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Lingering questions could sink renewal of Aramark contract

Thursday, June 28, 2012 by Michael Kanin

Members of the Austin City Council appear to be shying away from the extension of a contract with the firm that runs food concessions at the city’s convention center. Their reluctance comes in the wake of a deeply critical report from the office of City Auditor Ken Mory that questioned the veracity of an audit of accounts of Aramark‘s city contract.


With the contract up for extension today, Mayor Pro Tem Sheryl Cole, as well as Council Members Bill Spelman, Kathie Tovo and Laura Morrison – who collectively make up the Council’s Audit and Finance Committee – have expressed some reservations about extending the deal.


“I know that I will not be able to support the renewal of a contract when we have not received reasonable assurance from our auditor about the audit,” Cole said. “I think that I would recommend that we actually go ahead and rebid the contract.”


The Auditor’s report comes as the latest hit in a long line of troubles for the Convention Center and its concession contract. In April 2011, Council members heard that the City Auditor could not confirm that the city’s $1.7 million share of 2010 concession sales was accurate because annual audits of those figures had not been performed (see In Fact Daily, April 27, 2011).


Those concerns surfaced in the wake of the collapse of a contract that the city held with R. Mendoza & Co., an Austin accounting and auditing firm. After two years of digging into the Aramark-Convention Center deal, Mendoza and the city parted ways in 2010 with Mendoza officials telling the city that they did not have enough information to complete the audit.


Called in to pick up the pieces was MHM, a firm that has performed multiple audits around the nation for other contracts with Philadelphia-based Aramark, a leading provider of food services to schools, stadiums and other public facilities. After two weeks of field research and three-to-four months of follow-up, MHM pronounced the Aramark books clean.


However, when Mory and his team tried to replicate MHM’s findings they were unable to do so because of a lack of information. “It’s one thing if we’re saying the information is inaccurate – which I don’t think we’re saying,” said Cole. “I think we’re saying it wasn’t there, and, actually, that creates more of an alarm.”


The findings from the Auditor’s office are scathing. “As a result of insufficient audit documentation prepared by Aramark’s external auditors, (the office of the City Auditor) cannot provide reasonable assurance that the amount of net profit reported for Aramark is accurate,” according to the report. “Our review found several weaknesses in the documentation prepared by (Aramark’s auditors) to support their audits of Aramark’s financial statements.”


“The real concern here is that Aramark failed to provide the City with audited financial information for six years, and when they finally gave us all that information, we couldn’t verify that their audits were accurate,” Spelman told In Fact Daily via email. “Giving the contract to Aramark again seems like a risky proposition, and that’s reason enough for me to seriously consider doing business with another firm.”


Council member Tovo was also worried. “I find this situation very concerning,” she told In Fact Daily via email. “First, Aramark did not conduct external audits on an annual basis, as required by its contract with the city, and then when it did initiate an audit, that audit was done in a manner which the City Auditor said did not follow standard practices. When our Office of the City Auditor cannot assure us that Aramark’s reported net profit is accurate, that raises serious concerns for me about entering into a future contract with this company.”


Cole, a Certified Public Accountant, also elaborated on her concerns: “It is very serious when our auditors give a finding of negative assurance to an audit,” she said. “In light of that I will not be voting to approve the Aramark contract.”

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