CINCINNATI -- A state auditor uncovered $779,000 in misspending at Cincinnati’s Metropolitan Sewer District from contractors who collected paychecks for work they never did and padded expense reports.
“There was some bad stuff that we found. The oversight was not very good,” said Ohio Auditor Dave Yost. “They lacked some of the most basic kinds of things you would want - spot checking invoices against original documentation for example.”
The long-awaited audit, released on Friday morning, was ordered two years ago after an Enquirer investigation. Hamilton County Prosecutor Joe Deters said that evening he planned to partner with the office of Ohio Attorney General Mike DeWine to "get to the bottom of this mess." Doing so could involve civil and even criminal penalties.
"We are no longer holding back, and we are going to use every asset we have, including a grand jury.". Deters said.
Yost placed blame on MSD leaders for lack of oversight, including former MSD director Tony Parrott, who is jointly liable for $461,594 that must be repaid, and former superintendent of wastewater administration, Margie Anderson, who is jointly responsible for $87,999.
Under Ohio law, any public official who either authorizes an illegal expenditure or supervises the accounts from which an illegal expenditure is discovered is strictly liable for the amount of the expenditure, according to the audit.
“Ratepayers are fortunate that more misspending didn’t occur given the lack of controls in place at MSD," Yost said. "They were asking for trouble."
Seven companies and four government agencies got $779,000 in improper payments between 2009 and 2015, and must now repay that money.
Oversight was so lax that MSD supervisors approved invoices submitted by contractors even though billing rates were wrong or excessive, travel expenses lacked documentation, and the correct work was never done.
"We found one place where a guy was approving work to go to a firm where his son worked — his son was actually working on the project — I think 700 hours," Yost said.
City officials were quick to distance themselves from the audit, pointing out that new controls were put in place years ago that would prevent such widespread misuse of taxpayer dollars from happening again.
"MSD's process is much more equitable, transparent, competitive, and regulated than it was during the time period covered in this audit," Acting City Manager Patrick Duhaney wrote in a memo to city leaders on Friday.
"MSD is currently taking action to fine tune some of the management practices identified in the state audit, including contractor performance evaluations, invoice review and approvals, records retention, travel, and Hamilton County oversight," Duhaney wrote.
The audit's biggest offender was Urban Strategies & Solutions, a Cincinnati company owned by former city councilman Sam Malone, which was paid $294,000 for work that was either outside the scope of its contract, or wasn’t properly documented, according to the audit.
The company was paid to provide “tracking, monitoring, research, or consultation” services from January 2013 through May 2015.
“But no documentation existed to support the work or the resulting payments,” according to the audit. “MSD also continued to pay invoices from the company during a period when the work should have been suspended.”
Auditors also demand that $163,261 be repaid by Focus Solutions, a Cincinnati company founded by Zola Stewart, that excessively and improperly billed MSD from 2011, according to the audit.
The audit found 23 instances where Stewart’s time sheets listed that she had worked 24 hours or more in a day.
“We spoke with Ms. Stewart and she told us the hours reported on the timesheets (for her) included hours for other Focus Solutions employees," according to the audit. "In addition, Ms. Stewart told us Focus Solutions was billing the district and not getting paid in a timely manner and was requested… to consolidate old invoices and resubmit. Ms. Stewart provided us with an email from one of her employees that they were being requested … to resubmit old invoices with manipulated invoice dates.”
Focus Solutions also billed MSD $75,888 for work that was not directly related to the district, but instead helped a nonprofit, Project Rebuild Workforce Collaboration Foundation Inc.
The now-defunct nonprofit provided job training and mentorship programs for high school and college students. Parrott is listed as the president of the nonprofit and Anderson is the secretary-treasurer, according to 2015 tax documents, the most recent available.
In addition, MSD paid $92,546 to Ribway Engineering Group and $18,777 to the law firm Crabbe, Brown, & James for work that benefited the foundation, according to the audit.
"The lesson from this audit is to tighten up controls and to their credit, the city and the county and MSD are doing that now. We’ve seen some improvements during the course of our work," Yost said. "Nothing like the auditor knocking on your door to make sure that your receipts are in order.
Here is what is owed to MSD and what has been repaid:
- Urban Strategies & Solutions: $294,000
- Focus Solutions: $163,261
- Ribway Engineering Group: $108,591 ($16,885 Repaid)
- Greater Cincinnati Water Works: $82,366 (Fully Repaid)
- City of Cincinnati Planning Department: $48,536 (Fully Repaid)
- RA Consultants: $30,159
- Crabbe, Brown, & James: $18,777 (Fully Repaid)
- Ellington Management Services: $12,000
- Hamilton County: $9,072 (Fully Repaid)
- City of Cincinnati Finance Department: $6,840 (Fully Repaid)
- Early Morning Software: $5,562