Auditor General DePasquale Says Current Stalemate Between ICA, Pittsburgh Unacceptable; Parties Must Work Toward Improving City
Auditor General DePasquale Says Current Stalemate Between ICA, Pittsburgh Unacceptable; Parties Must Work Toward Improving City
Says ongoing disputes rooted in flawed ICA legislation
PITTSBURGH (Nov. 10, 2015) – Auditor General Eugene DePasquale today urged leaders of the Pittsburgh Intergovernmental Cooperation Authority (ICA) and the City of Pittsburgh to work with the General Assembly to dissolve the ICA in a way that keeps the city’s financial recovery on track.
“In the past decade, the ICA’s financial oversight has made a positive difference in Pittsburgh’s financial recovery by helping the city grow revenues, control expenditures, and turn projected deficits into surpluses in eight of the past 10 years,” DePasquale said. “However, as the city’s financial recovery continues, cracks and flaws in the legislation giving the ICA authority to distribute gaming money to the city are now beginning to show.
“Despite the shortcomings in the legislation from Harrisburg, leaders of the city and the ICA have a responsibility to the residents of Pittsburgh to find a way to work together. Full cooperation is needed to keep the financial recovery on track and ensure that residents, businesses, and visitors receive the municipal services and public safety protection they should expect.”
DePasquale issued a report today following a 6-week review of ICA operations covering 2013, 2014, and 2015. The report provides details about the ICA’s operations and makes 12 recommendations for action by both the ICA and the city moving forward.
“It is clear from our review that current conflicts between the city and the ICA are rooted in the ambiguity and flaws of the authorizing legislation,” DePasquale said, noting that the legislation:
• does not define what constitutes a quorum of the five-member board,
• allows ambiguity in how the ICA awards contracts,
• does not clearly define a balanced budget,
• fails to provide a formal process for how to determine the use of the gaming revenue for the city’s “best interest,” and
• does not specify when the gaming money is to be distributed to the city.
“City leaders should discuss with the General Assembly and the governor, their commitment regarding the use of future gaming revenues in Pittsburgh,” he said. “I recommend an agreement where the city’s share of gaming revenue is used to reduce the city’s sizable municipal pension liability. In exchange, the commonwealth can dissolve the ICA. My department will audit the city’s use of gaming funds in the future to ensure the parameters of the agreement are kept.
“If we can fix the city’s pension issues then Pittsburgh — and the entire southwest region — will benefit tremendously,” DePasquale said.
The auditor general makes the following 12 recommendations in the report:
The ICA should:
• Improve transparency of organization processes and recordkeeping by hiring an administrative assistant to support the executive director, and immediately begin to retain all agency documents in safe storage, including but not limited to invoices, cancelled checks, contracts, etc., in accordance with the Commonwealth record retention schedule and any other statutory requirements.
• Provide formal written correspondence to the city on all board actions requiring an action to be taken by the city, and obtain documented acknowledgement from the city of the ICA’s communications.
• Ensure that any and all disagreements/concerns or conditions for budget approval by the ICA board are formally and clearly communicated to the city in a timely matter.
• Immediately begin to follow the requirements of the Sunshine Act to promote public transparency and ensure that all board decisions are enacted during public meetings.
• Immediately begin to follow the Commonwealth’s Procurement Code as a best practice and to match other Commonwealth agency practices.
• Move toward a collaborative working relationship with the city and the Mayor to help facilitate the timely release of gaming funds.
• Work with the city to negotiate with the General Assembly and the governor to develop an appropriate timeline for the elimination of the ICA in a way that will ensure gaming revenue is used to reduce Pittsburgh’s sizable pension liability and set the path for continued financial progress.
The City of Pittsburgh should:
• Establish an effective communication protocol between the mayor’s office and the ICA for the exchange of information regarding any and all outstanding issues relating to ICA board conditions, gaming monies, etc., to ensure that they are communicated clearly and in a timely manner.
• Continue, and strengthen, its commitment to the annual funding of both the Pension Fund and Other Post-Employment Benefits (OPEB) Trust Fund at levels necessary to reduce the underfunding of both as soon as practical.
• Continue its aggressive implementation plan of the comprehensive financial management system: in particular, the final implementation of the payroll system by January 1, 2016.
• Continue its effort to reduce the percentage of outstanding debt service to a level of not greater than 12 percent of annual revenue, and refrain from using additional long-term debt to address resolving short-term problems.
• Avoid issuing any additional debt that would raise the percentage of debt service to a level that would violate any city ordinance.
DePasquale also noted that even after the ICA is eventually dissolved, Pittsburgh will likely remain under the oversight of advisors as part of the Municipalities Financial Recover Act, better known as Act 47. Pittsburgh is one of 19 cities across the state currently in “Distressed” status under Act 47.
“There should be a plan to review whether Act 47 is the best solution to help our struggling cities and make it a better tool to help cities out of financial distress,” DePasquale said.
A copy of the report on the Pittsburgh Intergovernmental Cooperation Authority is available online here.
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