FORNEY, Texas — The Forney City Council was presented the results of a months-long forensic financial audit conducted by the Weaver and Tidwell (Weaver) firm at Tuesday night's regularly-scheduled meeting.
FORNEY, Texas — The Forney City Council was presented the results of a months-long forensic financial audit conducted by the Weaver and Tidwell (Weaver) firm at Tuesday night's regularly-scheduled meeting.
The audit was the city's first forensic audit of its finances, which provided a deeper dive into the procurement process, and shed light on a number of city bids and contracts which skirted state bidding and procurement laws under the direction of former City Manager Anthony "Tony" Carson and his former Assistant City Manager Neil Cardwell.
The audit also revealed a number of discrepancies with contracts, some without purchase orders, some of which were not approved by city council, five of which were not publicly advertised for bid, and instances where Carson and Cardwell paid for site visits by vendors in advance of failed formal bid processes and divulged details of the bid scope and city's budget — effectively not providing the "best value" and stewardship of taxpayer funds. Not only this, but Cardwell had erased all the data and records from his city-issued laptop prior to returning it to the city in his departure in late 2021.
Newly elected Council orders forensic audit of city's finances
First approved in May of 2021, the newly elected council voted 4-3 to authorize staff to seek Request For Qualification (RFQs) for a forensic audit firm to take a deep dive into the city's finances.
"I’d like to be clear as to the purpose of seeking Requests for Qualification (or “RFQs”) from accounting firms for the purpose of selecting a forensic auditor," Forney Mayor Amanda Lewis said during the May 18 council meeting. "A forensic audit unlike the yearly audit report is a more in-depth review of our financials. It is a highly-specialized accounting practice to investigate irregularities, certain practices, financial process flow, and general transactions that may otherwise go unnoticed. In other words, this type of audit investigates the flow of funds for the purpose of evaluating the pathways taken and determine if all our transactions are ‘above board."
Lewis had campaigned on the need for a forensic audit in her bid to defeat former Forney Mayor Mary Penn.
"The immediate benefit will be increased transparency and improved operational efficiencies. If required, action plans are then implemented to prevent and deter any questionable future transactions. These steps will enhance the finance operations and therefore ensure we have viable and long-term security among our accounting practices. I feel it is in the best interest of all governmental agencies - at all levels - to have this type of audit to review our checks and balances and verify us as a transparent entity," Lewis told the council prior to the vote.
The motion carried 4-3; with Mayor Lewis, and council members Sarah Salgado, James Traylor and Jason Roberson voting in favor of the forensic audit and council members Robbie Powers, Shaun Myers and Derald Cooper voting against it.
Weaver was ultimately awarded the bid and began their investigation by interviewing city employees and combing through the city's financial records.
Their first road block was to discover that former Assistant City Manager Neil Cardwell, who was responsible for most if not all city purchases, had erased all the data on his city-issued computer following his departure in September 2021. Cardwell is now serving as the city manager in Belgrade, Montana, as inForney.com previously reported.
Former City Manager and his assistant repeatedly skirted the law
The forensic audit made one thing clear — and confirmed inForney.com's previous reporting on Carson and Cardwell — neither men were afraid to skirt the law to get deals done.
"The most alarming part of the audit to me are three substantial bids that the City awarded under the leadership of former City Manager Tony Carson and his assistant Neil Cardwell while brazenly flouting RFP/RFQ requirements," Forney Councilwoman Sarah Salgado said in a Facebook post following the release of the audit.
"The City of Forney is required by it’s own purchasing manual, and by Texas Local Government Code, to send notice for competitive sealed bids and proposals to be published in the newspaper for it’s municipality at least once a week for two consecutive weeks. This ensures that the bidding process is fair and transparent. There were (5) large contracts awarded by the City of Forney where they failed to publish notice of the RFQ or RFP in the Forney Messenger newspaper-which is a violation of Texas Local Government Code. Those contracts totaled roughly $1.6 million," Salgado wrote.
"In all (5) instances, the process to procure bids was handled by either Tony Carson or Neil Cardwell. These (5) purchases were also never published on CivCast-a third party platform used to help municipalities gather bids. This is inconsistent with other contracts awarded, which were published in both the Forney Messenger, and on CivCast," Salgado says.
"The pattern of these bids is unmistakable: each time, the City engaged in 'detailed discussions' with a preferred vendor or contractor BEFORE putting the project out for RFP/RFQ, thus making the RFP/RFQ process merely a technicality. As the audit report explains, 'in these instances, the City appeared to commit themselves to the vendor or contractor before giving equal consideration to other vendors who might offer a better value,'" Salgado says.
Texas Government Code states that respondents to a RFP or RFQ are to be treated fairly and equally with respect to any opportunity for discussion and revision of proposals.
"We identified three (3) instances in which the City had in-depth discussions with a potential vendor or contractor prior to the RFP or RFQ being issued. In these instances, the procurement process was being led by either the former City Manager, Mr. Carson, or the former Deputy City Manager, Mr. Cardwell," according to the audit report obtained by inForney.com.
Carson was hired as an operations manager for the City of Mesquite, Texas, following his departure from Forney. His pay there, as the Operations Manager in the Public Works Department, consists of a base salary of $130,000 and a $6,000 annual vehicle allowance. Although his contract was terminated by city council vote in June 2021, Carson noted his reason for leaving the City of Forney as, "Looking for a challenging opportunity in a desirable location."
The five bids identified as not being posted, as required by law, were the JAC Management Group contract, the Mosca Designs Festival of Lights contract, the Gallagher Construction contract to build storage buildings for the two trams purchased for the Festival of Lights, the GTI Garder Telecommunications fiber optics contract, and the ATI Systems ground warning sirens contract.
Sources tell inForney.com Cardwell sought and was instructed to build two separate buildings to store the Festival of Lights trams, without fire suppression systems, in an attempt to separately bid and keep costs below legal thresholds to keep them from public scrutiny and the formal bid process because the city had already come under fire for the initial purchases of the trams.
According to the audit, Former Assistant Director of Finance Charity Wilson served as a second member, only to Cardwell, on a two-person Staff Evaluation Panel on a number of the identified bid processes. Wilson left the City of Forney in December 2021 to serve as the Executive Director of Financial Services under Cardwell's administration. Wilson also served as the secondary agent on the CRF Funds program.
Wilson has subsequently left the city of Forney to take a job with Cardwell in Belgrade, Montana.
Ironically enough, Carson's foot-in-the-door in governmental work was as a purchasing agent in Trumbull County, Ohio. There, Carson made headlines and came under fire for his lobbying-for and ultimate selection of a company to take over the food contract at the county jail without a formal bid process.
Spellman Amphitheater contract could cost taxpayers nearly $1 million under perfect circumstances, if not more
As inForney.com previously reported, the Forney City council awarded Ohio based JAC Management, LLC a five year contract to manage the Spellman Amphitheater and book larger talents in August of 2020.
"The procurement process utilized by the City to contract services for the management and operation of the Spellman Amphitheater did not allow the City to obtain the best value for its taxpayer dollars, and did not appear to adhere to best practices. The City approached JAC Management Group prior to the preparation or issuance of the RFQ, including detailed discussions, as well as an out of state site visit by JAC Management Group," the audit report says.
"In addition, the City failed to advertise the RFQ in the Forney Messenger or on Civcast, limiting the potential pool of respondents, which resulted in JAC Management Group being the only respondent. Without having an alternate or backup firm during the negotiation of the contract, and with JAC Management Group having knowledge of the City’s budgeted expenditures for entertainment management, the City had little leverage to ensure the City received the best value for its taxpayer dollars," auditors said.
The proposed terms submitted by JAC Management Group in November 2019 and contract approved by City Council in December 2019 included an annual management fee of $190,000, equal to 95% of the budgeted expenditures. However, the revenue that the City would receive under the terms of the contract (i.e., $1.00 per ticket sold) would equate to $25,000 during the first year, assuming five (5) events (the minimum requirement in the contract) and that all 5,000 tickets were sold for each event.
"In other words, even assuming each event sold out, the City would incur a deficit of approximately $165,000 during the first year, and an estimated $795,000 over the length of the contract," the auditors said.
So far JAC Management has not been able to secure any acts that have reached anywhere near a sell out crowd according to city officials. JAC has also failed to sell any sponsorships at the Spellman Amphitheater.
The council members that voted unanimously to approve the seemingly one-sided contract were David Johnson, Derald Cooper, Kevin Moon, Mary Penn, Mike Thomas, Robbie Powers and Shaun Myers.
"This makes no sense financially. Even if every concert were to sell out, Forney’s best-case scenario would be to LOSE $795,000 over the life of the contract. Yet the City Council approved this contract unanimously in December 2019," Salgado said following the release of the audit.
CARES Act funds and 22 new fleet vehicles purchased by the City of Forney
When inForney.com first broke the story about former City Manager Tony Carson spending CARES Funds on the purchase of 22 vehicles, he and several members of the council at the time doubled down on his decision. The auditor's investigation, however, gives a different narrative than those shared by Carson and his closest allies on the council.
Shortly after being notified by the Texas Division of Emergency Management (TDEM) that a CRF Spending Plan was to be submitted by November 13, 2020 and documentation for reimbursement of expenses submitted by December 15, 2020, the City pursued vehicle purchases as a means to utilize the entire $1,395,405 allocation amount within the required time frame.
Carson and several council members, at the time, said they were rushed to make purchases under the CRF guidelines as they were only given two months notice. However, the audit revealed, TDEM sent notification of the terms and conditions of the grant program to Carson in May 2022 — which Carson signed for and executed the city's participation in the program.
"While it is our understanding that the City’s justification for the vehicle purchases was to allow for improved social distancing and avoid having to share vehicles, we have not identified any documentation showing that the City analyzed lease versus purchase alternatives other than the statement from Police Chief Lunt that the City does not utilize lease programs due to their unpredictability and inability to establish capital. It is unknown whether or not the vehicles would have been approved by TDEM had they been included in the Revised CRF Spending Plan," auditors said.
"The City was not reimbursed through the CRF grant for the purchase of vehicles and equipment included in the initial CRF Spending Plan, as these items were ultimately excluded from the officially submitted Revised CRF Spending Plan. However, the funds received from the CRF grant for eligible payroll expenses were placed in the City’s general fund to effectively offset the purchase of vehicles and equipment included in the initial CRF Spending Plan," the audit says.
"Although a broad range of uses is allowed, revenue replacement is not a permissible use of Fund payments," states U.S. Treasury Department guidance on the use of CRF funds. Auditors did not address this discrepancy.
Auditors make recommendations to improve city finances
Weaver auditors concluded the audit by making a range of recommendations to the city including the hiring of a purchasing agent, implementing a centralized purchasing process, utilizing the competitive bidding process on all contracts and purchases and a number of other accounting policies and procedures.
The auditors also suggested a policy for securing electronic devices and data due to Cardwell's manner of departure.
"During our review, we learned that Mr. Cardwell’s computer was not immediately returned upon his resignation in September 2021 and Mr. Cardwell ultimately mailed his City issued laptop back to the City after erasing the data from the computer. We recommend that the City consider implementing a formal policy and procedure for the return of City issued electronic devices for departing employees, as well as to safeguard the City’s data from being deleted by departing employees prior to the return of the device," the auditors recommended.
"The cost of the forensic audit to date is $90,150.70-this is taxpayer money that has been prudently spent," stated Salgado. "The findings of the forensic audit are ensuring that scenarios that have been uncovered-such as the handling of over $1.6 million dollars in contracts awarded outside of local and state law, do not happen again. This is the essence of transparency. Making public to you, our residents, how and when your tax dollars have been spent."
According to the audit, the City of Forney has since hired a person to fill the Purchasing Agent position, who started April 18, 2022.