By Fredrick Kunkle. Washington Post. March 6, 2015. “An auditor’s report on the District’s programs for the homeless found that its main contractor overbilled the city by more than $5.3 million last year, largely through the use of an accounting practice that appears to be a violation of city and federal law.”
“The review also found that the contractor, the nonprofit Community Partnership for the Prevention of Homelessness, had inadequately distinguished between programmatic and administrative costs, a key indicator of whether funds are spent efficiently.”
Read the entire story here.
Commentary:
- Using a “long-standing practice” does not mean you’re performing a task correctly. Sometimes, a task is performed incorrectly for years due to a lack of training (or poor training), frequent staff turnover, complacency, lack of oversight, etc. Procedures should be reviewed every two years to verify if they are being followed properly or if staff coaching is necessary. The review also provides an opportunity to explore more efficient methods of performing the task(s).
- Relying on a single contractor for too many years-or in this case, decades-is subject to problems. How does the contracting agency know they’re receiving the most efficient and impactful service by using a single vendor for ten, 15, 20+ years? Awarding contracts with little or no competition is not the best use of public resources. Corporations (non-profit and for-profit), for example, rotate their audit firm every four to five years (1) to have a fresh set of eyes looking at their books (i.e., providing a service) and (2) to make sure they’re receiving a competitive price for their annual audit. Public agencies should request proposals from service contractors every three to five years for the same reasons. Open competition is healthy.
- Awarding a sub-contract to your own firm is a red flag. Prime contractors should never be their own sub-contractor. Self-evident.
- Oversight matters. Audit reports are interesting and they’re vital to ensuring public funds are spent properly; however, public agency audits are hindsight, not oversight. The agency’s front-line program staff (and their supervisor) is responsible for reviewing a contractor’s performance on a monthly, quarterly and annual basis. Issues need to be corrected immediately as they arise. When program staff is effective at monitoring their contractors, agency audits will be free of significant findings. On the flip side, contractors can use their own internal reviews/audits as a proactive measure to identify potential problems and inefficiencies and to improve their systems and procedures.