Tuesday, February 21, 2017

Republic's Expert Forensic Accountant Is Decade Off

The Standard Times Mike Kelly defended Republic Services audit of unauthorized billing of commercial customers over a decade's time.  Mr. Kelly posted Republic's audit on his personal Scribd account, which has a total of 7 documents listed. 

Republic Waste Services
Expert Report of Gregory A Shanabrook
1. I have been retained by Republic Waste Services of Texas, Ltd. (“Republic”, “Defendants”) inconnection with the case between Acme Iron & Metal Company, Mayfield Paper Company, Inc., and those similarly situated (collectively the “Plaintiffs”) and Defendants.

2. In 2004, the City of San Angelo (the “City”) solicited proposals to provide solid waste management services for a future term. During that process, questions arose regarding Republic’s past charges to commercial and industrial customers. Republic determined to make a refund of the fuel recovery fees and environmental recovery fees charged in excess of the fuel fees expressly stated in City ordinances (referred to herein as “refundable fees”).
Expert forensic accountant Shanabrook needs to correct his report to 2014, not 2004, and resubmit it to the court.

The city did not conduct an internal investigation as to how this unauthorized billing occurred over the terms of Will Wilde, Ricky Dickson and Shane Kelton. These three gentlemen had operational responsibility for monitoring Republic's performance and compliance with contract provisions. The city did produce a one page investigation which concluded Republic billed and collected unauthorized fees on a long term basis.

Republic Services had two different accounting systems during their decade of unauthorized fee billing.

The city never caught this and once informed let Republic clean up its fraudulent mess. It has run away from internal review and management scrutiny at every turn.

I trust Mr. Shanabrook to correct his honest mistake. His was in one line of a report not over 5,900 customer accounts, ten years, three city leaders and two accounting systems.

Friday, February 17, 2017

Trash Audit: War of the Words

Investigative journalist Wayne Dolchefino traveled to San Angelo to ask officials about the internal audit conducted on unauthorized fees charged by Republic Services, formerly Trashaway.  The unauthorized fees impacted commercial clients beginning in 2004.

Two city officials referenced the audit in June 2014.

Mahaffey told the Standard-Times that the audit report would not be made public.

City Councilwoman Charlotte Farmer said that the audit committee reviewed the findings of the audit of the commercial charges and there will be a press conference held by Republic sometime this week to announce the findings and the resolution. 
San Angelo's Public Information Office Anthony Wilson officially started on September 1, 2012.  At the time he told the Standard Times:

"We have a responsibility to inform our citizenry what we're doing and why we're doing it. While I believe we deliver an extraordinary level of service, we don't always effectively share that story with the public we serve. We'll aim to tell that story through every available means."
Dolchefino wants answers on the 2014 internal city audit referenced by city officials, the one conducted before Republic hired an accounting firm.  In the video Wilson talks trash audit, the one conducted by a forensic accountant on behalf of Republic Services after the city effectively re-upped their contract.

Forensic Accounting:  the use of accounting skills to investigate fraud or embezzlement and to analyze financial information for use in legal proceedings.
Wilson said Republic's forensic audit is available via the fraudulent billing lawsuit filed in Tom Green County Court, a case in which the city has no part.

That means the city has no audit at all, neither the one referenced in June 2014 by the city's internal auditor and Councilwoman Charlotte Farmer nor the forensic accounting audit conducted on behalf of the city's longtime trash vendor.  It does have a one page investigation, which can hardly be construed as an audit.

The Standard Times, San Angelo Live and this blog advised city officials, elected and paid to conduct an investigation and share it with the public before acting on a long term trash/landfill contract.  I wrote in June 2014:

It seems prudent to extend the Republic contract for six months, have an outside audit investigation, hear those results and corresponding legal considerations and based on those findings consider whether to rebid the trash/landfill contract.  Moving forward with many questions unanswered feels like a rush to renew.  Unfortunately, that would fit with both language and actions by Council and staff the last ten months.

 It's time to take a step back, not rush forward
In July 2014 I reiterated:

I stand by my original suggestion that the new contract be put on hold, the city hire an outside firm to investigate this long term overcharge (under city leaders Will Wilde, Ricky Dickson and Shane Kelton) and share the results of that investigation with the public.  What communications occurred between these gentlemen and Trashaway-Republic on unauthorized charges?
City leaders chose to go ahead with promises to hold Republic accountable.   I don't believe the city can be more hands off in a potential fraud case perpetrated by a sole source vendor over a decade's time.  Republic gets to clean up their mess while city officials stick their heads in the sand, pulling it out every now and then to admonish those asking questions. 

It's the city's opportunity to effectively share how public officials ever audited Republic with those they serve.  Wilson's latest video is way off target.

Thursday, February 16, 2017

Development Corporation's OE Renewables Solar Project Remains in Shadow

The City of San Angelo's solar farm deal with OE Renewables Texas projected a mid 2016 start date.  That did not happen.  The company gave an overview at a Solar Expo the end of August 2016 but it lacked two critical elements, a progress update and timeline.  

The Development Corporation omitted the solar farm in its 2016 work program.  Is it considered a success if one leaves out failures?

Monday, February 06, 2017

City Cleans Up Another Contract

San Angelo City Council will take up an odd item in Tuesday's meeting.

February 3, 2009, San Angelo City Council accepted the conveyance of a 40 acre tract out of Phase II, Industrial Park from City of San Angelo Development Corporation for the development of a commercial venture which would act as a catalyst for other development within the US 67 Gateway. 

Council Memo states, if such development is not achieved within one year, it is understood such property would be returned to COSADC as a resource for business recruitment purposes; however, the Special Warranty Deed from COSADC to City failed to include this reversionary interest. The property was placed out for bids (RFB PRO-02-09), and the bid was awarded April 7, 2009 to Lamesa Enterprises for the development of a drive in theater. In addition to awarding the bid, Council authorized the City to extend a sewer line approximately 3300 feet for $150-$170K to the 40 acre property line. Lamesa Enterprises was allowed up to 1 year to construct the facility. 

The 40 acre tract was never transferred to Lamesa Enterprises and the facility was never constructed. 
It's odd on numerous levels.  One, Council's direction was not included in the original lease.  Two, it's been nearly seven years since the bid was awarded, nearly six years after the land should have reverted back to the Development Corporation.

Failure of the drive in movie theater joins other outdoor efforts like Lucas Oil off-road racing and OneEnergy Renewables solar farm on city land next to the Industrial park.   Neither has come to pass.  If any cleanup is needed from those efforts I hope it doesn't take seven years. 

Thursday, February 02, 2017

Development Corporation's Three Annual Reports

City of San Angelo Development Corporation (COSADC) is required to produce an annual report according to its bylaws.  Staff produced the 2012 annual report in October 2013 and then the reports stopped.  After a three year pause the COSADC Board approved annual reports for 2013, 2014 and 2015.

The 2013 report took two years and three months to reach the COSADC board.

The 2014 report fell one day short of two years in production.  When asked about the failure to produce annual reports per the bylaws COSADC President Roland Pena offered numerous responses.  The first came in March 2015:

He wrote in August 2015:

I believe that the abstract information that you are asking about in the by-laws refers to the Corporation Capital Improvement Plan.   The COSADC Board to my knowledge has not had a Capital Improvement Plan.   It is my intention to do so upon being able to identify capital development projects.  At that point, I believe the Plan is rolled into the City's Capital Improvement Plan for review by the city council.   In addition, I do intend to produce annual reports to provide to COSADC and the City Council.
Both annual reports were in production before Pena crafted these two replies.  Why the delay?  I believe the Development Corporation did not want to publish it was suing a recipient of economic development funds for nonperformance until the matter was resolved.  The timeline below supports this theory:

No report was produced for approval until the City put to bed its legal settlement with Hirschfeld Energy for failure to meet its promises for $2.8 million in public support. City Council's 1-17-17 action on the Hirschfeld settlement opened the door for a flood of COSADC annual reports the following week.  I wonder if any City Council members will notice the delay and ask why.