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GOVERNMENT OF THE DISTRICT OF
COLUMBIA
Office of the Inspector General
Charles C. Maddox, Esq.
Inspector General
August 10, 2000
The Honorable Anthony A. Williams
Mayor
District of Columbia
One Judiciary Square
441 4th Street, N.W., Suite 1100
Washington, D.C. 20001
RE: Management Implication Report on the Use of Inter-Agency Personnel Agreements
(MIR-2000-7) with Private Sector Entities
Dear Mayor Williams:
This Management Implication Report (MIR) is a follow up to MIR Number 2000-4, issued by
this Office on April 28, 2000, which identified a District agency that improperly
contracted for the services of a private sector employee through the use of an
Inter-Agency Personnel Agreement (IPA). The IPA was improper because it included a profit
for the private sector entity lending its employee to the District.
The purpose of this MIR is to inform you that (1) additional "for profit"
IPAs have been entered into, notwithstanding the admonishment in our April 28 MM that this
practice is unlawful, and (2) that the inappropriate use of IPAs has enabled agencies to
bypass laws and policies regulating the District's contracting process, salary ceilings,
residency requirements, residency preferences, hiring procedures, and management
accountability.
Background. District agencies were authorized by the Budget Support Act of
1995 to enter agreements to pay for the salary and fringe benefits of a private sector
employee on a temporary basis in order to resolve problems affecting the District. Our
April 28, 2000, MIR alerted the heads of all District agencies to the fact that "for
profit" IPA arrangements - those that obligate the District to pay more than the
employee's salary. or fringe benefits - violate District laws and regulations. It was
noted that this Office, in concert with the Office of the Corporation Counsel, concluded
that neither D.C. Code §1-628 nor Chapter 27 of the District of Columbia Personnel Manual
(DCPM) may be interpreted to permit the payment of a profit, or other fees, to a private
sector ear under the terms of an IPA. In fact, if a profit is to be paid to a private
entity for employment or consultant services, the agreement to provide those services
constitutes a contractual action subject to the requirements set forth in the Procures
Practices Act (PPA).
The focus of this Office's investigation has been twofold. The first priority is that
of ascertaining whether District agencies have entered into unlawful IPAs and, if so, the
magnitude of that problem. The second area of concern is that of determining the extent to
which the IPA is being used inappropriately, i.e., as a covert hiring system that
circumvents the District's procurement regulations, its personnel objectives, and,
ultimately, performance and accountability.
Unlawful IPAs.
Our investigation, subsequent to the April 28, 2000, MIR, has determined that the use
of the IPA in the District is more systemic than previously known. Because of our concern
that all IPAs in force have not yet been accounted for, we are not able at this time to
quantify the full extent of their use. We believe that records provided to us to date
about IPAs are incomplete or unclear for a number of reasons. First, IPA personnel can be
funded from non-personnel budget sources. Second, IPA personnel generally do not count
against an agency's complement of Full-Time Employees. Third, IPA personnel arrangements
are not always coordinated with the District's Office of Personnel.
So far, we have identified five private sector agencies that have been and/or are
curtly involved in twenty-seven separate IPAs with two District agencies. Of these
twenty-seven IPAs, twenty-five are known to have included unlawful profits in the hourly
wage or annual salary of the employee that are not in fact ever paid to the employee.
During recent interviews, company officials acknowledged that the District paid a profit
in at least twenty-two IPAs.
Also, a review of information developed so far during this investigation reflects that
two of the IPAs noted above were initiated subsequent to the issuance of our April 28
Milt. This fact is of great concern in that such actions suggest that the heads of at
least two District agencies either failed to read the MM or decided to ignore the findings
therein.
Inappropriate Use of IPAs
While the use of the IPA in an unlawful manner is a serious issue, the inappropriate
use of an IPA to circumvent District laws, regulations, and management oversight may have
even-more dire consequences in terms of subverting efforts to achieve long term
accountability and productivity in government operations and programs.
Supervision of employees. An agreement to build a profit into an EPA
transforms it from an assignment of personnel to a contrail for securing consultant
services (necessitating compliance with the PPA). Section 1901.3 of 27 DCMR limits the
parameters of a consulting contract by prohibiting: 1) detailed control or supervision by
District personnel of the contractor or its employees with respect to the day to-day
operations of the contractor or the methods of accomplishment of services; 2) a regularly
established tour of duty for the contractor, and 3) supervision of District employees by
the contractor:
Employees working for the District under an IPA are often placid in supervisory
positions. In fact, the IPA is commonly used as a mechanism to circumvent the prohibitions
of section 1901.3. The eligibility of an employee retained by a for profit IPA to
supervise others or to be supervised is legally questionable; the practice of entrusting
an IPA employee, or any other contractor, with managerial/supervisory responsibility is
administratively questionable.
Avoidance of Residency Requirements and Salary Ceilings. Recently this Office
conducted an inquiry involving a nonresident federal retiree who was hired as a District
Government employee in a position that required him to relocate his residence into the
District within six months. A few months after being hired, this employee negotiated an
IPA at a significantly higher salary with a local corporation, resigned from his position
with the District, and returned to the same job without relocating (he has since
resigned).
We have encountered a significant number of IPA personnel whose salaries grossly exceed
the District Schedule salary range for their job descriptions. Several command salaries in
excess of $200,000 for performing work similar to peers at significantly lower salary
ceilings.
Recruitment and Hiring Policy. The IPA, because it was intended to be limited
to temporary difficult-to-fill positions, bypasses District recruitment and selection
procedures and prevents career employees - as well as the public at large - from
competing. In fact, section 1900.8 of 27 DCMR prohibits contrails for expect or consulting
services from being awarded in such a manner as to give preferential treatment to former
District employees. In addition, contractors are usually exempt from due diligence checks
concerning nepotism, prior criminal convictions,- and credential verification that
apply-to District employees For these reasons, sufficient review and . oversight is
required to ensure that the IPA is strictly limited to its intended use. Early indications
are that IPAs have been used for positions that are not difficult to fill.
This MIR is intended to update you and agency heads prior to the conclusion of our
inquiry so that appropriate remedial action can be taken immediately. At this time, I am
recommending the following:
- The Office of Personnel should develop a procedure to identify and evaluate all on-board
IPAs and IPA applicants to ensure that all contracts are accounted for, reviewed for legal
sufficiency, and that justification exists for not competing the position at career
employee salary levels.
- The Office of the Corporation Counsel should review all IPAs entered into between the
District and a private entity to ensure compliance with relevant laws and regulations.
Upon completion, the final results of our investigation will be provided to you with
additional recommendations for corrective action. If you have any questions about this
report, please call me or Austin Andersen, Deputy Inspector General, at (202) 727-9553.
Sincerely,
Charles . Maddox, Esq.
Inspector General
cc: See Attached Distribution List
DISTRIBUTION:
The Honorable Alice M. Rivlin, Chairman, DCFRA (1 copy)
Mr. Francis Smith, Executive Director, DCFRA (1 copy)
Mr. Russell Smith, Chief of Staff, DCFRA (5 copies)
The Honorable Anthony A- Williams, Mayor, District of Columbia (1 copy)
Dr. Abdusalam Omer, Chief of Staff (1 copy)
Mr. Norman Dong, City Administrator/Deputy Mayor for Operations (1 copy)
Ms. Peggy Armstrong, Mayor's Press Secretary (1 copy)
Ms. Lydia Sermons, Director, Office of Communications (1 copy)
The Honorable Linda W. Cropp, Chairman, Council of the District of Columbia (1 copy)
Ms. Phyllis Jones, Secretary to the Council (13 copies)
The Honorable Kathleen Patterson, Chairperson, Committee on Government Operations, Council
of the District of Columbia (1 copy)
Dr. Natwar M. Gandhi, Chief Financial Officer (4 copies)
Ms. Deborah K. Nichols, D.C. Auditor (1 copy)
Mr. Elliott Branch, Director, Office of Contracting and Procurement (1 copy)
Mr. Jeffrey C. Steinhofl; Assistant Comptroller General, GAO (1 copy)
Ms. Gloria Jarmon, Director, Civil Audits, HERS, GAO (1 copy)
The Honorable Eleanor Holmes Norton, D. C. Delegate, House of Representatives (1 copy)
Mr. Jon Bouker, Office of the Honorable Eleanor Holmes Norton (1 copy) ,
The Honorable Ernest J. Istook, Jr., Chairman, House Committee on Appropriations,
Subcommittee on D.C. (1 copy)
The Honorable James Moran, House of Representatives Committee on Appropriations
Mr. John Albaugh, Office of the Honorable Ernest J. Istook, Jr. (1 copy)
Mr. Migo Miconi, Clerk, House Subcommittee on D.C. Appropriations (1 copy)
The Honorable Tom Davis, Chairman, House Committee on Government Reform and Oversight,
Subcommittee on D.C. (1 copy)
Mr. Howard Denis, Staff Director, House Committee on Government Reform and Oversight,
Subcommittee on D.C. (1 copy)
Mr. Robert Dix, Clerk, House Committee on Government Reform and Oversight, Subcommittee on
D.C. (1 copy)
The Honorable George V. Voinovich, Chairman, Senate Subcommittee on Government Oversight
(1 copy)
Mr. Peter M. Rowan, Legislative Clerk, Senate Subcommittee on Government Oversight (1
copy)
The Honorable Kay Bailey Hutchison, Chairman, Senate Appropriations, D.C. Subcommittee (1
copy)
Ms. Mary Beth Nethercutt, Clerk, Senate Committee on Appropriations, D.C. Subcommittee (1
copy)
Mr. Tim Aiken, Office of The Honorable James Moran (1 copy) |
