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While Nancy Graham led the organization, staff at the Centre City Development Corp. misrepresented the nature of contracts to its board, poorly documented vital aspects of key projects and gamed the agency’s procurement system to avoid board oversight, an audit released today found.

The audit, ordered by Mayor Jerry Sanders last year in the wake of Graham’s resignation from CCDC, documented numerous problems with oversight at the agency, still recovering from last year’s scandal involving Graham’s undisclosed financial relationships.

The agency had a lack of internal controls, the audit said. While they found no evidence of fraud or theft, the auditors said CCDC had “a lax control environment in which inappropriate or unauthorized expenditures could occur undetected.” CCDC’s lack of oversight created “an environment where risks of potential conflicts of interest and abuse are increased.”

The audit surveyed CCDC expenditures from 2005-2008 and examined the changes the organization instituted in the wake of Graham’s departure. Among the audit’s findings:

  • The agency’s staff misrepresented $1.7 million in sole-source contracts to the board as having been competitively bid. A sole-source contract allows a government agency to pick a contractor instead of receiving bids and picking the lowest option. Not all contracts were properly bid.
  • CCDC staff didn’t tell the agency’s volunteer board of directors about contract change orders that it was supposed to.
  • CCDC management purposely signed contracts for less than $250,000 to avoid needing board approval — even though the management knew the contracts would eventually exceed $1 million.

Fred Maas, CCDC’s chairman, said the agency needed to exhaustively look at those misrepresented contracts. He cautioned that some who are responsible may no longer work at the agency.

“To the extent there was malfeasance and people who misrepresented the contracts, there will be serious repercussions,” Maas said.

The audit also calls out Graham — not by name — for making an $18,500 expenditure on office furniture without soliciting bids from other sellers.

The audit notes numerous improvements that CCDC has made since Graham’s resignation last July. The auditors credited CCDC for taking steps to restrict sole-source procurement, establishing an audit committee and updating its conflict-of-interest disclosure policy.

Maas said those reforms would help address the issues the auditors identified. “We’ve come a long way in a short period of time to correct some of the bureaucratic and institutional problems that led to some of these criticisms,” he said.

But the auditors said oversight at the agency has room for improvement, specifically questioning whether CCDC staff should continue to be allowed to accept any gifts — even those under the legally allowable limit — from contractors or developers doing business downtown.

The auditors said the practice was dubious. The agency has a responsibility to engage in objective deals “that are free from conflicts of interest in fact and appearance,” the audit states.

The audit also questions whether CCDC is fulfilling its broader mission. The organization isn’t as engaged in economic development as other redevelopment agencies are across the country, the audit says. And the organization failed to meet its internal goals for producing affordable housing downtown, the audit says.

Maas said those affordable housing goals should be evaluated on a multi-year basis, not an annual basis. “This board is intensely focused on the full range of housing,” he said. “We’re committed to working through those things.”

ROB DAVIS

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