An auditor who examined Fulton County information technology contracts was so suspicious of what he found that he proposed a criminal investigation of the department’s dealings with one company – a recommendation his superiors decided not to include in the final report to county officials, documents obtained by The Atlanta Journal-Constitution show.
Atlanta-based Vixio Technology was paid tens of thousands of dollars for doing little or nothing, according to the auditor, Jeff Hill. False information was used to justify some of the payments, and IT administrators gave conflicting accounts of how that happened, Hill wrote in an early draft report obtained by the AJC under the Georgia Open Records Act. Hill also believed a former IT director may have broken county ethics rules by steering a contract to the company.
“Since there are elements in this area that could involve fraud, this matter should be referred to district attorney for further evaluation,” Hill wrote.
The documents, including the auditor’s notes and draft findings, contain new details about the IT Department’s mishandling of public contracts — problems that already have already drawn the attention of the FBI, prompted a lawsuit and cost taxpayers some $2 million to address. They also raise questions about whether Fulton officials have done enough to determine whether simple mismanagement or criminal wrongdoing was involved.
The final reports on Hill’s investigation made no references to possible fraud. Hill declined to comment. But County Auditor Anthony Nicks, Hill’s boss, told the AJC that audit managers reviewed Hill’s findings, conducted additional interviews and decided not to recommend a criminal investigation in the final audit report delivered to the county manager and the Board of Commissioners.
Nicks said the evidence showed a clear lack of internal controls over IT contracts, but “in my opinion, they do not rise to the level of criminal misconduct.”
Vixio Technology CEO Ed Ukaonu declined to comment.
Victor Hartman, a former FBI agent and fraud expert contacted by the AJC, isn’t troubled that the final audit report didn’t recommend a criminal investigation.
“There’s red flags there, but it’s not clear cut,” Hartman said. “It’s not so clear cut that they’re negligent in their duties by not doing it.
“That doesn’t mean that there’s not corruption going on there,” he added.
Allan Bachman, education manager of the Association of Certified Fraud Examiners, said the issues raised in the auditor’s early drafts may be worth a look by law enforcement authorities, who can review bank records and have other investigative powers that auditors lack.
“You’re chasing a ghost at this point,” Bachman said. “It seems to me to still be worth chasing.”
County Manager Dick Anderson, hired in March, called the problems pointed out in the audit findings “classic mismanagement.” But he said he hasn’t seen anything worth referring to the district attorney. He said he would rather focus on revamping the department for the future and recently hired a consultant to study IT operations. Its first report – due next month – will address issues raised in the IT audits.
County Commission Chairman John Eaves said the county attorney’s office, which gives legal advice and handles civil litigation, also reviewed the final audits and found no criminal activity. But at least one commissioner thinks the matter should be referred to the district attorney.
“It looks as if we’re trying to avoid any public discussion that we might have done something wrong,” said Commissioner Emma Darnell. “What I tell folks all the time, the public knows that we have thieves and crooks like everybody else. What they don’t like is you sitting up here and looking the other way.”
New details
In December, the Office of Internal Audit released a report saying the IT Department had mismanaged millions of dollars’ worth of contracts and violated ethics and other rules. A second audit, released in March, found more problems.
The IT Department has disputed some of the audits’ findings (read the full audits and the department’s responses at myajc.com). But it has pledged to improve oversight of contracts.
Hill, the auditor, assigned to the project, found problems with county contracts with several companies.
But in his draft findings he recommended a criminal investigation of issues involving only Vixio Technology contracts. Among his reasons:
- Vixio Technology charged Fulton County $147,950 in 2013 and 2014 to maintain software the county stopped using in 2012, the final audit report found. In an early draft, Hill called company invoices "by definition invalid or `phony'" because Vixio was charging for services it wasn't providing. That language is not included in the final audit report.
- In an early draft, Hill concluded IT Department payments for the software were justified, in part, by false information contained in county documents.
The county maintains a hardware and software maintenance and support list that is approved by the Board of Commissioners once a year. That annual approval authorizes the county to pay the vendors on the list without coming back to the commission.
The software Vixio supported was on the 2014 list, even though the county hadn’t used it since 2012. In their response to the audit, IT officials said the improper payments resulted from an “internal miscommunication.” But Hill’s notes indicate managers gave conflicting accounts of how the payments occurred.
The IT manager who prepared the annual software list said he received the incorrect information on Vixio from another manager. The second manager said he did not recall providing such information. In a draft finding, Hill cited several other conflicting statements given by managers.
- The final audit report concluded IT officials may have skirted purchasing rules by awarding Vixio a series of contracts valued at just under $50,000 – the threshold that would have required formal bidding and review by the Board of Commissioners.
Correspondence among IT managers obtained by the newspaper suggests they used the $50,000 threshold as a way to convince contractors to discount their prices.
In a March 2015 memo obtained by the newspaper, Assistant IT Director Derek McKay said a previous department head warned vendors to submit prices lower than $50,000 “if they want to have Fulton as a reference and a customer.”
- The auditor noted in a draft finding that representatives of Asentinel LLC told Hill they tried to sell software directly to the county in 2003. But they said former IT Director Robert Taylor told them to work through Vixio Technology if they wanted the county's business. So Asentinel partnered with Vixio. Asentinel provided the software and services; Vixio just handled invoices and took a $1,000 cut of the county's money, the auditor found.
Hill concluded Vixio provided nothing of value but made $10,555 from the Asentinel contract over the last four years.
In an early draft, he concluded that Taylor violated county ethics rules that prohibit employees from trying to influence contracts.
Taylor, who hasn’t worked for the county since 2007, said he may have referred Asentinel to Vixio, but doesn’t remember doing it. He said he never gave Vixio favorable treatment.
“It’s not the way I recall doing business,” Taylor said.
The cost of mismanagement
The fallout from the audits has been substantial.
Former IT Director Maurice Ficklin – who lost his job last fall – recently filed a lawsuit saying he was fired for blowing the whistle on contracting abuses cited in the audits. The FBI asked for a copy of the first audit, though that doesn’t necessarily mean it’s investigating.
County commissioners recently agreed to spend more than $1.5 million for Microsoft software the county is using but hadn’t paid for – an oversight reported by the auditor. They also agreed to pay consultant Accenture LLP $595,000 to review IT operations.
Several commissioners said they’re confident those issues will be fully vetted.
“I am reliant on our auditor, who I have faith in, to let us know if there’s anything that needs to be followed up on,” said Commissioner Liz Hausmann.
“The auditors are all saying they don’t have any hard evidence of (criminal activity),” she added. “Obviously, there’s red flags, or we wouldn’t be having this conversation.”
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