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Portland Development Commission audit tidbits

• During the audit period, the PDC paid approximately $22 million to 22 businesses that didn鈥檛 have proper licensing.
• PDC officials served on the boards of nine nonprofit organizations that received $1.4 million from the PDC during the audit period.
• 42 PDC employees (16 percent of the entire staff) had a personal stake in an Oregon business.

A recent review of the Portland Development Commission by the city auditor鈥檚 office revealed multiple PDC processes that warrant more attention. Some of these processes involve transactions of hundreds of thousands of dollars of PDC money, which mostly comes from public and federal sources.

However, neither PDC officials nor those from the auditor鈥檚 office found the results distressing.

鈥淭hey reviewed 2.5 million transactions and found only nine that warrant attention,鈥� said Shawn Uhlman, public affairs manager for the PDC. 鈥淔rom an overall process standpoint, we feel gratified.鈥�

Uhlman said the PDC was already aware of and addressing some of the processes highlighted in the review. He added that the commission also has begun tackling new issues.

鈥淎ny risk that was identified to the agency by the audit is being recognized,鈥� Uhlman said. 鈥淲e鈥檙e very pleased about this review, because we are always looking for ways to improve ourselves.鈥�

The PDC鈥檚 compliance with the review process is a sharp contrast to its resistance to citywide review by the auditor鈥檚 office in 2006. Gary Blackmer, who was city auditor at the time, accused the PDC of delaying the review and seeking an inappropriate level of control over the process. The PDC was never reviewed, and it wasn鈥檛 until a couple of years later that voter-approved changes dictated that the PDC was obligated to participate in citywide reviews.

Director of Audit Services Drummond Kahn said the PDC has complied ever since, though, and that the latest review went 鈥減retty much as expected.鈥�

鈥淎s far as audit processes go, this was a very positive transaction,鈥� he said.

Kahn admitted that it was difficult to gauge the PDC processes because this was the first transaction testing audit ever performed in the city. The audit was completed by a new computer program that, once set up properly, could calculate millions of transactions in a short period of time.

In addition, Kahn said each review conducted by the auditor鈥檚 office is individually tailored to specific bureaus, so it鈥檚 hard to compare results. In this case, a transaction review was done because the PDC, unlike other bureaus, has its own accounting system.

鈥淚 couldn鈥檛 say it鈥檚 better or worse (than other bureaus), because we examine different things; it鈥檚 like going to a doctor, then comparing a patient鈥檚 blood work to his life goals,鈥� Kahn said. 鈥淲e would need to do more reviews in the future in order to say whether or not eight or nine (processes that need attention) is a big number or not.鈥�

However, Kahn added that the results of the review should be taken seriously.

鈥淭he problems we found are significant 鈥� those shouldn鈥檛 be ignored 鈥� but they鈥檝e cooperated fully, so the process has gone well,鈥� he said.

According to the review, the PDC paid about $22 million to 22 entities that didn鈥檛 have proper business licensing during the audit period, from July 2008 to September 2010. Anyone doing business in Portland is required to register for a license through the City Revenue Bureau. Additionally, many businesses, such as construction contractors, need to register with the state to obtain any licenses, permits or certifications specific to their industry.

The review also found a number of 鈥渜uestionable relationships鈥� and determined whether they were addressed by PDC management. For instance, PDC officials were serving on the boards of nine nonprofit organizations that received $1.4 million from PDC over the audit period. And 42 PDC employees (16 percent of the entire staff) had a personal stake in an Oregon business.

Other problems included incomplete payment sequences, insecure information systems and inappropriate employment incentive offers.

The auditor鈥檚 office will not enforce any penalties against the PDC, because its purpose is to review how well city bureaus function and then report its findings to city officials.

Both Kahn and Uhlman emphasized that the PDC has begun addressing five of the nine questionable processes by improving aspects such as its wage recording system and its registration verification database.

鈥淲e鈥檙e doing whatever it takes to address the issues immediately,鈥� Uhlman said.

The auditor鈥檚 office will check on the PDC鈥檚 progress in one year, and then report to city officials again.