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Linn County Board of Supervisors Steve Tucker Fraud Report September 17, 2012
A possible incident of financial misconduct has been reported to me as the County’s Compliance Officer. As Compliance Officer, I am responsible for investigating and resolving this complaint. The allegation asserts that Joe Clarahan submitted fraudulent time records for time not worked as an employee of Kelly Services, Inc. (“Kelly”), a vendor to Linn County. Mr. Clarahan was retained as a project manager to manage the implementation of iMaint, a preventative maintenance software program. The following report summarizes the issues investigated, conclusions reached, and recommended action to be taken. In the course of review, other issues of concern were discovered and are included in the report. Reported Fraud A number of concerns 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, it relates to productivity, not the County’s definition of fraud. The scope of potential fraud does not include whether a vendor is adequately performing what’s identified in the contract. This issue is considered part of the supervisory process. However, this contract, signed by Auditor Miller, 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 for the 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 Oath” (“Report”), and when interviewed regarding the fraud investigation. Bob Bruce Radio Show – 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 didn’t work when he got there and it works now”. Auditor Miller then stated “If you look back, if you look on the web you can see that over the course of since March 2007, a month after I started work there that I had issues with IT and they weren’t delivering to me. So I wanted to bring somebody in that I knew was going to deliver what I wanted to be delivered.” Gazette – As part of a 05/15/2012 story written by Gazette writer Steve Gravelle, Auditor Miller stated that he hired Clarahan, whom he described as a close friend, to install software to manage maintenance of county-owned property. Report – Included in Auditor Miller’s Report of 05/23/2012 was a 09/22/2011 email he sent to Mr. Clarahan. Auditor Miller wrote “On June 30, 2010, I authorized the purchase of a program to manage the PM (preventive maintenance) requirements of our buildings… I don’t see 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 facilities workers at each building.”
Fraud Investigation Interview – During the 08/22/2012 interview, Auditor Miller stated that Mr. Clarahan was hired to manage the iMaint project and do whatever it took to make it operational. When asked what the initial problem with iMaint 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 as 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. Clarahan 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 prior to 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 duration, between 09/21/2011 and 12/31/2011, and the hourly bill rate to Kelly of $39.11 per hour. 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 a 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 Bruce Radio Show why Mr. Clarahan could not be hired as a County employee, Auditor Miller stated that “My managers complain about the additional paperwork and things that have to be done in order to do that.” Linn County Temporary Professional Services The established procedure is to issue an 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 contract 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 temporary staffing, outsourcing, vendor on-site, and full–time employment. Those services require the parties to agree to the scope of work to be provided. Those services include Kelly providing employees to customers based on the type of work requested, specific duties to be performed, and skills required. Based on the needs of the customer, Kelly will assign an appropriate employee. Kelly ensures that the employee has 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 and 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. Clarahan. It was the determination of Auditor Miller that Mr. Clarahan was qualified. Kelly relied on Auditor Miller’s referral. No review of qualifications was performed by Kelly. Kelly was not required to review the work performed, the
adequacy of the work, or any outcomes or results of the work. No deliverables, scope of work, or supervision was provided by Kelly. This was determined to be the responsibility of Auditor Miller. The terms of the agreement were up to Auditor Miller. The effective dates of the contract were 09/21/2011 through 12/31/2011. Mr. Clarahan would generally be expected to work Monday through Friday from 8:00 am to 5:00 pm. Mr. Clarahan was considered to be a “nonexempt employee” and paid for overtime. The hourly bill rate was determined by Auditor Miller. That rate was $39.11 per hour. Kelly understood that Auditor Miller would be Mr. Clarahan’s supervisor. Kelly understood that no project oversight was expected. Near the end of the contract, Kelly emailed Auditor Miller regarding the project. Auditor Miller indicated that the project was ongoing and not completed. Mr. Clarahan continued to work on the project through 03/16/2012. At that time, Auditor Miller emailed Kelly and confirmed that the “project was complete” (per Kelly staff). Mr. Clarahan used Kelly’s “Kelly’s Web Time” web-based tracking to record the hours worked. Per Kelly, Auditor Miller would then “approve or reject” the time submitted. Kelly declined to provide documentation of any time records without subpoena. Auditor Miller was asked how he was able to verify whether Mr. Clarahan’s claimed the time work was accurate. He stated that he knew about when Mr. Clarahan was working and was getting a report from him – similar to what he required from any employee. He further stated that he relied on Mr. Clarahan to enter appropriate information as he would any employee. Linn County uses NOVAtime to record hourly employee time worked and is the basis for documentation of hours worked for those employees. NOVAtime records the actual time work begins or ends at the point of data entry - the Kelly web program does not. At any time, a payrolled employee of Kelly can input the beginning or ending time of work regardless of the actual time at that moment. A review of the hours claimed to have been worked by Mr. Clarahan noted a number of unusual starting times. On 13 of the days worked, Mr. Clarahan claimed to have started work on or before 6:00 am, including one day where he claimed to work from 5:00 am until 7:00 am. Of those 13 days, activity on the iMaint program was only noted once. On 63 days Mr. Clarahan reported working in excess of eight hours including 16 days of working more than ten hours. When Auditor Miller was asked about the unusual times and hours, he stated that he did not find this unusual, particularly for a project manager and that he believed in flex time. Auditor Miller further stated that project managers are measured by results, not by the hours worked. iMaint Purchase The County’s purchasing process is detailed in County Policy OP-002. The policy requires that all items purchased for more than $5,000 have a purchase order signed by the Purchasing Director and the Budget Director. The Purchasing Policy also requires all requests for computer and related software purchases be authorized with the IT Director’s signature. The standard County practice is to have the Board of Supervisors act upon all claims at an open meeting prior to the payment by issuance of a County warrant. In emergency situations, a claim can be authorized with the approval of three board members. The purpose of the emergency situation is not to circumvent the spending decisions of the Board of Supervisors. In most emergency situations, the Board has already authorized the action but has yet to approve a claim which requires a warrant to be issued immediately. iMaint is a software program that was purchased by the County on June 30, 2010 at a cost of $38,050. This purchase is not considered an emergency situation. The purchase was approved by three members of the Board of Supervisors to allow a manual warrant to be written on the last day of the County’s fiscal year. The County’s Purchasing Policy was not followed. None of the policy authorizations mentioned above were followed. Additionally, while iMaint is considered a program specific to the Facilities Department, the cost of the program was split between the Facilities budget ($22,000) and the Auditor budget ($16,050). Disbursements would have exceeded the amount budgeted in Facilities had the disbursement been coded properly. The Facilities budget should have been amended in accordance with Chapter 331.435 of the Code of Iowa in order to purchase the software. This appears to be an example of circumventing the budget process and spending down a budget appropriation at year end.
iMaint – Prior to Mr. Clarahan iMaint is a software product of DPSI (DPSI is the corporation that licenses the iMaint software). iMaint is a system for managing maintenance and assets, including work orders, preventive maintenance scheduling, inventory, purchasing, personnel, projects, cost tracking and budgeting, reporting and analysis, and more. Implementation of iMaint was intended to replace the existing Facilities helpdesk. In his Report, Auditor Miller stated that he assigned Mr. Cassell the task of finding a CMMS (computerized maintenance management system). Mr. Cassell reviewed two different CMMS and an iMaint demo. Mr. Cassell recommended the purchase of iMaint which was approved by Auditor Miller. iMaint was purchased and installed on June 30, 2010. Facilities staff training on the system was completed in December of 2010. Mr. Cassell’s plan was for each county building to have those trained enter all inventories in the iMaint database by April of 2011. Facilities staff reported inventory information per building to Mr. Cassell. Debbie Chase, an administrative secretary in Facilities, then entered the data into the iMaint program as the data was received. During training, software issues were encountered including the pivotal switch to/retry box error. The instructor and team leader for iMaint, David Giddens, was in contact with DPSI iMaint support for resolution of the errors. It is noteworthy that they, DPSI, were not returning calls to their own technician in a timely manner and that no permanent solution was uncovered. The instructor told IT repeatedly to restart the services on the server. iMaint would work fine after the reset. Following training, data entry issues were also noted by Ms. Chase who contacted both IT and DPSI. Ms. Chase indicated that while there were issues, the program was usable and she was able to successfully enter data. Ms. Chase estimated spending approximately 90 hours over 30 days entering iMaint data prior to the retention of Mr. Clarahan. The data entered was received by Mr. Cassell from the Senior Facilities Worker at each building. Ms. Chase entered the data from coding sheets prepared by Mr. Cassell. Included in the data entered were equipment, employees, employee titles, and rate of pay. On 12/20/2010, an IT Helpdesk ticket was closed regarding error resolution on issues with connectivity “timing out”. It was indicated the errors were related to licensing issues and would be resolved prior to year end per Mr. Giddens. There were no other outstanding IT Helpdesk tickets open regarding iMaint. There were no additional IT Helpdesk requests made related to iMaint from 12/20/2010 until 10/07/2011, after Kelly was retained. Included in Auditor Miller’s Report was the following quote attributed to Mr. Cassell: After several false starts to get the data loaded into the iMaint and to get senior facilities workers to use iMaint, Cassell admits in a 6/18/11 email that, “I share your disappointment also. The progress with iMaint didn’t fail because I didn’t work hard to implement, it is the result of not getting Key Players support and participation.” Mr. Cassell stated that the “Key Players” he was referring to were Auditor Miller, Deputy Auditor Becky Shoop, and Senior Facilities Worker Joyce Sramek. During his interview, Auditor Miller stated that the “Key Players” was Garth Fagerbakke, as the County’s Construction Manager. According to Auditor Miller, Mr. Cassell had requested Mr. Fagerbakke provide him schematics with parts list and with equipment list systems that could be entered into the iMaint database. Auditor Miller stated that the information was “not necessarily forthcoming.” Auditor Miller further stated that Mr. Cassell was not getting the cooperation Mr. Cassell thought he needed from his own personnel “which are the facilities maintenance people. I wouldn’t call those key people because they reported to him.” Mr. Cassell disagreed with Auditor Miller’s assessment of the assistance provided by Mr. Fagerbakke. According to Mr. Cassell, Mr. Fagerbakke provided him all the information Mr. Cassell requested. Specifically, Mr. Cassell asked for and received from Mr. Fagerbakke the schematics for the Sheriff’s Office enabling Mr. Cassell to build the iMaint project database.
Mr. Cassell believed that, although he was responsible for the project, he was not allowed sufficient authority by Auditor Miller to assure staff cooperation. Mr. Cassell believed the lack of cooperation delayed the project. At the time Mr. Clarahan was hired, Mr. Cassell believed the iMaint program was working adequately.
iMaint – with Mr. Clarahan Auditor Miller introduced Mr. Clarahan to Mr. Cassell on the afternoon of Friday, 09/23/2011. At that meeting, Auditor Miller stated that Mr. Clarahan would be the project manager of the iMaint project and that Mr. Cassell was to support Mr. Clarahan in that effort as needed. Auditor Miller stated that he would be Mr. Clarahan’s sole supervisor. Ms. Chase was also told by Auditor Miller that Mr. Clarahan would be in charge of the iMaint project. Mr. Cassell was of the opinion that he was no longer responsible for the project. Mr. Cassell did give Mr. Clarahan a status summary of the project. Mr. Clarahan was informed of the iMaint difficulties that had been encountered and the amount of data already entered into the program. Following the initial project overview with Mr. Clarahan, Mr. Cassell had limited conversations with Mr. Clarahan regarding the project. Mr. Cassell was never made aware of any output or results achieved by Mr. Clarahan. Mr. Cassell indicated that Mr. Clarahan was away from his work station for 50% of his work day and noted that Mr. Clarahan claimed to work unusual hours. According to Mr. Cassell, Mr. Clarahan encountered similar difficulties with the program. The same issues uncovered during the training reappeared in October. Restarting the services temporarily fixed the issues. In November of 2011, with no resolution indicated, a complete reinstallation was suggested and initiated. Who suggested the reinstallation is highly debated and not pertinent. Auditor Miller indicated Mr. Clarahan generated the idea, although iMaint had been telling Mr. Clarahan that the issue was network related, and at no point did they mention to Mr. Clarahan or IT that it could be the iMaint software causing the issue. The reinstallation was done by IT on 11/15/2011. As a result of lack of cooperation with staff, Mr. Cassell did discuss using the Sheriff’s Office as a preferred pilot project with Mr. Clarahan (Mr. Cassell previously had attempted to use the Elections Depot as the pilot project). According to Mr. Cassell, Mr. Clarahan agreed. Auditor Miller confirmed in his interview that the Sheriff’s Office is now the pilot project. In his Report, Auditor Miller outlined the scope of work he said he provided to Mr. Clarahan. That scope of work included working with the facility worker responsible for iMaint at each County building. The facility worker at the Sheriff’s Office – the pilot project – was Kerry Adams. According to Mr. Adams, he “never worked with Mr. Clarahan ever.” Mr. Adams stated that Mr. Clarahan never called him or tried to contact him. He did state that he was introduced to Mr. Clarahan by Auditor Miller at a facilities meeting at Westdale. Mr. Cassell was informed by Auditor Miller at a staff meeting that Mr. Clarahan would be terminated due to funding running out. Prior to leaving, Mr. Clarahan was to present his accomplishments to staff that included Auditor Miller, Ms. Shoop, Steve Nunemaker, Amanda Hoy, and Mr. Cassell. The presentation was to be in a conference room at Westdale. Mr. Clarahan was unable to project his presentation on the wall of the conference room. The meeting was then moved to Mr. Clarahan’s workplace. Again, Mr. Clarahan was unable to show his iMaint accomplishments. At this point Auditor Miller had all the staff leave with the exception of Mr. Clarahan. Mr. Cassell has no knowledge of any accomplishments ever being presented to staff. In the opinion of Mr. Cassell, the iMaint project is further behind than when Mr. Clarahan was hired. According to the interview with Auditor Miller, Mr. Clarahan was no longer needed because “Joe Clarahan was complete because we couldn’t get any further than we were. We were - it was no longer productive for him to be working anymore because what he needed he was not getting from either Mr. Cassell or Mr. Fagerbakke, or Mr. Nunemaker in the realm of data he could get into the system.” In a 05/08/2012 follow-up email, Auditor Miller was asked as part of this investigation to provide the iMaint (isysadmin) Administrative password. On 05/16/2012, Auditor Miller was reminded that the administrative password had yet to be provided. On 05/16/2012 Auditor Miller then asked the IT Helpdesk to provide the requested password. IT stated that at some unknown date, the passwords were changed and IT no longer had the administrative password. Apparently, Mr. Clarahan changed the isysadmin password, didn’t document it, and did
not provide it, or was not asked to provide it upon leaving. As of the date of this report, Auditor Miller has not yet provided the administrative password.
Mr. Clarahan Time Records Kelly invoices for hours worked by Mr. Clarahan. Over a period of 126 total County paid days (118 business days, 8 holidays) and 1,008 hours (126 x 8), Mr. Clarahan recorded 119 days and 945.75 hours worked. Kelly was paid $37,342.11, which included 930.25 hours paid at the Kelly regular rate of $39.11 (increased to $39.24 per hour effective 01/01/12) and 15.50 hours of overtime at the rate of $58.67 per hour (increased to $58.86 per hour effective 01/01/12). The contract with Kelly Services and the Linn County Auditor was for the period 09/21/2011 through 12/31/2011. Mr. Clarahan’s first day billed was 09/23/2011 and last day billed was 03/16/2012. Mr. Clarahan worked 49 days after 12/31/2011. Review of Mr. Clarahan iMaint Logs Of the 119 days worked by Mr. Clarahan, activity in the iMaint system was noted on only 30 days. A recorded activity could include as little as one keystroke. That access was not limited to Mr. Clarahan. iMaint files did not detail the user identification in many instances. Additionally, there may have been occasions where Mr. Clarahan worked in the iMaint program but logged in with different user identification. In addition to Mr. Clarahan, other staff recorded activities in iMaint. The same password may have been used by at least two other individuals. Therefore, this review assumes all recorded activity in iMaint was done by Mr. Clarahan. Current Status of iMaint Mr. Cassell is again responsible for the iMaint project. At this point, the Sheriff’s Building is considered the pilot project – more specifically the air handlers at the building. The current plan is for the Sheriff’s Building to be operational by December of 2012. Mr. Cassell believes this plan to be acceptable with Auditor Miller. Mr. Cassell believes it will be between two – three years before iMaint is fully operational. Attempts to Interview Mr. Clarahan Mr. Clarahan was not interviewed. Beginning on 08/03/2012, a number of emails and telephone (home and cellphone) messages were left with Mr. Clarahan to schedule an interview. Mr. Clarahan was offered the opportunity to meet before or after work or on a weekend. On 8/15/2012 Mr. Clarahan informed me that he would be unable to interview during the time frame requested. He stated that he had retained an attorney and that the attorney’s schedule would not allow time to meet prior to the middle or end of September. I contacted his attorney’s office and offered to schedule the interview at any time prior to issuance of this report. No response to the request was received. Conclusions 1. Auditor Miller is not clear why Mr. Clarahan was retained. He stated on the Bob Bruce Radio Show that the iMaint program didn’t work; to the Gazette, he hired a close friend to install software, implying a lack of satisfaction with the County’s IT department; in his Report, he cited a lack of focus of his facilities managers; and in the fraud interview, not having enough data in the system. Mr. Cassell stated the program was working effectively and data had been entered into the program. The retaining of Mr. Clarahan circumvented the County’s equal opportunity and competitive processes. The purchase of iMaint software violated the County’s Purchasing Policy (OP-002). Activity in iMaint on 30 of 119 days is inexplicably low considering any objective for the project, including that of entering data into the program. Mr. Clarahan did not demonstrate the skills necessary for the iMaint project. The limited use of the program, the lack of data entered by Mr. Clarahan, and the inability to demonstrate any outcomes or results would dictate
2. 3. 4. 5.
6. 7. 8. 9.
the conclusion that Mr. Clarahan failed to accomplish any deliverables other than reinstallation of iMaint – an action actually accomplished by the County’s IT department. Other than the reinstallation of the iMaint software actually accomplished by IT, there were no discernable results or accomplishments by Mr. Clarahan. Auditor Miller was not able to produce the iMaint administrative password. Procedures should have been in place to assure the password was received from Mr. Clarahan upon termination and then reset. Conclusions 4-7 indicates a lack of adequate supervision of Mr. Clarahan by Auditor Miller. There is a lack of evidence to support the conclusion the Mr. Clarahan worked the hours for which the County was billed.
Findings of the Investigation This investigator could not conclude whether there was fraudulent misconduct by Mr. Clarahan. Virtually nothing was accomplished by Mr. Clarahan on this project. The lack of performance could and should have been avoided with a proper retention process and adequate supervision of Mr. Clarahan. However, the inexplicably limited activity in the iMaint program by Mr. Clarahan, the inability to document results (reports, tickets, etc.) for the project, and the observed discrepancy between Mr. Clarahan’s presence at the worksite and the hours billed to Linn County could be indicative of fraud. The apparent lack of need and shifting purpose of the project, circumvention of the County’s practices regarding the retention of professional services, the close personal friendship between Mr. Clarahan and Auditor Miller, and the lack of inquiry into Mr. Clarahan’s employment history, demonstrates, at a minimum, cronyism and inefficient oversight of this matter. Recommendation I cannot dismiss the potential of fraud by Mr. Clarahan. It is my recommendation that this matter be passed on to the Linn County Attorney for review and any further inquiry deemed necessary.
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