City Audit Recommends Many Changes For MSD
A newly released audit suggests Cincinnati officials need to further investigate some of the past practices of the former management of the Metropolitan Sewer District.
The audit reports 34 recommendations for changes.
The investigative team, established by current city manager Harry Black, found several problems with MSD's past use of contractors and issues with procurement practices. It also uncovered a number of questions concerning MSD's former "Student Intern Academy" and the "Project Rebuild Workforce Collaboration Foundation."
The sewer district started using contractors more as it launched efforts to comply with the federally-mandated consent decree.
"The practice can be justified to some extent; however, our review brought to light several areas of concern as well as control weaknesses regarding professional service vendor authorization, selection compensation, and scope of service," the audit report stated.
The audit found many instances where "contractors recommended and/or approved the work of other contractors." It also found some contractors were reviewing city employees for annual performance evaluations.
"Integrating them into the MSD organization by giving them ongoing, day-to-day management and supervisory authority over city functions and staff is not appropriate," the audit report stated. "A potential for built-in conflict exists in that the interests of the contractor many not necessarily be the same as those of MSD and the city."
The audit also confirmed the previous city administration had more or less given away any checks and balances concerning MSD. In 2007, former City Manager Milton Dohoney gave contract signing authority to then-MSD Director Tony Parrott. The current city manager revoked that in 2015.
"This arrangement significantly expanded the MSD Director's discretion to make contract decision in MSD and effectively removed many checks and balances otherwise provided by the city's central purchasing division as directed by the City manager or his office," the report stated. "In addition, it was reported to us that, over time, the purchasing staff internal to MSD had diminished decision-making authority as more purchasing decision were made by the director's office pursuant to the authority delegated to him by City Manager Dohoney."
The audit also reviewed several allegations involving the "Student Intern Academy" and the related non-profit corporation, Project Rebuild Workforce Collaboration. The academy was designed to provide summer jobs for youth and encourage interest in public service jobs. The collaboration was established to expand the intern academy and to increase training and apprenticeship opportunities for the disadvantaged.
The audit found that nearly all the costs for the programs were funded by MSD.
"Perhaps more significant are the potential Ohio Ethics Law violations that may arise in relation to the Foundation," the report said. "MSD funds were used to establish, market, fundraise for, and manage the operations of the Foundation, including solicitation of MSD contractors for contributions."
The city's Law Department will make the final decision on whether the items are referred to the Ohio Ethics Commission.
The audit also found that MSD, in acquiring property for the Lick Run conveyance system and other projects, may not have followed the legal requirements of federal law - formally known as the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. Not being in compliance with the Uniform Act, the audit said, "could jeopardize future eligibility for state and federal funding."
The Law Department will also decide if an outside agency should investigate former director Parrott's residency during his tenure. He was required to live in the city.
"The concerns expressed are that the MSD Director falsified his address, violated the city residency requirement, received special treatment, and did not receive adequate disciplinary action," the report stated.
Former interim city manager Scott Stiles did discipline Parrott, and he lost 40 hours of vacation time. City council later approved a residency waiver for Parrott shortly before he resigned to take a job in Louisville, KY.
The report said the city should retain an outside agency to "determine if there are grounds for any criminal proceeding."
City manager Black said in a memo "the city administration has preliminarily reviewed the findings and intends to implement any and all recommendations stemming from this report." He stated some of changed have already been implemented.
"We will be sending this complete report to the Ohio Attorney General's office, the Hamilton County Prosecutor's office, and the Ohio Ethics Commission,'' Mayor John Cranley said in a written statement.
Black, during a press conference, called the audit's release a step forward for MSD.
"With the leadership of Mr.(Gerald) Checco (current MSD Director) and his team, this report bolsters our efforts to ensure a more effective and efficient MSD which is what our ratepayers deserve and demand," Black said.
Council Member Kevin Flynn is happy the audit has been released. He had been asking for the document before city council votes on the new fiscal year budget, which includes a number of MSD capital construction projects.
"I'm glad it's out in the open, and I'm glad that we'll be continuing to follow-up as I'm sure State Auditor Yost will be following up and as I'm sure the Ohio Ethics Commission will be following up," Flynn said.
State Auditor Dave Yost is also auditing MSD; and the city manager said that review could take until the end of the year.
A recent newspaper report found the sewer district spent hundreds of millions of public dollars with little or no oversight at a time when residents' sewer rates have risen steadily.
The Cincinnati Enquirer found MSD spent approximately $680 million in the decade following a November 2007 memo from a former city manager that the newspaper says eliminated a checks and balances system.
Under an agreement that expires in April 2018, Hamilton County owns the sewer district and is responsible for its budget. The city manages it and owns the assets it brought to the deal in 1968.
(WVXU's Howard Wilkinson contributed to this story.)