City Hall
Report Details Fraud Allegations, Disciplinary Action at City Agency
A report by independent investigator Claire Cordon, released to reporters after several months' delay yesterday evening, describes in detail the "indefensible," "unacceptable" behavior of employees at the Seattle Human Services Department's Aging and Disability Services who failed to investigate whistleblower allegations of fraud and misappropriation of as much as $413,000 by an HSD contractor.
In an email, HSD director Dannette Smith said, "I value the positive contributions to the department that all of the staff who were disciplined made over the years. However, I take very seriously our responsibility to be good stewards of public funds and I could not overlook the gravity of the findings in our internal audit and the Cordon investigation."
The 50-page report is riveting in its details. Specifically, it concludes that senior grants and contracts manager Ginny Adams dismissed allegations from a whistleblower that an employee of Senior Services, a nonprofit agency that contracts with ADS, created a fake company called A&F that fraudulently billed Senior Services for at least $90,000 of work it did not do, and that the $90,000 in nonexistent work likely "would [not] have been uncovered] had it not been for a separate complaint to the State Auditor's Office by a second whistleblower.
Adams, the report says, determined that the whistleblower allegations were a "regular complaint ... like many other third party complaints you have received about agencies," not a whistleblower complaint , and, perhaps most shockingly, gave the fake company two weeks' notice that she would be reviewing its invoices, giving the Senior Services employee, identified in the report as Greg Townsend, ample time "to create documentation, such as invoices and case notes, ahead of HSD/ADS's site visit to Senior Services."
The fake company provided its nonexistent services to a Senior Services program called Kinship Care, which provides support to caregivers raising another family member's child or providing primary care for an older adult with a disability.
Attempts to reach Townsend---who, coincidentally, was the subject of a glowing 2009 profile in the Seattle Times---were unsuccessful.
"Because the Whistleblower had alleged the 'misappropriation of funds,' there was no excuse for HSD/ADS to treat this as a 'regular complaint' and to follow its 'normal, routine protocols,'" the report concludes.
"The decision to conduct a review based on documentation alone, without contacting any of the alleged customers of A&F, is indefensible."
The services A&F supposedly provided included "home repairs" to a "client" who had died long before the services were allegedly provided. When Adams asked Townsend for an explanation, the report says, he said the money had actually paid for clothes so that the dead client's grandchildren could attend their funeral. When Adams asked why A&F did not appear to be licensed to do home repairs, she accepted Townsend's explanation that the company actually did moving services, not home repairs. Finally, when Adams asked why all the checks to Townsend were all just under Senior Services' maximum funding limit of $1,500, she "accepted his explanation" that he billed less than the work was actually worth, according to the report.
As a result of the investigation, ADS director Pam Piering, whom HSD Smith recommended for termination, resigned, Adams was fired, Mayors Office for Senior Citizens community support and self-sufficiency director Selina Chow was suspended for two weeks without pay, and HSD contracts supervisor Georgiana Arnold was demoted. (Arnold was initially recommended for termination, but was ultimately demoted). Piering has been replaced by longtime HSD employee Rosemary Cunningham.
Besides the $90,000, another $322,665 in "approved transactions" were not adequately documented, including some that "were not supported by invoices or receipts of any kind," according to a letter from Smith recommending Arnold's termination. Those transactions include around $72,000 in undocumented payments to Townsend,; $155,000 in undocumented gift card transactions; $31,000 in "questionable credit card transactions," and $64,00o in funds paid directly to clients with no invoices, receipts, or any other documentation.
The report also reveals that Townsend personally picked up and delivered all checks to A&F---"a red flag for possible fraud." And it notes that Tacoma-based A&F was an odd choice of contractor for Seattle-based Senior Services, given that there are many companies in Seattle that could do the same work A&F was allegedly doing.
Townsend has since been fired and is under investigation by police. The report orders Senior Services to repay the $90,000 and either provide documentation for the additional $322,000 or repay that as well. According to HSD spokesman David Takami, Senior Services' contract was renewed at the end of September. Takami says HSD has to "consider the continuity of services for people in need, in this case vulnerable seniors and people with disabilities."
In Smith's letter recommending that Piering be fired, she wrote, "Minimal questioning would have led to a determination that the investigation of the whistleblower claims of misappropriation was cursory at best.
"Further, it is unacceptable that the nature of the complaint was not communicated to the State (DSHS), to the State Auditor, or to the Director of HSD."
Smith's letter continues:
The report outlines a number of steps for HSD and Senior Services to take to restore confidence in the agencies' contracting procedures. Notably, Senior Services will now have to submit invoices and receipts for work done by its vendors.
At this morning's budget meeting, Smith told council members the department was eliminating two vacant contract oversight positions and cutting a half-time contract specialist from its budget. Smith said the cuts would be made up through better organization of HSD staff.
"None of the budget reductions in the Mayor's Proposed 2012 Budget will affect our plans to revamp our contracting processes," Takami says. "We are in the process of improving the way we award, develop and monitor contracts to ensure the system is fair, efficient and accountable to the public."
Nonetheless, the news prompted some alarmed comments from city council member Tom Rasmussen, who said, "These are very important positions to ensure that we are properly spending literally millions of dollars" in nonprofit contract money. Rasmussen asked Smith to report back to the council on what lessons HSD has learned from its experience overseeing nonprofit contracts and "how you've applied those lessons."
In an email, HSD director Dannette Smith said, "I value the positive contributions to the department that all of the staff who were disciplined made over the years. However, I take very seriously our responsibility to be good stewards of public funds and I could not overlook the gravity of the findings in our internal audit and the Cordon investigation."
The 50-page report is riveting in its details. Specifically, it concludes that senior grants and contracts manager Ginny Adams dismissed allegations from a whistleblower that an employee of Senior Services, a nonprofit agency that contracts with ADS, created a fake company called A&F that fraudulently billed Senior Services for at least $90,000 of work it did not do, and that the $90,000 in nonexistent work likely "would [not] have been uncovered] had it not been for a separate complaint to the State Auditor's Office by a second whistleblower.
Adams, the report says, determined that the whistleblower allegations were a "regular complaint ... like many other third party complaints you have received about agencies," not a whistleblower complaint , and, perhaps most shockingly, gave the fake company two weeks' notice that she would be reviewing its invoices, giving the Senior Services employee, identified in the report as Greg Townsend, ample time "to create documentation, such as invoices and case notes, ahead of HSD/ADS's site visit to Senior Services."
The fake company provided its nonexistent services to a Senior Services program called Kinship Care, which provides support to caregivers raising another family member's child or providing primary care for an older adult with a disability.
Attempts to reach Townsend---who, coincidentally, was the subject of a glowing 2009 profile in the Seattle Times---were unsuccessful.
"Because the Whistleblower had alleged the 'misappropriation of funds,' there was no excuse for HSD/ADS to treat this as a 'regular complaint' and to follow its 'normal, routine protocols,'" the report concludes.
"The decision to conduct a review based on documentation alone, without contacting any of the alleged customers of A&F, is indefensible."
The services A&F supposedly provided included "home repairs" to a "client" who had died long before the services were allegedly provided. When Adams asked Townsend for an explanation, the report says, he said the money had actually paid for clothes so that the dead client's grandchildren could attend their funeral. When Adams asked why A&F did not appear to be licensed to do home repairs, she accepted Townsend's explanation that the company actually did moving services, not home repairs. Finally, when Adams asked why all the checks to Townsend were all just under Senior Services' maximum funding limit of $1,500, she "accepted his explanation" that he billed less than the work was actually worth, according to the report.
As a result of the investigation, ADS director Pam Piering, whom HSD Smith recommended for termination, resigned, Adams was fired, Mayors Office for Senior Citizens community support and self-sufficiency director Selina Chow was suspended for two weeks without pay, and HSD contracts supervisor Georgiana Arnold was demoted. (Arnold was initially recommended for termination, but was ultimately demoted). Piering has been replaced by longtime HSD employee Rosemary Cunningham.
Besides the $90,000, another $322,665 in "approved transactions" were not adequately documented, including some that "were not supported by invoices or receipts of any kind," according to a letter from Smith recommending Arnold's termination. Those transactions include around $72,000 in undocumented payments to Townsend,; $155,000 in undocumented gift card transactions; $31,000 in "questionable credit card transactions," and $64,00o in funds paid directly to clients with no invoices, receipts, or any other documentation.
The report also reveals that Townsend personally picked up and delivered all checks to A&F---"a red flag for possible fraud." And it notes that Tacoma-based A&F was an odd choice of contractor for Seattle-based Senior Services, given that there are many companies in Seattle that could do the same work A&F was allegedly doing.
Townsend has since been fired and is under investigation by police. The report orders Senior Services to repay the $90,000 and either provide documentation for the additional $322,000 or repay that as well. According to HSD spokesman David Takami, Senior Services' contract was renewed at the end of September. Takami says HSD has to "consider the continuity of services for people in need, in this case vulnerable seniors and people with disabilities."
In Smith's letter recommending that Piering be fired, she wrote, "Minimal questioning would have led to a determination that the investigation of the whistleblower claims of misappropriation was cursory at best.
"Further, it is unacceptable that the nature of the complaint was not communicated to the State (DSHS), to the State Auditor, or to the Director of HSD."
Smith's letter continues:
The failure to monitor contracts consistent with applicable expectations shows a lack of care for the fiduciary responsibility in the approval of funds to a contracting agency and severely undermines the public trust.
This was not a matter of one or two questionable transactions. The fraud occurred over many months and adequate documentation was lacking in other transactions going back to 2008. The scope and extent of the unsupported transactions suggests that lack of oversight is an ongoing problem and that none of the individuals with direct or indirect oversight of the program specialists exercised diligence in verifying compliance with contract requirements, the [Area Agency on Aging] guidelines, or the application of good judgment and common sense. These failures are unacceptable and have resulted in a loss of confidence.
The report outlines a number of steps for HSD and Senior Services to take to restore confidence in the agencies' contracting procedures. Notably, Senior Services will now have to submit invoices and receipts for work done by its vendors.
At this morning's budget meeting, Smith told council members the department was eliminating two vacant contract oversight positions and cutting a half-time contract specialist from its budget. Smith said the cuts would be made up through better organization of HSD staff.
"None of the budget reductions in the Mayor's Proposed 2012 Budget will affect our plans to revamp our contracting processes," Takami says. "We are in the process of improving the way we award, develop and monitor contracts to ensure the system is fair, efficient and accountable to the public."
Nonetheless, the news prompted some alarmed comments from city council member Tom Rasmussen, who said, "These are very important positions to ensure that we are properly spending literally millions of dollars" in nonprofit contract money. Rasmussen asked Smith to report back to the council on what lessons HSD has learned from its experience overseeing nonprofit contracts and "how you've applied those lessons."
Share
Show Comments
