All 28 tax increment reinvestment zones in Houston will undergo extensive auditing after members of the Houston City Council approved a $770,000 increase in consulting services to take a deeper dive into TIRZ spending habits.
What’s happening?
According to an Oct. 16 item on the council agenda, the work will be carried out by the accounting firm Ernst & Young.
The scope of work will include a spend analysis, a process that involves reviewing current and historical spending to find cost reductions and operational efficiency, according to Tipalti, a global finance company.
The process involves identifying all sources of spending data within an organization, such as:
- Vendor selection
- Supply management
- Contract pricing
- Payment terms
Some TIRZs will also be selected for forensic accounting services, which involve a combination of accounting and investigative techniques used to discover financial crimes.
Why now?
The decision comes on the heels of an ongoing investigation into the Midtown Redevelopment Authority that led to the alleged discovery of money laundering and theft by former real estate manager Todd Edwards and two contractors.
Harris County District Attorney Kim Ogg charged Edwards with abuse of official capacity, money laundering, theft and misapplication of fiduciary property, according to a press conference Ogg hosted in June.
Edwards allegedly used his position as an official of the Midtown TIRZ to use approximately $8.5 million of public funds for personal gain. Edwards and his two accomplices, Kenneth Jones and Veronica Ugorji, were indicted in June.
A quick note
According to the Texas Comptroller's Office, TIRZs are authorized to use funds gained from property taxes in their geographical zone to fund infrastructure improvements for streets, landscaping, development and utilities. Houston's TIRZs bring in roughly $200 million in city revenue each year, according to the city website.
The bottom line
Mayor John Whitmire said conducting audits for all TIRZs in Houston moving forward is a practice of “good government.”
The Midtown Redevelopment Authority is among those that will undergo a forensic accounting audit, city officials said during the Oct. 16 council session. Whitmire did not share if any other TIRZs will undergo the additional assessment as well.
“We are looking for accountability,” he said. “[TIRZs] spend large amounts of money with little oversight. So, we want to get inside the operations and see if can eliminate waste, duplication and corruption.”
The spend analysis is anticipated to take approximately five weeks, and the city will seek reimbursement for the $770,000 increase in cost from the TIRZs for all work performed.
