05/01/2012 01:38 pm ET

Detroit City Council Approves Contract Increase For Ernst & Young

Detroit City Council on Tuesday agreed to up the amount paid to the accounting and consulting firm Ernst & Young, despite the city's fiscal crisis. City Council voted 5-4 to amend the budget to pay the firm up to $1.35 million before the end of the fiscal year in June.

Cheryl Johnson, the city's finance director, said the money was needed to keep paying Ernst & Young for key services that city's finance department cannot provide, such as cash-flow reports and other financial analyses the state requires under Detroit's new consent agreement.

"Without them producing these reports, it will cause us to be in default on the agreement," Johnson said before City Council Tuesday. A default on the consent agreement could push Gov. Rick Snyder to appoint an emergency manager.

Johnson said the city hoped not to use the full contract amount, but City Council members were wary of giving any more money to Ernst & Young.

"I voted for it and had to hold my nose to do that because while I do think Ernst & Young brought a lot of value to the table early on, the issue is they're very expensive," said Council Member Ken Cockrel, Jr., who chairs the Budget, Audit and Finance Committee. "They're doing work at a premium price that really should be done by city employees."

Johnson said the city is looking to hire its own staff "so we don't have to pay a consulting firm to do it," but said the task was proving difficult. The city is still looking for a chief accountant, a treasurer and a deputy treasurer.

"Trying to find qualified individuals who are willing to come to work in the city at this point in time -- in an appointed position in the finance department with everything else going on -- to say [it's] extremely difficult is an understatement," she said.

Council Member Brenda Jones countered the city workers already in place weren't doing their jobs well.

"If the city administration had hired capable people in the first place, we wouldn't be in the position we're in today," she said. "It's just crazy -- we have so many people in this city that are not qualified to do the jobs they are there to do because they're people's friends and whatever."

Others made note of the fact that Ernst & Young came recommended to the city by State Treasurer Andy Dillon, who now has considerable control over Detroit's finances through the consent agreement.

"It is oxymoronic for the state to say, 'Use Ernst & Young' and 'We won't give you additional money,' but we are in this consent agreement to get out of debt," said Member Andre Spivey. "We are always at the end of the line, saying if Council doesn't approve this, we are going to be in trouble."

But the contract passed, with Jones, Kwame Kenyatta, JoAnn Watson and Council President Charles Pugh voting against it.

Flickr photo by R/DV/RS.