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Sunday, May 23, 2010

Procurement controversies -- Illinois, USA

Inspector General: Chicago's minority contracting program "beset by fraud"
For 25 years, City Hall has poured billions of dollars into affirmative action contracts for minority and women-owned business enterprises, or MWBE’s.

But many of those dollars have eventually ended up in the hands of non-minority businesses, according to a scathing Inspector General audit released today.

The report says the MWBE program is an administrative mess “beset by fraud,” and highlights the yawning gap between what the mayor says MWBE’s get versus what they really get.

The IG cites two main culprits: front companies and pass-throughs. Front companies claim to be MWBE’s but are really owned and operated by non-minority males. Pass-throughs, meanwhile, are when an MWBE gets a contract but then sub-contracts part or all of the work to a non-MWBE.

Front companies and pass-through are not exactly sophisticated racketeering operations. But they have defrauded the city of millions thanks to a MWBE program with “broad and pervasive deficiencies” and no credible mechanism to monitor contract payments, the report says.

Prosecutors: Garbage contract rigged
Federal prosecutors laid out for a judge how they think a politically connected firm rigged a $1.7 million contract.

Prosecutors say more than $434,000 of the contract was supposed to be paid to a woman-owned trucking firm and a minority-owned cleaning company. But the woman-owned business was paid only $15,000 and the cleaning company was never told that Urban Services had been the winning bidder and it received nothing, prosecutors allege.

UI audit shows holes in the hull of state’s flagship school
Released May 13 by Illinois Auditor General William Holland, the 392-page routine audit found 47 issues among UI schools at Chicago, Urbana-Champaign and Springfield. They include inadequate control of procurement cards, undocumented payroll and fringe benefits for school employees and inaccurate accounting procedures.

“In discussing these conditions with university personnel, they stated that the errors were the result of oversight and employees and their supervisors being unfamiliar with university policy,” Holland wrote in the audit. “Failure to properly review and approve procurement card transactions could result in erroneous or fraudulent transactions being recorded in the general ledger system.”

University officials acknowledged that “erroneous charges can and do occur” under current procedure, but added “… the university employs careful oversight and review to ensure these errors are minimal, and it takes immediate action when errors are discovered.”

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