New Jersey’s Office of the State Comptroller (OSC) is an independent office that audits government finances and investigates fraud and waste at all levels of government.
New Jersey’s local governments (municipalities, townships, cities, etc.) spend over 100 million dollars each year for legal services. Because this is a large public expenditure, the OSC examined how local governments procure legal services and made recommendations for improvement. The OSC focused on basic good-government questions: Are local government contracts transparent? Are they structured to help manage legal costs? Do they establish accountability?
The OSC published its legal services report on June 25, 2013. It found that local governments don’t always purchase legal services wisely or well. For example, some contracts allowed payment for estimated expenses rather than actual expenses; some paid for legal work that was so vaguely described that no one could know what it was; some allowed invoices to be submitted so far after the work was done that the local government couldn’t be sure if the charges were accurate or legitimate.
To correct these problems, the OSC developed 21 best practices which it organized within four broad categories. These categories are:
- Develop policies and procedures for the procurement, use and management of legal counsel. This category contains five best practices.
- Conduct a competitive procurement for legal counsel. This category contains five best practices.
- Draft formal, written contracts with legal counsel. This category contains eight best practices.
- Manage legal counsel contracts. This category contains three best practices.
I have long been concerned that Tabernacle’s legal bills are vague and usually late. I’ve wondered how committee members could possibly know what they’re approving. I routinely observe that no committee member ever asks questions about the invoices.
Because of my concerns, I’ve compared Tabernacle’s contract and Mr. Lange’s invoices with the OSC’s best practices guidance. This POST focuses on just three of the 21 best practices.
- Expenses and disbursements
- Detailed billing invoices
- The timely submission of invoices.
In addition to comparing Mr. Lange’s contract and his invoices with the OSC’s best practices, I also examined how Tabernacle responded to the legal services component of the New Jersey Division of Community Affairs Best Practices Inventory (DCA-BPI). The DCA-BPI is a management program that local governments use to assess “…their effectiveness in budgeting, management and cost control.”
The DCA-BPI contains 50 questions about municipal practices, procedures and standards. Question Four specifically asks if municipalities follow the OSC’s best practices for legal services. It says:
Has the appropriate administrative official reviewed the State Comptroller’s June 25, 2013 Report with respect to local government legal fees, and does your municipality follow the best practices outlined in the checklist annexed as an Appendix to the report?
This question was included in the DCA-Best Practices Inventory for three years: 2013, 2014 and 2015. In 2016, it was replaced by a question about independent authorities, such as a municipal housing authority or sewerage authority.
A local government’s submission of its DCA-BPI is not a casual matter. The State determines the amount of financial aid that it gives to municipalities based upon the municipality’s participation in and compliance with the DCA-BPI program. Also, the local government administrator and its certified financial officer (CFO) each must certify that the answers in the DCA-BPI are accurate. They sign a certification which says: “I hereby certify that the information provided in this Best Practices Inventory is accurate to the best of my knowledge.”
In addition, the local governing body is required to discuss the DCA-BPI at a public meeting. The township clerk must certify that the Inventory was discussed. The clerk must also include both the governing body’s discussion and the statements of the administrator and CFO in the official minutes.
I’ve reviewed the DCA-BPIs that Tabernacle submitted to the State in the last three years to see how it answered Question 4.
In the 2013 Inventory, Tabernacle said that it would address OSC compliance in future years. In the 2014 Inventory, Tabernacle said that it follows the OSC’s legal services best practices. In the 2015 Inventory, Tabernacle again said that it follows the OSC’s legal services best practices.
In all three inventories, Administrator Doug Cramer and CFO Terry Henry certified that the answers were accurate. The 2013, 2014 and 2015 inventories were presented and briefly discussed at the October 15, 2013, November 10, 2014 and October 26, 2015 meetings. Clerk Barber drafted the official minutes to reflect the Committee’s discussions.
It’s clear from my review of Tabernacle’s contract and Mr. Lange’s invoices that the township is not in compliance with the OSC’s best practices guidance. Here’s what I found when I compared the Tabernacle contract and Mr. Lange’s invoices with the three OSC best practices. The invoices that I use as examples are typical of the invoices submitted. There are numerous other invoices that could’ve been used as examples.
1. Calculation Of Expenses
The OSC’s report says that:
In their contracts with outside counsel, LGUs (local government units) should specifically address ancillary expenses and disbursements in order to maintain control of these costs. The contract should specify whether the contracting entity will reimburse counsel for expenses such as photocopies, faxes, long distance telephone charges, legal research costs, travel expenses and courier services. In any event, LGUs should pay only for actual expenses incurred [emphasis added].
Contrary to the best practices, Tabernacle’s contract with Mr. Lange doesn’t specify which expenses it will reimburse. The contract has two types of reimbursable expenses (“out of pocket” and “other”), but neither is defined.
Out-of-pocket expenses are those which “…includ[e], but are not limited to, photocopying charges, telecopier charges, filing fees, recording fees and postage.” This is a general provision without any limits. It includes everything. Yet the contract has a second category “Other items – actual costs,” which is undefined.
Regardless of the type of expenses (“out-of-pocket” or “other”), Tabernacle doesn’t reimburse Mr. Lange for actual expenses. Instead, it reimburses him a flat 9% of the total amount he bills on each invoice. This is exactly the practice that the OSC wants to prevent.
The OSC gives three reasons why reimbursed expenses should be based on actual costs rather than a percentage of the total billings. First, there’s usually no evidence that the percentage surcharge saves the local government any money. Second, it increases the financial incentive for the firm to bill for more legal work. Third, many so-called expenses, such as administrative support, are really part of ordinary overhead that’s already built into the attorney’s rate structure.
Here’s the relevant excerpt from Tabernacle Township’s contract with Mr. Lange:
The Attorney shall be reimbursed for all out-of-pocket expenses incurred on behalf of the Township including, but not limited to, photocopying charges, telecopier charges, filing fees, recording fees, and postage. All such items shall be subject to reimbursement in accordance with the following: (i) In order to recover my telephone, photocopying and mileage expenses, I will charge you an amount equal to nine percent (9%) of my total hourly charges. The 9% amount represents the average cost to the firm of these items relative to the fees I receive. I charge this average amount rather than attempt to record each such expense in a separate file; the additional administrative cost of recording my expenses in these matters would increase the total cost of providing my services [emphasis added].
Although the contract says that the 9% surcharge represents the average cost of expenses, the Committee cannot tell if it actually does. The township has been paying this 9% surcharge, at least, as far back as 2010. Basic administrative expenses such as photocopying, postage, fax and phone service may be too small to track. But that’s because they are part of the practice of municipal law. Expenses like these can be included in the hourly charge of administrative personnel. Larger expenses such as filing fees, recording fees and even mileage expenses can easily be itemized.
Every invoice submitted by Mr. Lange, and approved by the Committee, has an entry like the following:
Invoice #4717: September 2015:
- 9/30/2015, Administrative costs, 9% Administrative Costs, ($317.93)
Invoice #4856: May 2016:
- 5/31/2016, Administrative Costs, 9% Administrative Costs, ($524.25), (Page 2)
2. No Detailed Invoices
The OSC’s best practices identify specific information that a local government should require its attorney to include on his/her invoice. The purpose of this specificity is to ensure that the township and the public know what they’re paying for. The OSC also states that “Non-descriptive entries should not be accepted” [emphasis added]. There are eight items that the OSC says should be described in every invoice. And these items should be required by the contract.
- The matter name
- The date of service
- The attorney’s name or identification number
- The attorney’s hourly rate
- The total charge for each task or billing entry
- A detailed description of the services provided or tasks performed and all individuals involved
- The amount of time spent on each particular service or task
- An itemized list of any expenses or disbursements. Tabernacle’s contract for legal services doesn’t require its attorney to submit any particular information in his invoice. The issue simply isn’t addressed.
In practice, Mr. Lange’s invoices usually include the following four items:
- The matter name (sort of)
- Date of service. Though I’ve found some invoices that weren’t dated, the committee approved the payments anyway (see, for example, invoices #4738, #4739 and #4743).
- Attorney name or ID number
- Attorney’s hourly rate
The following four items are usually omitted:
- Total charge for each task or billing entry. Though a total charge is provided, a charge for each task is not provided.
- A detailed description of the services provided or tasks performed and all individuals involved
- The amount of time spent on each particular service or task
- An itemized list of any expenses or disbursements.
Here’s a closer look at the elements of an invoice, which the OSC says should be provided. Some of the examples fit in more than one category.
A. Lack Of Matter Name
It’s common sense that the Committee, and the public, should know the matter that its attorney is billing for. If the attorney is billing for work on the “XYZ” case, the invoice should have an entry for the “XYZ” case.
Typically, Mr. Lange labels each “Item” on his invoice with the general, non-descriptive catch-all term, “Legal Services.” “Legal Services” doesn’t describe any particular matter; it describes almost every matter.
Here are some examples of invoices that don’t list the matter name.
Invoice #4717: September 2015 (no title):
- 9/1/2015: Legal Services, 21.7 hours for General Legal Services ($3,363.50)
Invoice #4738: No Identified Month in 2015:
- “General”: No Date, General Legal ($3,177.50)
In some of Mr. Lange’s invoices, he gives the matter name in the column labeled “Description.” For example, under “Description” he says: “Verizon v. Tab.” “Verizon v Tab” is the name of the matter he worked on. But it doesn’t describe the services he provided or the tasks he performed on “Verizon v Tab.” This doesn’t meet the OSC guidelines for the detailed description of work performed.
B. Vague Description of the Work Performed
Mr. Lange’s invoices generally don’t show what tasks he performed or the specific work that he did. This omission drains the invoices of information that’s necessary to manage legal costs and establish accountability and transparency.
Without this information, the committee can’t see if the charges seem reasonable. They’re just guessing that the charges reflect the work he did.
The OSC recommends that “non-descriptive entries should not be accepted.” Yet the committee pays all of Mr. Lange’s invoices without question, even though his descriptions have become more and more vague.
One problem identified by the OSC, which is commonplace in Mr. Lange’s invoices, is the practice of block billing. Block billing occurs when tasks are lumped together and billed as one item. For example, a hypothetical invoice might say “chicken ordinance, 2.0 hours.” This is block billing because it doesn’t describe the individual tasks that were performed on the matter in the 2.0 hours.
The OSC’s recommended cure for block billing is for the invoice to list each task performed. The hypothetical invoice would say something like this: “telephone call with mayor regarding chicken ordinance, 0.4 hrs; research re: nuisance and chicken waste, 1.0 hrs; write memo re: chicken waste, 0.6 hrs.” This hypothetical billing entry gives a detailed description of the tasks performed in the 2.0 hours, the individuals involved and the amount of time spent on each task.
Here are a few actual examples of invoice descriptions that don’t state the task that Mr. Lange performed. In one, the matter name is given on the invoice as “Brooks v. Tab.” In others, the matter names are listed as a “description” on the invoice. But in all of these invoices, there’s no description of what work was done. My comments are in italics/bold.
Invoice #4717: September 2015 (no title)
- 9/30/2015: Legal Services, Litowitz credit (-$31.00). What work was done?
Invoice #4736: September 2015, “Brooks v Tab”:
- 9/15/2015: Legal Services, General ($418.50): What work was done?
Invoice #4873: June 2016, “General”:
- 6/1/2016: Longstreet ($77.50). What work was done?
- 6/4/2016: Review Ordinance ($31.00). Which ordinance?
- 6/16/2016: Emergency Services $62.00 (Page 2). Which emergency services; fire, ems, CERT? What work was done?
Invoice #4880: July 2016, “General”
- 7/5/2016: “9 Worrell” ($186.00). What work was done?
- 7/6/2016: Property Issues ($124.00). Which properties? What work was done?
- 7/7/2016: “General” ($108.50). What work was done?
The omission of a description is a recipe for confusion. For example, Invoice #4880 has nine entries under the matter name “Legal Services,” which are described as “General.” One item reads “General N/C,” and there’s no charge. This invoice gives no clue about whether these are different matters or not. There’s no way to tell what work was performed or what services were billed for.
Another vague description that Mr. Lange often uses is “OPRA.” OPRA is an acronym for Open Public Records Act. But using the term on an invoice as a matter name or as a description of the work done, doesn’t comply with OSC’s recommendations.
The term “OPRA” can’t be a valid matter name because it doesn’t identify the particular OPRA Mr. Lange is working on. It’s no more of a matter name than the general terms “ordinance” or “litigation” or “resolution.” The matter name for an OPRA request should reference the particular OPRA. This should be easy because the clerk identifies every OPRA by name, date and subject before she sends it to Mr. Lange. None of the Clerk’s identifying information makes it into Mr. Lange’s invoices.
The term “OPRA” also can’t be the description of the work done because it doesn’t state the specific tasks performed, services provided and all individuals involved.
The following are examples of typical invoice entries for Mr. Lange’s OPRA work in 2015 and 2016. For all of these entries, the committee and the public should know what OPRA request Mr. Lange is billing for. My comments are in italics/bold.
- 8/5: ”OPRA-Review Send Weinberg letter”: $31.00 (Page 1). Which OPRA?
- 8/6: “Brooks/OPRA Review reply”: $15.50 (Page 1). Which OPRA?
- 11/16: “OPRA and LOSAP letter; Research”: $341.00 (Page 2). Which OPRA?
- 3/29: ”OPRA”: $62.00. Which OPRA?
- 5/9: “OPRA Research”: $527.00 (Page 1). Which OPRA?
- 5/12: ”Review request for docs”: $15.50. Which request?
- 6/30: ”OPRA”: $77.50 (Page 2). Which OPRA?
- 9/29: “OPRA”: $31.00 (Page 2) Which OPRA?
- 12/21: “OPRA”: $77.50 (Page 2). Which OPRA?
- 12/6: “OPRA review requests, reply”: $62.00. Which request?
At the February 27, 2017 meeting, I asked committee members why they allow such vague descriptions of the legal work that they pay for. The answer that I received from Administrator Cramer was inconsistent with the township’s answer on the DCA-BPI.
Here’s the conversation between me and Administrator Cramer (FB: Fran Brooks; DC: Doug Cramer).
FB: …as you know, I file OPRA requests for Mr. Lange’s invoices, and one of the things that is quite self-evident about these bills, is there are many charges that are extremely vague. They could be just one word, say “OPRA,” and what I’m trying to understand is why you would allow and approve bills that are that vague?
DC : If I have any questions, they’re answered.
FB: Okay, so in other words, invoices, copies of invoices I’ve received are adequately explained to you?
DC: If need be.
FB: Okay, how is the public supposed to understand what work was performed under those charges that are so vague?
DC: That’s your definition of vague, that’s not my definition of vague.
The problem with Mr. Cramer’s answer is that it contradicts his certified statement that the township’s legal services comply with the OSC report. The OSC best practices call for the municipal attorney’s invoices to identify the specific matter name and provide a detailed description of the services or tasks performed and all individuals involved. Mr. Lange’s invoices typically don’t have this information. They rely on block billing.
Whether Mr. Lange’s invoices meet Mr. Cramer’s personal definition of “vague” is irrelevant. What matters is whether they comply with the Comptroller.
3. Late Invoices
The Comptroller’s report says that the contract should require that legal bills be submitted monthly for review by a designated employee. It says:
Designate one employee who will have primary responsibility for reviewing the LGU’s legal bills. The designated employee should conduct a detailed and thorough review of all legal billing on a monthly basis to determine whether the billing complies with contractual requirements and whether all entries are appropriate [emphasis added].
This, too, is a common sense requirement. If bills are submitted after 60 or 90 days, it’s more difficult for members of the governing body, (or the designated employee), to remember what work was done or determine if the work matches up with the charges.
Tabernacle’s contract with Mr. Lange doesn’t contain any term that specifies how often invoices are to be submitted. It doesn’t even require the regular submission of invoices, whatever that might mean.
In practice, Mr. Lange submits his invoices irregularly, approximately 60-120 days after the legal services were provided. For example, the December 29, 2016 Bill List shows a $15,585.94 charge for legal work. It doesn’t say which months were charged for. After questions, the committee said the charge was for legal work done in August, September, October and November. It’s doubtful that any of them remembered the work that Mr. Lange did in August, five months before. The committee didn’t ask a single question about the bills and approved the payment.
The February 24, 2017 Bill List shows a $4,017.74 charge for legal services. These were performed in December 2016. The charge was approved at the February 27, 2017 meeting, roughly 60 to 90 days after the work was done.
At the February 27, 2017 meeting, I asked why the committee accepted bills 60, 90, 120 days after the work is performed and if they were bothered by the stale bills or the haphazard interval of Mr. Lange’s billings.
Deputy Mayor Yates said that the committee relies on Administrator Doug Cramer to review the bills. Mr. Cramer then said he asked the attorney to provide more “timely” bills. I then asked what he considered timely? Mr. Cramer said 60 days.
The OSC recommends that attorney bills be submitted and reviewed monthly. Although Mr. Cramer certified multiple times that the township is following OSC guidelines, he has somehow substituted his personal sixty-day rule for the OSC guidance.
But even Mr. Cramer’s sixty-day rule isn’t being followed. It’s well past 60 days since January. As of the April 10 meeting, Mr. Lange’s bill for January 2017, hasn’t made it to the official Bill List.
Tabernacle’s contract should specify when legal bills are to be submitted. Invoices should be submitted no later than 10 days following the month the legal services were performed. This would allow the bill to be included in the Bill List for the regular meeting, the fourth Monday of the month.
Tabernacle’s Management Of Township Legal Services
The committee’s procurement and management of legal services doesn’t meet State standards.
The OSC says that contracts shouldn’t allow a flat fee for expenses. Tabernacle does.
The OSC says expenses should be actual and itemized. Mr. Lange’s aren’t.
The OSC says that each task should be separately described and billed for. Mr. Lange doesn’t.
The OSC says that invoices should be submitted monthly. Mr. Lange doesn’t.
The invoices that the Committee receives for legal services don’t inform Committee members, or the public, what we’re paying for. Committee members don’t ask questions when the invoices are presented for payment. They simply give a rubber-stamp approval.
I have to ask why the committee doesn’t have a legal contract with ordinary terms that would enable it to manage legal services with accountability and transparency. Why does it allow such lax legal billing practices?
I have wondered if the committee receives a more detailed statement of legal services. When I asked for these, the Clerk said that “there are no documents responsive to your request that exist.”
The OSC report was issued in June 2013. In its 2013 DCA-BPI, Tabernacle said it would address the OSC recommendations in the future. In 2014 and 2015, it certified that it complied.
Tabernacle Township hasn’t ever complied with the Comptroller’s recommendations.