State panel withholds payment on $1.4M in gaming revenue to Pittsburgh

Call it the $7 million question.

The Intergovernmental Cooperation Authority, one of two state-appointed groups overseeing Pittsburgh’s finances, wants to know why the city hasn’t implemented a joint financial management system with Allegheny County despite receiving more than $7 million from the ICA in recent years.

Members voted Tuesday to withhold $1.4 million in gaming revenue from the city until it gets an answer.

The authority also hired Gleason & Associates to conduct a forensic audit of the current payroll system, operated by a private vendor known as Ceridian, to determine whether it is paying some employees more than it should. Pittsburgh Controller Michael Lamb and county Controller Chelsa Wagner say they have identified some problems as they have developed the joint financial system, but they don’t know how extensive they are and applauded the call for an audit.

Mr. Lamb and Ms. Wagner say the joint management system has been nearly complete for about a year, but they held off implementing it at the request of Mayor Bill Peduto last year after he won the Democratic primary and faced limited opposition in the November election.

Since he took office in January, Mr. Peduto’s administration has expressed concerns about what it considers cost overruns on the project and is in the process of naming another consultant to implement the system.

Mayoral spokesman Tim McNulty sharply disagreed that the system is ready to be implemented, saying that notion is “not based in reality.” He declined to identify the new payroll consultant until the firm is submitted to city council for approval, but said the administration is concerned that the project is costing five times the original estimate, something the consultant will review.

“The administration is ready to work with the ICA on implementing a payroll system that works,” he said, but the current system in nowhere near ready yet.

Nicholas Varischetti, ICA chairman, said withholding the gaming money is one way the authority can try to force the city to move on the financial management system, which could save the city $1 million to $1.5 million annually. He and the controllers noted it is particularly important for the city to save wherever it can as it develops a new financial recovery plan under Act 47, which could require additional revenue including a tax increase.

Ms. Wagner compared the city to being in the position of a family that has a new, energy-efficient house available but is remaining in a drafty apartment. She said the city and county have been working on a joint system since she became a state legislator in 2006.

“As long as there is commitment from the administration to implement, this system is ready to go,” Ms. Wagner said. “But we have this paralysis of analysis. If there’s inaction for much longer, we won’t be able to begin before the end of the year and things become more complicated when you try to do this midyear. What’s frustrating is everything has been done.”

The forensic audit will determine how much is being paid out inappropriately through Ceridian.

“I think we can all agree any [inappropriate payment] is unacceptable,” Mr. Varischetti said.

Ed Blazina: or 412-263-1470. First Published June 17, 2014 2:20 PM

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