This article is a primer on how Purchasing works at the City School District of New Rochelle.
The last few weeks have been spent acquiring some additional invoices, sorting them out and analyzing them so we can better explain to Talk of the Sound readers the complete and utter lack of financial controls which exist in the City School District of New Rochelle and the myriad ways that the taxpayers are being fleeced.
We have now obtained the paperwork on about 200 jobs given to outside contractors by the New Rochelle school district over the past several years. In some cases, we have waited years, watching the work get done, taking photographs, filing them away for when the time was right.
We wanted to start with a few smaller jobs to illustrate the basic concept of how the game is played in New Rochelle. We already told you about the Trinity flagpole scam and the New Rochelle High School “snow storage” scam and the Columbus School brick scam. Over the years we have reported dozens of problems with the Buildings & Grounds Department with both direct employees and outside contractors, all under the watch of Assistant Superintendent John Quinn and ARAMARK consultant John Gallagher.
We will now expand on the various methods used by contractors to enrich themselves and whatever Central Office coffee cups they have been keeping full.
Our bible in understanding and explaining the process is the Purchasing section of the New York State Education Department web site so if you want to understand the laws and best practices for Competitive Bidding for School Districts you may want to take a look.
Competitive Bidding Threshold Changes
• Purchasing Handbook
• Purchasing Tips
• Cooperative Purchasing
• Lease-purchase of Instructional Equipment
• OSC Bulletin – Piggybacking Law of 2012
• OSC Local Government Management Guide – “Seeking Competition in Procurement”
We have made particular use of the handbook:
Chapter I. Steps in the Purchasing Function
Chapter II. RELATIONSHIP OF PURCHASING TO OTHER SCHOOL FUNCTIONS
Chapter III. COMPETITIVE PURCHASING
Chapter IV. PURCHASING PROCEDURES
Chapter V. Purchasing Through Agencies Other than Vendors
Chapter VI. Purchasing Forms, Records, and Recommendations
There are various ways to slice and dice the invoices for evaluation but a good cut-off point is $35,000, the statutory limit above which public works contracts must be put out for competitive bidding.
Chapter 494 of the Laws of 2009 also amended section 103 of NYS General Municipal Law. All contracts for public works involving an expenditure of more than $35,000 are subject to competitive bidding..
Work above $35,000 is supposed to be done through formal competitive bid process; we will set those aside for a separate series.
As we will see in the coming weeks, there are various ways around this limit, as is referenced on the NYSED website, such as dividing purchases into a series of small invoices or obtaining a Purchase Order below $35,000 but submitting an invoice above $35,000. Any trick you can imagine will be on display over the next month of articles as we examine various public works projects paid for by the City School District of New Rochelle.
Our records analysis will focus on a simple question: based on New York State Law and New Rochelle Board of Education Policy, should an invoice have been paid. In some cases, other questions may be raised about the quality of the work, whether the work was really needed, whether the materials were really used and whether the work was even done at all. But no invoice should ever be paid that does not meet all of the requirements and so a cut and dry way to evaluate these invoices starts with whether all requirements are met or not and therefore whether the contractor should have been paid. A different question for a different series is why were invoices paid that should not have been paid and who caused that to happen.
Public works jobs below $35,000 are typically done under annual “maintenance mechanics” contracts which are usually bid out in April and approved through a board resolution each May.
Maintenance Mechanics are carpenters, electricians, masons, painters and plumbers. The companies hired under these contractors are typically from a select group of companies: GRW Plumbing, T & G Electric, M. Zonzini Pipeline, Wager Construction, Environmental Control, F&L Flooring, J&J Backflow, etc. There are other contractors that fall under this category such as Flooring, HVAC, etc.
Contractors are approved vendors so when we use terms like “contractors” or “maintenance mechanics” we are describing a category of vendors and so when we describe processes that apply to contractors for bidding for award contracts, providing estimates, invoicing and so forth what we describe applies, generally speaking, to vendors as a whole.
Public works contractors obtain annual contracts through a bid process for unspecified “as needed” and emergency work. They are essentially blanket contracts which set terms, conditions, and prices for work assigned to them over the course of the year. Those bid terms clearly state that the resulting Contract Awards are not to be used for construction projects, demolition, additions, or new construction work usually bid separately as a major capital project.
Our focus will be on the public works contractors — carpenters, electricians, masons, painters and plumbers — otherwise known as Maintenance Mechanics.
BID AWARDS
Once a need is identified, a bid is developed describing what the District wants, various terms and conditions. As appropriate, the bid may be broken down in “Lots” (e.g, the 2013-14 Maintenance Mechanic bid has lots for Plumbing, Painting, Masonry, etc.)
The bid is announced in a Public Notice (or “PN”) via the Journal News, the district’s newspaper of record. A PN is assigned a 4-digit code so that the Contract Award is done under a code such as “PN 4399”.
By contrast, the City of New Rochelle also posts all bids, RFPs and RFQs on the web site and offers an alert system — an approach the District should adopt.
Contractors respond by completing a bid form in which they must indicate various prices and terms of providing work. Each contractor must submit a copy of a valid, current trade license with their bid proposal as appropriate (e.g., Electrician License, Plumbing License, Westchester County Contractor License, etc.).
Contractors must provide with their bid a minimum list of at least 3 professional references from schools of similar scope and size as the New Rochelle City School District.
The winning bid is selected based on best price for a company the District believes is capable of doing the work.
A board resolution describing the PN, the winning bidders, the losing bidders and a budgeted dollar amount for each is presented to the New Rochelle Board of Education for formal board approval.
Before any work can begin, Certificates of insurance naming the City School District as “Additionally Insured” are required to be on file with the District.
All Purchase Orders (or “POs”) for work done under these contracts must reference the correct PN; since no work can be done without a PO, all invoices must reference the PO which contains the PN which is the code in the system under which invoices are paid.
EMERGENCY AND NON-EMERGENCY WORK
There are two kinds of work under a Bid Award Contract: Non-Emergency Work and Emergency Work.
Most work in the New Rochelle School District is done on a non-emergency basis — our primary focus — so we will dispense with Emergency Work first.
Talk of the Sound recommends that the District should require “Before and After” photos of any work done under a Bid Award Contract or RFP.
INITIATING EMERGENCY WORK
Emergency Work in the District is to be authorized by the Director of Environmental Services or his designated staff. The Director of Environmental Services is, and has been for many years, an outside consultant from ARAMARK Education Services (K-12) — John Gallagher — long familiar to Talk of the Sound readers. The “designated staff” is other ARAMARK employees.
When Emergency Work is authorized by the Director of Environmental Services, the Contractor must submit a “not-to-exceed” written estimate within 24 hours of the emergency service so that a PO can be issued for all work performed as an emergency. From that point forward, any additional work necessary to complete the emergency repair service must have written approval if it exceeds the estimate.
We will look at some Emergency invoices in our series but there are not as many as there once was, ever since the Office of the State Comptroller completed an audit of the District in 2009 and cited the District for designating work as “emergency work” when the need was not an emergency.
INITIATING NON-EMERGENCY WORK
All non-emergency work requires an estimate from the Contractor which must include a proposal detailing estimated hourly labor, staffing, and material charges, if any. That information becomes a Requisition, the step required before the creation of a Purchase Order.
A Requisition is entered into the financial system and reviewed by the Purchasing Agent against a hard copy/PDF of the requisition with a contractor quote which details all aspects of the job — the work to be done, the location, the hours of work to done (with the hourly rates indicated) and anticipated materials necessary to complete the job (broken down individually). If the Purchasing Agent approves the requisition in the system it is entered into the District’s financial management system as a PO.
All of the documentation provided to Contractors makes it very clear that “ABSOLUTELY” no work is to be performed without express authorization in the form of a PO and that no invoices will be paid for work performed prior to the issuance of a PO. All Contractors are warned that failure to follow these guidelines may result in disqualification and cancellation of a bid contract.
THE PAYMENT PROCESS FROM THE PERSPECTIVE OF A PURCHASE ORDER
Whether work is done on an emergency or non-emergency basis, a Purchase Order must be created so that work being done is formally scoped, priced and authorized.
In the New Rochelle School District, Purchase Orders are managed electronically by a software program called Finance Manager. It is useful, however, to travel back in time and think of Purchase Orders as paper documents created using a form with carbon copies as was the common practice before the computer age.
The top copy with a wet signature is the Vendor Copy. This document is given to the Contractor after the requisition is approved. This is essentially a signed contract under which the Contractor is assured of payment for performing agreed upon work at an agreed upon price for labor and materials (i.e., a “time and materials” contract).
The second copy is the Receiving Copy. This document is given to the Director of Buildings & Grounds who is responsible for overseeing that the work is being done on time and done right and that the materials are to District specifications and used in the quantity specified.
The third copy is the Accounting Copy. This document is sent to the Accounts Payable Department.
When the work is done, the Contractor presents an Invoice matching the Vendor Copy of the Purchase Order as well as any required documents such as Certified Payroll sheets, receipts, and so forth. The Director of Buildings & Grounds confirms that the work was done as specified within the agreed upon terms, matches the Invoice to the Receiving Copy of the Purchase Order and sends the entire set of documents to Accounts Payable.
Accounts Payable “marries” the Receiving Copy from Buildings & Grounds with the Accounting Copy along with all of the supporting documentation such as estimates, receipts, certified payroll sheets and so on. Accounts Payable confirms that labor and materials on the invoice match the Purchase Order, along with any adjustments that may have been authorized.
THE PAYMENT PROCESS FROM THE PERSPECTIVE OF AN INVOICE
Before an invoice can be submitted for payment, the Contractor must create an invoice document that references the PO number, lists the Dates of Service and School Location, breaks down the hourly labor rate and provides an itemized list of materials. It must be accurate in terms of time and materials used at each job site with labor billed at the bid hourly rate and materials billed with appropriate, predetermined bid discount or mark-up per the bid award. For all materials/parts, the invoice must indicate what was actually used. Lump sum invoicing for labor and/or materials is not allowed.
Most materials will be supplied by the School District (as indicated in the Bid Award) but if the Contractor wishes to supply materials for a project, and if requested by the City School District, the Contractor must submit a detailed proposal and receive PRIOR written approval from the district before supplying such materials.
Talk of the Sound believes this policy should be amended so that a proposal and prior written approval is always required when a Contractor supplies materials for a project that are required to be provided by the School District under the Bid Award or to simply end this practice altogether.
The Contractor must provide, with each invoice, receipts for all individual material items in excess of $500 and for any individual part or individual material item over $500, the manufacturer information MUST accompany the invoice to the District.
The Contractor must provide with each invoice a Certified Payroll form which must verify the Contractor’s workers were paid at Westchester County Prevailing Wage Rates, that all workers were hired for a full normal working day (except a foreman who will only be paid for the net hours actually required). The labor rate must cover all costs, supplemental benefits, overhead, and profit. All trades personnel must be fully experienced and licensed if applicable such as the electrical and plumbing trades.
The Contractor may not charge for clean up costs and the removal of any debris created from their repair work at a job site. The work site must be left in “broom-clean” order. Waste disposal fees have been handled differently from year to year (e.g, Lot No. VIII in PN 4339 provided for dump fees; PN 4292 did not).
The Contractor may not charge additional surcharges, fuel charges, or travel costs.
The employees of the Contractors are required to report with the tools required for his or her trade in accordance with trade union agreements.
Talk of the Sound was unable to determine what “trade union agreements” the Bid Awards reference and such documents were not part of the Bid document.
MAINTENANCE MECHANICS’ SUPPLIES, MATERIALS AND EQUIPMENT
Painters
Supplies/Materials
School District Provides: paint.
Contractor/Employees Provides: nothing.
Tools/Equipment
School District Provides: nothing.
Contractor/Employees Provides: brushes, rollers, trays, tarps, and all other similar support materials.
Carpenters
Supplies/Materials
School District Provides: lumber and materials that can be purchased directly from the District Materials bid contracts or other bid contract that the District is eligible to piggyback off such as a New York State contract, Westchester and Rockland County contracts and BOCES contracts.
Contractor/Employees Provides: minimal materials as most everything is covered under various District materials bids/contracts.
Tools/Equipment
School District Provides: rental of heavy equipment, if necessary.
Contractor/Employees Provides: all other tools of the trade.
Electricians
Supplies/Materials
School District Provides: electrical materials and supplies if covered under the District materials bid contract or other bid contract that the District is eligible to piggyback off such as a New York State contract, Westchester and Rockland County contracts and BOCES contracts.
Contractor/Employees Provides: minimal supplies or something odd that is not covered under the District Materials bid or other available contract.
Tools/Equipment
School District Provides: lift equipment or heavy equipment, if necessary.
Contractor/Employees Provides: all other tools of the trade.
Masons
Supplies/Materials
School District Provides: masonry supplies such as block, concrete and so forth that is covered under the District Masonry Supplies bid contract or other bid contract that the District is eligible to piggyback off such as a New York State contract, Westchester and Rockland County contracts and BOCES contracts.
Contractor/Employees Provides: small, minimal supplies or something odd that is not covered under the District Materials bid or other available contract.
Tools/Equipment
School District Provides: rental of heavy equipment, if necessary.
Contractor/Employees Provides: all other tools of the trade.
Plumbers
Supplies/Materials
School District Provides: plumbing supplies that are covered under the District Plumbing Supplies bid contract or other bid contract that the District is eligible to piggyback off such as a New York State contract, Westchester and Rockland County contracts and BOCES contracts.
Contractor/Employees Provides: minimal supplies or something odd that is not covered under the District Materials bid or other available contract.
Tools/Equipment
School District Provides: rental of heavy equipment, if necessary.
Contractor/Employees Provides: all other tools of the trade.
PROCESS FOR SUBMISSION AND PAYMENT OF INVOICES
An Invoice is submitted for payment by a Contractor to the Director of Environmental Services.
If all is not in order, the Director of Environmental Services returns the invoice and related documents to the Contractor.
If all is in order, the invoice is given to the Assistant to the Director of Environmental Services who matches the invoice and any attachments to the Receiving Report— a hard copy of the PO on file — and sends the invoice to Accounts Payable.
Accounts Payable vouches the invoice — collecting and organizing the necessary documentation and approvals — placing a Voucher as a cover page and attaching the Contractor’s Invoice, the District’s Purchase Order, the Receiving Report, and other information needed to process the Contractor invoice for payment (estimates, authorizations, receipts, etc.).
If all is not in order, Accounts Payable returns the Invoice to Environmental Services.
If all is in order, Accounts Payable places the Vouched Invoice on the Bill Schedule for review by the Internal Claims Auditor.
The Internal Claims Auditor audits the Vouched Invoice.
If all is not in order, the Internal Claims Auditor will return the Vouched Invoice to Accounts Payable.
If all is in order, the Internal Claims Auditor approves the schedule for print as a check or EFT form.
A Clerk prints the check or EFT form and presents it to the District Treasurer for signature.
The District Treasurer signs the checks or authorizes the EFT so that payment is made to the Contractor.
Talk of the Sound recommends that each person that formally acts within this process be issued their own rubber stamp, with a unique design, color and title and a space to place a signature or initial so that an auditor can clearly differentiate one sign-off from another.
PREPARING AN ANALYSIS OF FINANCIAL RECORDS OBTAINED BY TALK OF THE SOUND
The processes and procedures described above are our best effort to explain them based on reading the NYSED regulations, NRBOE policies, analysis of hundreds of invoices and related paperwork, interviews with vendors and other sources familiar with various aspects of school district operations. We believe this to be an accurate description but recognize that school officials with direct knowledge may wish to find fault with some aspect of our description. We welcome such input and will make any necessary edits if they care to point out any specific issue.
Our purpose here is not to be perfect in explaining these processes and procedures but to share with readers the research done to prepare something else entirely where we do want to be perfect — developing a checklist of what should or should not be contained in the documents we have obtained under Freedom of Information requests so that we can evaluate each invoice and “score” it.
In an upcoming series of articles, our scoring will rate whether all required documentation and detail was provided with an invoice, that the invoice does not contain any erroneous charges, and ultimately whether it should have been paid or not. Each of those articles will be linked back to this article, intended really as a primer for readers who want to better understand those coming articles.
CHECK LIST FOR A BID PROPOSAL
- Properly completed bid form
- Copy of a valid, current trade license, as appropriate
- 3 professional references
- Board Resolution
- Certificates of insurance
CHECK LIST OF DOCUMENTS TO ACCOMPANY INVOICE FOR EMERGENCY WORK
- Authorization from Director of Environmental Services
- “Not-to-Exceed” Written Estimate
- Emergency Purchase Order
- Written approval for any additional work
CHECK LIST OF DOCUMENTS TO ACCOMPANY INVOICE FOR NON-EMERGENCY WORK
- Estimate from the Contractor
- Requisition Order
- Purchase Order
CHECK LIST FOR ALL INVOICES IN ADDITION TO THOSE FOR EMERGENCY/NON-EMERGENCY WORK
- Accurately references Purchase Order
- Lists Dates of Service
- Lists School Location
- Break down of hourly labor rate per Prevailing Wage/Bid Wage
- Certified Payroll
- Itemized list of materials, with discount or mark-up per the bid award, with indication of what was actually used AND a receipt and manufacturer information for any individual material item or part over $500 AND a a detailed proposal and PRIOR written approval for any materials normally supplied by the School District.
- Invoice does not contain charges for clean up costs, removal of debris at work site, additional surcharges, fuel charges, travel costs, tools of the trade
