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ALBANY---The New York State Department of Environmental Conservation (DEC) Division of Water did not follow proper procurement procedures when it expended million of dollars on services from two organizations for floodplain mapping and water pollution control activities, according to an audit released Thursday by State Comptroller Alan G. Hevesi.
"DEC failed to follow State procurement guidelines and, as a result, millions of taxpayer dollars were spent without sufficient agency oversight," Hevesi said.
Auditors found that DEC could not document that it had followed State procurement guidelines when it set up working arrangements with the Regional Application Center for the Northeast (RACNE), a unit of Cayuga Community College, to provide floodplain mapping. This work was later taken over by a not-for-profit created by the College, the Institute for Application of Geospatial Technology (IAGT). DEC also did not follow guidelines in selecting the New England Interstate Water Pollution Control Commission (NEIWPCC) to provide water pollution control activities.
The agreement between DEC and RACNE for floodplain mapping was in the form of a memorandum of understanding (MOU), which would be the appropriate form for agreement between State agencies. The original MOU for $1.9 million was later amended to $20 million, and a total of $14 million was spent under the agreement as of February 2005. However, community colleges are not considered State agencies, and auditors therefore determined that a formal contract should have been awarded using a competitive process. As with all State agency contracts valued at more than $15,000, the contract would be subject to review by the Comptroller's Office. DEC officials agreed that IAGT, RACNE's successor, is a private entity and are currently working with the Comptroller's Office to establish a formal contract for the ongoing work.
NEIWPCC's work on water pollution control activities under the federal Clean Water Act was supported by $1.5 million in grant funding from the United States Environmental Protection Administration (EPA), and was paid directly to the organization by the EPA at the request of DEC. The Comptroller's Office determined that the standard procedure for such federal grants would be to have the grant made to DEC with payments made to NEIWPCC.
DEC officials told auditors that the Division of Water evaluated its ability to handle its workload by assessing whether it had workers on staff with needed skills, whether required civil service job titles existed and whether waivers could be obtained to bring on staff during hiring freezes. Officials said that the Division handled its workload in part by using outside entities to perform certain functions, but they were unable to provide any documentation of specific factors that were considered when selecting RACNE/IAGT or NEIWPCC.
Auditors found that the Division of Water generally did not have difficulty filling staff positions, and determined that all of the 134 waivers to fill positions requested from the Division of the Budget during the audit period (April 1, 1999 through July 14, 2005) were granted in a timely manner. Auditors also noted that while the total number of employees in the Division of Water remained relatively stable during the audit period, the number of State staff in the Division dropped by 10.2% and the number of non-state staff increased by 72.7%.
Auditors compared the costs of workers provided by RACNE/IAGT and NEIWPCC with comparable civil service positions and found that the DEC could not demonstrate that the agreements with the two organizations represented cost savings for the State.
Auditors also found:
The activities undertaken for DEC by the two organizations included the placement of workers in DEC offices, where they were supervised by DEC managers.
While both RACNE/IAGT and NEIWPCC provided some workers to DEC with special expertise, other staffers provided by the organizations were assigned to work on routine Division of Water tasks.
The required job qualifications for certain positions were lower for RACNE/IAGT than for the comparable State civil service jobs.
The Division of Water did not verify that staff hired by RACNE/IAGT and NEIWPCC met required qualifications, and neither organization provided documentation to DEC that it has confirmed individuals' job qualifications.
DEC did not prepare any cost comparisons between State and non-state workers prior to engaging the organizations. However, in its response to the audit, DEC maintained that indirect costs at the rate of 24% should be added to the cost figures for State workers, thereby making State workers more expensive than non-state workers.
The 24% added includes not only overhead of DEC itself, such as its executives and support staff, but also costs associated with other State agencies, such as the Division of the Budget, the Department of Civil Service, the Office of Employee Relations, and the Office of General Services, which support all State agencies.
It is unclear how DEC's administering two relatively small contracts would have reduced any of its share of the costs of other State agencies. Since DEC managers supervised the contract workers, much as they would have supervised State employees, it is also unclear that these contracts saved any significant costs to DEC itself. Auditors researched how cost comparisons between government and contract workers are handled, and found that Texas has a formal process required under state statute for conducting such analyses that does not include adding indirect costs.
In fact, when recovering administrative costs for grant work where DEC employees are used, the Division of Budget approved adding indirect billing costs of 3.48 percent for non-federal funds and 3.22 percent for federal funds in 2004-05.
Governor Pataki signed legislation last month that will increase disclosure and review of State agency hiring of consultant contractors.
"DEC claims this audit is an attack on privatization. In fact, our findings in that area are neutral. There was no significant difference between the cost of state workers and contract workers in this case. We simply underscored the importance of considering this issue, and the newly-enacted legislation will facilitate that," Hevesi said. "My experience as New York City Comptroller was that sometimes government workers cost less and sometimes contract workers cost less. It's necessary to conduct a specific analysis in each case and not approach the issue with ideological blinders."
In their written response, included in the final audit, DEC officials suggested that the Comptroller's Office undertook the audit with "predetermined findings" and disregarded information that did not agree with those findings. In fact, all Comptroller's Office audits are conducted in accordance with generally accepted government auditing standards that require the highest degree of integrity, objectivity and independence, and undergo several levels of internal quality control.
DEC officials insinuated that Comptroller's Office auditors, who are members of the Public Employees Federation (PEF), had inappropriately released preliminary findings of the audit to PEF union representatives. Because of the serious nature of this allegation, Comptroller's Office audit managers investigated the matter and confirmed that documents were provided only to authorized DEC employees.
Officials also suggested that the fact that auditors were PEF members was a conflict under Federal Government Auditing Standards. In fact, Comptroller's Office auditors are required to attest to their independence, and their work is supervised and approved by non-union managers.
"DEC officials claim our auditors are biased against privatization, but in fact the audit found there was no cost difference, so it neither supports nor attacks privatization. Since DEC officials can't find fault with our findings, they are trying to attack the objectivity of our auditors," Hevesi said. "It is the everyday job of our union auditors and non-union audit managers to review the work of other government employees, union and non-union. They have never hesitated to report exactly what they find, which often means being critical of other union members' work. They commit to professional standards, which require them to be independent and objective. And all our audits are rigorously reviewed by non-union managers. There is absolutely no basis for this outrageous charge. The only bias is on the part of DEC officials, who have to justify their decision and who apparently want to divert attention from their admitted failure to follow procurement procedures."
The DEC Division of Water protects water quality in the State's rivers, lakes, reservoirs, wetlands, aquifers and coastal areas by regulating wastewater discharges, monitoring water quality and controlling surface runoff. The Division also operates programs to improve and protect the State's water resources and prevent flooding. www.osc.state.ny.us/audits/allaudits/093006/04s76.pdf 4-27-06
© 2006 North
Country Gazette
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