How this election could be bad news for KPMG’s Riverside County contract
by Jeff Horseman
The biggest loser of this Riverside County election cycle could be an accounting and consulting company, KPMG.
Candidates running for two seats on the county Board of Supervisors aren’t happy with the $40 million-plus the firm has gotten to find efficiencies and savings for a county government struggling to make ends meet.
One candidate called on the board to cancel KPMG’s contract. Russ Bogh, who is running in the Fifth District, called the contract “a boondoggle” and “a waste of taxpayer money from the start.”
“Not only has it yet to produce any tangible savings for the county, but every part of this deal has been handled unilaterally in back rooms by the board – with zero checks and balances,” Bogh, who wants to succeed retiring Supervisor Marion Ashley, said in a news release.
Supervisor John Tavaglione, the firms’ biggest booster on the board, defended KPMG’s work.
“I’m not at all surprised that people uninvolved in the process, especially those who are campaigning for a position on the Board of Supervisors, might have that opinion,” said Tavaglione, who is not seeking re-election in the Second District.
“Remember, it is election time. Candidates are working to secure endorsements and very likely have made promises to labor unions and others on many issues.”
In a presentation to the board last summer, KPMG representatives said the transformational change that supervisors want will take time.
“It would be very easy for us frankly to cut and paste and say, ‘OK, well here’s the answer. Cut there. Cut there. Cut there,’” said KPMG’s Ian McPherson.
“But actually if we did that, we would be doing a disservice to you as the Board of Supervisors and much more importantly … we’d be doing a disservice to the public of Riverside.”
The company’s role, and its compensation, recently have come under increased scrutiny. The international firm’s relationship with the county dates back to 2015, when it was hired for $761,600 to study public safety spending amid a dispute over how much cities pay for police services from the Sheriff’s Department.
The consulting company came up with 51 recommendations to deliver law enforcement in a more efficient manner. In March 2016, the firm got $15.7 million to implement those recommendations and another $2.7 million to find savings in non-public safety departments.
Last July, supervisors, meeting in public, approved a two-year extension worth up to $20.3 million for KPMG, as part of a master overhaul of county government. Officials said the goal is to deliver public services more efficiently and use hard data to make decisions.
The current deal with KPMG runs through June 2019 and can be canceled without penalty by submitting a 30-day notice to the firm, said county spokesman Ray Smith.
Finding efficiencies is key for a board faced with a series of new, ongoing and non-optional costs, from raises guaranteed to unions for pension savings, to rising pension costs passed on by the California Public Employees’ Retirement System, to a lawsuit settlement calling for more money to be spent on jail inmates’ health care, and the prospect of paying more for a state program providing in-home care to indigent adults.
During recent contract talks with county unions, talk of cost-cutting has led to bitter standoffs. One union, Service Employees International Union Local 721, has seized on the KPMG contract as proof, in its eyes, of supervisors’ poor decision-making, saying county workers are being asked to pay in the form of contract concessions.
‘Waste of money’
Three of the five board seats are on the June 5 primary ballot. Depending who wins – there will be a November runoff if no one gets a simple majority – that could mean as many as three supervisors who are less inclined to retain KPMG.
Supervisor V. Manuel Perez, who is being challenged by Palm Desert Councilwoman Jan Harnik in a district representing the Coachella Valley, voted with the majority last summer to extend KPMG’s deal. Harnik opposes the contract.
To varying degrees, the 10 candidates running for Ashley’s and Tavaglione’s seats expressed misgivings about KPMG. “I have real difficulties seeing the advantage of spending $40 million on an efficiency consulting firm,” said Riverside Councilman Mike Gardner, who is running to succeed Tavaglione.
“That’s a waste of money,” said Fifth District candidate Altie Holcomb. “We have enough smart people within the county executive office and department heads (to save money) without going to an outside firm.”
Bogh, a former Republican assemblyman, said county taxpayers “expect a full accounting of the entire KPMG contracting process, beginning with the original bidding.”
“Riverside County residents are the ones who suffer when the money goes to KPMG that could be going to our hospitals, to our streets, or to our public safety officials,” he said.
Even candidates with close ties to the current board have reservations about KPMG. “I would just go in a different direction,” said Ashley Chief of Staff Jaime Hurtado, who is running to succeed his boss.
“I think it doesn’t do any good to say it was good or bad or bash it,” said Corona Mayor Karen Spiegel, who has Tavaglione’s endorsement to succeed him.
That said, KPMG is getting money “that could have been targeted for more specific areas,” Spiegel added. “We could have taken bites at a time and not (have) eaten the whole thing. We could have used outside eyes without having to spend $40 million.”
Tavaglione said counties like Riverside lack the internal ability to make the types of changes it needs without the help of a firm like KPMG.
“We must operate more efficiently and base future budget decisions more on hard data and analysis rather than (on) past practices,” he said. “As I’ve said time and time again, we are well into the 21st century and we must operate… with modern and proven technologies, processes, and ultimately, greater efficiencies.”
Tavaglione added: “KPMG compiled and analyzed millions of lines of data about operations throughout the county to help us tailor staffing to needs, become more efficient, reduce projected spending and plan for the future.”
A new county performance unit “will strengthen the way we assess performance and accountability based on established, concrete goals,” Tavaglione said.
County officials say KPMG’s work will deliver tens of millions more in savings beyond what the firm is getting. In a July 2017 op-ed in The Press-Enterprise, Tavaglione and Supervisor Chuck Washington wrote that KPMG uncovered $50 million in savings by doing away with an old human resources computer system and $40 million could be saved by changing how county government buys goods and services.
This story was originally published by the Press-Enterprise.