State set to pay $270K for Flint funding monitor

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — A multinational accounting firm that helped oversee government cleanup grants for Hurricane Katrina and Superstorm Sandy is set to serve as an “oversight integrity monitor” for Flint water contamination crisis funding.

The Michigan Department of Technology, Management and Budget last week recommended the state award a $270,142 contract to Ernst & Young to supplement oversight work by the state Office of Auditor General and Office of Internal Audit Services.

Michigan legislators, who have approved more than $234 million in aid for Flint since October 2015, called for the additional scrutiny when approving the new state budget for the current fiscal year. Flint residents continue to rely on bottled and filtered water more than a year after state officials confirmed independent findings of elevated lead levels in the municipal water supply and blood of local children.

The monitor is expected to “conduct a fraud, waste, and abuse risk assessment,” develop a loss prevention strategy and create a tracking tool for government spending.

“I view that as simply a good kind of audit, a check and balance on the system,” Gov. Rick Snyder recently told reporters. “To say there’s someone helping provide oversight on that, in terms of looking at audit trails and compliance, is a very appropriate thing.”

Ernst & Young, which has an office in Detroit, was one of nine companies to bid on the state contract. It was not the cheapest bid but “offered the best value,” according to a five-person team that reviewed and scored the proposals.

The contract recommendation was based on “their score, what they could offer, oral presentations, along with price,” said DTMB spokesman Caleb Buhs. “All that is taken into consideration.”

The $270,142 Ernst & Young contract will not require approval by the State Administrative Board, which typically reviews contracts in excess of $250,000, Buhs said.

The board on Oct. 25 OK’d spending of up to $2 million on auditing and oversight services provided by “pre-qualified” state vendors. The Ernst & Young contract would only go before the board if it is later amended to exceed that amount, Buhs said.

The state’s bid review team said Ernst & Young demonstrated “a clear understanding of the scope” of the work “and the current Flint emergency situation.” Proposed staff have a “strong” accounting background “with extensive experience with fraud, waste and abuse in emergency type situations.”

The firm’s proposed 11-member Flint funding oversight team includes experts who helped New Jersey develop and administer risk assessments for federal grant funding following Superstorm Sandy in 2012, according to the bid it submitted to the state.

“The risk assessments were designed with the intention of preventing fraud, waste, and abuse of federal funds, similar to the goals set forth in this arrangement with OAG and OAIS,” the firm wrote.

Matt Jadacki, who will oversee development of a loss prevention strategy for Flint funding, previously worked for the Department of Homeland Security as a special inspector general for Gulf Coast Hurricane Recovery in the aftermath of Hurricane Katrina in 2005.

Jadacki has worked on “dozens of major disasters,” according to a resume provided to the state, including the Columbia space shuttle crash, Midwest floods and Hurricane Andrew in 1992.

“His reports identified hundreds of millions in ineligible and disallowed expenses and non-compliance with laws and regulations, including significant violations of federal procurement regulations, internal control weaknesses, and related project accounting issues,” said the resume.

The Ernst & Young bid anticipated 1,350 hours of work on the oversight monitor contract. The firm will charge the state between $152 and $199 per hour for general staff, who will complete the bulk of that work. Management will earn between $261 and $307 per hour.

Three of the 11 team members are based in Detroit, while others are in Washington, D.C., Chicago and other areas.

“Although our team members are not all based in Michigan, we will work … to coordinate on-site meetings and activities as mutually agreeable and appropriate,” according to the bid.

Ernst & Young submitted the third most expensive bid among the nine firms, but several of those did not meet the requirements of the bid request, according to the state review team, which ranked submissions based on work description, proposed staffing and price.

Guidepost Solutions of New York put in a low bid of $78,250 but its proposal did not demonstrate an understanding of the required work, and its pricing “was insufficient to the size and scope” of the project, the review team said.