Executive Summary
As the result of a report to the Good Government Hotline, we reviewed executive recruitments that occurred between July 1, 2020 and October 17, 2024.
We substantiated waste. The county overpaid for services by over $78,000. These overpayments occurred for two primary reasons:
- The county permitted a contractor to charge a higher rate than provided by the payment terms in the contract.
- The county did not properly reconcile submitted invoices to contract terms.
The county has a responsibility to be efficient with taxpayer dollars. The county’s current general fund reductions make this even more important. To prevent future, similar instances of waste, we recommend that the county reinforce contracting and invoice approval requirements to ensure that incoming invoices agree with the applicable financial terms in contracts.
We found that numerous county rate-based contracts lacked financial terms, which can cause confusion as to the intended payment agreement. In the case of one contractor, terms that would have reduced costs for the county were left out of a contract.
Additionally, we found that the county reached an agreement with a contractor outside of the county’s typical procurement process.
Investigation
Allegation
Our investigation stemmed from a tip to the Good Government Hotline. The allegation was that the county had improperly awarded a contract, because the contractor in question was not a qualified provider as required by Oregon law and Multnomah County policy. We did not substantiate the allegation. However, in the course of that investigation, we reviewed invoices which indicated that executive recruitment contractors potentially overbilled the county.
Scope
We analyzed 40 county executive or staffing recruitments that occurred between July 1, 2020 and October 17, 2024. In the course of that analysis, we reviewed 24 county contracts related to executive recruitment or staffing recruitment services. The total expense of the 40 recruitments was about $1.6 million.
Background
The county sometimes uses outside recruiting firms to hire high-level positions. County management told us that executive recruitment firms have the strategic advantage of being able to draw on vast networks of executive professionals, and tend to have greater geographic reach than county recruiters.
Analysis
The county overpaid for services by over $78,000:
- The county overpaid for services by more than $44,000, because it told a contractor they could charge a higher rate than agreed to by contract. Once contracts are developed from a procurement process, the contract terms must be honored unless amended. This helps ensure open and impartial competition in public contracting, and efficiency.
- The county failed to detect almost $34,000 in billing errors, by failing to reconcile invoices to contract terms.
Almost half of the contracts we reviewed omitted complete financial terms, and contracts with one contractor omitted cost proposals that could have saved the county money.
- Despite the fact that contracts typically undergo numerous rounds of review, we found that 11 out of the 24 executive recruitment or staff recruitment contracts we reviewed did not include financial terms. Without financial terms, it is uncertain how much the county should expect to pay the contractor for goods or services.
- With one contractor, the county failed to include a term that would have made recruitments less expensive, in some cases. During the procurement process, the contractor proposed a $49,500 maximum on its fee for executive recruitments. That maximum was not incorporated into either of two final contracts with the contractor. After we discussed with management that the maximum had been left out of the contracts, the current contract with the contractor was amended to include the cap, as of January 1, 2025.
The county reached an agreement with a contractor, outside of the county’s typical procurement process.
- For an executive recruitment, a county department reached an agreement with a contractor to pay a fee equal to 30% of the starting salary of the person hired.
- The county had an existing contract with the contractor, but it was for a different scope of work – IT staff recruiting rather than executive recruiting. And the terms of that existing contract called for an 18% rate, not a 30% rate.
- Because of the differences in scope of work and the rate, the county’s existing contract was not reconcilable to the agreement the county department reached separately. The department should have sought appropriate procurement authority or used a different contract. Other contractors may have been excluded from this opportunity due to procurement rules being circumvented.
Conclusion
We substantiated an allegation of waste. The county overpaid by over $78,000 due to deviating from contract terms and failing to identify overbilling. We also identified missing and incomplete contract terms, and failure to follow prescribed county procurement processes.
Recommendations
- The county should reinforce contracting and invoice approval policies and rules, including segregation of duties. Before payment, employees with approval responsibility should ensure that incoming invoices agree with the financial terms in applicable contracts and purchase orders.
- The county should ensure that the approval process for contracts includes verification that all applicable financial terms are included, and that the terms include any contractor proposals that minimize expenses for the county.
- The county should reinforce procurement policies and rules. Contracts must be based on valid procurement authority and match negotiated terms.
About Hotline Investigations
The Good Government Hotline is a service of the Multnomah County Auditor’s Office. You can report suspected fraud, waste, misuse of county resources, or abuse of position in county government at 1-888-289-6839 or online.
A hotline investigation is not an audit. We follow detailed procedures in the investigation of hotline tips, which include a preliminary review of the tip and an investigation when our preliminary review indicates it is necessary.
We follow all of the requirements of Oregon Revised Statute 297.765, Policies and Procedures for Local Government Waste Hotlines. Our compliance with ORS 297.765 requires us to determine in writing whether activities are occurring that constitute waste, inefficiency, or abuse. The statute allows us to include other pertinent information in our determination. When we determine that waste, inefficiency, or abuse has occurred, we are required to deliver our findings to the Board of County Commissioners.