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Jax Daily Record Thursday, Jun. 23, 201612:00 PM EST

$318,000 illegally spent on contract

Problems with 2007 consulting deal linked to 2 on Curry's team
by: David Chapman

In May 2011, City Council member Reggie Brown made several requests to improve his district.

Four projects comprising renovations and improvements to area amenities, paid for with $400,000 from his district bond account — money council members can use to help their area with capital needs.

However, the $400,000 never made it to the projects.

Instead, a week later, a city department illegally diverted the bond money to a consulting contract for affordable housing, with almost $318,000 being improperly spent.

A council auditor’s report issued Tuesday afternoon detailed the issues while also shining a light on the initial consultancy contract that’s been revealed to have its own share of questions.

That deal was approved under former Mayor John Peyton, yet some of those involved have senior positions on Mayor Lenny Curry’s team: Chief of Staff Kerri Stewart and Director of Public Works John Pappas.

It’s an issue that’s meant repaying the funds by borrowing money and possible greater scrutiny by the Office of Inspector General.

Bond money gone awry

Council district bonds are meant for capital improvements with a long shelf life.

What can and can’t be done is pretty clear — misusing them, as the auditor’s report states, can jeopardize their tax-exempt status.

Brown wanted to spend $100,000 each to renovate a building at the Community Rehabilitation Center, improve a vacant building at Scott Park, expand the Forestview Community Center and add concrete bleachers at the Bob Hayes Sports Complex. The rehab center later was deemed ineligible.

Stewart, who was Peyton’s chief administrative officer at the time, signed off on the spending.

A week later, though, what was then the Housing & Neighborhoods Department approved a detour.

Wight Greger, department director, requested the money be diverted to an existing consultancy contract the city had with Infinity Global Solutions, also known as IGS. Pappas, then deputy director of public works, concurred.

The high-profile lobbying firm signed a contract with the city in 2007 to provide technical assistance and consultant services for affordable housing developments.

The $318,000 — the only expenses made with the bond money — went toward the contract and violated the intent of such funds, the audit said.

Additionally, council auditors said the money was labeled in city accounting systems as “other construction costs” per the requests of the housing and neighborhoods department. It was a criticized decision in the audit.

“Such a practice was misleading and created the appearance that the funds were being expended on capital items,” said the report.

All four projects remain incomplete and no substantial work was started.

The auditors did not stop with the bond money.

Contract had issues from start

The auditor’s office began the review after Brown sought guidance in summer 2014 when he realized the projects hadn’t progressed.

Text messages and a call to Brown were not returned Tuesday.

The scope of the auditors’ work, however, focused on the affordable housing contract with IGS.

The purchase order was sole sourced in 2007 for $85,000 after being approved by Stewart, who was director of housing and neighborhoods at the time.

Auditors questioned that process, particularly when a procurement subcommittee decided to reject extending that deal and instead issue a Request for Proposals on a contract.

Six organizations responded — enough, the auditors stated, that the initial order shouldn’t have gone to one group — but the winning company was IGS for $98,000.

From there, the contract was amended four times with three-one-year extensions. The payouts continued to increase, too. Those were done by Greger, Stewart’s neighborhoods successor.

By the end of the contract, the city paid $868,000 for less than four years of work — more than eightfold what the original 18-month, $98,000 contract was for, said the report.

Despite the “substantial increase,” the report said, there was no change in the contract’s scope of services.

The report also included issues of payment during months when no contract or renewal was in place, lack of supporting documents detailing work being paid for and billing errors on invoices. The latter resulted in IGS actually being underpaid by about $3,300.

Stewart and Greger’s ties with IGS also were pointed out in the report.

Between her time in the Peyton and Curry administrations, Stewart was hired as a senior vice president with IGS. Greger left the city in 2011 to become a redevelopment consultant, with one of her clients being IGS.

Jim Gilmore, president of IGS, said in a statement that Brown and a member of the company’s senior staff who has since retired “discussed engagement of the company to manage community redevelopment activities in the council member’s district.”

He said records show after a scope of work was agreed upon, work was done to support four redevelopment projects between 2007 and 2011.

“As is typical with complex community redevelopment projects, a considerable amount of work occurs before projects of this magnitude come to completion,” the statement said. “Unfortunately, after years of work were invested, the City of Jacksonville stopped the projects before they came to conclusion.”

In response to the funding source used for the contract, Gilmore said those determinations are made by the city, not the vendor.

The initial fallout

Stewart said she hadn’t seen the report Tuesday afternoon and declined comment.

Curry spokeswoman Marsha Oliver issued a statement, saying the mayor is unable to speak to previous administrations’ practices but read the report and is adhering to its recommendations.

Sam Mousa, Curry’s chief administrative officer, responded to the auditor’s report and agreed with all but one recommendation. (He only “partially agreed” to a recommended change of how the procurement committee scores Requests for Proposals.)

Those recommendations included adhering to and tightening various city policies relating to contracts.

The improper use of the capital funds from five years ago has a tangible impact today.

To make Brown’s capital account in good standing, the city is repaying close to $318,000 that was improperly spent. A bill recently introduced to council will make good on that by way of the banking fund — meaning the money will be borrowed.

“Audits afford us the opportunity to learn from challenges while strengthening our operations and services,” said Oliver in the statement.

Council auditor Kirk Sherman said Brown approached his office and the Office of Inspector General about the initial complaint.

The two offices coordinated efforts, Sherman said, but the auditors took the lead given the nature of the issue.

Now that the report is done, Sherman said, one of the next steps will be to further engage with the inspector general to determine if other action is needed.

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