Audit targets Republic Waste
for allegedly overbilling Houston

City Controller Annise Parker has announced the start of an in-depth audit of alleged criminal activity involving Republic Waste Services and city garbage collection and disposal.

Republic is accused of billing the city for collection and disposal of tons of garbage collected in other cities that also paid for the same collecting and disposal. The company is also accused of hiring workers with phony Social Security numbers. The alleged criminal activity was revealed in a series of investigative reports aired by Channel 13.

"It's obvious from information shared with my office by 13 Undercover reporter Wayne Dolcefino that the city has been ripped off," said Parker. "I am determined to recover all the money that is rightfully owed to taxpayers."

"This is one of the largest privatization contracts in the city, and these problems raise doubts about our ability to oversee such contracts."

The controller's audit will be conducted in two phases. Phase I, to be completed as soon as possible, will determine the extent of the alleged fraudulent activity and determine how much money the city is owed. Phase II includes a performance audit of the city's Solid Waste Management Department and its organizational structure, internal controls, policies and procedures.

The Controller's Office audit is part of a multi-agency investigation that includes the Houston Police Department, the Harris County District Attorney, the U.S. Immigration and Naturalization Service and the Social Security Administration. The mayor has engaged attorney Jim Moriarty of Moriarty & Linedecker to negotiate a financial settlement with Republic.

Record performance audits, Katrina evacuee housing contracts and a new financial system — it was anything but a quiet year in the City Controller's Office.

"The past year was easily one of the most productive years in the office's 100-year history," City Controller Annise Parker concluded.

2005 in review

• Three comprehensive performance audits (the 311 call center, the 911 emergency center and the Fire Department's Life Safety Division) as well as 33 other audits. The 911 audit, for instance, outlined $6.8 million in potential savings.
   
• ERP (Enterprise Resource Planning) - Since last summer, the controller's staff has borne the brunt of the monumental, year-long conversion to a new citywide financial system (SAP). Six staffers, including Deputy Controller Mary Ann Grant, are assigned full-time to the project. The conversion is at the halfway point.
   

• More than 3,500 Hurricane Katrina apartment landlord contracts. Already short-handed, the Controller's Office staff has worked overtime to push through contracts so tens of thousands of Katrina evacuees can live in apartments and payments to landlords can be processed. Unfortunately, this has slowed normal contract processing but that should improve in January.
   
• Parker named investment expert Gilbert Garcia to represent her on the Houston Municipal Employees Pension System Board of Trustees (HMEPS). This is the first time the controller has had any oversight of city pension systems.
  
 
• Bank fraud/identity theft - The Controller's Office started the year trying to sort out how the city's bank accounts had been illegally debited. Working closely with the bank, the DA and HPD, all money was recovered, and several perpetrators went to jail.
  
  
• Produced the first list of non-profits that collect money on behalf of the city. The Parks Board is familiar to many, but you may not realize how many groups raise money for city projects (www.houstontx.gov/controller/sourceofcharitablefunding.pdf).

Audits are available at: www.houstontx.gov/controller/audit.html .

FEMA is clearly a troubled agency, but at least it's reimbursing the city in a fairly timely manner for Hurricane Katrina expenses.

As of November 23, the city had received FEMA checks totaling $100.8 million, bringing the total available revenues to $112 million. This includes a $10 million advance approved by City Council in September, $1 million in charitable contributions and $170,000 of interest on pooled investments (www.houstontx.gov/controller/October%202005%
20MFOR%20Katrina%20Schedule.xls).

The city has spent or encumbered nearly $74 million (mostly on apartment leasing).

Money Matters takes a look at one of the city's most under-funded divisions this month when City Controller Annise Parker tours BARC (Bureau of Animal Regulation and Control).

Money Matters airs at 2 and 8 a.m. and 2 and 8 p.m. Mondays on the Municipal Channel (Warner Cable 16, Kingwood 14, TCI 16, Phonoscope 2 and TvMax 20.)

City officials smiled, but the unusual words didn't flow easily — budget surplus. What's that? Yes, both the city controller and the Finance and Administration director predict almost $3 million may be left over at the end of the fiscal year June 30.

City Controller Annise Parker delivered the joyful holiday news during the MFOR (monthly financial report) presentation. The report covers the period ending October 31.

"We're cautiously optimistic," Parker said, "but we're not running out to spend it." Mayor Bill White echoed the sentiment.

Four factors account for the revenue increase:

•  A one-time sale of a Public Works facility on Gillette;
•  Reimbursement from the Reliant rate case;
•  Higher than expected interest earnings;
•  $800,000 adjustment in electricity costs.

According to the latest monthly projections, the General Fund will end the fiscal year with a surplus of $2.9 million. This represents a $10.4 million increase in revenues over last month when a $7.5 million shortfall was projected.

Surplus vs. cash reserves

The surplus is a separate item from the approximately $100 million cash reserves, which includes the mandatory $20 million rainy day fund.

"Given the possibility that we'll continue to experience rising utility costs as well as uncertainty surrounding the holiday shopping period, it would be wise to attempt to maintain this revenue cushion in the coming months," Parker told council.