TIMELINE: A look at East Point’s financial predicament
Late 2011: Mayor Earnestine Pittman and the City Council ask the city staff to find someone to do a forensic financial audit of the city's purchasing and vendor payment system.
June 2012: Progress on the development of a Request For Proposal for the forensic audit begins in earnest, only after the interim city manager is asked about the status of the audit.
Aug 23, 2012: The city's Contracts and Procurement Department issues an RFP for the audit.
October 2012: The audit, known as the Council-Initiated Investigation, begins after the mayor and the City Council authorize City Attorney Corliss Lawson to oversee the investigation. Lawson appoints Randy Turner of Turner and Ross LLC to do the investigation.
Oct. 24, 2012: The city attorney tells the mayor and council that the Contract and Procurement Department has received information indicating the RFP was "materially flawed," raising questions of misconduct by the department's director and the then-interim city manager. Lawson considers bringing in an outside, independent investigator.
January 2013: Mark Felton of Felton Financial Forensics and Valuations LLC of Minnesota joins the fraud investigation team looking into East Point's finances.
March 11, 2013: Preliminary findings from the audit are reported to the mayor and the City Council.
March 18, 2013: The City Council votes unanimously to approve Phase II of the investigation, which looks at disbursement-related transactions that occurred between Jan. 1, 2000, and Dec. 31, 2012.
June 3, 2013: Report released detailing results of an investigation into allegations of improprieties tied to the purchase of goods and services by East Point. Violations of city procurement codes are found.
East Point at a glance
The city
Location: Fulton County
Size: 13.8 square miles
Budget (2013): about $117.5 million
10 top employers: Tenet-South Fulton Medical Center, 600 workers; Newell Recycling, 600; city of East Point, 523; Dick's Sporting Goods, 248; Federal Aviation Administration, 200; Lowe's, 155; Worldpay US, 150; CEVA Logistics, 142; Crowne Plaza Hotel - Atlanta Airport, 133; and Bonterra Nursing Center, 105.
Key point of interest: Home to PPG Industries Inc., the only nonflammable paint facility in the United States. It makes Olympic brand paint for Lowe’s.
The people
Population: 33,712
Males: 47 percent
Females: 53 percent
Median age of residents: 31.5 years old
Median household income in 2012: $38,759
Median house value in 2012: $107, 368*
* Zillow website
Source: City of East Point website
Where did the money go?
It’s a $200 million question that East Point cannot answer.
The south Fulton County city cannot account for nearly half the money it spent on goods and services over the past 13 years, according to a recent audit ordered by the City Council. While no one is saying whether anyone walked away with the money, nobody can say how it was spent because purchase orders are unavailable.
The nearly $200 million in unexplained spending was one of the most eye-catching findings in the audit, which also discovered that several years of accounting records were missing — in what the audit called a violation of state law — plus the common employment of some purchasing practices in an apparent effort to dodge oversight. Mayor Earnestine Pittman has asked for an investigation, and the Fulton District Attorney’s Office is looking into it.
“$200 million is a huge amount. The citizens of East Point and Fulton County deserve to know whether such an amount has been misplaced or misappropriated,” District Attorney Paul Howard said in a statement. “By reason of the inquiries my office has received, we have decided to make at least an investigative inquiry into this matter and will govern our future responses regarding this issue based upon our evaluation.”
State Sen. Vincent Fort, D-Atlanta, has asked Attorney General Sam Olens, in a letter, to have his office investigate “so that the appropriate actions can be taken if any state laws have been violated.”
While the money is a substantial amount for a city with an annual budget of about $117.5 million, those familiar with how East Point’s government operates know the audit’s findings are merely symptomatic of long-standing ills that have dogged the city of about 34,000 for the past decade. Besides the shoddy bookkeeping, problems include a steady stream of changes among the city’s key administrators and a long-simmering feud between the council and mayor.
“Poor record-keeping has been a consistent problem over there,” said Nina Hickson, who left East Point government last year to become ethics officer for the city of Atlanta. “Couple that with a lack of continuity in leadership and you lose a lot of your institutional knowledge with all of the (job) changes. A lot of the problems were problems that had already surfaced in previous annual audit reports.”
Pittman and the eight City Council members won’t discuss the audit, but the mayor conceded that the blame may rest with those who make city policy.
“The biggest problem in the city is with the mayor and council. This council refuses to police itself and hold the staff accountable,” said Pittman, who believes a crime has been committed. “Looking at the audit and looking at the recommendations stated in the audit, we are intent on making sure our current policies are adhered to by our staff and that accountability for the enforcement of these policies will begin at the top with the mayor and council.”
Council Member Jackie Slaughter-Gibbons pushed back: “Morale is low among the rank and file, from the director on down to the lowest-paid person. We haven’t had a personnel manager in the last five years. We don’t have a solid set of rules for employees to go by.”
The city also doesn’t have a 2014 budget yet. It recently tabled the matter.
There’s little outward indication of what city officials are doing to repair their government. East Point’s fifth city manager in eight years was fired recently, but that had no relation to the missing money or audit, city officials said.
While city officials play verbal pingpong, the financial missteps have annoyed many residents of East Point, once considered among metro Atlanta’s up-and-coming towns, and they are eager to get back to that pre-recession ambition.
Nearly 14 square miles, East Point meanders through a ribbon of economic contradictions: gleaming new subdivisions in the vibrant Camp Creek corridor and some of the region’s grittiest enclaves of poverty. About one in five East Point residents lives below the poverty line.
The city has managed to flourish despite such a dichotomy, attracting a mix of the urban and the urbane in the past decade. Neighborhoods such as Jefferson Park and Eagan Park have drawn young families seeking refuge from the adrenaline rush of Atlanta. White-collar professionals rub elbows with blue-collar workers at outdoor festivals. It’s home to a predominantly black population and a growing gay population.
“I’m so frustrated that every time we turn around there’s something putting a dark cloud over our city,” said Brian Frey, president of the East Point Main Street Association, an all-volunteer nonprofit group that produces community events. “The only way the city’s going to move forward is with a fresh new leadership with a new vision that puts the city and its residents at the forefront of economic development and growth.”
The 28-page audit and an accompanying final report detail a city government in chaos.
The reports list a host of allegations, including:
- Bids being opened before the reveal date, with the "select" vendor receiving information about the lowest bid.
- Large capital items being purchased before their slated replacement dates.
- Workers receiving gifts from vendors.
- Employees taking city property for their personal use and gain.
In addition to the missing money and records, the investigation found common usage of a practice of “splitting invoices” to circumvent bidding requirements. Here’s how the practice works: The city has thresholds of $300 and $5,000 that trigger certain monitoring. For purchases of $300 or more, a department must get three quotes. Once the cost has hit $5,000, a formal bid must be drafted, issued and publicized. To avoid the formal bidding process, multiple purchase orders might be used, each less than $5,000 but all related to the same purchase and vendor. The audit found a “definite spike in purchase orders issued in amounts just under the $5,000 threshold.”
Hickson said she finds it “hard to believe there’s $200 million of purchases with no documentation.”
She is in a position to know. During her seven years with East Point, she served as city attorney, interim city manager and human resources director twice.
Hickson said the constant churn of officials at the top of the city’s administration — since 2005, in addition to the five city managers, the city has had four finance managers and seven personnel directors — has eroded the institutional knowledge of the city’s operations.
Departments often operated independently of each other when it came to purchases, Hickson said, and record-keeping also wasn’t uniform. Many of the departments “would create their own record-keeping systems,” she said.
Hickson said she doesn’t believe criminal activity occurred. She wonders whether the auditor talked to enough rank-and-file workers to get a true sense of how the city operates and how records are kept.
“There was no one place where you could find everything,” Hickson said. “Had the forensic auditor talked to a variety of employees he may have been able to find many of the documents that are alleged to be missing.”
Right now no one knows for sure because no one’s talking.
“There’s just one side being (told). Nobody’s really talking about what’s really going on over there,” Hickson said. “It just paints certain city employees with a broad brush that I don’t think is fair.”
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