City contract ends, but scandal saga continues

Mayor Bloomberg, citing findings of massive fraud, asks the contractor that built the city’s high-tech timekeeping system to return the $600 million taxpayers spent on it.

By Jeremy Smerd
Buck Ennis
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“Certainly nobody paid as much attention to (CityTime) as they should have—from me on down,” Mayor Michael Bloomberg told reporters this week.

Published: June 29, 2011 - 3:24 pm

CityTime has finally clocked out.

After more than 12 years and $628 million, the scandal-plagued effort to build a timekeeping system to track city employees will end Thursday, closing a sorry chapter for the Bloomberg administration.

At the same time, Mayor Michael Bloomberg opened a new plot line Wednesday, sending a letter requesting $600 million back from the contractor. He cited a finding from federal prosecutors that the project was permeated by fraud. The mayor noted that the timekeeping system is functioning, and did not say what actions the city would take if money is not returned.

With the June 30 expiration of the city’s agreement with the primary contractor on the project, a transition period will begin during which the system will be handed over to city workers to maintain.

Under an agreement worked out between Mr. Bloomberg and city Comptroller John Liu, the project’s lead contractor, Virginia-based Science Applications International Corp., will begin to hand maintenance of CityTime to city workers starting next month.

The agreement also calls for the city to evaluate the system’s effectiveness by the end of the year and to issue by January 2012 a formal request for information from other companies that may be able to demonstrate a better timekeeping alternative. But there is little chance of the system being scrapped after such a long and expensive investment.

Mr. Liu said the transition agreement would yield $20 million in annual savings but did not explain how the savings would be achieved. The details were part of a resolution voted on by the board of directors of the city’s Financial Information Services Agency, which oversees the project. The directors are appointed by the mayor and the comptroller.

Approximately 71 consultants will be eliminated and 83 will be retained to help with system maintenance. The consultants will eventually be replaced at a rate of 20 employees per year with city workers.

More than 67 agencies and 163,000 city workers—about half the municipal workforce—now use the system, which keeps tabs on the hours they work and the rates they are paid under their union contracts. Neither Department of Education employees nor elected officials and their staff use CityTime, which replaced a labor-intensive, outdated pen-and-ledger system.

But CityTime is hardly a shining example of the technology mayor’s stewardship. Mr. Bloomberg admitted as much this week when he took partial responsibility for the alleged fraud and mismanagement that tarred the long-delayed, over-budget project.

“Certainly nobody paid as much attention to it as they should have—from me on down,” he told reporters.

Mr. Liu said the problem has been the city’s reliance on outside contractors.

“The rapid completion of the project over [the last] nine months does not make up for fraud of epic proportions that has taken place over the past decade,” he said in a statement. “As we move forward, it is my hope that the city will be able to recoup every dollar stolen from taxpayers, and that the administration will continue to cut down on the use of outside consultants.”

Science Applications is still owed up to $32 million on the project but the city has suspended all payments until the federal fraud allegations are resolved. The company has not been accused of wrongdoing, but its lead manager, Gerard Denault, has been charged with receiving about $9 million in kickbacks from a subcontractor he hired.

On Friday, the Department of Investigation said it had received $2.5 million from Science Applications. The money was returned to city coffers and is immediately available for the city’s use, a department spokeswoman said. The company promised to return the money, informing the city that Mr. Denault had kept inaccurate timekeeping records, making it impossible for the company to accurately bill for his work.

Eight other defendants have been charged in a widening investigation of fraud that federal prosecutors said riddled the project.

Bloomberg: My Bad About That Whole $740 Million CityTime Mess
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Last month Mayor Bloomberg said he thought his administration had done "a pretty good job," handling the criminal cash cow that is the city's automated payroll system CityTime. But that was before the U.S. Attorneys office brought forth another indictment in the case that called the program "one of the largest and most brazen frauds ever committed against the City of New York" which "served as a vehicle for an unprecedented fraud." So, yesterday at an unrelated presser Bloomberg at least admitted, “We should have watched it more carefully and hopefully we learn and don’t make the same mistake again."

“Certainly nobody paid as much attention to it as they should have, from me on down, and we’re going to find out who did what,” Bloomberg told reporters. Despite the fact there is already some evidence that officials had been concerned about the program—whose budget ballooned from $60 million to more than $722 million—for years, it is nice to see Bloomberg at least finally admit there was a problem on the part of his team.

Which isn't to say hizzoner didn't take time to point out, again, that despite all of its financial woes at least the CityTime system is in use and now finally appears to be working. "The real thing, the important thing is, looking forward, we now have a system that from all reports is working very well," he said.

And further, he insists the money is gone, but not lost: "I don't know when all is said and done how much fraud there will have been in terms of how much money we really lost," he said. "Because a lot of the monies you will get back. People who stole it didn't spend it, and we'll recover a lot of that. It'll be a long time."

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