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Administration gives State Auditor private data on OGB study but denies access to Dept. of Economic Development records

Posted in Auditor, Contract, Contracts, Economy, Governor's Office, OGB, Office of Group Benefits, Teague, Transparency on March 19, 2011| 1 Comment »

A $49,999.99 contract between the Office of Group Benefits (OGB) and Chaffe and Associates appears to give the legislative auditor’s office complete and unfettered access to all records of Chaffe’s work for OGB, something it lacked in its recent audit of the Louisiana Office of Economic Development (LED).

Chaffe’s contract with OGB, executed on Feb. 16, calls for the New Orleans investment banking firm to prepare a “detailed report structured to provide sufficient information to permit OGB and the State Affiliated Parties (Office of the Governor and/or the Division of Administration) to understand the data, reasoning, and analysis underlying its (Chaffe’s) conclusion of value” of OGB.

Chaffe is charged with preparing and submitting a report setting forth its opinion of the current fair market value of the operations of OGB in preparation for Gov. Bobby Jindal’s anticipated attempt to privatize the office.

Capital News Service earlier reported that the Wall Street investment banking firm Goldman and Sachs was brought in for several weeks to assist in the preparation of a request for proposals (RFP) from “qualified financial advisors” to assess the market value of OGB.

The deadline for bids was March 7 with interviews of bidders scheduled to begin last Monday, March 14. The problem of timing arose when the administration realized it needed preliminary figures at least in time for the presentation of the governor’s proposed budget on March 11, three days before interviews were to begin.

Chaffe was given a contract to fast track the valuation of the agency in time for the budget presentation. The $49,999.99 contract amount was for one penny less than the minimum contract amount requiring Office of Contractual Review approval. CNS first reported that the contract was for $49,999 but upon receipt of a copy of the contract pursuant to a request under the Louisiana Public Records Act, it was learned that the contract was actually for an additional 99 cents.

While the contract was signed by Tommy Teague, chief executive officer of OGM, and Chaffe Managing Director Jonathan Briggs on Feb. 16, it was back-dated to Feb. 10 and runs through June 30, according to terms outlined in the document.

The contract also gives the legislative auditor the right to audit Chaffe’s work. “Chaffe grants to the Office of the Legislative Auditor, the Office of the State Inspector General, and any other duly authorized agency of the state the right to inspect and review all books and records pertaining to services rendered under this contract,” it says.

State auditors recently complained that the Louisiana Office of Economic Development (LED) denied them complete, unfettered access to requested documents during an audit of that agency.

The audit report said two meetings were held with LED Secretary Stephen Moret and the legislative auditor also sent two letters requesting unrestricted access to records but LED, citing workload issues and legal concerns, refused to cooperate, thereby preventing auditors from knowing to what extent documentation that was provided may have been compromised or whether or not they received complete information.

LED is a public agency, supported by taxpayer dollars, while Chaffe is a private entity.

R.S. 24:513 (I) provides that the legislative auditor’s authority to audit extends to “all documents, records, and files, whether confidential or otherwise.”

While appearing to give the legislative auditor carte blanche in the examination of Chaffe’s work product, the contract also takes careful measures to protect the firm’s report and work papers from public disclosure.

“Chaffe will not release any information to any third party about OGB or this engagement without OGB’s prior written permission,” the contract says, adding, “Chaffe’s work product or other written or electronic documentation regarding this engagement does not carry with it the right of publication without Chaffe’s previous written consent.”

The last sentence might be open to legal challenge inasmuch as once the report is submitted to OGB, DOA, or the governor’s office, it is presumed to be a public document under the state’s public records law and Chaffe would have no say in any decision to make the report public. The contract does appear to recognize that contingency in the next paragraph when it says that OGB agrees to notify Chaffe in writing “prior to the production of any Chaffe work product in response to a request pursuant to the Louisiana Public Records Act or any proceeding before a court or governmental or regulatory body.”

Payment terms of the contract calls for OGB to pay Chaffe a fee of $45,000 for the report, due upon delivery. The maximum payment, inclusive of other fees, expenses and copies is not to exceed $49,999.99, according to terms of the contract.

At the March 7 formal bid opening for the state’s RFP on the “qualified financial advisor,” an RFP in which Goldman Sachs played a major role in drafting, the only bidder was Goldman Sachs.

The global investment banking firm’s bid to more fully assess the fair market value of OGB and to find a buyer for the agency was for $6 million. A spokesman for DOA said that under terms of its bid, Goldman Sachs would receive the $6 million even if it is unsuccessful in securing a purchaser for the agency.

The same source said OGB’s current surplus of more than $500 million would be discounted and the state would receive $150 million to $200 million of that to help Jindal plug the gaping $1.6 billion budget gap with the purchaser retaining the balance.

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Fired security contractor has not paid former employees final checks despite receiving final payment from state

Posted in Contract, Contracts, Governor's Office on February 22, 2011| Leave a Comment »

Controversy surrounding JAT Bureau of Services and Management just won’t go away, despite the fact that the Montgomery, Alabama, firm’s million dollar contract with the Louisiana Department of Public Safety and Corrections was terminated last month.

Former employees of the firm have not received their final paychecks from the company even though the state made a final payment of $27,693.19 on the company’s contract two weeks ago, according to Jill Boudreaux, undersecretary of Public Safety Services.

JAT’s problems first surfaced in early December when it was learned that security guards employed by the firm either had not been paid or paychecks that were paid bounced. The company was under contract to provide security services to 15 state office buildings and employed 74 guards in Baton Rouge.

JAT employs 200 persons overall and had 2009 revenues of $2 million, according to information provided on its web page. JAT Chairman Arthur Coleman has never returned phone calls made to his offices in Montgomery.

The state, when issuing its request for proposals (RFP) from security companies, apparently did not require that bidders post either a bid bond or performance bond though the RFP did stipulate that bidders carry liability insurance.

Soon after Capitol News Service and Louisiana Voice ran the story about the bounced paychecks, JAT posted a one-page memorandum threatening to fire any employee who complained about not receiving a paycheck or about a bounced check.

Boudreaux, in an email to Louisiana Voice, said the final payment of $27,693.19 was made to JAT on Feb. 9.

Boudreaux was initially asked what recourse is available to the state to requirement payment to JAT’s former employees. She referred that question to either State Purchasing or the Attorney General’s office.

One source said the Attorney General’s office was looking into the matter and had been in touch with the Division of Administration in efforts to obtain payments for the former JAT employees.

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State contracts continue to proliferate

Posted in Campaign Contributions, Contract, Contracts, Education, Governor's Office, Higher Education, Legislature, Legislators, Lobbyist, Public Records, Transparency on February 6, 2011| 2 Comments »

The big news out of the nation’s capital last week was a Feb. 3 Washington Post story trumpeting the fact that the federal government spent $15 billion less on contracts for outside products and services during fiscal 2010, the first reduction since 1997.

The $15 billion cutback in contracted services will barely show up in the federal budget but the decrease from $550 billion to $535 billion is a start for those seeking ways to reduce the federal deficit.

The $550 billion spent on contracts during fiscal 2009 was more than double the amount awarded in federal contracts as recently as 2001. Federal contracts have gone unchecked for so long that the practice spawned its own organization. The Professional Services Council is a trade association (read: lobbyist group) formed specifically for the government professional and technical services industry.

Gov. Bobby Jindal and the Louisiana Legislature might be wise to take their cue from Washington for a change instead of continuing to snipe at the Obama administration—at least on this one issue. Obama’s fiscal 2012 budget will propose an additional reduction of 10 percent in federal contracts. That’s another $50 billion or so in cuts, something that should make fiscal conservatives weep for joy.

For fiscal year 2008-09, the latest data available, Louisiana had 6,304 contracts for goods and services worth a whopping $5 billion, according to the state’s annual report for that year. That figure is somewhat misleading in that nearly $3.2 billion was in the form of 1,083 cooperative endeavor agreements ($2.9 billion), 468 interagency contracts ($213.4 million) and 495 intergovernmental contracts ($79.4 million). In other words, it was money simply shuffled between agencies.

But that still leaves 1,292 professional services contracts ($178 million), 160 personal contracts ($7.4 million), and 1,275 consulting contracts (an eye-popping $1.4 billion).

Like the federal contracts, state contracts have increased by 153 percent in dollar amount since fiscal 2005-06 when a paltry $2 billion in contract work was on the books. That amount made a quantum leap to $3.3 billion the very next year (a 64.6 percent increase), and jumped to $4.7 billion in 2007-08, an increase of another 44.5 percent.

Granted, much of that increase in 2006-07 was for contracts for recovery from two devastating 2005 hurricanes—Katrina and Rita—and granted, much of the money was from the influx of federal disaster relief dollars. But once the genie is out of the bottle, it’s hard to put her back. In 2008-09 the dollar amount nudged up another $337 million, helping to set the stage for the budgetary disaster now being faced by the Legislature and the Jindal administration.

The state has a $37.2 million interagency contract with the office of the attorney general for legal representation to various state agencies, boards, commissions, and departments but still sees the need for scores of private legal firms across the state to “provide legal services to various state agencies.” Only the top 50 contracts were listed in the report, but 41 of those totaled an additional $33.4 million. Eight of those contracts were for legal services totaling $18.3 million on behalf of indigents statewide, the report said.

Contracts, particularly professional service and consulting contracts are handed out by the state like so much candy on Halloween night and there appears to be little oversight. Fully half of all state contracts awarded during 2008-09 were not approved by the Office of Contractual Review (OCR).

The $5 billion for the 6,304 contracts approved by OCR is only part of the problem. Hidden away among all the numbers spewed out so far is another $655.5 million for 6,341 contracts that were awarded in fiscal year 2008-09 which were approved not by Contractual Review, but by the individual agencies awarding the contracts.

These contracts, awarded under an obscure state law that allows the OCR director to delegate authority to state agencies for approval of professional, personal, consulting and social services contracts. Typically, such contracts are for $20,000 or less but the statute also grants leeway to the OCR director to delegate that authority to any state agency as deemed appropriate.

Accordingly, 5,334 of those contracts awarded under the delegation of authority were for amounts below the $20,000 threshold. Those 5,334 contracts totaled $51.7 million, an average of $9,700 per contract. Another 1,007 contracts totaling $603.7 million, however, were also awarded under the delegation of authority.

More than half of that amount, $330.9 million, was accounted for in 383 contracts awarded by the Office of Group Benefits.

Group Benefits had another 32 contracts totaling $898 million approved by OCR. Other contracts approved by OCR included 282 for the Office of Economic Development ($629.6 million), and 1,080 awarded by the governor’s office through the Division of Administration ($2.3 billion).

One contract, for $68.9 million was apparently a major windfall for Cypress Realty Partners of Baton Rouge. The contract was for an alternative housing pilot program for the Louisiana Recovery Authority. An internet company profile of Cypress Realty said the company employed six people and had annual revenues of $410,000.

Two other contracts, both intergovernmental, were with out-of-state universities and totaled more than $900,000. Jackson State University of Jackson, Mississippi, was awarded a contract in the amount of $536,435 to “recruit, select and train teachers for placement in high need local education agencies/school systems.”

Clemson University of Clemson, South Carolina, was awarded a $375,000 contract to develop “active, selective catalysts for the conversion of natural-gas derived syngas (synthetic gas) to ethanol.”

Several contractors were paid to represent the state in other countries. Pathfinder Team Consulting received a $690,000 contract to provide foreign representative services in Europe while Access Marketing got a $234,000 contract to serve as a foreign marketing representative in Ontario Province and western Canada for the Office of Tourism.

A contract for $148,500 was awarded to Louis Bowden, dba Asia Capital to provide foreign representative services in China. Steve Lee and Hernan Gonzalez each received $75,000 contracts to provide foreign representation in Taiwan and Mexico, respectively. Ofihotel S.A. had a $60,000 contract to provide foreign representation in Central America.

Following is a partial list of contracts for fiscal year 2008-09:

• V- Vehicle Company, Ouachita Parish ($87 million);

• Foster Poultry Farms, Union Parish ($50 million) as inducement to purchase and operate poultry production and processing plant and provide 1,100 jobs;

• Lafourche Parish Council ($24.8 million), repair, rebuild, replace hurricane-damaged infrastructure;

• Bayou Lafourche Fresh Water District ($17.5 million) to clear debris from Bayou Lafourche;

• Lafourche Parish School Board ($480,000) to provide academic assistance in literacy and/or math, enrichment, recreation, technology, tutoring parental involvement and family literacy activities;

• Lafourche Parish Council, Office of Community Action ($319,964) to provide services and programs in accordance with the Community Service Block Grant Act of 1981;

• Terrebonne Port Commission ($10 million) for bulkhead, land improvements and other related infrastructure improvements, planning and construction;

• Terrebonne Parish Consolidated Government ($2.2 million) to provide intensive residential treatment program, provide funding to assist with design of a ring levee to surround Chabert Medical Center;

• St. Mary Parish Government/Council ($3.55 million) to operate a 52-bed inpatient treatment programs to individuals with addictive disorders; to operate a 12-adult bed and 21-children’s bed for TANF-eligible women and their dependent children;

• Vermilion Parish School Board ($9.2 million), rebuild, repair, replace hurricane-damaged primary and secondary public school infrastructure;

• Vermilion Parish Police Jury ($5.5 million) to repair, rebuild, replace hurricane-damaged infrastructure;

• St. Martin Parish School Board ($302,784) to provide comprehensive/preventive services to registered students;

• Jefferson Davis Parish Police Jury ($310,821) to complete strategic prevention framework planning process for substance abuse;

• West Feliciana Acquisition, LLC ($6 million) for acquisition, improvement, and operation of a paper mill in St. Francisville, creating 200-375 jobs;

• City of Ville Platte ($675,000) to provide juvenile delinquency prevention/diversion services to youth;

• City of Hammond ($367,728) to provide juvenile delinquency/diversion services;

• Southeastern Louisiana University TIP Comptroller’s Office ($2.1 million) to provide a continuum of family preservation, community based family support services;

• Lallie Kemp Regional Medical Center ($785,000) to provide Ryan White Care Act Aids Drug Assistance program;

• Grambling State University ($106,601) to provide educational opportunities for persons committed to entering or continuing in the field of child welfare;

• Louisiana Tech University ($1.2 million) to provide lessons to youth ages 11-14 to prevent/reduce addictive disorders;

• Southeastern Louisiana Area Health Education Center ($5 million) to provide system point of entry services for St. Mary, Terrebonne, Lafourche, Tangipahoa, and Washington parishes;

• First Steps Referral and Consulting ($2.8 million) to provide system point of entry services and provide site development workshop training to school leadership and teachers in Acadia, Evangeline, St. Martin, and Vermilion parishes;

• Families Helping Families at the Crossroads of Louisiana ($2.7 million) to provide point of entry services in LaSalle, Avoyelles, and Winn parishes;

• Youth Empowerment Project ($1.3 million) to provide system point of entry services for reintegration services for youth and counseling for families in Acadia, Evangeline, St. Martin, Vermilion, Jefferson Davis, and Allen parishes.

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Department of Corrections to receive prison phone bids

Posted in Contract, Contracts, Prison, Transparency on February 1, 2011| 3 Comments »

Vendors who wished to provide prison pay telephone service were scheduled to have submitted their bid proposals this week, according to information received from the Louisiana Department of Corrections.

Prison telephone service is big business, profitable to the vendor and to the Department of Corrections but has been a source of controversy across the country for several years.

The Center for Constitutional Rights (CCR) has been conducting a long legal battle against what it terms as inflated collect phone call rates and “kickback commissions” paid to states.

Louisiana’s contract, awarded on a competitive bid basis, does not approach CCR’s claim of charges levied against prisoners’ families who are the ones who ultimately pay the cost of the phone calls. While CCR maintains that some phone services charge up to $6 per minute for calls (in California, the rate is about $3.50 per minute), Global Tel Link Corp. charges from 9 cents to 25 cents per minute, depending on the distance and time of day.

In addition to the per-minute charge, there is a surcharge for each phone call placed from any state correctional facility that varies from 80 cents to $4.50, depending upon whether the call is local or person-to-person collect. All charges are paid by the call recipient, not the prisoner and therein lies the rub.

CCR and an organization called the New York Campaign for Telephone Justice feel that the exorbitant charges are not only wrong, but illegal. New York State receives 57.5 percent of all profits from prisoner phone charges. That comes to about $200 million per year for New York. Global Tel Link pays Louisiana 55 percent under its contract.

Some of Louisiana’s commissions are spent on computer software and security.

“We are not challenging how the commissions are spent,” CCR said. “But the high rates for prison phone calls are being paid by the families of incarcerated people.”

Louisiana’s 12 prison facilities grossed slightly more than $3 million during fiscal 2009-2010, netting the state more than $1.6 million, state records show.

In some states, the practice appears to be more questionable. While Louisiana, with the largest rate of incarceration in the nation, generated only $3 million in phone bills in FY 2009-2010 charges to California prisoners’ families came to more than $120 million.

Not surprisingly, prison phone contracts are a prized commodity in other states. Some carriers offer California counties signing bonuses. In the case of Los Angeles County, the bonus for the 2004 contract was $17 million.

An investigation conducted by Associated Press revealed that California counties received more than $300 million in revenue from prisoner phone calls over a five-year period.

“It’s a gouging of family members, those who have never committed a crime, said Charles Carbone, an attorney with Prison Focus, a San Francisco-based prisoner rights group.

The California State Assembly passed a law in 2000 that would have required negotiating for lower rates but then-Gov. Gray Davis vetoed the bill, saying it would cost the state $30 million per year in revenue.

Like Louisiana Music? Be sure to check out Louisiana Rocks! The True Genesis of Rock & Roll! This book is the only complete history of all genres of Louisiana rock and roll. Re-live all those great old songs that used to play late nights on WTIX, WNOE, KAAY. Learn about all the great artists like Elvis, Johnny Cash, Jim Reeves, D.J. Fontana, Floyd Cramer, and Hank Williams who got their start on the Louisiana Hayride. Check your local bookstore or log onto http://www.louisianarockstomaswell.com.

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Former Louisiana Budget Director says little has changed: politics still wins out over pragmatism

Posted in Budget, Contract, Contracts, Education, Exemptions, Incentives, Governor's Office, Higher Education, House, Senate, Legislature, Legislators, Politicians, Taxes, Transparency on January 27, 2011| 1 Comment »

The former state budget director says little has changed in the Louisiana Legislature’s spending mentality in the decade since he retired.

Stephen R. Winham, who served as the state’s budget director from 1988 to 2000 and as a budget analyst for the Department of Corrections budget, is also a vocal critic of the proliferation of professional service contracts.

“Back when the State Budget Office actually had some clout, budget analysts did a common sense review of professional services contracts,” he said. “But then Governor (Dave) Treen decided that the budget office had too much power and that no one should be questioning things his cabinet appointees did.”

Winham said after that, central oversight of state agency expenditures began to decline “and now nobody routinely second-guesses the need for professional services contracts above the agency level.”

The State of Louisiana Annual Report for 2008-2009, the latest report available, shows that the state issued more than $5 billion in contracts, fully 20 percent of the state budget. That figure is somewhat misleading because 1,083 contracts for $2.9 billion, nearly 60 percent, were in the form of cooperative endeavor agreements with other public agencies; $213.4 million was for interagency contracts, and $79.4 million was for intergovernmental contracts.

Still, the report showed there were 1,275 consulting contracts in the amount of $1.4 billion; 1,292 professional contracts totaled $178 million, 160 personal contracts came to another $7.4 million, and 1,531 contracts for social services came to $288.9 million.

Winham said during his tenure, his office presented an annual budget to the Legislature that cut funding to programs “below the line” of available funds. He said that list was a best effort at a fair representation of what people want and need from state government. “Every year the program ranked dead last on our list was funded,” he said. The program consistently ranked last by his office was an appropriation of about $3,000 for CODOSPAN (the Council for the Development of Spanish). It was the Spanish equivalent of CODOFIL (the Council for the Development of French in Louisiana),” he said. “Always last on our priority list and always funded.”

He said there were other local subsidies (now called Non Governmental Organizations, or NGOs) that were always funded, like basketball tournaments and festivals.

He said his worst experience was coming to realization that “when it comes down to a choice of politics and what makes the most sense, politics always wins. In a political environment, you can’t avoid that but when politics always supersedes everything else, it’s always frustrating.” His best accomplishment, he said, was getting the budgetary process automated and available on line. “We made the budget more accessible to the citizens.”

Given a choice, he said he would make a different career choice. “I felt I was spinning my wheels,” he said. “I would not do it over. I felt I was accomplishing things early on but I became less and less effective. The Joint Legislative Committee on Appropriations just started ignoring my presentations. Everything was just a formality,” he said.

“They say all politics are local, and they’re right,” he said. “That’s why (Gov. Bobby) Jindal goes all over the state handing out those little checks to local governments. It’s the same reason legislators want to protect their turf with those local appropriations and it’s also the reason Jindal won’t veto any of those appropriations.

“Jindal is always thinking about the next thing,” Winham said. “We need a governor who will think about the now.”

He said government is not a business. “When a candidate says he is going to make government operate like business, it’s just rhetoric. Government and business do not exist for the same purpose; government exists to serve the people and business exists to make a profit.”

Still, he expressed concerned about the Legislature’s apparent inability to rein in pork spending. He said he agrees with State Treasurer John Kennedy’s assessment that until individual legislators, working together in large numbers, begin to take their responsibility seriously, funding decisions will remain irrational, irresponsible, and reckless.

Winham said former Gov. Buddy Roemer was a strong fiscal conservative but where he cut in some areas, he added in others, so he never got credit for any cuts.

“I was surprised once when I did an analysis and found the least budget growth occurred during one of Edwin Edwards’s terms, his third term, I believe,” he said.

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