« And now for an historical lesson from one of the experts | Main | On the bus: CARTA raising rates, seeking budget increase »
May 08, 2008
Nary a mention of the henchman
I hope you have been following the discussion (as dry as it may seem) regarding the purpose and function of auditors in the City of Chattanooga.
Like many a tedious procedural debate, this one started with something of a scuttlebutt: though not quite a scandal, the recent report of a few minor infractions uncovered during an audit of the 21st Century Waterfront raised general concerns about the audit process.
The next milestone was the report by Dave Flessner that indicated how developer and former Ron Littlefield for Mayor campaign manager Dale Mabee received what many consider to be perks in his partnership's deal to build the condominiums between 2nd and 3rd Streets near the Walnut Street Bridge.
The main question resulting from that revelation was: why was an audit conducted of the RiverCity Company's and related Waterfront transactions, but no audit has been performed to date on the Walnut Hill project? Or, more to the point, are there political implications in the decisions about which audits do or do not take place?
Most recently, the lead attorney for the city, Randy Nelson, informed the City Council that an auditor has not been properly installed since the inception of the current charter in 1990. According to reports, the Council has an analyst, but auditor Stan Sewell reports to the Mayor. (The charter calls for the auditor to report to the Council.)
Mr. Sewell recently stated, as part of his declaration of independence, that "the mayor does not tell us what to audit." But let's take a closer look at that statement from a couple of different angles. The most obvious inference is that Mayor Littlefield did not order the audit on the Waterfront. I'm fairly inclined to believe that.
After all, His Honor's background is in real estate, with additional experience in public works administration. But what if there were, say, an experienced CPA in the administration? Like, perhaps, Chief of Staff Dan Johnson? And what if Dan Johnson has a history of being critical of RiverCity Company? Why, there is; it's he; and he did. Could Dan Johnson have ordered the audit?
Now, back to the Dale Mabee deal. Here's what Stan Sewell did not say: "The mayor does not tell us what not to audit." Is it therefore possible that Mayor Littlefield (or Dan Johnson) ordered the absence of an audit on a close political ally? Technically, yes.
Another thing: Sewell says that audit targets are chosen for a) large amounts (which, to be fair, would explain the $120M Waterfront's inclusion) and b) "operations where cash is involved." I'll remind you that the land deal around the Walnut Hill development was made possible by an interest-free loan from the city, and the city accepted a promissory note as payment. It could be argued, I suppose, that this was not a "cash" operation.
Please be careful not to infer any allegations here, against Messrs. Littlefield, Johnson, Sewell, or anyone else; I am simply raising the possibility that these things could have happened, and Mr. Sewell would have nonetheless gone on record stating the truth. In all likelihood, there was no intrigue behind what I have pointed out as potential omissions from his remarks. He was probably just answering a question.
But the mere possibility of politically motivated audit decisions emphasizes the need for the City Council to take swift action so that an independent auditor is accountable directly to the people of this city (through their elected represantives in the legislative body), and is not taking orders from an arguably power-hungry chief executive nor from his power-wielding administrative director.
Government | By joe lance | 10:09 PM
Comments
Great Commentary. I wish to add one clarification. The Audit referred to above was done on the Chattanooga Downtown Redevelopment Corporation (CDRC) looking at a period from July 02-June 07. As the CDRC hired RiverCity to be the master developer of the 21st Century Waterfront, the City Auditors had every right in the world to audit RiverCity's books. Likewise The City Auditors had the professional responsibility to look at all other land transactions handled by the CDRC during this time period. There were seven stated objectives of the audit. Number 7 of the stated objectives of the audit was to determine if "land purchases/transfers were reasonable during this time period". Interestingly enough, the CDRC entered into the contract with Dale Mabee in March 2007, well within in the time frame of the City Audit yet there is not one mention of the Mabee deal in the Audit. Three highly questionable transactions occurred that had the auditors looked at the deal should have higlighted as bad business practices, a violation of the City's purchasing practices and procedures and a general violation of the public trust. 1) A 750,000 Interest free loan where Mabee has no personal liability. 2) The option to buy a piece of property that was not competitively bid. Maybee pays nothing for that option and has 5-10 years to make a decision whether to purchase or not. 3) Mabee was given $100,000 of free land for the driveway to his condos. In closing, the six months the City Auditors spent pouring over every record of the RiverCity Company discovered none of the wild accusations that Ron Littlefield and Dan Johnson claimed in earlier days. Sure there were some minor issues, (like no back-up on a $178 American express bill for a Hartford hotel) but the few minor issues discovered by the City Audiotrs were dismissed by the City's CFO and City attorney. It's laughable to think that the City Auditors are independent and based on above it should be argued, not professional.
Posted by: Ken Hays at May 9, 2008 08:02 AM