To the Campus Community:
I would like to express my appreciation to many of you who have taken the time to share your concerns about recent reports involving the relationship between Cal State Northridge officials and employees of Law/Crandall, Inc.
In response to many of your questions and concerns about this particular matter, I have attached to this issue of From the President's Desk my letter to CSU Chancellor Barry Munitz that conveys the current facts of this case and the actions that the University has taken in response.
Please be assured that I share your concern about the importance of maintaining the public trust at the University and, particularly, demonstrating its commitment to the proper stewardship of public funds. I am grateful for your efforts to ensure the continued well-being of the University and, particularly, your concern for ensuring that the University and its employees meet State law and the high standards of conduct and propriety expected by the public we serve.
Blenda J. Wilson President June 2, 1995
BELOW IS THE TEXT OF THE LETTER TO THE CHANCELLOR:
June 1, 1995
Chancellor Barry Munitz Office of the Chancellor The California State University 400 Golden Shore Long Beach, CA 90802-4275
Dear Barry:
On Sunday, May 28, 1995, the Los Angeles Times published a story about the relationship between two Cal State Northridge officials and employees of Law/Crandall, Inc. Law/Crandall, Inc. is one of the many contractors who were engaged immediately following the Northridge earthquake; their role included specialized engineering and structural assessments, documentation, and repairs. The story casts doubt about the University's financial controls and raises questions about possible conflict of interest involving our staff.
Soon after the earthquake, with the assistance of your office, the University established several coordinated check and balance processes to assure full public accountability of the earthquake recovery process:
- Due to the significant volume of financial transactions, the University contracted with the State Controller's Office (SCO) which has extensive experience in disaster recovery situations and with the reimbursement policies and practices of the Federal Emergency Management Agency (FEMA). The SCO has conducted pre-payment audits of all contractor claims to assure that they were fully documented and consistent with our interpretation of FEMA reimbursement policies and guidelines.
- The University hired a contract management firm, CMTS and now DMJM, who have responsibilities to oversee the performance of contractors, including review of invoices, materials received and percentage of work completed; and participate with the facilities planning staff to assure that work performed was within the proper scope and appropriately billed.
- In March, because of the extraordinary workload and complexity of earthquake-related demands on our internal accounting systems, I requested an independent audit by the State Controller's Office of our State Earthquake Trust Account to insure that appropriate internal checks and balances are in place before payments to vendors are made. That audit is being conducted currently.
These coordinated procedures, utilizing the best professional skills that are available in the state, provide an unusual level of checks and balances. University officials, acting independently, cannot negotiate or obligate the University to a contract or issue a payment that did not meet rigorous standards of financial accountability.
Disallowances, change orders and questions about deliverables or completed work are a normal part of the contracting process. In this case the University's own control processes identified questionable billing practices, disallowed expenses for meals and/or levied fines related to the Law/Crandall contract. We estimate that the pre-payment audits by the State Controller's Office alone have saved the University and the state approximately $8 million to date by disallowing inappropriate charges by contracting firms that have worked on the earthquake recovery project.
Maintaining public confidence in the University's ability to manage public funds is my highest priority. I have taken three actions to reinforce that commitment:
First, it is my judgment that permitting Law/Crandall employees to assist them with repairs at their home was a serious error in judgment by Bill and Jane Chatham, which created an appearance of impropriety that is inconsistent with the performance expectations I hold for all senior staff. I have discussed this with them personally and placed a formal warning in their personnel files that their actions must represent rigorous adherence to all policies of the University, including the Conflict of Interest policy.
Second, because I believe it is important to the University and to our employees that the allegation of impropriety be examined objectively and expertly, I have written the Fair Political Practices Commission requesting that they review this specific circumstance to determine if an actual conflict of interest occurred. I have also asked the Commission to review information regarding entertainment claims by a Law/Crandall employee in which various officials of the campus were listed.
I want to thank you for honoring my request for the personal involvement of the Senior Director of Physical Planning and Development and the PP & D unit of the Chancellor's Office during this review or until a new Vice President for Administrative Services takes office at Cal State Northridge. This assignment complements the agreement we had reached six months ago to have PP&D manage the reconstruction of the major facilities that remain damaged from the earthquake. In this role Jon will advise and assist me, and existing Northridge staff will perform their duties related to the reconstruction work at Northridge at his general management direction. I will also ask him to review, as he sees appropriate, information related to entertainment claims by a Law/Crandall employee in which the head of the Seismic Review board which advises CSU is named.
Finally, I have informed Law/Crandall that, except for uncompleted or undelivered items, the University will invite potential contractors to submit proposals for continuing engineering and reconstruction work.
I wish to assure you and the Trustees that the campus has demonstrated its commitment to the proper stewardship of public funds throughout this process. I believe that our existing controls have prevented the payment of any inappropriate cost claims by contractors. With your continuing assistance, I hope to continue to restore the Northridge campus to a fully productive learning environment. And, as always, I value greatly your advice and support.
Sincerely,
Blenda J. Wilson
President