the Knox County Commissioner will talk more about the matter during its work session on Monday.

Not all happy with audit committee

A month after the Knox County Audit Committee recommended firing the county's longer-time internal auditor, one member resigned and another local leader publicly berated the panel's chairman.

Mary Kiser, in an often emotional speech during Tuesday's meeting, told the committee that she felt it unfairly suggested to the Knox County Commission the need to terminate Richard Walls.

Shortly after her announcement, Knox County Commissioner Mike Brown, who attended the meeting, accosted its chairman, Joe Carcello.

"I know crap when I see it and you're throwing some here, fella," said Brown, adding that he was "tired" of Carcello's "smug and smiling attitude."

The resignation and the heated discussion came a month after the committee in a 4-1 vote agreed to ask the County Commission to fire internal auditor Richard Walls. Committee members, led by Carcello, said Walls did not do anything illegal or inappropriate, but, rather, it was what he didn't do while performing his duties that made them want to replace him.

Officials called his work "limited" and said he only conducted three audits last year, a low amount for the money spent on the responsibilities. Committee members also said he should better focus on areas where the "county has the greatest risk," including the Trustee's Office, which has a recent history of wrongdoing.

The panel, which makes recommendations to the County Commission, is comprised of Carcello, a University of Tennessee accounting professor; Kiser, a manager for internal audit services at Oak Ridge National Laboratory; and county commissioners Ed Shouse, Dave Wright and Amy Broyles.

Kiser, who's served on the committee since its inception five years ago, cast the dissenting vote to get rid of Walls. The County Commission, which oversees the county's internal audit department, will talk more about the recommendation during its Aug. 19 work session.

During Tuesday's meeting, Kiser said she was stepping down, but not before defending Walls and suggesting that the Audit Committee could have done more to guide his work.

She said the "overall" audits that he's conducted during the past half decade "have been satisfactory and some even more than satisfactory."

"I believe Richard, as a long-time county employee, has been treated unfairly," said Kiser, who represents the East Tennessee Chapter of the Institute of Internal Auditors on the committee. "He has uncovered fraud and identified controls that needed to be strengthened."

Click right smack here for the rest of the bad a$$ story.

Audit Committee member steps down, commissioner rages, fireworks fly

Talk about an insane Knox County Audit Committee meeting this morning. The fireworks were a flyin'!

Committee member Mary Kiser resigned and Knox County Commissioner Mike Brown, who is not on the panel, let the committee Chairman Joe Carcello have it. (All this, by the way, is in response to the committee suggesting to the County Commission that the board fire county internal auditor Richard Walls.)

I posted a very short story earlier today and will have the full length, full brawl up later today. Good stuff. Heh.

In the meantime, the Knox County Commission will take up the matter during its work session on Monday and - if no deal gets worked out - will vote on whether to keep Walls.

In the meantime, here's an excerpt (that will no doubt be tweaked, edited and refined) from tonight's report:

Brown, a county commissioner who has long supported Walls, disagreed, pointed at Carcello and said: “We’ve got a failure to communicate and the biggest part of it is sitting right there in that chair. Why did you wait five years to wait do something about it? You have an axe to grind and I don’t like your attitude and I won’t stop until you’re out of that chair, fella.”

At one point, Carcello told Brown he was “acting inappropriately,” but continued to let him talk. The two bantered back and forth somewhat for a number of minutes, before panel member and Commissioner Dave Wright cut them off, saying: “Please we’ve got daylight to burn.”

Brown then warned Carcello: "You will hear some more next week (during the commission work session). This is just a preview.”

Carcello, responding sharply to Brown, yet addressing the committee, said: “Mike is free to say whatever he wants to say next week and we’ll have evidence with us that will refute anything you say. So think long and hard before you do.”

Fueling the fire for Trustee 'fix'

So at some point during yesterday's Knox County Commission meeting, a number of board members were leaning toward postponing the vote to select a trustee. One key argument was that Commissioner Mike Brown wasn't there.

Members suggested waiting anywhere between 14 days and next month's voting session. Eventually, they opted to vote instead.

This is actually a head scratcher and is only going to (cliche alert) fuel the fire that "the fix was in." (And no, I don't believe there was a fix, but whatever.)

So, think about it.

During last week's work session, the board agreed to hold off the vote on whether to fire county internal auditor Richard Walls. The reason? Brown wouldn't be there to vote.

You see, word going around is that there are enough commissioners (you need six) to vote out Walls. Yet, Brown is a Walls' supporter. So, that was the excuse: Give Brown a chance to weigh in. But, what difference does it make if the other side has its six votes? None.

However, yesterday's trustee vote - which is certainly a  more important matter - was a heck of a lot closer. It went four round until commission Chairman Tony Norman said the "heck with it" and broke the 5-5 tie, switching over vote for Craig Leuthold.

Too bad we'll never know what would have happened had Brown been there. It certainly would have made sense to wait for his return. I guess.

I mean, the board was going to wait for him on the Walls vote, which a lot of folks say is a done deal. (I hope not - Walls is a good guy.)

Like I said: What's the hurry? The board postpones practically everything else. Heh.

Anyhoo, in the meantime, congrats goes out to Leuthold.

For all the trash talk going around, I'm sure he'll do a good job, and his appointment will certainly make for a spirited race if Commissioner Ed Shouse does decide to run against him in next May's Republican primary.

Walls days more than likely numbered

Richard Walls

I've always gotten along with Knox County internal auditor Richard Walls, but he's certainly rubbed people the wrong way. And it's always been the wrong people, too.

Mayors, top commissioners and, not the least, audit committee chairman Joe Carcello, who led this morning's revolt against the (let's call him "embattled") auditor.

Only Mary Kiser voted to keep him. Carcello and Knox County Commissioners Ed Shouse, Dave Wright and Amy Broyles voted to fire him. The audit committee only makes recommendations, so the full commission will talk more about it on Monday.

Heh, what a coincidence: The same day they talk about firing their auditor (the position reports directly to the commission), they'll also talk about replacing the trustee, too.

Anyhoo, I somewhat expected this move.
Walls' office in the past couple of months has overseen two audits - one that looked into the county's purchasing cards practices and the other into its ethics policy - that have raised eyebrows.

And not about what he looked into, but rather some of what officials say are unfounded accusations.

Afterward, he and Carcello got into a somewhat heated/sarcastic debate about each of them. Walls backed off somewhat, but not all the way.

I'm not going to go into the details of the audit. I wrote about them awhile back, but essentially it's about "risk versus reward," and Walls felt the county should take a more conservative approach and the mayor's office feels that by using them more often, the county gets back larger rebates (and no, these aren't those Pilot rebates).

It certainly makes sense and if that's the position you take - and Carcello agrees with the position - then there's not point dying on the hill over it. Walls didn't agree, though, and I can respect that.

So, we'll see what happens in two weeks, but if Shouse, Broyles and Wright don't change their minds, I don't think he'll make it. I know that at least three other commissioners have privately said that they will not vote to support him.

Plus, a number of commissioners think that outsourcing the office, something they've discussed number times, will save the county money. It won't, but whatever.

That's another issue.

Also, another matter is whether Walls will sue if fired.

My guess is yes. A whole bunch of folks. 

Expect this to turn into a mess.

Meetings set for audit department

Apparently, Joe Carcello likes the Copper Cellar. The chairman to the county's Audit Committee has scheduled three meetings at the Cumberland Avenue restaurant to talk about the bidding process for internal auditing services.

You might recall that the county is looking into whether it's cheaper to hire outside help or keep Richard Walls and his crew. (I'm here to tell you keeping this in-house is not only going to be cheaper, but more convenient, particularly with the amount of mileage county commissioners get out of the office.)

Anyhoo, the meetings are in December and open to the public. I'm betting that you have to pay for your own food. Click right smack here for the list.

Three apply for internal audit gig

Three firms have expressed interest in taking over Knox County's internal auditing program.

Yeah good luck. Like that contract is really gonna go anywhere.

A little catch-up here: Awhile back the audit committee and the county commission started talking about outsourcing the $251,000-a-year operation. Now, I'm not sure who internal auditor Richard Walls ticked off, but it was someone. Cause, really, no one is buying the whole “we're just testing the water and trying to see if we can save money, so we're going to bid out the office.”

Cause that's not happening. Not with the peanuts the county invests in the audit department right now. So, don't expect any changes.

However, to keep the charade going, the county did open up the “request for proposals” process on Oct. 30. Three organizations – Pugh and Company (they're also the county's outside auditors), KPMG (the county's most recent external auditor) and Blackburn, Childers and Steagall submitted proposals.

Walls' operation, which didn't have to turn over anything, also will be considered.

The county still needs to get some more information from the firms, like references and how much it will cost to staff such an operation. The county set a Dec. 7 date to get that, and officials expect to hold interviews Dec. 11.

Each firm will get 45 minutes – 20 minutes for presentations and 25 to answer questions. The meeting will be open to the public although I'm pretty sure no one from the public will attend.

The internal audit department investigates financial transaction and reports directly to the Knox County Commission.

And that's the problem. The commission is always asking the department, which has like four people, to look into stuff. And it's easy; it's not an issue. It's already paid for.

Now, what happens when the commission wants something investigated and a replacement firm comes back with a major bill? Will commissioners be so quick to investigate?

Audit email war Day II: Jarret returns

(Note from Mike: No idea why the font is so small and funky. Blogger sucks sometimes.)

Frank Cagle has a good read about county law director stuff right smack here. And speaking of law director stuff: You remember the email correspondence the other day between the builder, the auditor and the rogue? Click right smack here for the original blog entry and right smack here for all sorts of electronic goodness and read further.

If you don't want to click, then the short of it is that local developer Sandy Loy wanted the county's internal auditor, Richard Walls, to turn over some information (I think it was his notes) that he put together when he was investigating the PBA's handling of the Hardin Valley Academy project.

Walls refused, citing some state law stuff. Brian Hornback then sent Law Director Joe Jarret a note, asking whether Walls could turn down Loy. Jarret pretty much said that the information Loy wanted was public record.

Loy, then asked for it again. Now, however, Joe says that's not the case.

In an email to Sandy this morning, Joe said:

I misread Mr. Hornback's email. While the completed audit is a public record, the TN code does render confidential, audit working papers. I believe the purpose behind the legislation was to project (I think he means “protect”) innocent parties should the auditor's initial mental impression prove incorrect.

Now, before you get all crazy and say: “Jarret flipped flopped again,” Joe sent me a follow up email that reads:

This wasn't a "he changed his mind again" issue, I was cooling my heels at the hospital (where he is with his mother right now) and misread the email.

Now, this isn't a blog entry if I don't have a Sandy Loy follow-up to Jarret's initial email. Take it away, Sandy:

Joe,

Thanks for your reply. I am constantly amazed at how complicated keeping the rules straight is in local government.

Private business people such as myself just don't understand how the same tasks we perform every day, place in the hands of government becomes so complicated and difficult.

Given the obvious, that there are enough laws and rules now passed to allow even the most inefficient and duplicitous of management schemes to be declared OK because it is “LEGAL” … I am going to get back to the work which I do understand.

At the audit committee meeting last week there were 28 people in the room at one time, of which 26 were being paid to be there by my taxes. I have to get back to work; so I can pay the 15 different types of taxes currently “LEGAL” to support those 26 people who obviously think I have no right to know they spend the money they collect 15 different ways from me and every other business in Knox County.

Just a “sidebar” … if I “accidentally” short one of those tax payments by even $6 do you think they will just forget about it as “insignificant”?

What an indictment of our county government.

Sandy Loy

On a side note, I was at the meeting and so, too, was Hornback. (He blogged about it right smack here and right smack here.)

OK, finally, Joe responds back to Sandy:

Sir, it is certainly understandable. The TN Legislature of late seems to be expanding rather than contracting the list of documents deemed confidential. This is one of the reasons why my attorneys must be constant students of the despite our respective experience levels.

Now, there is an inside baseball jab there right out of Screams from da Porch.

Email battle over audit, open records

Local developer Sandy Loy has taken the PBA out of his sights. Sort of. For now.

Instead, he's focused on the county's internal auditor Richard Walls.

A quick rehash before we get to the fun stuff: Loy has long been concerned with the Public Building Authority's handling of the Hardin Valley Academy project. After years of complaining, the County Commission and the Audit Committee asked Walls to conduct an audit of the project. He did. And he didn't find much. Here's a short story about it right smack here.

Afterward, Sandy took the audit and marked it all up. You can find that right smack here.

Needless to say he wasn't happy. So, he asked Richard for more information, which Richard refused. Then he reached out to two commissioners who sit on the audit committee (Amy Broyles and Dave Wright) and also Commission Jeff Ownby. It doesn't appear that they responded.

Then the Rogue Blogger got involved. Then county Law Director Joe Jarret. Then Sandy again. Then Richard.

Then someone in the office sent an email to the staff, letting us know there's some free food in the break room.

But, essentially, Walls says the records aren't open. Jarret tells Hornback that they are. Sandy wants them. Walls won't give them up.

And I'm kicked back, eating some of the free food.

So, here's all the email correspondence.

CLICK RIGHT SMACK HERE

Enjoy. Good stuff.

PBA fight: First Loy, then Walls, now Loy

First local builder Sandy Loy fires a shot. Then county internal auditor Richard Walls. Now, Loy is back. Heh. This thing is like a tennis match. A Rocky movie. A . . . whatever. Good stuff.

Anyhoo, I'm talking about the recent audit of the Public Building Authority's handling of the Hardin Valley Academy project. Walls, as reported right smack here, didn't find much. And that's not going over too well with Sandy.

Here's a blog post of some back and forth right smack here. (You might want to read it 'cause I'm about to publish Sandy's response.)

So, without further ado, Sandy fires back:

Richard,

Sorry to hear about your loss.

I must respond to a couple of the items in your reply.

1. First, the “reissued report” were words out of Carcello’s mouth not mine. He said he got an initial report and didn’t read it because he knew another version was coming. You yourself said, “There was a lot of give and take with PBA during the audit”. Sounds like a negotiation to me. What was removed from the initial report? I am requesting to see that initial report under the Tennessee Open Records Request act.

2. You admitted during the meeting yesterday that you did not reconcile the workers compensation rates charged against the workers comp audit which every general contractor has done every year by their insurance carrier as a matter of standard procedures. The 9% rate was initially explained as high rates for carpenters, then Merit admitted they did not hire any carpenters, but PBA still paid them on a rate based upon carpenters being hired by Merit directly. That makes no sense. Yet you say the costs were “verifiable”?

3. When no payroll records were available to verify the hourly rate of $69/hr for the project manager, you accepted a letter from the CM charging the rate as certification of that payroll cost as accurate? Yet you say the costs were “verifiable”? I have never participated in an audit in which I could answer an auditor’s concern with a self written letter! That is ridiculous.

4. You didn’t even address in the report the change orders being written for 18 months after the project was finished…if you accepted an explanation for that as acceptable practices I would like to see it as well as a request under the Open Records Act!

5. You didn’t address change orders written with no back up other than “additional services”, also written 18 months after the project was completed….if you got an explanation for that which you accepted I would like to see it as a request under the Open Records Act!

6. You found $600 in mark-up charged by the Architect which was not contractually correct but you recommended they NOT try to collect it as it was insignificant? Then you say the contracts were followed?

7. I would also like to request under the TORR Act to see the confirmation by the State Comptroller of the Law Director’s opinion. I have previously shared with you an email from the State Legislative attorney; which does NOT agree with the LD’s opinion.

8. Commissioner Broyles shared her input from County Purchasing that redirection of funds over $1,000 should have been, per County Code, revisited by the funding body. Why did your audit at least question that? If the LD’s opinion satisfied you this was legal you should have included that in the report so it could be better understood by the commission.

9. I am extremely disappointed that you so clearly were manipulated with half truths involved in explanations about the processes used on HVA. You had assured me you would review the processes and then you either didn’t or you were snowed into believing the processes were ok.

10. My question to you is this: IF THE PROCESSES WERE SO ADEQUATE HOW DID THE AMOUNTS OF EVERY CONTRACT WRITTEN WITH TBD IN THE AMOUNT LINE GO UP!!! BY 24-32%???? Does that sound like good project control methods? How can an audit exclude mentioning that fundamental fact especially when I handed you the documents and all you had to do was confirm them? They were there…they were accurate….they were valid…WHAT HAPPENED?

11. Your third party assistant either didn’t understand what I said and the documents I provided or was already predisposed to the party line of this all being a personal vendetta. Either way this “audit” is a travesty and an absolute shameless performance by your department. To not even address the state statute and the effect it has on the PBA”s practices is even more shameless and irresponsible.

I am very dismayed to say the least.

Sanford C. Loy CCM, president, Construction Plus Inc.

Walls responds to Loy about HVA audit

Yesterday I posted an entry about the audit committee meeting, the probe into the Public Building Authority’s handling of the Hardin Valley Academy Project and some other stuff. In addition, I published local developer Sandy Loy’s letter to county internal auditor Richard Walls.

In the note, he expressed dismay about a number of things. You can read the whole thing right smack here.

And today's story is right smack here.

Walls this morning responded to Loy. Here’s what he had to say:

Sandy,

Thanks for your comments.

I apologize for the slow response. We have had a death in our family and I will be out of the office until Monday.

You may have misunderstood a few of the items we discussed today:

(1) Our report was not issued and then withdrawn. The body of our report initially issued to the audit committee remained unchanged.

(2) We included the issues you raised in our work plan and most of them were satisfactorily explained. Part of our process included an outside consultant in order to make sure an independent third party concurred with what we found.

(3) The project manager's salary was not included with the payroll that was directly charged to the project. It is accumulated in an overhead account with other items and simply then allocated to various projects based on hours worked & an allocation rate, rather than actual costs.

(4) We feel confident our audit report was fact based and included all findings we felt were relevant. At no time was any finding negotiated. If facts were presented (and verified by us) to us that satisfactorily explained the issue, there simply was not anything to report.

(5) We confirmed the Law Director's opinion with the State Comptroller's Office.
I'm sorry you feel the way you do, however, I wish you the best.

Best regards,
Richard

Jarret seeks audit of own department

Knox County Law Director Joe Jarret this evening sent an email to the county's internal auditor, Richard Walls, asking him to audit the legal department.

Don't read a whole lot into this. The move is pretty much protocol for Joe. He did the same thing after he took over for Bill Lockett a few years ago.

"I kindly ask that you conduct an audit of my office . . . to ensure my (successor) is inheriting an office that is in full compliance with our auditing policies and procedures," Jarret wrote. "My last day with the county is March 31, 2012, as such, I kindly (ask) that the audit be completed by then."

The Knox County Commission later this month will pick an interim law director to serve until Bud Armstrong is sworn in Sept. 1.

PBA, HVA and more from audit committee

Sat in an audit committee meeting this morning where officials spent about two hours talking about the Public Building Authority's handling of the Hardin Valley Academy project.

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.

You're welcome.

Moving on.

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.

Heh.

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,

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.

Thank you,

Sanford C. Loy CCM

President, Construction Plus Inc.

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.)

Again, the commission is expected to address this during next week's work session.

Walls is finalist for university audit gig

Remember awhile back when some county folks were talking about outsourcing the internal auditor's office? Whatever happened to that, anyway? I sure don't remember.

Hmmm. I should probably look that one up, huh?

Anyhoo, Richard Walls, at left, the county's internal auditor, sure didn't forget. Cause apparently he's been out looking for a new job.

You know, just in case.

According to a University of Tennessee spin release, the school's Audit Committee will meet next Monday to interview candidates for the executive director's gig for “audit and consulting services.”

They'll be held from 9 a.m. until 4:30 p.m. on the 8th floor conference room of Andy Holt Tower.

According to the fancy note: “Audit and Consulting Services provides objective, independent appraisals of accounting, financial and other operational systems in University departments and units and oversees institutional compliance.

Other candidates include Betsy Bowers, Associate Vice President for Internal Auditing and Management Consulting, University of West Florida; Judith Burns, Interim Executive Director, Audit and Consulting, University of Tennessee System; and Sandy Jansen, Assistant Chief Audit Executive, Texas Tech University System.

We need a cage fight, not a PBA audit

At some point, the county commission should just throw PBA top dog Dale Smith and local developer Sandy Loy into a steel cage and let the two go at it.

I'll get to what I'm talking about in a minute.

Earlier this week, I covered the county audit committee, but the big story that came out of it was the release of the Beck Cultural Exchange Center investigation. You can find that right smack here.

Anyhoo, I didn't get around to writing or talking about the Public Building Authority audit. Or proposed one. Or lack thereof. Or whatever.

The commission in July authorized the audit committee to authorize an audit of the PBA and the financial aspects that led to the construction of the $50 million Hardin Valley Academy. (That's a lot of authorizing.)

Sooooo, on Tuesday, the audit people talked briefly about it. The problem that chairman Joe Carcello brought up, however, is that the commission wants the internal auditor to go back six years. That's a ton of work. And a ton of dead trees to go through. I'm pretty sure the commission had no idea what six years entails. A lot of work. And work done by the county's small internal auditing department. But, again – whatever.

I'm rambling here, I know.

But Carcello knows this, too.

“The Hardin Valley one is at least more limited in scope,” he said. “The PBA? This is ambitious.”

In the end, the committee asked auditor Richard Walls to examine the Hardin Valley issue.

Carcell said “if it comes though squeaky clean then I don't know if it's the best use to use the limited resources we have to do a six year audit of the PBA. If it comes back clean, we can say: 'Do you really need an audit of the PBA?'”

Walls said by mid-November, the next time the committee meets, he should almost be done with the investigation.

In the meantime, Carcello also, albeit very, very briefly, talked about the deal between Loy and Smith.

You see, these two do not like each other. For years, Loy has beat Smith over the head in news columns about some supposed mischief that went on in the construction, bidding, building, whatever process of Hardin Valley school.

It culminated awhile back when Smith talked about the issue in front of commissioners and then Loy threatened to sue him for slander.

You can read that bad boy right smack here.

On Tuesday, Carcello asked rhetorically whether the two have ever been in the same room together to hash out the allegations. He talked about how one says one thing; then the following week, the other answers. Or how their attorneys will do the talking.

I say: Screw that!

Either get them in a public forum to debate.

Or get them in the cage.