From the State Journal Register

Audit slams CMS
Contract practices, spending criticized
By DOUG FINKE
STATE CAPITOL BUREAU
4/27/05
State auditors Tuesday accused the Illinois Department of Central Management Services of wasteful spending, skirting its own rules when awarding contracts and failing to document claims that it had saved the state hundreds of millions of dollars.
Auditor General William Holland did not allege any criminal wrongdoing at the giant administrative services agency, but he did forward his report to Attorney General Lisa Madigan and Gov. Rod Blagojevich's inspector general.
In angrily rejecting the auditors' findings, CMS Director Michael Rumman said the audit "contained deliberately inflammatory suggestions of impropriety devoid of factual or logical basis."
The scathing, long-awaited audit for the two years that ended June 30, 2004, focused heavily on contracts awarded by CMS to consultants hired to find ways of saving the state money through "efficiencies." The contracts are worth nearly $69 million.
Among Holland's findings:
CMS had no written records explaining how the contracts were awarded.
Companies began working for the state and getting paid before written contracts were executed.
Companies won contracts after compiling research that CMS used to draft bid specifications.
CMS paid contractors hundreds of thousands of dollars in expense money without documentation. In some cases, expense money was paid that exceeded the contract terms.
CMS could not document the purported savings from the efficiency effort. The agency pegged the savings at $252 million during the 2004 budget year. Holland said it was $100 million at best.
CMS fired back with 60 pages rebutting nearly every issue raised by Holland's audit. The response was unusual in state government for its length and language.
"The (audit) findings are troublesome; their responses are even more so," Holland said at a Statehouse news conference. "The unwillingness to acknowledge that there were weaknesses in the contracting process. It is a troublesome response."
Rumman has announced he will resign as CMS director next month, a move administration officials have said is unrelated to the audit. He will be replaced with deputy director Paul Campbell, who said Tuesday he agrees with Rumman's assessment.
"We still believe at times (Holland's) analysis is not logical. We still believe at times he articulated facts that are not supported by his own (documents)," Campbell said.
In its written response to the audit, CMS said the companies that did research for the agency shared that material with other companies that bid on contracts and thus got no advantage. With most CMS contracts, it said, no money was paid to vendors until a written document was in place. The exceptions were contracts where it was important to get the work under way as quickly as possible, according to CMS counsel Ed Wynn.
One of the biggest disagreements is over the savings from improved efficiencies in state operations. More than $68 million in contracts have been awarded to companies to find ways of saving the state money on computers, cars, buildings and general purchasing. CMS said the companies have saved the state $600 million so far.
Holland's audit disputes that, saying CMS "didn't provide adequate documentation to support the amount of savings it attributes to efficiency initiatives."
"I have no idea where the $600 million comes from," Holland said.
Campbell said CMS has the documentation, but he admitted that the agency never gave it to Holland.
"The auditor general never asked for that level of documentation," Campbell said. "The questions they asked never led us to believe that they were questioning the validity of the savings."
Holland's response: "Anytime throughout this entire process they could have shared with us all of the documentation that relates to the $600 million. It wasn't there."
CMS agreed with Holland that some expenses paid to politically connected Illinois Property Asset Management were improper. The company was hired to help CMS save money by consolidating state buildings. CMS will pay $25 million, plus expenses, to IPAM under the contract.
Holland questioned a number of expenses submitted by IPAM and paid by CMS, such as a rental car used by an employee for personal business, an ice bucket and tongs, mileage for an employee to drive to Springfield on the same day the employee wanted reimbursement for parking his car in Chicago, and nearly $2,000 in cell phone headsets.
Holland also questioned a number of meal charges, including an instance when IPAM paid for meals for two CMS employees who then billed the state for meal money. Auditors said there was no evidence that CMS scrutinized the expense reports submitted by IPAM before paying them.
Wynn said CMS has demanded and received $35,000 from IPAM in reimbursement for the questionable expenses. He said CMS is conducting a full investigation not only into IPAM's expense reports, but also into why CMS employees didn't review them.
Holland went a step further, turning over information about the reports to Blagojevich's inspector general. He also turned the audit over to Madigan, but he declined to elaborate.
"There clearly was some inappropriate activity," he said.
Asked if CMS oversight was sloppy, Holland said, "Sloppy is a very kind word. It's above sloppy. I don't know that it's sinister, but I don't know that it's not."
A Madigan spokeswoman confirmed that the office had received Holland's full audit and said "we will be taking a very close look at it."
Although IPAM submitted questionable expenses, CMS's chief operating officer, Brian Chapman, said the agency won't be ending its contract with the company.
"The vendor has helped the state achieve significant savings," Chapman said. "To cut off that contract until we complete that investigation would be a mistake."
The audit drew the attention of state officials from both parties.
Rep. Jack Franks, D-Woodstock, said his House State Government Administration Committee will hold hearings on the findings.
"I believe there have been some illegal transactions here," said Franks, a frequent critic of the Blagojevich administration. "We can't allow this type of behavior."
Sen. Steve Rauschenberger, R-Elgin, a potential candidate for governor in 2006, said the audit revealed "a pattern of almost criminal behavior."
"I've read audits for 14 years, and I've never seen an audit like this," Rauschenberger said. "In our first reading, clearly there are misdemeanor violations and potentially some felonies. I hope Lisa Madigan, the attorney general, and Patrick Fitzgerald, the U.S. attorney, take a close look at what is happening here."
Two other potential GOP candidates for governor - Treasurer Judy Baar Topinka and DuPage County State's Attorney Joe Birkett - also weighed in. Birkett called the audit the "Magna Carta of mismanagement." Topinka said that because CMS is refusing to change its practices in the wake of the audit, state lawmakers will have to take action.
Rep. Frank Mautino, D-Spring Valley, said he will call a special meeting of his Legislative Audit Commission to deal solely with the CMS audit. The commission reviews audits after Holland completes them.
Doug Finke can be reached at 788-1527 or doug.finke@sj-r.com.