OFFICE OF INTERNAL AUDIT

Stan Sewell, City Auditor

MEMORANDUM

To: Mayor and members of the City Council

From: Stan Sewell, City Auditor Digitally signed by Stan Sewell
DN: cn=Stan Sewell, o=City of Chattanooga,
ou=Office of Internal Audit,
Date: July 2, 2020 email=ssewell@chattanooga.gov, c=US
Date: 2020.07.02 12:14:36 -04'00'

Re: Global Green Lighting Fixtures

On December 9, 2019, the Office of Internal Audit (OIA) attempted to conduct a

physical inventory of the Global Green Lighting (GGL) fixtures stored at the City’s
warehouse on Main Street. We expected to find a substantial number of light fixtures
that were purchased during 2013. Some light fixtures were never placed in service
(new). However, most were previously placed in service, taken down and returned to
the City’s Main Street facilities by EPB 1. We found the City no longer had possession of
the GGL light fixtures and City management was not aware the light fixtures were gone.
After finding the light fixtures were not present and key City personnel had no
explanation, we set two primary objectives:

1. Determine how and why the light fixtures were removed (i.e. who, if anyone,
authorized the removal of the light fixtures and why), and
2. Determine how it was possible City management could be unaware the light
fixtures had been removed.

Background:
OIA inquired of the former City Attorney, City Attorney’s Office, Public Works (formerly
General Services), Finance, Chattanooga Furniture Bank, Chattanooga Department of
Transportation (CDOT), a retired CDOT employee, and City Administration (Mayor’s
Office) about the removal of the GGL fixtures in an attempt to determine who
authorized the transfer of the GGL light fixtures and how management was not aware
the fixtures were removed eighteen months prior. We also inquired of GGL’s attorney
who confirmed Don Lepard of GGL removed the light fixtures from City facilities over
several days starting June 13, 2018.

1
Almost $6 million of light fixtures were purchased by the City as part of a lighting project being implemented by
EPB. Prior to project completion, EPB began removing the lights that had been placed in service and returning
them to the City (i.e. the project was never completed).

1001 Lindsay Street • Chattanooga, Tennessee 37402

(423) 643-6202 • FAX: (423) 643-6204 • E-MAIL: ssewell@chattanooga.gov
Upon inquiry, the City Attorney advised there might have been a settlement agreement
between the City and GGL allowing GGL to take possession of the light fixtures.
Ultimately, the City Attorney could not locate a related file or agreement in his offices.
A signed agreement was located and provided by GGL’s Attorney on January 22, 2020.
The settlement agreement dated June 6, 2018 was signed by former City Attorney
Wade Hinton and Don Lepard of GGL.

The intent of the agreement was to resolve all claims by GGL against the City, as well
as all potential claims by the City against GGL. The terms stated that upon approval of
the City Council and signature of the City’s authorized representative, the City would
transfer ownership, use and control of all GGL light fixtures currently in the possession
of the City located at the Main Street warehouse and adjacent lot. Council approval to
dispose of the light fixtures was never obtained.

According to GGL’s Attorney, GGL began picking up the light fixtures on June 13, 2018.
Upon inquiry, he explained former City Attorney Wade Hinton had authorized GGL to
pick up the light fixtures. He further stated it was his understanding a woman from the
City Attorney’s Office met GGL staff to remove a padlock from the fenced area
containing some of the light fixtures. GGL’s Attorney was unable to provide the name of
the woman asserted to have provided access. OIA inquired of the City Attorney’s Office
and former City Attorney, Wade Hinton, about these assertions. No one acknowledged
authorizing or providing access for GGL to pick up the light fixtures.

Chattanooga Furniture Bank staff verified GGL picked up the majority of light fixtures in
June 2018 without a representative of the City present (Chattanooga Furniture Bank
was located inside the City’s warehouse on Main Street). According to Furniture Bank
staff, it was a regular practice of GGL and EPB to enter the warehouse without a City
employee present. They would drop off and pick up GGL equipment. Furniture Bank
staff stated Mr. Lepard showed them an agreement with the signature of former City
Attorney, Wade Hinton, and stated that gave him the right to the light fixtures.

Conclusion in Regard to Objective 1:

There is no question the settlement agreement executed by the City Attorney with GGL
required approval of City Council prior to GGL taking possession of the light fixtures.
There is also no question such approval of City Council was not obtained. Therefore,
per terms of the agreement, GGL did not have the right to take possession of the City’s
light fixtures. However, on June 5, 2018, City Attorney, Wade Hinton, emailed GGL’s
attorney “The vote of Council will take place next Tuesday…Barring some emergency, I
[would] say, your client can plan on start picking up the items next Wednesday
afternoon.” That “Wednesday” would be the date GGL did begin picking up the light
fixtures (June 13, 2018).

It appears GGL entered the City’s Main street warehouse without a City employee on
June 13, 2018 and began removing the light fixtures either: (a) with the knowledge
City Council had not approved, or (b) without regard or concern as to whether City
Council had approved.

Conclusion in Regard to Objective 2:

Historically, Rick Davis, Traffic Engineering Coordinator within CDOT, had been the key
individual responsible for oversight of the GGL light fixtures. Mr. Davis retired in
November 2017. After Mr. Davis’ retirement, it appears oversight of the GGL light
fixtures was not reassigned or was not properly assumed by any CDOT staff. Finance
made several inquiries of CDOT about the status of the GGL lighting project. In July
2018, after no response from CDOT about the status, and because there was no
payment activity for several years, Finance capitalized the light fixtures. This resulted
in the elimination of the work in progress status (inventory) of the light fixtures and
created a depreciable (infrastructure) asset. Although inventories and other fixed
assets are subject to periodic physical inventories, infrastructure is not.

It appears City management was unaware over 5,600 light fixtures were missing for
eighteen months due to: (a) failure to ensure all duties and responsibilities of Mr. Davis
were properly assigned and assumed after his retirement, and (b) failure of CDOT staff
to appropriately and properly respond to CIP/Inventory inquiries of Finance 2.

Additional Consideration:
OIA obtained GGL invoices 3/payments and compiled a listing of light fixtures purchased
from January 2011 to August 2015 totaling $6,105,288.09. GGL reported picking up
5,617 light fixtures in June 2018. The approximate original cost of the lights removed
by GGL was $5,590,000. The light fixtures removed by GGL included some new fixtures
and mostly used fixtures returned by EPB. A complete list of the GGL invoices and
details is being provided to the City Attorney via separate communication along with
PDF copies of the invoices.

2
City Code Sec. 2-5 requires “Each department and agency of the city shall, under the supervision of the city
finance officer, keep a perpetual inventory of the city property under its control, and shall furnish such reports in
relation thereto as the city finance officer may require.”
3
OIA received the final set of invoices on June 1, 2020. The delay in obtaining these documents was due to delays
in receipt of requested archived documents from Iron Mountain.
The lighting project discussed in this memorandum was never fully implemented and
the City no longer has possession of the light fixtures. However, the City has
capitalized an infrastructure asset with a value near $6,000,000. Accounting standards
require this asset be removed from the City’s balance sheet.

We are attaching a time line of key events, which should assist in providing a clearer
picture of the events that transpired.

The issues discussed in this memorandum are not the result of an audit performed in
accordance with generally accepted government auditing standards. Had we performed
such an audit, additional issues might have been reported. The purpose of this
memorandum is to provide those charged with governance information that may be
deemed useful in the execution of their responsibilities.

Attachment

cc: Anne Wilkins, Audit Committee Chair

Daisy Madison, Chief Financial Officer
Kerry Hayes, Chief of Staff
Maura Sullivan, Chief Operating Officer
Blythe Bailey, CDOT Administrator
Phil Noblett, City Attorney
Attachment to GGL Lighting Memorandum Dated July 2, 2020
Timeline of Key Events

Date Details
2011-2012 City purchased a relatively small quantity of GGL lights for Coolidge Park and
Northshore.
March 12, 2012 As part of a major street light replacement project, the City paid GGL an advance
deposit of $1,764,000 on a contract for the purchase of street light fixtures.
2013 The City purchased/acquired the majority of GGL light fixtures during this year. 6,036
light fixtures were acquired for $5,811,469.33.
November 2017 Rick Davis (Traffic Engineer Coordinator) retired. He was responsible for oversight of
(maintaining inventory) the GGL light fixtures. Per Mr. Davis, EPB began returning
the GGL light fixtures to the City prior to his retirement.
2017 - 2018 Sometime during this period, EPB uninstalled 5,400 GGL light fixtures that had been
placed in service and returned them to the City’s warehouse on Main Street and/or
gated lot across the street.
April 20, 2018 Finance emailed CDOT inquiring about the status of the GGL light project. There had
been no notice of project completion on this construction in progress. However, the
project had gone several years with no payment/expenditure activity.
June 6, 2018 Former City Attorney Wade Hinton signed an agreement with GGL with both parties
dropping all claims and future claims against each other. The terms provide the City
will transfer ownership of GGL lights located at the City’s Main Street warehouse and
lot after approval by City Council and signature from the City’s authorized
representative.
June 13, 2018 GGL began removing lights from the City’s Main Street warehouse and gated lot.
GGL reported picking up 5,617 light fixtures. The approximate original cost of the
lights picked up by GGL is $5,590,000. This amount is based upon the invoice prices
of the light fixtures in CY2013.
July 25, 2018 Because there was no payment activity for several years, and CDOT failed to respond
to several status inquiries on the GGL Lighting project, Finance capitalized the light
fixtures 1. This resulted in the elimination of the work in progress status (inventory) of
light fixtures and created a depreciable (infrastructure) asset.
December 9, 2019 OIA visited the City’s Main Street warehouse and found GGL lights were not there.
December 19, 2019 OIA inquired of the City Attorney. Mr. Noblett advised there might have been a
settlement agreement between the City and GGL transferring the light fixtures to GGL.
He stated he would forward a copy of the agreement to OIA if one existed.
January 15, 2020 OIA notified Blythe Bailey (CDOT Administrator) that the GGL lights were picked up
by GGL a year and half ago. Mr. Bailey stated he was not aware the lights were no
longer in the warehouse.
January 22, 2020 OIA received a copy of the agreement executed on June 6, 2018 referenced above.
The City did not have a copy of this agreement on file. It was obtained from GGL’s
attorney.

January 23, 2020 OIA searched City Council minutes for any mention of declaring surplus or
transferring light fixtures to GGL. No approval could be located.
January 23, 2020 After inquiries of several individuals, OIA notified City Administration, the City
Attorney and CDOT of the missing light fixtures, provided a tentative synopsis and
requested they provide any information they can obtain. At this date, it is unclear why,
and what, authorization was given to remove the light fixtures.

1
City Code Sec. 2-5 requires “Each department and agency of the city shall, under the supervision of the city finance officer,
keep a perpetual inventory of the city property under its control, and shall furnish such reports in relation thereto as the city
finance officer may require.”