Culver City’s Independent Auditor warned that Culver City needed to establish internal controls. Internal controls help to prevent fraud, waste and abuse. On December 29, 2015, Culver City entered into a written contract with Moss Adams LLP for Internal Auditing Services (Agreement).
Though the “fees” and “expenses” were not defined or restricted in the Agreement, the maximum charge for Moss Adams LLP’s services is $90,000—no ups, no extras—for FY 2015-2016. The Agreement fails to mention any cap after FY 2015-2016. The Agreement could be “renewed,” but, as of March 18, 2019, there was no documentary support that it had been. However, by March 18, 2019, Culver City had paid $119,040 to Moss Adams LLP—$29,040 in excess of the supposed cap.
More importantly, the Agreement’s cap notwithstanding, the Agreement fails to state how Moss Adams LLP’s compensation is to be determined. Moss Adams LLP unilaterally commenced billing on an hourly basis where its employees were assigned non-negotiated rates, e.g., $350 per hour. Culver City did not question the practice. All billing statements set forth hourly totals that had been rounded. Culver City has no information whether Moss Adams LLP’s billing statements were round-up in one-hour increments, e.g., 2.1 hours is billed as 3.0 hours. One statement contains a $6,000 flat charge for “final report.” An internal auditor should have viewed these items with suspicion and investigated.
On April 1, 2019, under the guise of continuing the Agreement, Moss Adams LLP proposed an “engagement letter” seeking an additional flat fee of $235,000. $235,000 is approximately three times the original $90,000 cap. But, Moss Adams LLP seems to have completed its services pursuant to the Agreement, e.g., billings in excess of $90,000, delivery of various “final” reports. Further, the “engagement letter” contains such vague/ambiguous descriptions, e.g., “Enterprise Risk,” “Fleet Efficiency Study,” “Policy Development,” that it is probably unenforceable, as there are no objective criteria by which to determine whether Moss Adams LLP performed.
This “engagement letter” is not a “renewal” of the Agreement, but a thinly-veiled attempt to enter a new agreement, while avoiding the City Council’s approval, the City Attorney’s review and/or competitive bidding.
Culver City’s contract administration, if any, and contract management, if any, has been missing-in-action. How did the poorly-drafted Agreement get by the City Attorney? How did paying $29,040 over the $90,000 cap get by the City Manager? How is the “engagement letter” getting through the backdoor?
A thorough investigation might reveal systemic waste as the Agreement is only one of many contracts that Culver City has entered with numerous vendors. But, who should do the investigation—Moss Adams LLP, the City Attorney or the City Manager? They would be conflicted. Culver City needs an independent Inspector General. The City Council needs to report for duty.
Les Greenberg, Esquire