NEW ORLEANS – As city officials consider raising rates for the Sewerage & Water Board, a letter from Inspector General Ed Quatrevaux to Mayor Mitch Landrieu expresses deep concerns of potential fraud and mismanagement at the city agency.
While not doubting the need for critical upgrades to city water service, Quatrevaux wondered whether the agency has the capacity to deal with additional resources.
An assessment of the agency by the Office of Inspector General found indicators of potential fraud.
“The Sewerage and Water Board total risk score was second to only an entity where a criminal investigation was in progress at the time of the assessment. The S&WB is the most likely of the City’s component entities to engage in fraud, waste, and abuse according to standard risk assessment methodology,” said Quatrevaux.
Quatrevaux’s letter cites several instances of problems at the Sewerage & Water Board in different media reports. The number of take-home cars, 123, at the agency – one for every seven employees – dwarfed the amount of take-home cars for “similar units” in Jefferson Parish, where only 21 take-home cars are used.
Also questioned was the substantial financial package due to Marcia St. Martin, executive director, upon retirement. Martin would get a $175,000 lifetime annuity and a lump-sum payment of $877,000.
A comparison of the cost of providing medical insurance to water board employees to other city employees also raised a red flag, according to the letter. In 2010, the Sewerage and Water Board paid $17,439 per employee, while the City of New Orleans paid $6,800 per employee, states Quatrevaux in the letter.
“The 2010 fiscal year independent audit of the S&WB cited two material weaknesses, including the finding that ‘general ledger reconciliations for some significant accounts were not performed in a timely manner.’ This is a repeat finding from the 2009 independent audit and demonstrates a disturbing inattention to ‘significant accounts’ and management in general,” said Quatrevaux.
“However, the S&WB’s foremost deficiency is its failure to fix the problem indentified in the prosecution of its felonious former director, Benjamin Edwards,” said Quatrevaux.
Edwards pleaded guilty to federal charges in 2010 and was sentenced to more than 20 years in prison for his role in soliciting kickbacks from companies doing work on behalf of the S&WB for nearly 11 years. He was also ordered to pay $3.6 million in restitution.
“The (Edwards) scandal revealed constant Board meddling in the procurement actions, contrary to the example you set as Mayor by removing yourself from City procurement decisions. Procurement is a management function, not a political one,” said Quatrevaux.