City Controller Announces Audit of Special Exemption Contracts

FOR IMMEDIATE RELEASE: April 29, 2024

PHILADELPHIA - City Controller Christy Brady today announced her office will conduct an audit of special exemption contracts for city departments that gave contracts to vendors without going through the public bidding process and allowed expenditures to carry over beyond the contracted year.

The audit is being conducted after concerns were raised by City Council President Kenyatta Johnson during a recent budget hearing and after the release of a preliminary report by the Inspector General's Office involving the Office of Homeless Services.

"We are conducting a deeper dive into how the city issues contracts after concerns recently raised by city leaders along with prior audit findings involving procurement practices," said Brady. "We want to ensure that taxpayer-funded contracts are being awarded properly and fairly. Most importantly, we want to make sure essential services are being delivered to all residents and businesses."

Certain city departments are exempt from the public bidding process if they need to procure goods or services for immediate needs, as stipulated in the city charter. It includes the Department of Public Health, Department of Human Services, Office of Homeless Services and the Department of Behavioral Health and Intellectual Disabilities. However, this practice can potentially create issues and concerns, because it circumvents the scrutiny and oversight of the standard RFP process, resulting in unaccounted for expenditures and budget shortfalls.

In addition, it was already discovered that some city departments without the exemption were using these departments to issue contracts and avoid the public bidding process. This practice can create situations where an exempt department has no oversight of the contract or work being performed but assumes the full responsibility of maintaining the contract.

"While the city charter recognizes the exemption for specific departments, it presents the possibility that the city could be paying too much for products and services, directing contracts to specific individuals or organizations that may not be qualified to perform the work, and putting minority businesses at a competitive disadvantage," said Brady. "Furthermore, it creates an environment absent from accountability and liability."

The Controller's Office will review several key areas of contracting, including but not limited to:

• Determining whether departments encumbered amounts substantially lower than the contract amount compared to what was actually spent,
• Performing services that occurred under one contract but paying for them using another contract with the same vendor,
• Exempt departments that have been contracting for similar services with the same vendor in the same period, and
• Reviewing the number of instances that departments without the exemption have been using exempt departments to avoid the city's contracting process.

The City Controller anticipates the audit work will take several months depending on the volume of records that need to be reviewed and the potential findings.

Visit https://controller.phila.gov/ to view audits, investigations and policy reviews issued by the City Controller's Office.

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