State Auditor publishes findings on Black Brilliance contract

This morning the Washington State Auditor released its annual accountability audit of the Seattle city government. It’s a short, pro-forma report saying that mostly everything is fine. But it does call out “certain matters related to procurement of consultant services” that it addressed in detail in a separate letter to Mayor and the City Council last week.

That letter is entirely about the $3 million Black Brilliance Research Project contract that the City signed last November with King County Equity Now through a fiscal agent, Freedom Project. (see SCC Insight’s four-page series on the contract for all the details)

In the letter, the Auditor office says that the fiscal sponsor arrangement in the contract technically followed the law, and the city received the “broad deliverables outlined in the agreement.” However, it calls out “several problems in the contract and how it was established.”

  • The scope of work listed in the contract “was not sufficiently defined to protect the City’s interests. For example, the City did not specify how the money would be spent, including requirements on administrative costs; a method for compensating community participants; research methodology requirements; and details on how the City would use the results.”
  • The fiscal agent contract with Freedom Project specifically directed the contract to King County Equity Now, without a public procurement process or any documented justification as to why these two organizations were uniquely qualified for the contract. “This contract was specifically directed to this particular organization that requested the funding before the contract was awarded.”
  • In February, after Freedom Project terminated its fiscal sponsor agreement with King County Equity Now and assumed full responsibility for the project, it signed thirteen subcontracts before it had obtained the required written approval from the city to do so. “We found that the City did not provide written consent for Freedom Project to subcontract its obligations before work was done by 13 subcontractors.”

The Auditor makes four recommendations for actions for the city to take:

  • Define a more detailed scope of work in contracts awarded under Seattle Municipal Code 20.50.090.
  • Follow the provisions of its own agreements on obtaining written consent for the contractor to hire subcontractors.
  • Improve its documentation showing how it determined a contractor is best qualified, including explaining why a contractor would be uniquely qualified under SMC 20.50.090, and including that information in the Council resolution to award the contract.
  • Consider conducting a more deliberative public process when awarding contracts under SMC 20.50.090 to improve transparency and accountability for the use of public funds.

In short: write better contracts, follow the terms of those contracts, document why a contract is going to a specific organization and why you think they’re qualified to receive it, and be public and transparent when awarding contracts.

Auditors usually focus their recommendations on specific actions, rather than broad critiques. This has one of the former (written approval for subcontractors) and three of the latter. In auditor’s language, this is a strong reprimand for not following well-established “contracting 101” and public procurement best practices. Here is how State Auditor Pat McCarthy summed up the situation in a press release this morning:

“While the process the City of Seattle used to award this $3 million contract did not technically violate the relevant rules, in my view, the city exercised only the bare minimum of accountability and transparency in this matter. Taking a few more steps to define the terms of the contract and justify the process used to award it could have addressed public concerns. In order to create trust in government, it is incumbent on public servants to establish clear, fair and open processes for the actions we take, especially when they use public dollars.”

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  1. How can it be legal for them to no-bid a $3 million contract? When the City is supposed to go out for bids on anything above $54,000.00 (I think thats the amount). Aren’t taxpayers supposed to be protected by adhering to this law? It’s there so that we don’t waste money. Shouldn’t our City Attorney look into this or perhaps the State Attorney General and make them get more bids? It’s got to be someones job to look out for taxpayer funds and make sure they are administered properly.

    1. I would refer you to my original article on the contract from last December, that explains the two legal loopholes that allowed them to do this. The city is supposed to bid out any contract that is greater than $54,000, though there are a couple of exceptions — and one of those exceptions is for a contract going to a nonprofit. However, they had to use a nonprofit fiscal sponsor as a pass-through because King County Equity Now isn’t a nonprofit.

      They chose their fiscal sponsor poorly, as it was a sub-contractor of KCEN and had already accrued over $300,000 in payroll expenses by the time it signed the fiscal sponsor contract with the city — major conflicts of interest.

    1. I get that question a lot. I did not see any payments to Nikkita Oliver in any of the financial reports and invoices. Oliver is associated with Decriminalize Seattle, not King County Equity Now. That doesn’t mean that she definitely didn’t receive any money, but I didn’t see any. I posted all of the financial reports I got from the city here so you can read through them all yourself to see if I missed something. The reports and invoices provide line-item level information for King County Equity Now and Freedom Project, but not for the other sub-contractors, so it may be that she had a relationship with one of them. But again, I saw no evidence of that.

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