Grand jury says Riverside County's $36 million KPMG project hasn't paid off

The Riverside County Civil Grand Jury has found that the county has benefited relatively little from the $36.4 million the Board of Supervisors paid to consulting giant KPMG to identify cost-cutting opportunities in the county's public safety services, according to a grand jury report.

In its report, issued earlier this month, the grand jury disagreed with claims made by officials in the Riverside County Executive Office to the Board of Supervisors in August 2018 that more than $100 million in savings had been achieved due to KPMG's work. 

The grand jury reported that when it asked the executive office to provide further accounting proving the legitimacy of these purported savings, namely among the county's sheriff's department and district attorney's office, officials with the executive office couldn't.

As a result, the claims of savings among those two departments, the grand jury reported, "lack validation."

The county's civil grand jury is comprised of county residents and provides oversight into the operations of county and municipal governments. It files its reports with the county's presiding judge and does not discipline the governmental bodies it is charged with investigating.

However, those agencies it investigates are required to respond to the grand jury's findings and recommendations. 

County board Chairman V.  Manuel Perez, who represents the Fourth District, which includes the Coachella Valley, will discuss the formation of a committee to respond to the "grand jury KPMG report" during the supervisors' Aug. 25 meeting.

The report

In an effort to understand the project's benefits, the grand jury interviewed 22 current and former county elected officials, including staff who worked on the project from both the county and KPMG.

Ultimately, the grand jury identified that some project recommendations, like those made to fleet services, resulted in about $7 million in savings. Other recommendations, like the failed roll out of a new human resources software, cost at least $8 million before it was abandoned completely. And still other recommendations could not be thoroughly investigated because departments did not provide them with the requested information.

The grand jury acknowledged that the KPMG project's timeline, roughly 2016 to late 2019, has been plagued by a series of events that threatened its success, including what the grand jury described as the county's "significant political turmoil."

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The grand jury claims that after KPMG submitted its findings in 2016, the county should have sought bids from other firms to manage the implementation of the project's findings and secured the commitment of the affected departments to see the change through. 

"This Project might yet provide benefits to the County in the future," the grand jury wrote. But if that's going to happen, they contend, more change is needed still.

The grand jury has asked the Board of Supervisors to take effective action at further implementing the project's findings, asked the county to get departments to commit to change earlier in a such a project's life cycle and suggested establishing a new department responsible for auditing county projects in the future.

The grand jury has given the board of supervisors and sheriff’s department 60 days and the Executive Office 90 days to respond to their recommendations and requests.

KPMG County Transformation Project

In September 2015, the board of supervisors agreed to a proposal made by the County Executive Office to hire KPMG, an international business consulting firm, to help identify ways to cut costs among the county's public safety departments.

County leaders were bracing for a surge in costs after the state legislature passed criminal justice reform bills related to sentencing and prison overcrowding, which meant the county's criminal justice system was going to see an increase in its inmate caseload. Part of the reforms reclassified certain drug and property offenses, increasing the likelihood that offenders convicted of those crimes would serve their sentences in a county jail rather than a state prison.

KPMG was awarded a contract of more than $760,000 to determine how related departments could save money and become more efficient. The primary departments slated to be studied were Riverside County's sheriff's department, the District Attorney's Office and the Office of the Public Defender and the county's probation department.

KPMG reported 51 recommendations for cost-cutting to the board of supervisors in March 2016. The board then authorized an amendment to the original contract with KPMG to pay the firm $15.73 million to implement its findings.

Another amendment, amounting to $2.7 million, followed that same month and increased the scope of the firm's analysis to 10 other county departments, including the county's Human Resources Department and Economic Development Agency.

 A third amendment was approved in December 2016 adding nearly $2 million in funding for another round of implementing cost-cutting measures. And a fourth amendment was approved in July 2017 adding about $20.3 million in funding for even more.

According to the grand jury's analysis, the contracts amounted to about $41.5 million for KPMG, at a rate of $370 an hour. Ultimately, the county would pay just over $36 million before the funding of the final amendment was reduced and the project stalled.

'Ask' vs 'give'

The grand jury noted in its report that the KPMG project happened at a time of political turmoil in the county that likely damaged its potential for success.

For example, then-Fourth District Supervisor John Benoit died in December 2016. Jay Orr, the county's executive officer, retired in August 2017. Chad Bianco was elected in 2018 to succeed Stan Sniff as the county's sheriff in 2019. And, supervisors Bob Buster and John Tavaglione, the first and second district representatives, did not run for reelection.

Additionally, the grand jury noted, heads of key agencies — such as human resources and the Economic Development Agency —  and staff from those departments either left or were replaced.

As a result, the grand jury reported, some new leaders weren't motivated to support an initiative that preceded them, didn't have the experience to efficiently implement its recommendations or openly opposed the project.

The grand jury reported that some department representatives admitted they publicly played down the project's benefits and others acknowledged that any proposed cost-cutting plans could have resulted in their budgets being reduced. However, the report did not identify who made these claims or which departments they worked for.

In August 2018, Executive Officer George Johnson submitted a plan about how, in the future, the board of supervisors could transition the KPMG project to county staff. He included a report of a purported $100 million in savings that the project had achieved and encouraged the board to continue with this progress.

The grand jury investigated how the executive office arrived at that calculation, but was unable to substantiate it.

It requested additional information from the executive office and was told the savings were calculated based on the difference between proposed and actual budgets over several years.

"The difference between ask and give for the sheriff and District Attorney budgets over two budget years = $89 million estimated total savings," the executive office wrote to the grand jury.

Subsequently, the grand jury reviewed the sheriff's department and district attorney's proposed and actual budgets for the last four fiscal years but said that effort only partially amounted to the claimed $100 million.

Furthermore, the grand jury asserted that it is "at least questionable to claim that the difference between what one wants ("ask") and what one gets ("give") is a "savings."'

The executive office and sheriff's department have yet to respond to the grand jury's requests for more information to substantiate the calculation and further evidence of the project's benefits, and asked them to respond in the coming months. 

Still, the grand jury reported, the costs and benefits to other departments were far more obvious.

The Riverside County Purchasing and Fleet Department, which manages the procurement of goods and services for other county departments, showed the grand jury how the KPMG recommendations helped it save more than $7 million in negotiated contract cost savings.

The report referred to the evidence provided by that department as the "clearest cost savings to the county."

In contrast, the county's attempt to deploy a new cloud-based human resources software was "declared a failure only 21 months after it was approved," the grand jury wrote.

The county hoped to replace an outdated software, described by the grand jury as "very expensive and time consuming," that had been in use for more than a decade. 

"Not including the cost of KPMG’s work on selection and implementation of the system, the county has incurred a loss of at least $8 million" on the aborted implementation of the software, called Workday.

The grand jury recommended that when the supervisors and executive office attempt such large-scale and costly change in the future they should make sure departments are willing and able to achieve "the expenditure's expected results."

'Going forward'

While the KPMG project has provided some savings to date, the grand jury's report asserts that the county needs to keep working to ensure the massive investment pays further dividends.

That won't happen, the jury reported, unless more is done by county leadership.

Following KPMG's final presentation on the project in June 2019, the grand jury reported, many county officials expressed a willingness to continue fighting to implement their suggested changes. 

But when the grand jury asked "a high ranking official" in the county's executive office what reports or actions have been taken since, they were told: "none."

"When the Grand Jury asked why, the response was 'because the board has not asked,'" the report reads.

The grand jury recommended several ways the county could ensure that future projects don't suffer a similar fate, including assuring competitive bidding on large contracts with outside service providers and securing commitment to follow-through on major operational changes.

Another suggestion was for the county to establish a new department, similar to an inspector general, that would perform financial and operational audits of projects the county undertakes.

"Most importantly, the county in its actions should not treat the KPMG County Transformation Project as if it were over and done," the grand jury wrote. "It is highly likely there are still benefits to be achieved and money to be saved from the Project in areas that the Grand Jury was unable to investigate."

Desert Sun reporter Christopher Damien covers crime, public safety and the criminal justice system. He can be reached at christopher.damien@desertsun.com or follow him at @chris_a_damien.