Government Waste

School Board to crack down on golden parachutes: Portland School Board member, Julia Brim Edwards is working to stop the abuse of contract buyouts have on the school district. Already special consulting contracts and buyout provisions in just three years has cost taxpayers $800,000.The former Deputy School Superintendent left the district with a $250,000 severance package after working only for a short time. The former school superintendent, Ben Canada, also received a $250,000 severance package. Former human resource consultant for the district, Neil Goldschmidt, was paid $282,000 and only worked fullt-iem for four of the seventeen months. Julia states “We shouldn’t be in the business of providing ‘golden parachutes’. I don’t believe in pay for no work, and I don’t believe most of the people in this city believe that.” Portland Tribune 2-11-03. Oregon Tax Research (www.oregontaxes.org) Local Tax News 3/1/03

Eugene eyes condo tax break: A group of developers want Eugene to give a 10 year property tax break for the construction of a downtown condo project. From the debate came differing views on whether there is a market for upper income condos in downtown Eugene located next door to a fire station.  Register Guard 1-30-02. Oregon Tax Research (www.oregontaxes.org) Local Tax News 2/15/03

Water Bureau Disaster defined: Baby Face Sten Battles with Business and Doesn’t Back Down. By Victoria Taft Brainstorm Magazine April, 2003.  The Water Bureau story is told in the local press as if it’s a budget-run-amok-debacle. It is. But it’s also a story of an environmental experiment gone bad. Too bad the Water Bureau couldn’t reduce, re-use, and recycle all the money wasted on Sten’s experiment. The problems started when the 28-year-old thought he should update the bureau’s billing system to charge more for large water users and less for people and companies that conserved. Fair enough. His inspiration for revamping the system was the so-called “Natural Step” environmental belief system, founded by a Swedish oncologist. The Natural Step holds that enviros are getting bogged down with the details of policy and should agree on what founder Dr. Karl-Henrik Robert calls core systems conditions which would then rule all elements of society, businesses, governments and individuals.

These core principles are: 1) Materials from the earth’s crust must not be allowed to systematically increase in nature (e.g. mining and use of fossil fuels) 2) Persistent (read: non degradable) substances produced by society must not systematically increase in nature (e.g. CFC’s, DDT, plastics) 3) The physical basis for the earth’s productive natural cycles and biological diversity must not be systematically deteriorated (e.g. overfishing, habitat destruction) 4) Therefore, if we want life to continue, we must a) be efficient in our use of resurces to promote justice-because ignoring poverty will lead the poor, for short term survival, to destroy resources that we all need for long-term survival (e.g. the rainforests).*from the website In Context, the quarterly of humane, sustainable culture  Sten told the Business Journal of Portland in February 2001, “I’ve been really promoting The Natural Step.the water bureau has really tried to take it on full steam. One additional angle I’ve been trying to push is that the city place more focus on issues of environmental technology and sustainability.”  Unfortunately, the taxpayers needed someone concerned about their financial sustainability. Through mismanagement, over selling on the part of the contractor, Severn Trent, and plain stupidity, the initial $6.5 million cost of the computer switchover has ballooned to as much as $30 million and counting.

Just days before Sten ordered the new billing system to be turned on, the team assigned to implement the computer system outlined 49 flaws–including some major ones–in a memo to Sten and his point man on the project, Mike Rosenberger. It urged that their go-live deadline be pushed back Apparently someone wasn’t delivering memos that day. Or maybe somebody wasn’t reading them. Sten and Rosenberger ordered the system turned on and the old one turned off without even running a shadow program. Chaos ensued. When the memo surfaced in the news nearly a year later, Sten and Rosenberger claimed, never to have seen it. Some customers received bills for hundreds of thousands of dollars (one small Portland firm received a bill for $399,000.), some received no bill, and there was no way to check to see who had paid and who hadn’t. The ‘say what?’ calls to city operators went on for days, weeks, months. Eventually Rosenberger took the fall–and a $120,000 severance deal. Not bad for a guy who was making $105,000 per year. BrainstormNW 4/2003

Some schools flush with money: Salem schools have reacted interestingly during our recession. The Salem school district just moved into a new $3 million district building and gave a 2% raise to its employees. The new West Salem High School has been called a “palace” by some because of its four tennis courts, four baseball fields, four soccer fields and new 2,900-seat stadium. At West Salem High there are more musical instruments than students and one computer for every two students (700 in all). The West Salem prosperity stories come at a time when other schools in Salem are struggling. One Salem newspaper headline read “schools find extra $3 million”. Statesman Journal 9-2-02, 9-11-02. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2003

Taxpayers pick-up cell phone tab: Marion County taxpayers pay $200,000 a year for county government cell-phone expenses, and County Commissioner Randy Franke wanted to expand coverage to include government employee personal use. Taxpayer watchdog and fellow Commissioner, Patti Milne, helped to put an end to the policy. Statesman Journal 7-13-02. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2003.

Health plan ill with errors. The Oregon Health Plan was faulted for having a 5% error rate in intakes and in billings. A state audit found problems with the millions of dollars the Human Services Dept. awards in contracts. 28% of the reviewed contracts had missing documentation and 15% of others had problems. 2002 Audit of Dept. of Human Services.  wr Spring 2003

County wastes $24 million: MuOregon Tax Research (www.oregontaxes.org) Local Tax Newsomah County has been criticized by a recent audit for wasting $24 million in building protects in the last five years due to mis-management, project delays, unnecessary cost overruns and leadership struggles. 2002 MuOregon Tax Research (www.oregontaxes.org) Local Tax Newsomah County Audit. wr Spring 2003.

PERS disaster. At latest count the State Public Employee Retirement System is as much as $16 billion in debt, helping to devour local school, police and fire safety budgets. One audit of PERS calculations showed that 14% of the calculations were in error. Because of missing documentation and poor record-keeping, auditors were unable to determine whether many of those miscalculations were over-paying or under-paying retirees. A Circuit Court judge ruled that the PERS Board in 1999 took $6 billion in earnings, and instead of using it for reserves accounts, spent most of it unlawfully among current benefactors, helping to increase payments to some retirees by 20%. 2002 State Audit. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2003

Bad grades for Dept. of Education: The state did not follow competitive bidding practices, costing taxpayers as much as $62,600. Questionable commuting and travel expenses cost taxpayers $12,900. 70% of the Education Program Specialist employees were hired at the top salary rate and not in accordance with state policy. More than 1/3rd of the personnel files sampled showed that support documentation was missing for the of paying of employees at an increased rate, at a cost to taxpayers of $40,000. Employees were awarded paid leave in violation of state policy. Close to 400 calls were suspect as personal, with most being made to the employee’s residence. 2002 State Audit of Dept. of Ed. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2003.

Overpaying health plan:A state audit found that Oregon Health Plan caseworkers were “knowingly” extending benefits to illegal immigrants and unqualified people. Also, 4,400 people who were above the income limits still received benefits. The total cost to Oregon taxpayers is $4.3 million a year. Oregon State Audit OHP 2002. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2002

$50 million on consultants: The City of Portland spends $50 million a year on architects, engineers, attorneys, management consultants, and other contract labor. The city audit report noted that consultant fees were not controlled, payments frequently went beyond the original contract without documentation or reason, and required performance evaluations were seldom used. Many of the outside contracts that were designed to relieve city employees of small repetitive tasks turned into huge sizable projects. One project by the Transportation Engineering Dept. ballooned to almost a million dollars. Portland City Audit 12-2001. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2002

Millions overpaid to welfare clients: Oregon’s Food Stamp program overpaid clients $15 million between 96-99, according to the Federal Government. A state audit showed $200,000 in benefits were going into the pockets of the caseworkers or their friends. One caseworker alone routed $19,000 to herself. Some welfare clients had their cases, financial data and social security numbers posted on the agency website by accident. Some caseworkers made up clients. Many of the problems stemming from the Health and Human Services were initially brought up in 1991 and have since been ignored. Oregon State Audit 2001. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report fall 2001

50 escaped inmates: Over 50 inmates have escaped the prisoner work program in Salem during the past two years. Fortunately, most of the inmates were caught. Statesman Journal 3-27-01. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Fall 2001

AFS recommends dumpster diving: Lane County Adult and Family Services came under fire for giving welfare applicants a controversial book called 1001 Ways to Stretch a Dollar. The book of tips included tips on how to search dumpsters, both residential and business. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Fall 2001

UofO’s labor controversy costs $10 million: EUGENE – The University of Oregon is seeking $10 million in bonds to add to their existing $80 million bond to help renovate Auzten stadium. When the UofO joined a controversial labor rights organization it caused a walk-out of their chief philanthropists and alumni Phil Knight. Phil Knights back-out caused delays to the stadium and ran costs to the tune of $10 million. The Daily Emerald 10-18-01.  Oregon Tax Research (www.oregontaxes.org) Local Tax News 11-15-01.

All Fines, No Funds: The city of Bend is losing $100,000 a year in revenue from uncollected traffic fines. The total amount of uncollected fines is as much as $750,000. When Bend police catch these fine dodgers, they find that they ignore the new fines as well! (Bend Bulletin 01-16-01). Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2001.

Building Towards Debt The new $31 million Deschutes County Fair is reeling in debt and financial problems. Taxpayers are expected to swallow $440,000 of the growing debt for a project that showed years of financial red flags.
- In Portland, the city is bailing out the new Chinese Garden for the second time. The city will help the Garden’s expanding debt with a $221,000 grant and $1.18 million dollar loan above the financial assistance already given. (
The Oregonian 12-13-00). Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2001.

School Funds to Second-guess Schools: Portland schools paid $8,900 in lawyer fees asking the Attorney General for a ruling regarding whether a for-profit business could operate a charter school when the answer is clearly spelled out in statute. Critics saw this challenge against legislative intent and national precedence as a delaying tactic against charter school advocates. (The Oregonian 01-10-01). Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2001

Audit uncovers frequent misuse of education funds at OSU: An state audit of Oregon State University found numerous examples of misspent money and poor oversight of credit cards, payroll and university property.  The audit found many problems with OSU’s Foundation Funds which are, by contract, meant for scholarships, research grants and university equipment. It turns out that too often the Foundation funds went to parties, parties and more parties. Although Foundation funds are allowed to be spent on functions for guests, they are not meant for staff and students. $1,622 went for a staff retirement party which included $350 for alcohol. $1,000 went for food and alcohol for an open house at the dean’s home. $11,000 was spent on flowers for various occasions. Only $2500 of the purchases appeared to be employee related.  More disturbing was that Foundation funds went for parties with no university-related reason. $1,191 was spent for a banquet with no explanation on why the function was held. $1,000 was spent for wineglasses with no university-related explanation. $12,700 was spent for country club memberships for staff. Another example of waste was $17,014 in overdraft charges.………..100 Misspent Charges: OSU issued 327 credit cards to staff and students with about 30% of the cards rarely or never used. A small sample revealed over 100 examples of prohibited charges. One staff member charged over $800 for items from the Home Shopping Network (not to be confused with another public employee who bought $645 on the Home Shopping Channel last fall using the state travel card). In many instances, the OSU credit card holders were the user, approver and custodian. For students with the cards, user agreements were ignored and documentation is missing. OSU appeared unconcerned with the whereabouts of millions of dollars of “high-risk” equipment such as laptop computers. A sample of 13 departments found only two departments were tracking such equipment. As a result, OSU equipment was finding itself in the wrong hands. Several former employees were able to keep using OSU computers up to four years after they left the campus. Science equipment and a laptop computer were being used by former employees who no longer resided in the country…………Employees Selling Property To Themselves…… Surplus property found itself into the hands of employees. One sample showed almost half of OSU items were being sold to employees in charge of selling them. $8,000 of lab equipment went to a former faculty member who was involved in the original purchase of the lab equipment. The lab equipment was advertised for only one hour before being sold to the former faculty member. Even the auctioning process itself was compromised when the OSU manager of surplus property was selling off items through his privately owned auctioning business. The manager made $3,670 from 22 auctions. It is no surprise that the manager did not open the process to competitive bidding.…………….Poor Payroll Oversight: The OSU payroll office identified 134 over-payments in just six months. Total overpayments amounted to $146,695. Many of the overpayments were made to employees who were no longer working. OSU was slow in catching overpayments and slow in responding once they were noticed. The audit found dozens of examples of wide pay fluctuations without explanation. One included the questionable use of “stand-by” hours where an employee was paid in one month $3,716 for 173 normal hours and an additional $2,115 for 592 stand-by hours (source of entire audit: Oregon State Audit Dec.1-2000). Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Spring 2001

$1.4 Billion in disappearing funds: An Oregonian survey helped to unveil $1.4 billion in uncollected debts to the state. It appeared that most state agencies have a collection problem and the actual cost may be even higher than $1.4 billion. These debts ranged from felons who never paid their criminal fines, to deadbeat dads owing child support. Another example was a business that bought $50,000 of supplies made by blind workers under the State Commission for the Blind, for which they never paid. The uncollected amount is about twice the state’s supposed deficit for 2001-03 “current service level” spending. The Oregonian 10/2/00.  Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Fall 2000.

Lottery’s Fuzzy Math: Fuzzy math became the target of a state audit that criticized how the lottery calculates administrative expenses. By law, the lottery can only spend 16% of its profits on administrative costs with the rest going to its customers and the state. The Lottery counted credits won on a video poker machine as official state lottery profit, even if the player gambled away all the credits and didn’t come away with a dime. The audit recalculated the administrative costs and discovered the Lottery’s claim of 3% was actually 17%, which, not surprisingly, is over the state limit.7

The state lottery showed disregard for taxpayer funds this summer when it grossly undersold state property. The Lottery paid $12,300 for a collection of new ladders and then sold them all a year and half later for only $3,075 (a 75% drop in depreciation). State Audit 10/5/00 Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report Fall 2000

The vendor from hell: “Fool me once, shame on you – fool me twice, shame on me,” goes the old saying. Public agencies seem unable to learn this lesson when it comes to bad vendors. The Portland Development Commission had one such experience when they contracted to pay $70,000 to Creative Data Corp., a computer consulting company, to install a new computer software. The vital financial software system never worked and caused rampant problems in the office. Despite a failed software system and an expired contract, Creative Data Corp saw their compensation grow to $500,000. In the end, PDC decided to hire a new consulting firm and pay $1.2 million to install a fully functional software system. Even with the new consultants, PDC still is attached to Creative Data Corp and is paying them $140,000 for on-going work.

Computer problems ail Marion County/Portland
Marion County and Salem faced similar computer problems when last June it was reported that their financial information management system went over budget by $2.2 million. In July, Portlanders learned that their Water Bureau recently spent $8 million on a computer system that doesn’t work, which also cost $500,000 in uncollected fees. Taxpayer Association of Oregon (www.oregonwatchdog.com) Waste Watch Report 7/2000

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