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Chamber Audit: Highlights pitfalls of contracting out government services

money-handsThe long-awaited audit of the Enterprise Zone Voucher management contract awarded to the Anaheim Chamber of Commerce in 2012 was released just before the end of the year. While the audit itself is somewhat moot because the contract was terminated as a result of the demise of the termination of the state-wide program, the audit report demonstrates, once again, that the theory claiming government programs are best run by private enterprise is false. The report demonstrates that when conservatives rush to outsource services to their campaign contributors, the result is invariably a waste of public funds and absolutely zero accountability.

Voice of OC reported on the release of the audit on Monday:

The audit largely confirmed details of a draft Voice of OC reported earlier this year based on sources who had seen it.

Perhaps the most important issue described in the audit was the chamber’s unreliable timekeeping system. Among other problems, staff was not required to log hours worked on tasks unrelated to the Enterprise Zone, used several different methods, and timesheets couldn’t be verified, the audit says.

“Without requiring timekeeping for the entire workday, the Chamber could not reasonably determine the allocation of time between Chamber activities and Enterprise Zone responsibilities,” the audit reads. “The city cannot be assured that it was receiving the level of services it was paying for, and the city did not have sufficient information to assess the reasonableness of budgeted resources.”

The chamber claimed and the auditor agreed that contract language was confusing and ambiguous, combining a “time and materials fee” structure with a contradictory “fixed-fee” structure.

The business group’s assignment of blame to the contract notwithstanding, it implemented a new timekeeping system in March to resolve its staff time recording problems, a city response to the audit states.

However, the audit — which according to City Hall sources was delayed for months because chamber President Todd Ament had delayed his responses to the auditor’s questions and findings — found other problems as well, including potential conflicts of interest, inadequate cost control measures, the hiring of subconsultants without contract-required city approval and advance payments from the city for work not yet complete, among other issues.

The Chamber contract was amended in May 2013 while the demise of Enterprise was pending in the state legislature. The amendment did provide for the linkage of “budgeted resources to specific activities and goals in the contract’s Scope of Services for program year 2013-14, enabling improved monitoring.” That revision did not implement any clarification or correction of ineffective monitoring provisions that were readily apparent. According to the audit the amendment “did not adequately address other provisions necessary to provide a sound basis to evaluate program costs.” In addition to more than doubling the contract value, the May 2013 amendment allowed the Chamber to receive almost “90 percent of its standard compensation in September, after submitting its August status report reflecting approximately 50 percent progress towards its annual goals.”

In August, with the demise of Enterprise Zones all but signed, sealed and delivered, Mayor Tom Tait attempted to get his colleagues on the Council to issue notice to the Chamber of the pending termination of their contract before the September “advance payment” would be maid. His attempt resulted in visceral responses from his colleagues on the majority.

We note that the Chamber and the Council Majority have been in complete agreement related to tax-giveaways to private developers and the Angels, as well as the proposal for Council district-based elections.

Even with the audit, significant questions remain as to whether funds from the Enterprise Zone contract went to support the political activities of the Chamber, which have supported the Council Majority and its political priorities. In fact, because of their failure to ensure appropriate const controls and accountability for contracted out public services, the taxpayers will never know for sure where the money was spent, or if it was spent appropriately.

When will conservatives realize that when you outsource your public services, you give up accountability and cost effectiveness you’re supposedly seeking. It is probably more likely that these politicians do this stuff on purpose in order to line their campaign coffers than to savethe public money.