This is Part XVII in a Series.
I know I said that I would ztart running projects through this checklist next but I realized I still needed to tune up what I had begun last year and set the stage a little better. I want to get more into the Procurement Process Value Chain.
Procurement Rules for the City School District of New Rochelle are mandated by New York State as described in the Purchasing Handbook on the New York State Education Department web site.
This is the “bible” in understanding and explaining the process is the Purchasing section of the New York State Education Department web site so if you want to understand the laws and best practices for Competitive Bidding for School Districts you may want to take a look. The Procurement Rules are critical to protecting the interest of taxpayers and sacred to any investigating agency.
For years Procurement Rules in New Rochelle have been routinely ignored to justify large, unwarranted payments to vendors who over bill the district and then kickback a portion of the funds. I have been writing for years about the complete and utter lack of financial controls which exist in the City School District of New Rochelle and the myriad ways that the taxpayers are being fleeced. District officials and board members turned a deaf ear.
The issuance of smaller Purchase Orders and/or the regular use of “emergency” contracts is to circumvent the system. It is a gross violation of the terms of contract, and more importantly violates procurement rules, which, when violated and investigated, can cause major problems for the government employees involved.
That Aramark did not have a signed contract for 18 months is a gross violation of procurement and award; it surely speaks to the "coziness" that is pervasive. No one in City Hall has been able to explain how a government entity has been releasing funds against an unsigned contract?
What is perhaps most startling of all is that of the 200+ invoices I have obtained, as best I can see, there are no rejected invoices. Most invoices are returned to the contractor for one reason or another, the dates do not match up, they have the wrong PN or project number, there is over billing, and so forth
While any procurement rules and/or specification sections may be byzantine to follow, they are there for a reason. They should be enforced, and failure to do so (solely, accounting for no other factors) is a violation of the procurement rules and the public trust. When you have the same people bidding over and over, and they are almost invariably winning as the “lowest” bid that is an indication that there is practice in place where the lowest bidder will not be held to strict enforcement of the procurement process so they can get make money on the deal.
In April 2014, Interim Superintendent Dr. Jeffrey Korostoff hired a company to analyze such claims in six instances. The Orifici Report concluded that of the six projects selected at random for audit, none of the invoices should have been paid due to incomplete, shoddy or fraudulent paperwork and an absence of on-site authentication that the work was done correctly or done at all.
Orifici found the district was over billed for at least $58,000 on five of the projects (the sixth was redacted). Orifici, whose report was kept secret, concluded that in the District there was no methodology to confirm that actual workers are on site for the period in the invoices, payroll did not correspond to the Certified Payroll Reports (or there were no such reports), materials were not substantiated with paid invoices and there was no evidence that material was actually utilized on site. There was no documentation that required insurance and indemnifications were submitted prior to the start of work and remained in effect throughout the project and more.
The Procurement Process Value Chain (pictured above) describes a 8-Step Process which is supposed to identify and weed out errors and fraud. The process was routinely ignored. Of the 200+ paid invoices obtained by Talk of the Sound none of them should have made it all the way through the process and been paid.
The Procurement Process Value Chain I created begins with the existence of a Requisition Order which is basically someone in the District saying “hey we need this work done” and some else saying “I’ll see how much it will cost”.
The way this gets done is based on various Federal, State and County laws in addition to District policy which govern which vendors are approved to provide services and how much they must pay to their workers. A vendor can be approved directly by the District or be approved by a large governmental entity like a County or the State of New York or the federal government. A local school district can “piggyback” off a contract with one of these larger governmental entities but this typically does not apply to service contracts, primarily because prevailing wage requirements vary throughout the region and state and country. This can get very complex but for my purposes I am going to stipulate that all Requisition Orders were valid (even though I know this is not always true) and legal (even though I know this is not always true either). I will delve into the Requisition Process Value Chain some other time. However it comes about, once a valid contract from which the district may procure products and services is identified a contractor provides the District with a quote for the work through the bid award. This holds unless the contract resulted from a project specific bid in which case the pricing will already be evident. Once the quote has been reviewed the Director of Buildings & Grounds provides that information to their assistant; that person enters the information into the Finance Manager software and so the Purchase Request becomes a Purchase Requisition. Again for purposes, we are going to limit our concern to the Purchase Requisition not how it came into being.
There are several requirements in matching the invoices to work performed and materials used; all of the documentation provided to Contractors makes it very clear that “ABSOLUTELY" no work is to be performed without express authorization in the form of a PO and that no invoices will be paid for work performed prior to the issuance of a PO. Lump sum invoicing for labor and/or materials is not allowed. Manufacturer information MUST accompany the invoice to the District. The labor rate must cover all costs, supplemental benefits, overhead, and profit. The Contractor may not charge for clean up costs and the removal of any debris created from their repair work at a job site. The work site must be left in "broom-clean" order. The Contractor may not charge additional surcharges, fuel charges, or travel costs. The employees of the Contractors are required to report with the tools required for his or her trade in accordance with trade union agreements.
Contractors do not provide materials, supplies, heavy equipment but are required to supply “tools of the trade”. Specifically…
For Painters, did district provide paint and contractor provide rushes, rollers, trays, tarps, and all other similar support materials?
For Carpenters, did district provide lumber and materials that can be purchased directly from the District Materials bid contracts or other bid contract that the District is eligible to piggyback off such as a New York State contract, Westchester and Rockland County contracts and BOCES contracts? Little or nothing should be supplied by contractor as most everything is covered under various District materials, did the district provide rental of heavy equipment, did the contractor provide all other tools of the trade?
For Electricians, did district provide electrical materials and supplies if covered under the District materials bid contract or other bid contract that the District is eligible to piggyback off such as a New York State contract, Westchester and Rockland County contracts and BOCES contracts. Little or nothing should be supplied by contractor as most everything is covered under various District materials, did the district provide rental of heavy equipment, did the contractor provide all other tools of the trade?
For Masons, did district provide masonry supplies such as block, concrete and so forth that is covered under the District Masonry Supplies bid contract or other bid contract that the District is eligible to piggyback off such as a New York State contract, Westchester and Rockland County contracts and BOCES contracts. Little or nothing should be supplied by contractor as most everything is covered under various District materials, did the district provide rental of heavy equipment, did the contractor provide all other tools of the trade?
For Plumbers, did district provide plumbing supplies that are covered under the District Plumbing Supplies bid contract or other bid contract that the District is eligible to piggyback off such as a New York State contract, Westchester and Rockland County contracts and BOCES contracts. Little or nothing should be supplied by contractor as most everything is covered under various District materials, did the district provide rental of heavy equipment, did the contractor provide all other tools of the trade?
From this I have created a checklist to evaluate each paid capital project invoice:
- Is there a Requisition Order?
- Is there an Estimate from Contractor?
- Does amount of project exceed limits requiring public bidding?
- Does Contractor Estimate details estimated hourly labor?
- Does Contractor Estimate details staffing?
- Does Contractor Estimate details material charges?
- Is there a Purchase Order?
- Does the Purchase Order reference the correct PN number?
- Is there an invoice?
- Does the Invoice list Dates of Service?
- Does the Invoice state School Location?
- Does invoice charge for clean up costs (not allowed)?
- Does invoice charge for removal of debris at work site (approved rate)?
- Does invoice charge for additional surcharges (not allowed)?
- Does invoice charge for fuel charges (not allowed)?
- Does invoice charge for travel costs (not allowed)?
- Does invoice charge for tools of the trade (not allowed)?
- Does the Invoice reference the correct Purchase Order?
- If a Cost Overrun, did the Purchasing Manager give prior approval?
- Does the billing conform to terms of annual contract, there is such a contract?
- Are there multiple invoices that exceed amount requiring public bidding?
- Are Certificates of Insurance naming the City School District as "Additionally Insured” on file?
- Is the invoice accurate in terms of time worked at each job site?
- Does the invoice accurately bill for labor at the specific bid hourly rate?
- Are there daily reports to validate work done?
- Did the Contractor provide a Certified Payroll form?
- Does the Certified Payroll submitted match the invoice?
- Did the Certified Payroll form verify workers were paid Westchester County Prevailing Wage?
- Did the Certified Payroll form verify all workers were hired for a full normal working day?
- Did Contractor verify that trades personnel were licensed if applicable (electrical, plumbing)?
- Was any methodology used to confirm that workers were on site for the period in the invoices?
- Is there documentation that actual workers were on site for the period in the invoices?
- Are there Supporting Documents for Materials used on the job?
- If the Contractor provided materials did the Contractor submit a detailed proposal?
- If the Contractor provided materials did the Contractor receive PRIOR written approva?
- Is the invoice accurate in terms of time materials used at each job site?
- Does the invoice accurately bill for materials with the appropriate, discount/mark-up?
- Does the invoice indicate the precise amount of materials used?
- Were materials used required to be be supplied by the School District as indicated in the Bid Award?
- For a painting project, did district provide paint and other materials?
- For a carpentry project, did district provide lumber and other materials?
- For an electrical project, did district provide electrical materials and supplies?
- For a masonry project, did district provide masonry supplies such as block, concrete, and other materials?
- For a plumbing project, did district provide plumbing supplies?
- Did the Contractor provide receipts for all individual material items in excess of $500?
- Did the Contractor provide receipts for any individual part or individual material item over $500?
- Is there any evidence that material was actually utilized on site?
- Is there evidence that material purchased were Tax Exempted?
- Is there Markup consistent with other invoiced projects?
- Is there Markup consistent with contracts?
- Did the Contractor charge for waste disposal fees as described in the PN?
- For any Equipment described as purchased in the Invoices was that equipment turned over to District?
- For any Equipment described as rented in the Invoices are there matching Equipment Rental invoices?
What I will do next is start running specific projects through the checklist.
If you are knowledgeable on this sort of stuff and you feel I left something off the checklist PLEASE let me know right away before I start chunking away at the 200+ invoices.
NEXT: New Rochelle Board of Education: Criminal Enterprise Masquerading as an Educational Institution - Part XVIII