City plans to spend $ 3.9 million on “compliance and enforcement” consultant for US bailout stimulus funds

Posted on November 21, 2021

By Tom Travis

The City of Flint plans to contract with compliance consultant Ernst & Young of Detroit for compliance and the implementation of the US bailout (ARP) stimulus money. According to a pending resolution from Flint City Council, the contract would not exceed $ 3,994,074 for budget years FY2022 through FY2027.

Meeting as a finance committee, the board discussed the proposal at a Friday night meeting. Earlier this year, the city was told it would receive $ 94 million in ARP stimulus funds from the federal government, of which $ 47 million has already been received in one of two installments.

The finance committee voted 6-1 to keep the resolution in committee until the next meeting. Councilor Pfeiffer was the only one to vote against. Councilors Quincy Murphy (Ward 3) and Jerri Winfrey-Carter (Ward 6) were absent for Friday night’s meeting. The resolution is not yet approved until it is finally approved by city council.

The resolution was presented to council by the city’s administration and finance department. The resolution explains that Ernst & Young would ensure that ARP funds are spent in “compliance” with US Treasury rules for the “implementation” of funds. If Treasury rules are not respected and implemented [spent] under these rules, the city may have to return some or all of the funds to the federal government.

According to the resolution, the contract would be a series of payments from 2022 to 2027. The installments would be: Year 1 – $ 1,150,650; Year 2 – 884,380; Year 3 – $ 738,025; Year 4 – $ 627,494; Year 5 – $ 523,525 for a total of $ 3,994,074.

CFO Widigan defends city’s need to hire ARP funds compliance firm

Flint’s Chief Financial Officer (CFO) Robert Widigan, who joined the City of Flint as CFO in August, answered board members’ questions about the contract for over an hour.

Councilor Eva Worthing (Ward 9) asked Widigan how Ernst & Young was chosen. Widigan said the Finance Department reviewed eight consultants for the contract. Four were in Michigan and the other four were in Washington DC, Tampa, FL, Falls Church, VA and Utica, NY.

The city’s finance department reviewed each business with a series of questions and an Oct. 18 deadline to respond. According to Widigan, eight of the companies responded by the deadline and one company responded one day late on October 19, their offer was not considered in the final bidding process. The eight offers reviewed ranged from $ 590,000 to $ 7.5 million.

The last four were chosen based on total cost, whether the company is outsourcing the work or not, proximity to Flint and Genesee County, working with other Michigan communities, and the overall experience working with government grants, Widigan said.

Widigan explained that the compliance firm would consider “tapping into” other funds. The full ARPA legislation is $ 1.9 trillion and Widigan added, “There are ways to tap into other funds that we can use to leverage these. [ARPA] more dollars.

For example, Widigan said, the city could receive dollars from the Federal Emergency Management Agency (FEMA), although the specific amount and type of FEMA funds was not discussed or defined during the meeting. Friday meeting.

Widigan explained that the current ARP Act legislation is 243 pages long. “And in these pages he explains that up to 10 percent of the ARP money can be ‘captured’ for administration costs and Ernst & Young came in at 4.2 percent,” he said. declared.

Widigan pointed out that “the US Treasury”final rules “ [for compliance and implementation of ARP funds] must be tracked when spending ARPA money and we must also ensure that we are in compliance with federal regulations.

Widigan told the council that the city’s finance department told every bidder, “We want a partner – we want to make sure you’re not just going to come here and make sure we’re following the right report and that we will never see you again. Help us work with the community to ensure residents’ money is spent fairly and transparently.

Widigan explained that the finance department didn’t want a company to outsource the work so they had to work with several different companies. He said city officials wanted to work with “one partner”. Widigan said Ernst & Young will not subcontract any work.

“We got $ 94 million with a bunch of hooks so we better get it right and make sure it’s well spent because we don’t want those dollars to be remembered.” Widigan added.

Worthing (Ward 9) and Dennis Pfeiffer (Ward 8) asked Widigan if “compliance and enforcement” work could be done “in-house” by the city’s finance department itself.

“I am disappointed with this proposal,” Pfeiffer said, saying he believed the city’s finance department should consider leading “compliance and enforcement” of ARP funds “in-house.”

Widigan’s firm and straightforward answer to both was “No”. He explained that the ARP money spending rules are “new rules, created only for spending ARP funds. So we need a specialized company to maintain compliance. The expense rules are unique and different from the traditional accounting rules that have been put in place, ”Widigan explained.

He noted that Ernst and Young works with “hundreds of communities in 36 states … their ‘bread and butter’ is compliance.”

Pfeiffer pointed out that other municipalities such as Oakland County and Royal Oak use compliance companies that charge 1.5% of the ARP funds the community has received. Pfeiffer asked Widigan if there was a reason Ernst & Young was charging Flint 4.2%. “What do we get for the three percent of this proposal?” Pfeiffer asked.

Widigan responded that he had read the Oakland County proposal and said, “I wish Genesee County had the funds to do what Oakland County did. They appear to have “contained members of their own team” made up of “several companies and allowed Oakland County municipalities to use them. Later, one of the companies that County d ‘Oakland uses is Ernst & Young.

Widigan replied, “Two problems I see is that this is a ‘single hit’ that we are getting.” Pfeiffer intervened: “That’s exactly what I mean. I don’t want the money to go into this community and go out the back door.

Widigan agreed with Pfeiffer, adding that part of Ernst & Young’s responsibility will be to raise more dollars than the city has received and those one-time funds for one-time uses. Pfeiffer retorted, “Are you suggesting that Ernst & Young could afford it? Widigan replied that he wasn’t sure that would happen.

However, Widigan further objected to using the city’s finance department, explaining that if the city used “three of our employees” they should “know everything” instead of using a company like Ernst & Young who has the “right resources to make sure we get the right answer.” They have people in Washington who can get us answers.

Pfeiffer further suggested a scenario in which the city allocated the ARP funds alone for water infrastructure and payments in the event of a pandemic for first responders. Pfeiffer asked that if ARP funds were used only in these two categories, would the city need a compliance firm?

Widigan replied, “I would always say yes. The feds are going to watch this [the spending of the ARP funds] from beginning to end. Federal authorities will review the procurement process and whether the procurement process does not check “funds may not be eligible for use.”

Pfeiffer said, “Why do we have to spend $ 4 million to have someone tell us exactly where to spend it when we know exactly where to spend it?” “

Widigan again responded by saying, “They’re not just going to tell us where to spend it. They will also leverage for more money, more bang for our buck. So the $ 94 million, I hope in four years I can stand in front of you and say that was way over the $ 94 million that we put into the community for long term stability. .

Pfeiffer suggested delaying the decision to contract with Ernst & Young for another four or five months and review the process and consider doing ARP fund compliance and implementation “in-house”. Pfeiffer explained that he preferred to delay the community “losing $ 4 million”.

Pfeiffer asked Brian Jarzynski, executive director of Ernst & Young, if they had been hired and when the ARP money was spent spending the federal government came back and told Flint he had to repay part of the money because it was not allocated correctly. Ernst & Young will be required to repay these funds. Jarzynksi replied, “We would not take full responsibility. But Jarzynski went on to explain, “Our role is to confirm compliance with US Treasury standards. “

Pfeiffer asserted that “the community would have no recourse”. Jarzynski responded, the community’s recourse would be limited to the amount of “our fees”, which is $ 3.9 million.

City Councilor Allie Herkenroder (Ward 7) asked Widigan using compliance firm Ernst & Young that this could save the city from possible non-compliance lawsuits. Widigan replied, “Absolutely.”

Council Chairman Mays appoints Councilors Priestley and Lewis the ad hoc Committee

Council Chairman Eric Mays has appointed Councilor Judy Priestley (Ward 4), a vocational accountant, and Ladel Lewis (Ward 2) as ad hoc committee responsible for overseeing and reviewing the city’s ARP spending of $ 94 million.

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Widigan, along with City Attorney Angela Wheeler and City Administrator Clyde Edwards, all approved the resolution. The resolution will have to be finalized in committee and then sent to a municipal council meeting for approval. The next regular council meeting will be on Monday, November 22 at 5:30 p.m., in person on the third floor of Town Hall.

GEV Editor-in-chief Tom Travis can be reached at tomntravis@gmail.com.

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