As e-mailed this morning, 3/15/16
Dear Mayor Jackson -
News reports today tell us that in a press conference yesterday, you announced that “the city’s outside labor counsel is reviewing its internal controls and any steps that can be taken to ensure there is no repeat of its payroll fiasco.” I am glad that you are finally taking this action after several weeks during which this story has developed in the absence of any substantive information from your office or elsewhere in the Administration of the City of Trenton. As I and others have said on multiple occasions since the news of the City’s payroll theft first became public, action must be taken and information publicly shared that will not compromise the integrity of any current civil and criminal investigation. Recovering from this event will require a hard look at processes, personnel and systems to make sure nothing like this will happen again. I am pleased that you and your Administration recognize this, however belatedly.
The article by Cristina Rojas in this morning’s Trenton Times which describes your statements made during yesterday’s press conference is informative, but begs several questions. I respectfully request you to provide some further information about this effort now under way.
You stated, “Not only are we taking an internal audit, but we’re having an outside legal firm look at the processes that not only took place during that period, but the organization that’s set up so we can avoid having similar things.” Does this statement indicate that there are two parallel processes taking place?
Is there an internal audit taking place? That is, a functional accounting and management audit to be undertaken by the City’s Finance and Business Administration offfices, with the assistance of the City’s regular outside independent audit firm, or another independent CPA firm? Is that the work to be undertaken by the City’s outside counsel?Or will that counsel be working on a separate but parallel project?
If the latter is the case, how is the scope of work to be constructed for each task? How will they report? What is the timeframe for this effort?
Frankly, the selection of outside legal counsel to lead an investigation into what was essentially a failure of financial, accounting and management systems strikes me as an interesting choice. What are the qualifications of this firm, and of the specific attorney leading this effort that suggests that they are singularly qualified to perform this work?
News of the selection of a legal firm to be involved in this kind of investigation and audit brings to mind the work performed by the law firm of Gibson Dunn & Crutcher for Governor Chris Christie last year in the aftermath of the Bridgegate incident. The integrity and independence of that effort has been challenged on several counts, including cost, the lack of notes and work product, and the general sense that the Governor always intended that effort as a piece of political theatre with a pre-determined outcome favorable to him.
In order to avoid those kinds of charges to this effort, Mr. Mayor, you need to publicly lay out several ground rules for this effort.
First, you should announce that attorney-client privilege will not apply to any reports and work product that is prepared and delivered to you from the audit and/or attorney review. Everything should be made public, with the exception of any materials that may be determined to be of material relevance in potential criminal investigation.
Oversight of this extraordinary audit and management review should be inclusive of members of City Council as well as independent parties from outside the City having professional background and experience in NJ municipal administration. Former Business Administrators and/or City Attorneys from other NJ municipalities would be excellent candidates.
As referenced above, the Scope of Work for this effort should be made publicly available, as well as a timetable for the effort. News reports have revealed over the last couple of weeks indicates that multiple warnings from the State and Federal agencies were ignored for a period of at least nine months, which suggest several problems. All of the notes written to IPS by the single accountant in the Finance Department fail to suggest any sense of the urgency of the matters at hand. Although the City Comptroller was copied on these notes, there has been up until now no evidence that she involved herself in further investigation of these matters. Nor did she – as far as we know – include or notify anyone further up the administrative chain of command in City Hall from April 2015 until December.These failures suggest problems with internal communications, training of financial personnel, and even common sense judgment. This management audit must describe how these problems will be addressed, and when.
This effort should also produce a full chronology of the sequence of events since last April. In yesterday’s press conference, you and Mercer County Acting Prosecutor Onofri both said that the City “acted very quickly,” when the scale of the theft was discovered in December. Since statements like this are at odds with the fact that serious delinquencies with tax deposits were made known to the City at least eight months prior, these contradictory facts can be resolved via a definitive chronology that tells us Who Knew What When, and What They Did About It.
You also stated yesterday that “depending on how the litigation turns out, next year’s budget could be impacted. ‘They’ll take that into consideration as we build toward next year’s budget depending on where we are in litigation to figure out where we have to balance that out at.’” This loss occurred during the first 2 quarters of the current fiscal year ending June 30. Generally Accepted Accounting Principles (GAAP) require expenses to be recognized in the period in which they are incurred. That is, any loss to the City as a result of this theft should be recorded in the current year. What makes you believe that we can defer any fiscal impact of this crime for the next year’s budget cycle? On what authority are you depending for this advice?
Mr. Mayor, this is an opportunity to get to the root causes of the problems within the City’s Administration that allowed this crime to take place. To attempt to rebuild confidence in your Administration on the part of the public and other stakeholders in the City’s future, this effort needs to be comprehensive, transparent, and independent. We do not need allegations of another Bridgegate whitewash to tarnish this effort and the City’s reputation.
I am sure you understand.
Thank you, Mayor Jackson.