A city internal audit released Friday asserts that there were some cases in which competitive bidding did not take place and where contracts were not authorized for the $120 million 21st Century Waterfront Plan.

The audit contends that eight of 52 waterfront expenses analyzed did not follow the city’s purchasing policies and procedures. The RiverCity Co., which had managed the development of the waterfront, was supposed to follow those city policies, according to the audit.

“Some expenditures did not have proper supporting documentation, some were not competitively bid and some were not properly approved,” states the audit, which was signed by Stan Sewell, director of internal audits.

Mr. Sewell said in an e-mail that his department found no “evidence of fraud.”

Ken Hays, who used to lead the RiverCity Co. and worked closely on the 21st Century Waterfront Plan, said in an interview Friday that the audit, which examined a period between July 1, 2002, and June 30, 2007, was an “inflammatory document.”

“All the issues that they raised were very small in nature in the big scheme of things,” Mr. Hays said. “I’m surprised by the lack of professionalism that’s shown in its reporting.”

Mr. Sewell said in an interview that his department has a peer review every three years. The review, to be conducted by the Association of Local Government Auditors, should be conducted by the beginning of 2009 at the latest, he said.

“Every statement that we make is based on substantive evidence and documentation,” he said.

The audit comes just days after the Chattanooga Downtown Redevelopment Corp. voted for an $85,000 forensics study of The Passage, a water-based feature of the waterfront that currently is closed. City officials said the site presents issues such as electrical grounding concerns.

Staff Photo by Meghan Brown-- The city is repairing the bump-out terrace on the 21st Century Waterfront, seen here on Tuesday. Each concrete slab was drilled into and leveled with additional concrete. An estimated 7,200 linear feet of caulking is needed to seal the terrace steps.

Commenting on the internal audit Friday, city Chief Financial Officer Daisy Madison, who leads the Chattanooga Downtown Redevelopment Corp., acknowledged that there are instances “where procedures were not followed.”

But Ms. Madison said the expenditures flagged by auditors — $17,390 for cultural analysis and another contract for legal services — originally were not expected to exceed $10,000.

As professional services, the less than $10,000 anticipated cost of the analysis and legal work did not require competitive bidding, either under city policy or state law, she said.

Over time, however, the costs did exceed $10,000, “and we should have acted more quickly to take it to the board (for approval),” she said.

Ms. Madison said the cultural services work, performed by Patrick Garrow with TRC Garrow Associates, was taken to the board and approved some eight months after those costs exceeded the $10,000 threshold. She said the cultural analysis was to ensure compliance with state and federal guidelines for historic preservation.

She said the Miller & Martin legal services overrun never was carried back to the redevelopment corporation board for approval. On Friday, Ms. Madison said she could not immediately put a number on the final cost of those legal services.

“Overall these are fairly insignificant amounts for a project this size. The city’s share of the $120 million redevelopment was $60 million,” she said. “I’m pleased that the findings were as minor as they were. However, we’ll try to make sure we cross all our T’s and dot all our I’s if we do a project of this size again.

In a statement, Mayor Ron Littlefield said that “there is nothing revealing or surprising” in the audit.

Mr. Sewell said that when a private group attempts to abide by “very complex” city policies, he “would have expected to find errors and issues.”

“Quite frankly, I would have expected to find more than we did,” he said.

The 21st Century Waterfront Plan came together during the administration of Mr. Littlefield’s predecessor, former Mayor and current U.S. Sen. Bob Corker, R-Tenn.

Todd Womack, who served as communications director during the Corker mayoral administration and now is the senator’s chief of staff, said “the harsh tone of the audit doesn’t reflect its limited findings.”

Mr. Sewell said auditors “just report what we find, period.”

Comments