Inspector General’s 2016 Statement to Chicago City Council Budget Committee

Opening Statement of the Inspector General, 2017 Budget Hearings, October 26, 2016

Madam Chair and members of the City Council:

Thank you for the opportunity to be here today before the Committee on Budget & Government Operations. I look forward to answering your questions and discussing the Office of Inspector General’s (OIG) 2017 budget request.

This year’s OIG budget incorporates funding that accompanied significant changes made to OIG’s responsibilities in 2016, specifically in relation to police accountability and investigative oversight of the Council itself.

Legislation assigning investigative oversight of the City Council, including its members, staff, and vendors to OIG, took effect in March 2016. Since then, OIG has gathered and reviewed the files of the former Office of Legislative Inspector General (OLIG), with particular focus on those matters left unresolved. We also undertook assessments of complaints backlogged during the four month gap between the sunsetting of OLIG operations and the effective date of the transfer of responsibility to OIG. OIG has now integrated City Council complaint review and investigations into its regular investigative responsibilities. We are also developing a thorough understanding of the various activities conducted by aldermanic offices that will allow us to better assist aldermen in meeting their ethical and legal responsibilities.

The Council’s October 2016 enactment of the first stage of legislative reforms related to police accountability in Chicago will not take effect until November 11, 2016. Among other things, that legislation will result in the creation of a dedicated police and police accountability oversight function to be housed within OIG. While much attention has rightfully focused on the creation of the Civilian Office of Police Accountability (COPA), as it will be the independent investigative component of the broader accountability infrastructure, the audit-oriented dedicated police and police accountability oversight function also constitutes one of the key recommendations of the Mayor’s Police Accountability Task Force. This recommendation drew upon the insights and guidance of national experts in the field of civilian oversight of law enforcement, who have reached the broad consensus that a dedicated audit function is the best vehicle for continuous improvement of policing and police accountability.

Such insights are particularly relevant for OIG as we have in recent years built a growing expertise in public safety. OIG has published numerous audits, advisories, and reviews in this area including an audit of the accuracy of certain crime statistics, the efficacy of the Chicago Police Department’s (CPD) gun buyback program, a review of civilianization opportunities at CPD, and an advisory on use-of-force reporting. Additionally, the dissolution of hiring and employment related court-monitoring under Shakman litigation was predicated in part on federal court confidence in OIG to serve as a compliance monitor for the CPD Hiring Plan.

Since 2011, OIG’s Investigations Section has increasingly stepped in, to address shortcomings and voids in the faltering system of police misconduct investigations. Notable in this regard is OIG’s inquiry into the handling of the investigation of the 2014 fatal shooting of Laquan McDonald. In addition, also in 2016, OIG closed its long running investigation into CPD’s 2011 reinvestigation of the 2004 homicide of David Koschman.

The creation of a special subject matter unit dedicated to increasing OIG’s work in this area, marks public safety oversight as an executive and legislative priority, constituting an important milestone in the City’s history. Prior to the debate, discussion, and controversy that continues following the release of the video of Laquan McDonald’s shooting, the City did not provide the resources or the full cooperation needed for effective oversight of CPD—a department that delivers one of the most important municipal services and that constitutes approximately 40 percent of the City’s workforce and general operating budget. However, the new police accountability legislation is the beginning, not the end, of the long path to establishing public legitimacy and confidence in CPD. The work of the future police and police accountability function, no matter how substantive and rigorous, cannot be fully effective if it is not responsive to the evolving needs of the community. The police oversight system must be critically assessed by a formal community oversight board, constituted of true representatives of and from the communities we all serve. Therefore, we begin our work anticipating the creation of such a body in the next stage of police accountability legislation.

Looking Ahead

OIG plans to begin building out the Public Safety Oversight function this fall. We have already begun working to identify an organization to lead the national search for the City’s first Public Safety Deputy IG. We will also be collecting applications for other positions connected to this function, so that the work can get started as quickly as possible.

In addition, OIG as a whole will be building on the results of an Independent Peer Review conducted by the Association of Inspectors General and completed in February 2016. OIG submits to a peer review every three years that includes an on-site, in-depth examination of OIG’s work. The most recent review noted a number of areas of distinction at OIG including the exceptional professional qualifications of OIG’s staff and the training opportunities available to them—this finding is also reflected in the national reputation of the office and our staff, as a result of which we are often called on to serve as technical advisors, instructors, and presenters at professional conferences and training programs, and in recent years to take leading roles in municipal task force initiatives in the areas of procurement and police accountability and in a national data analytics working group. In addition to noting areas of distinction, the latest peer review suggested that OIG create dedicated positions for complaint intake and noted ways to improve our case management system for use in audits. OIG’s budget reflects operational changes to address these suggestions.

Finally, in early 2017, OIG will publish its 2017-2019 Strategic Plan. OIG’s plan establishes the vision and strategic direction for the office and will be used to align our day-to-day activities around shared values and goals. Building off of the City’s continued progress in enacting good government reforms, the strategic initiatives OIG hopes to pursue focus on collaboratively working with City departments to improve efficiency and reduce waste, fraud, and corruption through data-driven decision-making. By the same token, I look forward to working together with this Council towards these goals by maintaining and cultivating the growing dialogue between your offices and mine, which can take many forms—from cooperation in the fulfillment of OIG’s core function of uncovering misconduct, to helping us better understand your and your constituents’ experiences with City services, to working together to identify and implement governmental best practices as a more general matter.

Highlights From Previously Reported Activities[1]

  • OIG published 7 program audits and reviews that identified over $7 million in either missed revenue or potential savings for the City;
    • An audit found that the Chicago Department of Transportation’s (CDOT) pavement program was neither efficient nor cost-effective. OIG estimated that a reallocation of resources in the program could save the City $4.6 million per year. In response, CDOT committed to regularly conducting street condition surveys of arterial streets and using the data to better maintain streets.
    • An audit found that Chicago Fire Department (CFD) could save an estimated $1.2 million annually by civilianizing 34 positions and eliminating 1 position. The Department agreed with OIG’s assessment for all but two positions and committed to reviewing all assignments for further opportunities for civilianization within the Department.
    • An audit found that bills issued by the Department of Finance (DOF) for emergency medical transports were accurate, but OIG estimated DOF could save between $883,211 to $1.5 million annually by adopting certain compensation provisions. DOF stated it would take this into account during new contract negotiations. In addition, OIG explained that when a patient is evaluated and treated on scene without transport, the City does not bill the patient. However, if the patient is evaluated, treated, and transported to the hospital, the City bills the patient for all three services. DOF committed to analyzing treat-no-transport services and said it would, “plan to minimize the impact on low-income patients and patients [who are] declining treatment.”
  • OIG issued 3 audit follow-ups, and 13 advisories and notifications, which originated from audit or investigative inquiries and provided recommendations regarding the transparency, management risks, and efficiency of more than a dozen City programs.
    • An advisory identified the absence of a comprehensive risk management program in Chicago. Based on the limited data available, OIG estimated that in 2013 and 2014 the City paid over $457.8 million in claims including $203.1 million for workers’ compensation, and $146.3 million for police misconduct and other public safety claims. In response the City stated that it would establish a cross-departmental risk management working group. The City stated that the working group would include worker’s compensation claims in its analysis but declared it would not include police misconduct in the initial scope.
    • An advisory review determined that the numbers provided in the Independent Police Review Authority’s quarterly reporting from September 2007 to September 2014 did not match the number of actual use-of-force incidents. OIG suggested that that future reporting should describe incidents in a manner that aligns with CPD’s Use of Force Model, makes clear distinctions between incident types, and categorizes incidents based on the relevant contextual factors. In response, the City stated that CPD will begin releasing its own quarterly reports on use-of-force incidents and that use-of-force reporting by any responsible entities will be reported in line with OIG’s recommendations.
  • OIG completed more than 120 investigations of misconduct, many of which resulted in judgments and collections totaling over $3 million.
    • In 2016, there were federal trial convictions, sentencings, and forfeiture and restitution judgments against individuals involved in one of the largest and longest kickback fraud schemes in City history, including former CDOT Managing Deputy Commissioner John Bills who was sentenced to 10 years in federal prison for orchestrating the scheme—on which a jury found him guilty on all twenty counts charged, including federal corruption and filing false tax returns— and Martin O’Malley, Bills’s friend and bag man, who was sentenced to six-months in federal prison after cooperating with the prosecution and providing extensive testimony at trial. The sentencing of the third defendant, former Redflex Traffic Systems Inc. CEO/CFO Karen Finley is scheduled for November 15, 2016. The defendants are jointly liable to an order of restitution to the City for $2,032,959.50. In addition, Bills received a judgment of forfeiture of $680,107 and $224,399 in taxes due.
    • An OIG investigation, summarized in Quarter 1, found that six CPD members violated CPD rules and regulations in the course of their involvement in CPD’s 2011 reinvestigation of the 2004 homicide of David Koschman. OIG’s administrative investigation followed its appointment as the special investigative body to assist the Office of Special Prosecutor in its criminal investigation of Koschman’s homicide. OIG recommended that CPD seek to discharge two CPD detectives and one supervisor and that the Department impose discipline up to and including discharge against three additional supervisors. CPD recommended to the Police Board a one-year suspension on only one supervisor, who is seeking to vacate the charges based on an arbitrator’s decision. The three other supervisors retired from CPD after OIG issued its report. One of the detectives resigned in lieu of discharge and CPD imposed a one-year suspension on the other detective.
    • In January, the owner of Seven Amigos Used Cars Inc, Alexander Igolnikov, was sentenced to 12 months and a day in federal prison for illegally obtaining clean titles for approximately 180 salvaged and rebuilt cars which were eventually used as taxicabs on the streets of Chicago, in violation of City, State, and municipal law.
    • In June, OIG reported on the federal trial conviction of Elizabeth Perino, a former subcontractor for the City of Chicago, who was found guilty defrauding the City of Chicago MWBE program. Perino acted as a pass-through on a multi-million dollar runway repair project at O’Hare Airport. During the weeklong trial the prosecution presented the transcript of a federal wire tape in which Perino lamented improvements to prevent fraud in the City’s MWBE program, stating to her coconspirator, “how we used to be able to do it before, we can’t do that anymore.”
    • An OIG investigation established that a Sanitation Laborer for the Department of Streets and Sanitation (DSS) engaged in a counterfeiting scheme involving over $10,000 of fraudulent City of Chicago payroll checks. OIG’s investigation established that over a five-month period, the laborer provided counterfeit City checks to three accomplices. After cashing the checks, the accomplices split the proceeds with the Laborer. DSS terminated the Laborer and two of the Laborer’s accomplices were convicted in the circuit Court of Cook County
  • OIG conducted 565 reviews, monitoring actions, and audits of hiring activity including monitoring 185 hiring and testing sequences, auditing 281 hiring and assignment packets, and 67 testing administration packets. OIG also responded to 32 complaints about the City’s hiring practices.
    • In 2016, OIG’s Hiring Oversight section implemented procedures for conducting audits of Chicago Fire Department (CFD) specialized unit assignments. Through these new activities, OIG uncovered a long-standing unofficial practice of allowing audition periods before permanently assigning members to certain units. OIG collaborated with CFD to align its practices with existing policy. Subsequently, CFD published a General Order that strengthened the process for all temporary assignments and made its practice transparent.
    • Throughout 2016, OIG engaged several City Departments to understand their operational needs as they relate to service contracts. Through the review, OIG became aware of several obstacles that impeded full compliance with the Contractor Policy. These operational issues included outside obligations to grant funded projects and positions, varied contractor selection processes, and indistinguishable roles between independent contractors and common-law employees. Presently, OIG Hiring Oversight is comprehensively evaluating and preparing recommendations for changes to the policy

[1] Summary based on time period beginning 10/01/2015 and ending 09/30/2016.