I-Team: City manager never made recommended changes to nonprofit contracts after audits

CINCINNATI -- Auditors last summer found that two city agencies had wrongly billed taxpayers for thousands of dollars.

UPDATE: Mayor Cranley cites WCPO Health Gap report as concern with City Manager Harry Black

Yet the city never collected any of the combined $43,238 that Keep Cincinnati Beautiful and the Center for Closing the Health Gap improperly charged for -- until last month, the same week WCPO began asking about the payments.

WCPO’s investigation also found the city manager never made the changes auditors said would safeguard those taxpayer dollars in the future.

Keep Cincinnati Beautiful for months has owed $19,632 to the city, while the Health Gap has carried a debt of $23,654.

The money went uncollected even as City Manager Harry Black implemented a hiring freeze and warned of a $25 million projected deficit in the city’s upcoming budget.

“The whole issue is disturbing,” Mayor John Cranley said of WCPO’s findings. “I was not aware of it, but I think it’s wrong.”

Cranley is now vowing to change how human services groups, like the Health Gap, get city money.

"I can assure you that when I submit a budget to council in June of this year, that I will make it explicitly clear in the legislation that any monies for this kind of thing will go through a competitive process where everyone is treated the same," Cranley said.

Keep Cincinnati Beautiful, which is slated to receive $497,711 from the city this year, made a single $2,094 payment toward its debt on Jan. 17 -- nearly six months after an audit uncovered the agency billed for unperformed work.

The Center for Closing the Health Gap, which will collect $750,000 from the city this year, repaid nothing toward its $23,654 debt as of Jan. 30 -- nearly nine months after an audit revealed questionable billing practices and charges to the city for political action work.

The Health Gap’s debt went uncollected because the employee in charge of their contract was out on extended sick leave, Black said.

“It got lost. They dropped the ball, but the ball has been picked up,” said Black, who gave his assurances that the city would subtract the money from the Health Gap’s January payment.

That outstanding debt is separate from $17,822 in expenses the Health Gap submitted to the city for reimbursement from March through August 2017, which the city disallowed.

Cincinnati Mayor John Cranley's email to City Manager Harry Black by WCPO Web Team on Scribd

‘It’s the taxpayers’ money’

The Health Gap and Keep Cincinnati Beautiful were the only two city-funded outside agencies the city audited in 2017.

Improper spending was found in both cases.

And in both cases, the city vowed to re-write their contracts and hold all nonprofits to higher standards.

But WCPO discovered that nearly a year later, the contracts with both agencies remain nearly identical.

“It’s the city’s fault that we’re not getting this right,” said former City Councilman Kevin Flynn, who led efforts to change how the city contracts with outside groups before he left council in December.

“It’s the citizens' money,” Flynn said. “It’s the taxpayers' money, and that’s what’s most distressing to me.”

In May 2017, board leaders at Keep Cincinnati Beautiful placed the nonprofit’s executive director on leave, alerted the city of possible improper spending at their agency and asked the city to perform an audit. The nonprofit promotes litter prevention, recycling and citywide cleanups.

Their audit found the former director had lied about hours worked, and the city ultimately paid for it. It pointed out the need for better internal controls and criticized the city for “minimal” oversight and “lack of training” for contract administrators.

The city never amended its contract with Keep Cincinnati Beautiful to add any protections, despite the scathing audit. The five-year contract, which has been amended before, has gone unchanged since 2016.

“Given the findings of the audit, given that they were supposed to be repaying money, that’s certainly grounds to change the contract,” Flynn said. “There should have been an amendment required. They were in default of the contract by misspending money.”

But changes are happening at Keep Cincinnati Beautiful in the wake of the audit, interim director Marissa Reed said.

“The audit proved very helpful in understanding where we needed to improve our existing accounting policies and procedures,” Reed said in a statement. “We are implementing a system for expense tracking and have begun monthly meetings with program managers to ensure budget compliance.”

The agency also agreed to a monthly plan to repay its debt to the city through February 2019.

The Health Gap

Mayor John Cranley called for an audit in March 2017 after a two-month WCPO investigation found the Center for Closing the Health Gap, which is tasked with improving minority health in poor neighborhoods, was billing the city for questionable expenses.

Former Cincinnati mayor Dwight Tillery leads the Health Gap, which has collected more than $4.5 million in city funds over the last decade.

When the audit was released in May 2017, it revealed the city’s contract with the Health Gap was too vague, oversight was too lax and several contract terms were unfulfilled.

“(The Health Gap) does not maintain records that allow for third-party verification of performance measures,” the audit stated. “(It) does not regularly maintain attendance sheets at workshops and does not count attendees at their larger events.”

Black promised, in the wake of the Health Gap’s audit, to give all nonprofits a sharper look.

“When we do the next contract with the Center -- as will be the case of all of our leveraged funding contracts -- when we redo them for 2018, they will be totally different,” Black said in a May 2017 interview. “They will be more specific as it relates to expectations, as it relates to the scope of what they’re going to be doing, as well as tightening up the key performance measures for each one.”

But those changes never happened.

Black signed the Health Gap’s newest contract with the city in October. It contains identical performance metrics compared to the prior contract -- ignoring the auditor’s criticism that the terms were so vague they were unenforceable.

Black said he tried to present the Health Gap with new contract terms after the audit in 2017, but the nonprofit’s leaders balked and called the process "unfair."

Black agreed, and his office changed the contract back to its original terms.

“I agreed with the center’s sentiments on that,” Black said. “I made it very clear that we’re not going to treat the Center any differently than we treat everybody else.”

As a result, Black only made one change in the Health Gap’s new contract -- adding a clause reserving the right to “unilaterally go in and make changes,” for any reason, giving the city an added layer of protection, he said.

The city has not responded to WCPO’s request for the draft contract.

The Health Gap declined to comment, and directed questions to the city manager’s office.

Black insists that he’s done nothing wrong, and neither has the Health Gap.

“Let me be clear: There is nothing that supports the idea that the Center for Closing the Health Gap is out of compliance with this contract,” Black said.

But Cranley saw things differently. After an interview on Feb. 2 when WCPO revealed its findings to Cranley, he immediately wrote an email to Black, questioning both agencies’ contracts.

“Why weren’t there any changes consistent with the audit?” Cranley asked. “I worry that contracts with outside agencies could put at risk our city’s well-earned reputation for performance management.”

That’s a concern that Flynn shares. He said he wonders what the city would uncover if it audited every outside group that gets taxpayer money.

“So if we were to audit 18 outside organizations, how many of those would we find had misspent money?” Flynn asked. “Would we find all 18? Or would we find that all 18 contracts that had been entered into for fiscal year 2018 … were the exact same as they were for fiscal year 2017?”

Fresh produce in food deserts

When the Health Gap signed a contract with the city in 2016, it promised at least 11 convenience stores in poor, urban neighborhoods would stock fresh fruits and vegetables.

A place where people living in food deserts could find a fresh apple or carrots.

Yet when WCPO visited those stores in March 2017, only three were stocked with a variety of fresh fruits and vegetables.

Other places did not have any produce in stock or workers said they did not participate in the program.

“In terms of that particular element of the contract -- they were lacking,” Black said when WCPO asked about the lack of fresh markets during a May 2017 interview.

Nearly a year after the investigation, WCPO reporters returned to the Health Gap’s 14 healthy corner stores in late January 2018 to see if anything had changed.

The Health Gap, as part of its November 2017 annual report, provided the city a list of 14 corner markets it was supposed to be operating.

But only five of the stores were stocked with a variety of fresh produce.

Some store owners said the Health Gap has been helpful, providing new refrigerators for produce and suggestions for which vegetables to stock up on.

Others were different.

One store was closed. In another store, a lone apple and banana sat atop a pile of candy. Several others had empty bins. A few owners said they don’t stock produce because customers rarely purchase it, so it gets thrown out.

WCPO showed Cranley photos of the stores from recent visits.

“It’s outrageous,” he said. “These are commitments that are made in writing to the city, for city funding, and I will also ask for what recourse we have in our contracts for this. But the fact that it’s happened two years in a row I think calls into question the entire contract.”

But Black said he does not believe the lack of fresh produce in stores is a violation of the Health Gap’s contract with the city.

The city’s contract with the Health Gap specifically says they are to maintain 11 to 14 healthy corner stores. But that is a goal, “something softer” and not a quota, Black said.

The Health Gap is just required to provide education and awareness -- not stock shelves, Black said.

“They perform an education awareness function as it relates to the corner store by attempting to get the owners to volunteer in the program. So it’s education and awareness,” Black said. “It’s not taking fresh produce, literally, and having it at the store.”

The city’s contract says otherwise.

“Corner Store initiative to provide access to healthy and fresh foods in the food desert areas in the city,” states the contract Black signed in October.

Cranley wonders if the $750,000 the city is paying the Health Gap this year -- more than any other single outside agency receives -- could be better spent elsewhere.

“Well, based on what I know -- which is promising to put out fresh fruit and not doing so -- that seems like a waste of money when we have police, fire and basic services that we’re trying to make sure that we don’t have to cut back on,” Cranley said.

A 'symbolic gesture'

Councilman Kevin Flynn introduced a motion in June 2017 to tighten how the city awards money to nonprofits.

“One of the things that was concerning as we were getting into these contracts -- there seemed to be no rhyme or reason to why certain objectives were in there and where these objectives came from,” Flynn said. “And they didn’t seem to be drafted by the city. They didn’t necessarily match the city’s reasons for funding these outside groups.”

The motion, which won unanimous approval from all nine council members, asked the city manager to change the contracting process.

Instead of allowing each agency to create its own contract goals, the new motion would let the city determine what services it received in return for the hundreds of thousands of taxpayer dollars it spent.

Flynn’s motion was explicit: All money that city council awards to outside groups would be withheld until the city manager completed a rigorous examination -- called PartnerStat -- of the nonprofits.

After completing PartnerStat, each contract would come back to city council for final approval, according to the motion.

But none of that ever happened.

Contracts were signed and taxpayer money was sent to the organizations.

The city manager signed a new contract with the Health Gap in October 2017, without ever bringing it to city council for final approval.

“I’m shocked that there is a new contract,” Flynn said. “Before this money gets spent, you’ve got to come back and tell us what you’re going to do with that money. And we as a council have to agree to that. That clearly hasn’t happened.”

Mayor John Cranley asked that same question in his email to Black last week.

“Why wasn’t the contract brought to Council before it was signed,” Cranley asked in the email.

But Black says council’s motion does not carry any legal weight to force a change.

“A motion is a gesture, a motion is a resolution,” Black said. “Perhaps it has symbolic value.”

Black added that Flynn’s motion is “inconsistent and not in compliance with the city charter.”

Flynn disagreed.

He said the city manager’s office routinely brings economic development contracts to city council for final approval. He does not believe Black has the authority to write contracts that spend city money without any input from city council.

“Under his theory, he’s got the authority to enter into any contract and that’s just not true,” Flynn said. “The city manager doesn’t get to make his own policy and that’s what he’s telling you. That’s just flat out wrong.”

Black said his office, “as a compromise,” has brought to city council plenty of information from the PartnerStat sessions it has with nonprofits.

And Assistant City Manager Sheila Hill-Christian did brief city council in December 2017 about agencies that had gone through recent PartnerStat sessions.

But the Health Gap still has not had one of those review sessions with the city for its new contract. The city had scheduled another PartnerStat session with the Health Gap in late 2017, but the city had to cancel that session and it was never rescheduled, Black said.

In fact, none of the nonprofits has undergone one of these sessions to examine their new contracts signed in the fall of 2017, Black said.

A session with the organizations will be scheduled in the coming weeks to review current contracts, Black said.

For his part, Flynn is confused and disappointed.

“I’m flabbergasted at the turnaround,” Flynn said. “(Black) was all about greater accountability and greater transparency. And this flies in the face of that.”