The Schutze Audit

Imagine it this way. You own a vacant building. A guy wants to rent it for a business. You rent it to him for a percentage of his business revenue. But you never ask to see his business' books, cash register tapes, anything. You never even stroll by to see how he's doing. Every once in a while he brings you a check. You have no idea what it's based on. You take the check and tell him thank you.

In the Harvard Business School, they have a term for what you would be if you operated in this fashion: idiot.

But this is exactly how our city government operates every day.

In the last week, I have been carrying out my own one-man efficiency study of local government in Dallas. Think of me as the Uncertified Public Accounting Firm of Schutze, Himself and What's-it-to-you (SH&W). I went over to City Hall and did what the high-priced guys from Big Four accounting firms would do. I sampled the existing public documents to look for signs of a pattern. Tell me if you think I found one.

ITEM: Every year the city rents out facilities at Fair Park to the Southwest Celtic Music Association (SCMA) for its annual North Texas Irish Festival. The city is supposed to be paid 25 percent of gross revenues from the concessions at the festival. People are supposed to pay for everything with coupons. The city knows how many coupons it gives the SCMA before the festival. Counts the coupons it gets back. Knows how much money it is owed.

But an audit last year found that the city had failed to count the coupons before the festival. The major food concessionaire took coupons for some food sales but also sort of took cash. The SCMA itself sold booze for cash. Various small vendors sold stuff for cash. Or coupons. Whatever. Nobody had a cash register. The city didn't ask for register tapes, anyway. The city didn't even ask for the leftover coupons.

Auditors asked city employees if they had walked around to see if the concessions were doing a lot of business. City employees said they hadn't done that very much. Auditors asked how much. City employees said not since 1998.

Wow. That's really really not much.

Auditors asked how much money the SCMA had paid the city. City employees said not actually anything. YET. But the check was very likely in the mail. Auditors pointed out that payment was due 36 hours after the event and that six weeks had elapsed.

NOTE FROM ACCOUNTING FIRM OF SH&W: Six weeks is actually 1,008 hours.

A short time later, the SCMA sent over a check for $11,707.11. But there was no documentation to show what that amount was based on. Auditors had to point out to city employees that this was bogus. Soon afterward, the SCMA sent over another check for $3,054.78.

NOTE FROM ACCOUNTING FIRM OF SH&W: If you keep asking them for documentation and they keep sending you checks instead, this is not a good thing.

ITEM: Remember recently when the city manager said he had to cut benefits for cops and firemen injured in the line of duty? Then after there was an uproar, he "discovered" half a million bucks to help them out?

Well, here's an example of how this sort of thing could happen. For years the city manager had been whining about the increase in the cost of health benefits for city employees. But last year an audit found that an entire division of people in the city's human resources department--staff that had precious little to do with health benefits--was being paid out of the health benefits administration budget to the tune of more than half a million dollars a year.

In fact, there weren't supposed to be any city employees involved in health benefits administration, because that function had been out-sourced to private firms.

Why, when the city manager told the city council that health benefit costs were going up, did he not mention that he was pinching off half a million bucks a year in health benefits money for other operations? And why did the council not notice--even after the city auditor pointed it out?

SH&W NOTE: Scary thing about guys who miraculously "find" half a million bucks: They can just as miraculously lose it.

ITEM: We haven't been the victim of a bomb attack in this city, right? So what's with the craters all over the streets? A major cause of bad streets in Dallas is "street cuts" by utilities and construction companies--trenches and holes dug in the streets that never get repaired properly.

The city spends an average of $430,000 a year to support a staff of 11 employees including eight inspectors who do nothing but look for street cut violations. City code says you have to get a city permit to cut a street. You have to install a permanent repair--concrete on a concrete street--within 14 days after you finish your work.