View Comptroller letter to Klein

View Klein letter to Comptroller

New York City Comptroller William C. Thompson, Jr. sharply criticized Schools Chancellor Joel Klein for an “appalling” failure to both track contract expenditures and understand basic contracting procedures.

Thompson fired off the letter after Klein issued an erroneous missive defending the Department of Education’s out-of-control contracting costs after Thompson’s exposed how a fifth of DOE contract costs have swollen by 25 percent or more.

“Your reply attempted to defend DOE from our findings that 20 percent of DOE’s contracts that ended in Fiscal Years 2007 and 2008 exceeded their contract amounts by 25 percent, or more,” Thompson wrote. “That amount that DOE overspent on those contracts was $726.7 million, a number so high that a modest 10 percent savings could preserve 720 teaching positions.”

In a detailed response – which is available at www.comptroller.nyc.gov – Thompson charged that Klein failed to understand the difference between renewal contracts and contract extensions – which are treated and tracked differently by the City.

“In an effort to obscure DOE’s inability to manage its expenditures, your reply focused on renewal contracts and commingled renewal and original contract amounts without regard for how contract expenditures are properly tracked and managed by the City,” Thompson said.

“If DOE properly monitored its contracts, it would have been aware that its spending was far exceeding its own estimates,” he added, charging Klein’s administration with an “appalling lack of consistency…at such a level that it calls into question DOE’s oversight of its entire payment process.”

Thompson’s new letter follows his revelation on April 1 that the Department has routinely let hundreds of contract costs balloon well past their expected costs – including one that jumped by 6,700 percent. Thompson found that:

• One out of every five – or 20 percent – of the Department’s contracts that ended in the last two fiscal years inevitably cost well over the estimated amount by 25 percent or more.

• That rate already continues to climb. So far, in the current fiscal year, 27% of the Department’s requirement contracts have swollen costs topping 125% - and there’s still three months left until the fiscal year ends.

• One contract, with the Xerox Corporation, was supposed to cost at most $1 million – but the Department spent close to $68 million – a 6,759 percent jump in costs. Another, with Ideal Restaurant Supply, jumped from $15,000 to more than $852,000 – a 5,530 percent jump.

• During those two fiscal years combined, the Department issued 372 requirement contracts, originally estimated to cost $325,236,416 but which inevitably exceeded those estimates by 25% or more. The final tab wound up at more than $1 billion.

• Additionally, many recipients of the contracts - 127 of them – got the lucrative work without any competition because the Department didn’t put the work out to bid. Those 127 contracts were supposed to cost $195 million at most. But the Department spent $525 million on them.

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