Says $7 million in contracts were awarded without public vote
HARRISBURG, Pa., Dec. 15, 2010 /PRNewswire-USNewswire/ -- Auditor General Jack Wagner said today that the Pennsylvania Gaming Control Board failed to adhere to state procurement procedures and failed to comply with the Sunshine Act in the awarding of $7 million in contracts for legal and other professional services through competitive sealed bid, emergency, and sole-source contracts.
A review of 23 professional service contracts awarded by the Gaming Board found serious flaws including the board's failure to hold open meetings for the awarding of contracts, and failure to ensure that sufficient records of justification were maintained to support contracting decisions.
"The single most important mission of the Gaming Control Board is to reassure the public that the gaming industry in Pennsylvania is being professionally run and to protect its integrity," Wagner said. "Issuing contracts behind closed doors only undermines that mission."
The Sunshine Act mandates that open meetings are held for official action and deliberations regarding decisions on agency business, including the creation of a liability by contract, and the substance of such decisions must be disclosed in open meetings and outlined in meeting minutes.
Wagner's audit, which covered the period July 1, 2006 through June 30 2009, found at least 19 of 23 service contracts did not comply with the Sunshine Act.
Wagner said that the board's regular meeting minutes gave no sign as to whether the governing board did or did not know about the details of the contracts, or how the governing board may or may not have been involved in the decision-making and deliberations. The audit further found that the Gaming Board took the position that the board was briefed about the contracts in executive sessions, which are not required to be open to the public and for which no minutes are maintained, but the board was adamant that the contracting decisions were made appropriately and not in a secretive manner.
"The absence of documentation to support claims made about selected vendors is a serious problem, Wagner said. "Without such documentation, the Board cannot assure the public, the General Assembly, gaming entities or other service providers that it selected the service providers in the commonwealth's best interest."
Wagner's audit also found that the Gaming Board spent excessively on travel during the three-year audit period, with spending reaching nearly $2 million. Among the expenditures:
- Governing board members and some top staff unnecessarily claimed meal reimbursements at two and one-half times more than the state's standard reimbursement rate,
- Four governing board members and a staff executive spent at least $33,000 for a trip to Rome,
- Governing board members did not justify their stays at expensive hotels, and received reimbursements for rooms paid for of guests who traveled with the Gaming officials.
Auditors found that 39 of 135, or 28.8 percent, of meal vouchers were submitted for reimbursements at the maximum enhanced rate that was as high as $152.50, compared with the maximum standard rate of $61. Wagner's auditors found that the Gaming Board had no way of determining if the claims matched the actual spending because the board did not require receipts. The audit also found that the Gaming Board paid for questionable expenses like meals and flowers, and misclassified the expenses as office supplies which totaled about $8,800 between July 1, 2006 and June 30, 2009, bringing into question whether the board tried to obscure the spending.
These expenses should have been paid for with personal dollars rather than board monies or should have been accounted for elsewhere in the board's records if the spending was an appropriate use of government resources, Wagner said. The misclassifications can affect the accuracy, consistency, and transparency of the board's financial activity and can negatively impact the budget process.
"While the $8,800 may not be a significant amount of dollars when compared to the board's total budget, the spending is important because it raises the question of propriety regarding the use of board resources, and the potential for speculation about why the spending was not classified correctly in the accounting records," Wagner said.
The Gaming Board was created by Act 71 of 2004 to ensure the integrity of casino gambling in Pennsylvania. The board is comprised of a 10-member governing board of which seven have voting power and three are non-voting ex officio members. According to its annual reports, the Gaming Control Board had an average annual budget of $30 million during the audit period. As of today, 12 of 14 possible casino licenses were awarded, and 10 casinos were open and operating.
Wagner made 17 recommendations to fix the deficiencies identified by the audit to improve the oversight of the Gaming Control Board, including that The Pennsylvania Gaming Control Board should:
- Comply with Pennsylvania's Sunshine Act by awarding all contracts openly at its public board meetings.
- Prepare and retain in contract files documentation to support the claims made about selected vendors on the written justification forms.
- Formally and publicly resolve that all governing board members and staff will claim reimbursement for meals/subsistence at the standard rate, thus ceasing to use the enhanced reimbursement rate available only to certain officials, and ensure that all governing board members and staff submit receipts for actual business travel expenses to comply with the Gaming Act.
- Establish a policy that clearly defines allowable and unallowable expenses, and ensure that it classifies all expenses accurately.
This is the second special performance audit of the Gaming Control Board released by Wagner. The first audit was released in May 2009; it evaluated the board's hiring practices. Both audits are available to the public at www.auditorgen.state.pa.us.
Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly. He is the Commonwealth's elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations. The Department of the Auditor General conducts more than 5,000 audits per year. To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department's Web site at www.auditorgen.state.pa.us
SOURCE Pennsylvania Department of the Auditor General