REPORT SUMMARYEg] Finance & Budget Linn County, owa Steve Tucker, GPA. Finance Drecior Dawn Jindrich, CPA ~ Budget Director Pubie Service Contr 136 Second Sect Southwest | | cedar Rape, ows 52404-2100 TO Linn County Board of Supervisors FROM: Steve Tucker oy RE: | Fraud Report DATE: September 17, 2012 A possible incident of financial misconduct has been reported to me as the County's Compliance Officer. As ‘Compliance Officer, 1 am responsible for investigating and resolving this complaint. The allegation asserts that Joe Clarahan submited fraudulent time records for time not worked as an employee of Kelly Services, Inc, ("Kelly"), a vendor to Linn County. Mr, Clarahan wes retained as a project manager to manage the implementation of iMaint, a preventetive maintsnance software program. ‘The following report summarizes the issucs investigated, conclusions reached, and recommended action to be taken, In the course of review, other issues of concem were discovered and se inclided in the repor. Reported Freud ‘A number of concems were expressed that could be considered fraud if Mr, Clarahan and Kelly certified to Linn County that deliverables were performed that were not, Also reported was the lack of time spent on iMaint related activities, While this is a valid concern, itrelates to productivity, not the County's definition of fraud. The scope of ppotential fraud does not include whether a vendor is adequately performing what's identified in the contract. sue is considered part of the supervisory process. However, this contract, signed by Auditor Mille, is devoid of deliverables other than the duration of the contract and the reimbursement rate paid to Kelly. Without specified deliverables, supervision of performance is all the more critical, The individual(s) alleged that a significant number of hours were reported as work when, in their observation, Mr. Clarahan was not actually at work, These allegations could potentially be considered financial misconduct and are the basis for this investigation and report, Rationale forthe Project Auditor Miller discussed his rationale for hiring a project manager on the Bob Bruce Radio Show, in the Gazette, as part of his “Report under Osth” ("Report”), and when interviewed regarding the fraud investigation. During the 05/09/2012 radio interview, Auditor Miller was asked if he was satisfied with the work of Mr, Clarahan, Auditor Miller stated that he was satisfied that “we had a program that dict work when he got there and it works now”. Auditor Miller then stated “If you Iook back, if you look on the, web you can see that over te course of since March 2007, a month after I started work there that I had issues with TT and they ‘weren't delivering to me, So I wanted to bring somebody in that T knew was going to deliver what 1 wanted to be delivered” Gazeste ~ As pat of «05/15/2012 story writton by Gazotte writer Stove Gravelle, Auditor Miller stated that he hired ‘Clarshan, whom he described as « close friend, to install software to manage maintenance of county-owned property, Report ~ Included in Auditor Miller’s Report of 05/23/2012 was @ 09/22/2011 email he sent to Mr. Clarahan, Auditor Miller wrote “On June 30, 2010, T authorized the purchase of @ program to manage the PM (preventive maintenance) requirements of our buildings... I don’t soe my facilities managers focusing enough time on getting this implemented - they have too many distractions now with new buildings being commissioned, I need someone to implement this program with our fsclities workers at each building.”Fraud Investigation Interview ~ During the 08/22/2012 imerview, Auditor Miller stated that Mr. Clarahan was hired to manage the Maint project and do whatever it took to make it operational. When asked what the initial problem ‘with Maint was, Auditor Miller stated “I thought we were facing a problem of just not having data in the system...” Retaining Mr. Clarahan On Tuesday, 09/20/2011, Auditor Miller emailed Mr. Clarahan, a close personal friend, asking him if he was {interested in implementing the new preventative maintenance program. Auditor Miller told Mr. Clarahan that he ‘would be employed through a temp agency and not a3 a County employee, Auditor Miller met with Mr. Clarahan on Wednesday, 09/21/2011 to discuss the scope of work, Auditor Miller also met with Kelly on 09/21/2011, On Friday, 09/23/2011, Mr. Clarehan was introduced to Mr. Cassell. Mr. Cassell stated that Auditor Miller said “this is the guy I hired to manage iMaint”. Mr. Cassell stated he was surprised by the hiring that this had not been discussed with him pri fo the introduction, In the Fraud Investigation memorandum sent to Auditor Miller 04/30/2012, a description of the scope of work on the iMaint project was requested. The contract, signed by Auditor Miller and Kelly, included only the contract's uration, between 09/21/2011 and 12/31/2011, and the hourly bill rate to Kelly of $39.11 per hou, The service identified was “Project Manager ~ Software Implementation.” ‘There were no specifics regarding what this meant nor were any deliverables identified Auditor Miller discussed options for retaining a project manager with Lisa Powell, the County's HR Director. Ms. Powell advised Auditor Miller that 2 Request for Proposal RFP”) process is the recommended practice for retaining temporary professional services, According to Ms. Powell, Auditor Miller did not want to do an RFP nor did he want to create a new Project Manager Position and go through the recruiting and competitive hiring process, ‘Ms, Powell does not recall if the conversation she had with Auditor Miller was before or after the contract with Kelly was signed. When asked on the Bob Bruco Radio Show why Mr. Clarahan could not be hired as « County comployse, Auditor Miller stated that “My managers complain about the additional paperwork and things that have to be done in order to do that.” ‘The established procedure is to issue en RFP when a department needs professional services that aren’t currently being done in-house. ‘The example cited by Ms, Powell, and questioned by Auditor Miller, regarded the County's retaining of Wendel Consulting Services to provide construction oversight. Auditor Miller contended the retaining of Mr. Clarahan through Kelly was “similar” to the Board's contract with Wendel Consulting Services. ‘Ms. Powell does not believe the two are similar ~ the County used an RFP process for Wendel Consulting Services and did not ccontract through a temp agency. Ms. Powell further stated that not using an RFP process when retaining Mr. Clarahan circumvented the County’s competitive processes. Kelly Services Kelly offers services that include temporery staffing, outsourcing, vendor on-site, and fall-time employment. ‘Those services require the parties to agree to the scope af work to be provided. ‘Those services include Kelly providing employees to customers bescd on the type of work requested, specific duties to be performed, and skills require. Based on the needs of the customer, Kelly will assign an appropriate employee, Kelly ensures that the employee hes the necessary skill sets, Another placement method, “Payroll Service Solutions” (or “payrolling”), involves hiring and providing employees referred or chosen by the customer, In these situations, Kelly relies on the customer referral; qualifications of the employee are not reviewed. No other applicants are considered. Under this method, Kelly does not ensure the skill sets end may not define the scope of work, making it all the more critical that adequate supervision is provided by the customer. Auditor Miller met with Kelly on 09/21/2011 and discussed the program with Kelly in general terms ~ an IT management role. Auditor Miller used the payrolling method for the selection of Mr. Clarabian, Tt was the ‘determination of Auditor Miller that Mr. Claraban was qualified. Kelly relied on Auditor Miller's referral. No review of qualiiations was performed by Kelly. Kelly was not required to review the work performed, the