Monday, August 28, 2006

The Education consultant racket: why politicos should stop listening to consultants

New York Daily News - http://www.nydailynews.com
Schools hired guns' fat checks
BY ERIN EINHORN and MICHAEL SAUL
DAILY NEWS STAFF WRITERS
Sunday, August 27th, 2006

Seven of the high-powered consultants hired by City
Hall to cut fat from the school bureaucracy are
charging taxpayers more than a million dollars each
for work over the next 18 months, the Daily News has
learned.
The most expensive consultant, Sajan George, is
billing the city a staggering $450 per hour as part of
a $17 million contract that the city awarded his firm,
Alvarez & Marsal, without competitive bidding, records
show.

George's fees alone will cost taxpayers $1.7 million -
more than four times what Schools Chancellor Joel
Klein will earn during the same 18-month period.

And in an unprecedented move, the contract appears to
make some of the consultants responsible for work
historically performed by top Education Department
officials.

Hired gun Sam Mehta - who will bill taxpayers for $1.6
million - is already sitting a few paces away from
Klein's office at the Education Department's lower
Manhattan headquarters. Until recently Mehta's desk
was occupied by now-retired Chief Financial Officer
Bruce Feig, who earned $178,156 a year.

Mehta has been introduced during meetings as the new
chief financial officer, according to two city
officials who requested anonymity. Mehta also has
signed employee time cards, according to a source.

But Education Department spokesman David Cantor - who
maintains the consultants will save the city hundreds
of millions of dollars a year - said Mehta's title is
chief restructuring officer. Cantor said a budget
document that listed Mehta as CFO was a typographical
error.

"For a one-time charge of $17 million, we're
implementing internal restructuring that will cut at
least $200 million annually from our administrative
budget to give to schools," Cantor said.

"We're also developing financial systems that will
help us to better manage our budget and give
transparency to our spending decisions. We don't have
the capacity in-house to do this kind of work - nor
does any government agency or private company, as a
rule."

As private employees, the consultants are not required
to file financial disclosure forms or follow other
rules governing public employees, though they oversee
the schools' $15 billion budget.

Public school and government watchdogs expressed
concern over the consultants' fees.

"If they drive more money to the schools [that the
city has] been starving, then it's really wonderful,"
said Noreen Connell of the Educational Priorities
Panel. "But if they don't, then it's another wasteful
extravagance that's taking money away from other vital
stuff."

"It boggles the mind," Connell added. "I think there's
enough budget people in New York City who ... could do
it at far lower costs."

The consulting contract is the largest of the roughly
$120 million worth of no-bid contracts that educrats
awarded during the last fiscal year - a total that far
surpasses previous years, as The News revealed last
Monday.

No one currently holds the title of chief financial
officer in the Education Department. The former acting
CFO, Susan Olds, is listed on the department Web site
as executive budget director. When she was acting
finance director, she was paid $162,000 a year,
records show.

Klein's annual salary is $250,000. He is the
second-highest-paid city employee.

City Council Education Chairman Robert Jackson pledged
to hold hearings on all the no-bid contracts in the
fall.

"If they'll save us $300 million, okay, it may be
worth it," Jackson said. "But to pay $17 million on a
contract that was not competitively bid and knowing
the contract is paying employees over 18 months $1.6
or whatever millions, I think anyone has to question
that."

The Alvarez & Marsal contract calls for its six
highest-paid consultants to work 55 hours a week for
17-1/2 months. Another 13 consultants will work the
same hours for shorter periods, ranging from a month
to a year. The billing rates range from $275 to $450
an hour.

"Quite frankly," Jackson said, "those individuals are
making more money than any city employee in New York."

Dream team of bean counters

What the highest-paid financial consultants are
charging the Education Department:

Sajan George, Project leader
$1.7 million

Sam Mehta, Chief restructuring officer for finance
$1.6 million

Michelle Lewis, Setting up system for principals to
choose programs and services
$1.3 million

Erin Covington, Overhauling budgeting process
$1.3 million

Cory Schupp, Integrating financial accounting with
operations
$1.3 million

Andrew Thung, Assisting with budget overhaul
$1.3 million

Nate Arnett, Chief restructuring officer for school
food and student transportation
$1 million
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