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Recent Examples of Government Waste, Fraud and Mismanagement

Local Government

  • Audit Finds Los Angeles Fails to Collect Nearly Half of Its Debts. Los Angeles City Controller Wendy Greuel reports that the city has failed to collect at least $260 million a year for traffic tickets, ambulance transportation and other services an amount that accounts for approximately 47 percent of the money owed to the city.

    The controller sampled collections from several city agencies to arrive at the estimate. The percentage of uncollected debt is down only 1 percent from three years ago, when a similar audit was conducted.

    Ms. Greuel said the collection rate is "not acceptable," and added that part of the problem is the amount of time it takes the city to process bills and request payment. "If it takes six months to get a bill to someone, they are less likely to pay," she said.

    A spokesman for the Department of Transportation said traffic tickets often are paid late, but most are paid eventually because people can't renew their vehicle registration if they have outstanding tickets.

    Councilman Paul Koretz said, "Maybe it's time we held the department heads accountable and looked at their overall budget to see if it should be cut unless they improve collections." (Source: Los Angeles Daily News, July 1.)

    Cal-Tax recommendation: Councilman Koretz's suggestion is a good one, and should be implemented. The best way to force department heads to take the problem seriously is to cut their funding until they make improvements. The audit three years ago has not resulted in any improvement, and it's doubtful that this one will, either, unless penalties are put in place for those who accept the status quo.

  • Santa Clara County Supervisor Overspends Annual Office Budget by $87,500. Scott Herhold, a columnist for the San Jose Mercury News, reports that for the fiscal year that ends June 30, Santa Clara County Supervisor George Shirakawa Jr. overspent his $1 million-plus office budget by $87,500, nearly 9 percent. Now, the supervisor is "asking for a bailout from the financially pressed county's contingency fund," Mr. Herhold writes.

    The columnist adds: "Let me put this in the simplest possible terms. A guy that we've elected to supervise the county's budget to make decisions on hundreds of millions of dollars at a crucial time can't keep within a budget for himself and his nine staffers."

    The supervisor, the only one on the five-member board who had an overspending problem, said in a memo to his colleagues that "this unfortunate overage was due to unforeseen employee benefit costs." An aide said the office has two part-time employees who were intended to be classified as contractors, but were classified as employees, which means they qualified for benefits that had not been budgeted. (Source: San Jose Mercury News, June 21.)

    Cal-Tax recommendation: The county should follow Mr. Herhold's suggested recommendations to take the money out of the supervisor's next budget, and to require that he explain in a public meeting how the fiscal mismanagement occurred.

  • In Orange County, Government Lobbyists Spent $1.1 Million to Lobby Other Government Officials. The Orange County Register's OC Watchdog blog reports: "A tally of lobbying expenditures for just eight local governments in Orange County shows that $1.1 million was spent on government-to-government influence-peddling, reports the Orange County Grand Jury in its ominously-titled 'Lobbying: The Shadow Government.'"

    The biggest spender was the Orange County Transportation Authority, spending $336,000 on lobbyists. In second was the county itself, spending $240,000. Other government agencies spending big on lobbying included: the Orange County Water District, $120,000; the Orange County Sanitation District, $110,000; the Municipal Water District of Orange County, $80,000; the Orange County Fire Authority, $60,000; the Orange County Employee Retirement System, $40,000; and the Orange County Clerk-Recorder, $30,000.

    The blog noted that this spending is just the tip of the iceberg: "When you consider that just about all of OC's governments 34 cities, and 28 school districts, and 31 special districts, and four community college districts employ lobbyists, well, it's clear we're talking about millions upon millions of dollars spent just so one branch of government (that's supposed to be working for We The People) can ask for something from another branch of government (that's also supposed to be working for We The People)." (Source: Orange County Register's OC Watchdog blog, June 10.)

    Cal-Tax recommendation: Government agencies at all levels should reduce or eliminate lobbying expenses and redirect the money to programs that serve those in need. Government officials are elected to represent the people in their districts, and should be expected to be aware of their constituents' needs without being lobbied by other elected officials.

  • L.A. Controller Says Department of Water and Power Tried to Extort the City Council. Los Angeles City Controller Wendy Greuel released an audit June 10 blasting the Los Angeles Department of Water and Power for claims the department made during a dispute over whether it could afford to transfer $73.5 million to the city to help with budget problems.

    "I can say with 100 percent certainty that the DWP did have the $73.5 million available to transfer to the City, and could have done so without putting itself in ANY financial jeopardy," Controller Greuel said. "My audit lays out in detail that none of the reasons given by the DWP for refusing to transfer the money are supported by facts. As of April 1, the DWP's Power Revenue Fund had approximately $752 million dollars in it, more than enough money to transfer the $73.5 million to the City."

    The controller also said the department did not need a controversial Energy Cost Adjustment Factor increase to complete the revenue transfer, as it had claimed.

    On April 5, the DWP sent a letter to Controller Greuel giving five reasons why it "could not transfer" the $73.5 million.

    "It's hard to look at these numbers and not say that the DWP was trying to extort the City Council into passing its proposed ECAF increase," the controller said. "This audit is clear, there needs to be greater transparency at the DWP. The insulated culture and the lack of accountability in the Department must change. The DWP has lost the trust of the public through this debacle and it will require dramatic steps over the coming months and years to rebuild the confidence of the ratepayers." (Source: Report from the Office of the Los Angeles City Controller, June 10.)

    Cal-Tax recommendation: While taking money from the Department of Water and Power in order to address the city's general fund imbalance may or may not be a good idea, the proposal should be decided based on sound data and reliable reports from all government staffers. We applaud the city controller for looking into the department's claims and speaking out strongly about the problems she discovered.

  • Audits Reveal Waste in L.A. County Departments. Auditors in Los Angeles County recently released a report documenting 101 cases of fraud that occurred from June through December of 2009. The cases were discovered after auditors reviewed calls made to the county's fraud hotline. The hotline generates about 500 tips every six months.

    Some of the findings:

    • An employee in the Department of Public Social Services obtained personal and confidential information for 82 welfare recipients. The information was obtained during home visits to the recipients and from the department's computer systems. The employee, Trang Dinh, reportedly used the information to file fraudulent income tax returns and refunds totaling $100,000.

    • Los Angeles County's Beaches and Harbors and Library departments paid $842,000 for custodial and janitorial services that were never performed. The departments had a contract with a phony company. When the fraudulent contract was discovered, the owner of the "maintenance company" was arrested and convicted of a felony. He has been ordered him to pay back the county.

    • Three county Fire Department officials played golf during work hours, but claimed a full work day on their time card. One official went as far as to claim overtime. Two of the officials were not disciplined. Previous employee regulations allowed employees to report a full work day as long as the employee worked at least one hour.

    • Fire Department Deputy Chief Helen Jo received a reprimand for hiring one of the county official's future sons-in-law. According to the audit, Ed'ward Rhone was overpaid and received more benefits that most new employees are entitled to. Since the audit was performed, the employee was transferred to a more demanding position to justify his pay. (Source: Los Angeles Times, May 27.)

  • Nearly $1 Million in County Purchases Unaccounted for in Orange County. A report by Orange County Auditor-Controller David Sundstrom reveals that county staff can't account for nearly $1 million in items purchased with taxpayers' money. The report said 60 big-ticket items including a covered trailer, laser printers and LCD projectors cannot be accounted for.

    Mr. Sundstrom said the majority of the missing items are electronics that are so old that they are no longer valuable. "That's true," the OC Watchdog blog said. "All but two of the items are more than 6 years old: An enclosed trailer bought in January 2005 for $20,741.88 was reported missing to county supervisors on February 3, 2009, (and) a VHF radio transceiver, bought in October 2007 for $8,429.91 is missing."

    The most expensive item on the list was a pharmacy dispensing machine purchased for more than $152,000 in 1999. An official in the county's Health Care Agency said the device was traded in to the manufacturer. (Source: Orange County Register's OC Watchdog blog, May 25.)

    Cal-Tax recommendation: The county needs to tighten up its recordkeeping and oversight. The list of missing items includes many expensive items that are not easily misplaced, including a $5,500 oven at the sheriff-coroner's office, a $95,000 film imagesetter at the Department of Public Works, and a $12,600 steam generator at the Health Care Agency. County officials should know whether the equipment was traded in, junked or stolen, or else they won't be able to do an adequate job of safeguarding the taxpayers' money.

  • County Builds $23 Million Pet Shelter, Then Ponders Closing the Facility. The Sacramento Bee reports on one of the more remarkable examples of poor long-range planning: "Six months after unveiling its $23 million shelter for unwanted dogs and cats, Sacramento County is contemplating getting out of the animal care business, a county executive acknowledged Thursday. The county has dismissed its shelter director, Pat Claerbout, and on Thursday met with area officials to discuss the possible consolidation of animal care services across the region."

    The county has faced deficits for three consecutive years, and a county official said, "Unless we come up with a different revenue stream, the current model (for sheltering abandoned animals) is not sustainable."

    "The gleaming new shelter on Bradshaw Road opened to fanfare in October," The Bee reports. "It was publicly financed, and the county inherited a $1.6 million annual bond obligation on the building." (Source: The Sacramento Bee, May 28.)

    Cal-Tax recommendation: Consolidating animal care services with city-run facilities sounds like a good idea, and the county also should consider eliminating its fiscal planning staff, since the taxpayers don't appear to be getting any benefit from their services. In addition to building a pricy high-end animal shelter when keeping it open should have been a foreseeable challenge, the county supervisors decided in mid-2007 to spend $295,000 on a handful of sculptures to beautify the building. The county needs to examine its priorities.

  • Audit Shows City of Los Angeles Misplaced 45 Percent of Purchases. A new audit reports that the city of Los Angeles, facing a budget deficit of $222 million, has misplaced hundreds of purchased items worth a total of almost $1 million. Auditors also found that the city spent taxpayer dollars on many items that were unneeded and sat in storage.

    Auditors could not locate 115 items (45 percent of the items purchased by the city), including a $60,000 video camera purchased by the Los Angeles Information Technology Agency (ITA).

    The audit also found that ITA and the Los Angeles Recreation and Parks Department purchased 138 items that were unneeded, including some that have remained in storage for more than seven years. These items include refrigerators, stoves, a swimming pool heater, a deep fryer, two televisions, nine microwaves, and several computers and printers. The unused items in storage are worth $237,000. (Cal-Tax: Of course, a seven-year-old computer isn't worth much now.)

    City Controller Wendy Greuel said: "With the city facing such a large budget deficit, it's essential that any equipment that we are able to purchase is easily located if needed and utilized immediately. It's critical that we keep tight controls on the city's scarce resources. Unfortunately, we found in this case that no one was minding the store."

    Ms. Greuel offered several recommendations: departments should update their inventories at least once a month when assets are disposed or transferred; departments should conduct biennial physical inventories of all equipment, as required; guidelines should be developed for departments to follow when conducting physical inventories of the city's assets; departments should use purchased items by putting them into service as soon as possible, and such items should not go into storage upon being purchased; departments should develop policies to monitor and track assets that cost less than $5,000 and are susceptible to theft or loss; and departments should place identification tags on every asset owned by the city, to assist in the inventory process. (Source: News release from Los Angeles City Controller, May 3.)

    Cal-Tax recommendation: Other cities and counties should follow Controller Greuel's lead and review recent purchases. It is critical that officials conduct oversight of taxpayer dollars, especially in times of fiscal hardship. The audit included a number of recommendations that all local governments should follow.

  • Auditor Finds More Than $300,000 in Errors in City of Menifee. An auditor reported this month that the city of Menifee (in Riverside County) has a severe lack of internal financial controls that has left the city open to potential fraud since it became a city in July 2008.

    The city-commissioned auditor reviewed six of the city's 31 contracts and took issue with more than $300,000 in billing errors caused by overbilling, backbilling, delayed billing, double payments or unauthorized payments.

    Councilman Scott Mann, who had pushed for the audits, said, "When you consider the accounting firm only reviewed six of the city's 31 contracts, the prudent man and the prudent taxpayer would have to ask, 'Are there additional errors out there that we need to fix?'"

    Among the auditor's findings:

    • An administrator was paid at an hourly rate of $140 to $145, when $130 was the maximum allowed in a contract. This resulted in a $16,500 overpayment in a 10-month period.

    • A subcontractor billed the city for $27,171 for labor hours that had no corresponding timesheets.

    • The city manager who awarded contracts was simultaneously serving as a manager of a subcontractor that received contracts, and received bonuses based on the company's performance.

    • Contracts for $236,900 and $56,600 were awarded without the required City Council approval.

    City officials said they were troubled by both the depth and the breadth of the oversight problems. (Source: Riverside Press-Enterprise, April 16.)

    Cal-Tax recommendation: It goes without saying that the city's remaining contracts should be audited as soon as possible. City officials reacted to the audit by indicating they will institute real checks and balances to safeguard the taxpayers' money, and the city's residents should hold their elected officials accountable to make sure the needed reforms actually occur.

  • Tax Dollars for Job Creation Instead Spent on Trips to the Boardwalk. The San Francisco Chronicle reports: "Federal stimulus dollars intended for job creation in Oakland were spent instead on trips to the Santa Cruz Beach Boardwalk and a Concord water park, rent, church repairs, bus passes, salaries and car allowances, according to a state review."

    Oakland, which has a 17.7 percent unemployment rate, received $3 million last year for summer youth, adult and dislocated worker programs. But more than $830,000 of the money received under the American Recovery and Reinvestment Act from February to December 2009 was not properly accounted for or was misspent, according to the state Office of the Inspector General.

    In addition, state auditors found that the city inflated the number of jobs created, claiming 35 when only about six jobs were created with the stimulus dollars.

    Laura Chick, the state inspector general overseeing federal recovery dollars, found that stimulus funds were passed down from a city agency, the Oakland Workforce Investment Board, to a nonprofit, the Oakland Private Industry Council, which took control of the money despite the fact that the group had no valid contract with the city from July 2009 until earlier this month.

    Questionable spending included:

    • $2,806 given to the Spanish Speaking Citizens Foundation for food and field trips to the Santa Cruz boardwalk, Waterworld California and Washington Park in Alameda.

    • $5,415 given to the Alameda County Youth Development program for staff salaries, benefits and bus passes.

    • $9,100 given to the Watkins Memorial Church of God for salaries, maintenance and repairs, and rent.

    Auditors had trouble tracking money in part because the Industry Council drew stimulus funds based on arbitrary estimates rather than actual expenditures, Ms. Chick's report said. (Source: San Francisco Chronicle, April 21.)

    Cal-Tax recommendation: The federal government and the city should put some oversight measures in place, and funds should not continue to go to agencies who have misused the tax dollars they previously received.

  • San Diego Throws Away $31,000 in Discounts. An audit of San Diego city departments found that the program used to purchase goods and services to meet emergency needs is inefficient and wasteful. City Auditor Eduardo Luna said the program has a cumbersome process, a lack of timely payment for invoices, and no requirement that departments set aside money to pay for purchases before placing orders.

    The auditor said vendors offered the city nearly $53,000 in discounts if it paid invoices in a timely manner, but a poor tracking system led to the city losing nearly $31,000 of those discounts. (Source: San Diego Union-Tribune, March 31.)

    Cal-Tax recommendation: The city should take the auditor's advice, which is to eliminate the program and replace it with one that is efficient and has effective controls.

  • Ban on Lawn-Watering Blamed for Water Main Breaks in Los Angeles. The Los Angeles Times reports: "A blue-ribbon panel of scientists said (April 13) that the high-volume water main breaks that bedeviled Los Angeles last summer and fall were caused in part by the city's restrictions on lawn watering, and their findings could force the city to remake its strict water conservation policy."

    In June, the city limited the use of lawn sprinklers to Mondays and Thursdays. Officials said the restrictions were successful, as in February, Los Angeles had its lowest recorded water use in 31 years.

    However, the fluctuations in water pressure "accelerated the metal fatigue failures of aged and corroded cast-iron pipes," the report found. From July through September 2009, the city recorded 101 major breaks that flooded streets, damaged property and wasted countless gallons of water. There were 42 such breaks in the entire year of 2008 and 49 in 2007.

    The Times noted that in one break, a water main under Coldwater Canyon Avenue in Studio City exploded, "sending a 10-foot gusher of water and mud into the air." The paper continued: "Homes and businesses were flooded. The street, a major thoroughfare connecting the San Fernando Valley and the Westside, was closed for a week. Less than 72 hours later, another main burst in Valley Village, creating a sinkhole that swallowed half a firetruck that responded to the call."

    Damages from just the Studio City break have led to 108 legal claims against the city. (Source: Los Angeles Times, April 13.)

    Cal-Tax recommendation: Next time, consult with the experts before passing restrictions. This ill-designed effort will be costly for the city's taxpayers, who already have watched water flow through the streets while their lawns turned brown.

  • Grand Jury Finds Big Problems at Small Water Agency. The Sacramento Bee reports: "Citing years of dysfunction, the Sacramento County grand jury is pushing for an overhaul of the Rio Linda/Elverta Community Water District. On Monday, the grand jury released the findings of its investigation into the district, which serves 18 square miles in northern Sacramento County. The investigation found that political squabbling, lawsuits and wasted taxpayer money are crippling the district and threatening public health and safety."

    The grand jury report stated: "The conduct of the board of directors has been deplorable. It has wasted taxpayers' dollars at the same time that it has brought disrepute on the District. Since they have failed repeatedly in the past, there is no reason to believe that they will be successful in the future. The only hope for the District is that major changes are enforced."

    The grand jury found numerous problems, including low pressure, unsafe drinking water, questionable spending and apparent conflicts of interest on the part of the board of directors.

    For example, the grand jury found that residents conservatively pay an extra $100 per year in insurance premiums for single-family homes partly because of the fire hazard that low water pressure poses.

    Criticizing the agency's use of tax dollars, the grand jury reported: "Currently the district only has six employees and has never had more than ten employees; yet the District has spent hundreds of thousands of dollars on labor negotiations and employee lawsuits." (Source: The Sacramento Bee, April 6.)

    Cal-Tax recommendation: Local officials should get involved and fix the problems, and there should be more oversight in the future.

  • UPDATE: Los Angeles Supervisors' Slush Funds Aren't Illegal, County Prosecutors Say. Los Angeles County prosecutors said April 6 that county supervisors did not break the law when they spent millions of tax dollars on pet projects without a public vote or public discussion.

    The Los Angeles Times reports: "The district attorney's inquiry began in response to a complaint received last month after The Times detailed some of the $3.4 million per year that each of the five supervisors receives to spend at his or her discretion."

    Deputy District Attorney David Demerjian, who oversees the district attorney's Public Integrity Division, said: "I made a determination that there was statutory authority for the board to adopt a budget. Within their legislative function, it is their right to determine how the budget should be divided up."

    Nor did the supervisors violate the state's open meetings law, the prosecutors said, because supervisors have delegated authority to the county's chief executive officer to make the individual expenditures dictated by the supervisors. (Source: Los Angeles Times, April 7.)

    Cal-Tax recommendation: The budget for the District Attorney's Office is set by the Board of Supervisors, so there may have not been the same level of scrutiny applied as there would have been if a truly independent entity examined the spending. If the spending is, in fact, allowed by law, then the law should be changed immediately to ensure that taxpayers' money cannot be spent without a public, recorded vote.

  • Los Angeles Supervisors' Spending Is Under Investigation. The Los Angeles Times, which recently reported on Los Angeles County supervisors using $3.4 million slush funds without any votes to authorize the spending, now reports that prosecutors are examining whether the spending was a violation of the law.

    Supervisors have been using the money for parties, donations to local groups, drivers, and to buy places for themselves in "who's who" books.

    The head deputy district attorney said he has assigned two prosecutors to look into the spending. "One is reviewing whether supervisors violated the state's open meeting law by spending the funds without a public vote," the Times reported. "The second is examining whether supervisors had the legal authority to spend the money."

    The newspaper also reported that supervisors used to vote on donations, "until the 1990s, when the contributions dropped off the public meeting agendas apparently without explanation."

    Questionable spending included $25,000 by Supervisor Mark Ridley-Thomas to pay for a reception for a for-profit exhibit organized by a long-time friend, television and radio host Tavis Smiley. (Source: Los Angeles Times, March 19.)

    (Cal-Tax recommendation: This investigation is good news to Los Angeles taxpayers, who deserve to know where their tax dollars are going.)

  • Despite Massive Deficit, Santa Barbara County Spends Big on Remodeling Offices and More. The Santa Barbara County Board of Supervisors is facing an estimated $40 million budget shortfall this year, and is considering cutting as many as 400 jobs but that hasn't stopped the supervisors from spending big on non-essentials, including $18.4 million for two new county buildings and an office remodel for the public defender.

    Other recently approved expenses:

    • A retirement incentive program that has cost the county and assorted departments an estimated $13.5 million.

    • Creation of the Gaviota Coast Rural Regional Plan, a $1.4 million, four-year project to establish a blueprint for the future development of rural areas.

    • A "climate action strategy" that will cost an estimated $500,000.

    • Creation of a new countywide energy financing district that will cost $1 million.

    • A $40,000 allocation to seasonal homeless shelters.

    • A $15,000 bill to test ocean water quality.

    However, the Santa Maria Times reported that on March 10, supervisors "showed a rarely seen frugal side" and postponed action on a request for $350,000 for the first new computer system the treasurer-tax collector has had in more than 30 years. The board asked for more details, and postponed a decision until March 23. (Source: Santa Maria Times, March 7 and March 10.)

    (Cal-Tax recommendation: The county needs to get its priorities straight. It has spent millions on unnecessary new buildings, including $5.5 million for a new Board of Supervisors hearing room, while letting a vital computer system get so outdated that the county's tax collection system is in jeopardy of failure. The Santa Maria Times reported that "the mainframe is antiquated, and the only employees who know how it works are retiring." In 2008, the system overheated and it took two field engineers and internal staff members several days to diagnose and repair the computer because the hardware is so old.)

  • Los Angeles Supervisors Continue Spending Millions on Parties, Chauffeurs and Other Non-Essentials. The Los Angeles Times reports: "As Los Angeles County supervisors prepare to carve deeply into everything from public safety to social services, they also are spending millions in taxpayer dollars to burnish their public images, pay for chauffeurs, hold parties for friends and lobbyists and support pet projects. Each supervisor receives $3.4 million a year to spend as he or she sees fit, without any public vote or scrutiny."

    The spending includes:

    • $200,000 by Supervisor Zev Yaroslavsky to support his new website.

    • $25,000 by Supervisor Mark Ridley-Thomas to buy a place in "Who's Who in Black Los Angeles."

    • $99,000 by Supervisor Don Knabe for an armed driver.

    The Times reported that supervisors and county workers have not been cooperative when asked for documentation of where the money has been spent, and generally refused to be interviewed. Still, the newspaper obtained a significant amount of information after filing a Public Records Act request.

    The paper reported: "According to the records, Los Angeles County leaders gave a total of $4.8 million to outside groups in the last 28 months sometimes boosting their public profiles or benefitting people to whom supervisors had personal or political ties. Antonovich's name is emblazoned on the schedules of soccer leagues he supports, and Knabe is listed as a benefactor in many nonprofit newsletters." (Source: Los Angeles Times, March 10.)

    (Cal-Tax recommendation: These slush funds must be abolished, immediately. There is simply no justification for the supervisors to be authorized to spend a combined $17 million per year without any vote or public accountability.)

  • San Francisco Library Spends Money on Social Worker Instead of Books. The main branch of the San Francisco Public Library has become the first known library in the nation to hire a full-time social worker for $85,000 a year to help homeless people.

    (Cal-Tax: It is interesting to note that in 1978, as Californians were preparing to go to the polls to vote on Proposition 13, the San Francisco libraries posted signs reading: "NOTICE! If Proposition 13 passes on June 6, the San Francisco Public Library WILL CLOSE EFFECTIVE JUNE 30, 1978." The library not only survived, but has expanded with a multimillion-dollar improvement program, and now is doing well enough to hire a social worker.)

    An Associated Press report explains that the library "is near a neighborhood of single-room occupancy hotels, soup kitchens and other service providers for the very poor." The story continues: "Some mornings, just after it opens, the library seems to have more people who appear to be homeless wearing half their clothes and carrying the rest than not."

    The San Francisco Chronicle describes the library's situation in more detail: "There has long been an unwelcome footnote at the San Francisco Main Library in the Civic Center: homeless people who hang out among the shelves, sometimes cursing loudly or threatening others. The bathrooms often have proved downright scary, with people doing drugs, bathing in the sinks and having sex in the stalls. Patrons' comments collected by the library over the past couple of years include, 'The Main Branch library, while well-intentioned, looks like a homeless shelter inside and out.' And, 'The homeless are driving me and many of my professional friends away.'" (Sources: Associated Press, February 22; San Francisco Chronicle, January 11.)

    (Cal-Tax recommendation: The city should differentiate between the library and a homeless shelter, rather than hiring a social worker and further blurring the lines. Turning the library into a homeless shelter is a disservice to taxpayers who want to use the library for its intended purpose, and a disservice to homeless people who would receive more compassion and care at a true shelter.)

  • Orange County Spent $842,450 on Failed Information Technology Plan. Orange County spent $842,450 to create an information technology plan that leaves out critical information and fails to guide the policymakers who are considering the county's future technology needs, according to a report from the county's performance auditor. "The plan does not achieve its intended purposes: to serve as an actionable road map for countywide IT operations and investments over the next five years," according to auditor Steve Danley's report.

    For example, the plan does not discuss outsourcing, even though that option has been weighed, nor does the plan include any metrics to measure progress toward implementing a strategic IT plan.

    The county's IT chief disputed the findings of the auditor.

    This is not the first time Orange County has been criticized for its handling of technology. In December, Mr. Danley reported that the county had awarded $45 million in no-bid contracts relating to IT projects during a four-year period. In 2006, a $6 million computer mainframe was delivered to the county before the supervisors even voted to approve the spending. (Source: OC Watchdog, February 24.)

    (Cal-Tax recommendation: The county already has taken the wise step of calling for audits of IT spending, and supervisors should be ready to act on the findings of the auditor, before more money is wasted on flawed plans or more contracts are awarded without competitive bids.)

  • Tulare County Misspent $1 Million in Federal Stimulus Funds. State Inspector General Laura Chick reported March 2 that a Tulare County agency improperly spent $1 million in federal stimulus money.

    The Tulare County Workforce Investment Board spent the money on rent, equipment, utility bills and other overhead, when most of the money should have been used for summer jobs for at-risk youth.

    Ms. Chick criticized the accounting practices of the agency, saying, "Problems included miscoded revenues, erroneous journal entries, inappropriate allocation methodology and shifting of expenses."

    Among other things, the agency recorded expenditures for only $2,079,039 of the $6,847,084 in Recovery Act funds that were received.

    Ms. Chick said: "We've been told not to worry by officials at the Federal Department of Labor and the State Employment and Development Department. They feel that the (Workforce Investment Board) will reconcile these discrepancies and make the accounting adjustments at the end of the 2011 fiscal year. While this might be legal and might make sense at the end of the day, this kind of confusing and convoluted accounting flies in the face of the intent and spirit of the Recovery Act." (Source: March 2 letter from Laura Chick to Governor Arnold Schwarzenegger and to the Tulare County Workforce Investment Board.)

    (Cal-Tax recommendation: Obviously, Tulare County needs to tighten up on its accounting procedures. We commend Ms. Chick for continuing to be the government's most outspoken critic of waste and mismanagement.)

  • Los Angeles Flood Control District Fined $275,000 for Allegedly Polluting Harbor. The Los Angeles Times reports: "The Los Angeles County Flood Control District faces a state fine of almost $275,000 for allegedly allowing bacterial pollution to flow into the harbor at Marina del Rey for more than two years." The state cited 186 violations from 2007 to 2009 of the district's storm water permit.

    The fine is not yet official. The California Regional Water Quality Control Board will decide May 17 whether to assess, modify or rejection the fine. (Source: Los Angeles Times, February 23.)

    (Cal-Tax recommendation: The obvious recommendation is for the water district to correct its mismanagement issues and start improving water quality the reason for the district's existence. Unfortunately, when one government agency fines another, the only person who actually suffers a penalty is John Q. Taxpayer. In this case, the residents of the flood control district will be paying the fine even though they also are the people who have suffered from the polluted water.)

  • Los Angeles County Has Been Buying $40 Pens, Wasting $162,000 a Year. Los Angeles County officials recently eliminated thousands of pricy items from the county's official government office supplies catalog but only after years of allowing county workers to buy $40 pens and $131 floor mats.

    Chief Executive Officer Bill Fujioka said he "wasn't aware" that county workers have had the choice of buying fancy pens instead of 24-cent ballpoints. He said that under the new purchasing options, the county's annual pen bill will drop from $195,000 to $33,000.

    The county spends $6 million a year on office supplies, and a county official estimates that purchasing lower-cost items will trim 25 percent to 30 percent off the bill. That estimate came from Joe Sandoval, a purchasing manager who recently went line-by-line through the 18,000-item office supply catalog and trimmed it in half.

    Cal-Tax Vice President of Communications and Research David Kline was quoted by the Inland Valley Daily Bulletin, saying: "It just boggles the mind that anyone would consider a $40 pen a wise use of taxpayers' money. It's sad that it took a major recession for them to even scrutinize this list and eliminate the wasteful spending." (Source: Inland Valley Daily Bulletin, February 16.)

  • Sacramento City Council Members Get $50,000 Each to Spend at Their Discretion. In what critics have labeled as a "slush fund," each Sacramento City Council member gets $50,000 a year of taxpayer money to spend as he or she wishes, with no public hearings or votes. Sacramento Mayor Kevin Johnson, who campaigned on elimination of the funds, said the "council felt strongly that those were their dollars, and I wasn't going to get the votes on this."

    Jon Coupal, president of the Howard Jarvis Taxpayers Association, said, "The discretionary funds can be properly labeled as slush funds."

    Most of the contributions went for sponsorships of activities and for tickets for fundraising dinners of various organizations and special interest groups, and other activities that taxpayers would have to pay out of their own pockets to attend. Many of these expenditures clearly should have come from campaign funds, not taxpayer dollars. (Cal-Tax: What is particularly unfair is that not all organizations are treated the same. Why should some PTAs get slush funds while others do not?)

    Most of the spending occurred in small increments, with many items in the neighborhood of $100 to $500, but the spending adds up significantly.

    Some of the expenditures by individual City Council members:

    Steve Cohn

    Sponsor prison guards union conference


    Robert Fong

    Sponsor "Bamboo Classic Golf Tournament"


    Robert Fong

    Table at dinner for Asian Peace Officers Association


    Robert Fong

    Sponsor Camellia Waldorf School graduation


    Lauren Hammond

    KVIE membership renewal


    Lauren Hammond

    Capitol Public Radio membership renewal


    Bonnie Pannell

    Earth Day sponsor


    Sandy Sheedy

    Sponsor "The Spot" teen center


    Roy Tretheway

    French Film Festival sponsor


    Roy Tretheway

    Subscription to the pricey California Lecture series


    Roy Tretheway

    Tickets to United Farm Workers union fundraiser


    Kevin McCarty

    Sponsor event by College Democrats at Sacramento State honoring Assemblyman Dave Jones and others


    Kevin McCarty

    Reimbursement to Steve Maviglio for plants at Stockton and T streets


    Kevin McCarty

    Purchase of laptop computer


    Organizations that are recipients of this largesse can be expected to look favorably on re-electing the giver, to stay in the gift-recipient loop.

    A number of payments are for ads in various programs or publications of certain groups. For example, City Councilman Steve Cohn spent $110 for a sponsorship ad in the December 2008 issue of the Sacramento Valley Union Labor Bulletin. (Source: KCRA-TV, Sacramento, February 8 and February 9.)

    (Cal-Tax recommendation: The discretionary accounts should be eliminated. There is no public policy justification for gifting tax dollars to special interest groups. In the meantime, the ads in various programs and publications should thank the taxpayers of Sacramento, not the individual council members.)

  • Los Angeles Coffers Empty, but City Council Members Benefit From Increased Discretionary Budgets. Discretionary accounts held by Los Angeles City Council members are flush, even as the city's general fund is deep in the red, the city controller reported this week.

    Council members' accounts have grown as the city has collected revenue generated from the sale of surplus property. Under current city law, half of the revenue generated from the sale of surplus property goes to council members' discretionary funds, while the other half goes to the city's general fund, which currently faces a $400 million deficit. Funds deposited into the discretionary funds generally are unrestricted, and have little oversight.

    Los Angeles City Controller Wendy Gruel reported February 10 that these funds should be made transparent, and said all of the revenues generated from the sales of surplus property should be deposited into the city's general fund.

    Over the last 12 years, Los Angeles City Council members have obtained $25 million that otherwise could have gone into the city's general fund. (Source: Los Angeles City Controller's Report, February 10.)

    (Cal-Tax recommendation: While the controller's report does not note how the council members used their discretionary funds, use of the surplus revenues to address the budget deficit would seem to be a more efficient use of taxpayer funds. This use of the revenue also would be more transparent to taxpayers, since the spending would be detailed in the budget. City councils should eliminate discretionary funds to avoid the appearance that elected officials have "slush funds" of tax dollars that can be spent without oversight.)

  • Former Directors of El Dorado Irrigation District Cite Waste and Mismanagement. Six former directors of the El Dorado Irrigation District, a public entity formed in 1925 under California Irrigation District law and providing water to 100,000 customers, have charged the district with frivolous spending.

    In a column in The Sacramento Bee, they wrote that the EID proceeded to "spend like there was no tomorrow," and cited:

    • Expenses to water conferences for friends of board members.

    • Four-figure restaurant bills.

    • Contracts to friends of board members, such as $10,000 to research how other water districts get their legal advice.

    • Two infomercials (costing approximately $50,000) that aired late in the night to let insomniacs know what a world-class utility EID is.

    • A $166 million five-year capital improvement program in 2003 which they say is extravagant, and another $133 million in new debt in 2009.

    • A dramatic increase in labor costs, from $11 million to $34 million in just six years.

    • An increase in the CalPERS retirement benefit formula from 2 percent at 55 to 2.7 percent at 55, retroactive for all years of EID service.

    • An increase in staff from 180 to 305 employees in less than five years.

    As a result, despite rate increases for the last six years, another 35 percent rate increase has been proposed.

    The six former directors are asking the Legislature's Joint Audit Committee to review the district's finances.

    The six former board members making these charges are Al Vargas (1999-03), Eugene Larson (1969-95), Richard Akin (1994-03), Howard Kastan (1991-93 and 1997-2001), William Bergmeister (1989-91 and 1999-01) and Raymond Larson (1996-99). (Source: The Sacramento Bee, January 29.)

    (Cal-Tax recommendation: The Legislature should take the former board members' advice and audit the water district, and should consult with the former board members, since they are familiar with the board's operations and finances.)

  • Indio Accused of Misspending $500,000 in Housing Aid. The U.S. Department of Housing and Urban Development alleges that the city of Indio (in Riverside County) misspent $500,000 in federal funds intended for housing-related programs. The city instead used the money to offset its general fund to pay for code enforcement, the federal government says. In a letter to the city, a HUD official said, "We can appreciate the challenges that cities are facing with the state budget crisis, but using (Community Development Block Grant) funds to solve its budget problem is not the purpose of the program."

    Indio will not have to repay the money as long as it develops an "action plan" for future spending, and will not lose out on future federal funds because of the misuse of the block grants, a city official said. Mark Wasserman, assistant to the city manager, said, "We take responsibility for the error and will fix it." (Source: The Desert Sun, January 27.)

    (Cal-Tax recommendation: It is good that the federal government discovered the misspending and that the city has taken responsibility for it, but the fact remains that money intended for housing development was spent for other purposes, and there is no penalty for the transgression. Some sort of punishment is needed to keep this sort of abuse of tax dollars from happening again, lest taxpayers become even more disillusioned with their government.)

  • La Quinta Spends Big on Sculpture, Then Spends Again to Have It Removed. In 1996, the La Quinta City Council authorized spending $93,000 in tax dollars for a sculpture that was placed at a busy intersection as an attempt at public art. In 2001, the city spent an additional $34,900 for improvements. Now, responding to public complaints that the sculpture is an eyesore, the city is going to spend another $15,000 to remove and dispose of the piece.

    The sculpture, titled "Oasis One Eleven," is described as an "art piece-turned-blight" by The Desert Sun. The artist contends that city officials have failed to polish and maintain the bronze piece, but city officials say the now-dingy artwork "was not what was originally envisioned" and was "not in keeping with community design standards." (Source: The Desert Sun, January 20.)

    (Cal-Tax recommendation: Public art is a constant source of debate should government stay away from art entirely, or does taxpayer-funded art sometimes provide a public benefit by making an area more enjoyable and more attractive to tourists? The jury is still out, but this example illustrates that government officials would be wise to err on the side of caution, lest they follow in La Quinta's footsteps by spending almost $143,000 to install and then remove a hunk of bronze that has the look of a bunker for defending against Nazi attacks on the Maginot Line.)

  • Unused City Phone Lines Cost Los Angeles Taxpayers $3 Million a Year. Nearly 12,000 municipal phone lines sit unused at a cost of $3 million per year, according to an audit released January 14.

    "With the city facing a massive budget deficit, we must look at every way we can save money," Los Angeles City Controller Wendy Greuel said. "While the policies are strong, oversight is severely lacking."

    In addition to unused phone lines, the controller found that city employees had placed unauthorized calls to Mexico, Canada and the Philippines.

    In response to the audit, the city has revised its telephone procedures. Randi Levin, general manager of the Information Technology Agency, which oversees the city's telephone system, said all long-distance and international calls now must be placed through a city operator.

    Telephone problems in Los Angeles are not new. Former City Controller Rick Tuttle reported in the 1990s that the city had failed to pay a number of its phone bills and may be required to pay penalties of $800,000 per year.

    (Cal-Tax recommendation: Having oversight procedures in place is not enough. Officials should ensure that procedures are followed, and that oversight continues so that further taxpayer dollars are not wasted. Also, Los Angeles may not be alone. Other cities should examine their phone systems to see where savings might be found.)

  • City's Plan for Low-Cost Housing Includes No Money to Build Homes. The Coachella City Council is in the midst of a plan to use $6 million in redevelopment money for low-cost housing. But The Desert Sun reports that "all the money was spent to buy property and no money was set aside to build houses." Since the sale of low-cost housing units was supposed to generate money to pay back a $6 million loan, this puts a big hole in the plan.

    "Going forward with the projects at this point may not make much sense, because the recession has given the city a large stock of low-income housing," the newspaper said in an editorial. However, the paper noted: "Low-income housing is not just an altruistic goal for the city. The California Redevelopment Act requires that at least 20 percent of the profits from tax-increment financing be spent on low-income housing." (Source: The Desert Sun, January 15.)

    (Cal-Tax recommendation: The city already has taken a good step by commissioning an independent investigation into several problems that led the project to go off track. In the bigger picture, state officials need to re-examine the law that requires the city to spend tax dollars on low-income housing even when there is an oversupply of such housing.)

  • Sacramento Pays Massive Legal Fees Instead of Making Minor Change to Building. The city of Sacramento owns and operates the Sacramento Community Center Theater, which recently was the subject of a complaint by a disabled theater patron who couldn't get to the most desirable seats in her wheelchair. Rather than spending an estimated $80,000 to make the theater more accessible to disabled patrons, the city ignored the patron's requests, which led to litigation. Now, the city has settled the litigation by agreeing to make the changes, and a judge ordered the city to pay $140,000 in legal fees to the patron's attorneys.

    In an editorial, The Sacramento Bee stated: "Those fees might have been substantially reduced or avoided altogether had the city treated (the theatergoer's) initial complaint seriously." The paper added, "Governments have a higher duty to protect the rights of the disabled than private businesses." (Source: The Sacramento Bee, January 8.)

    (Cal-Tax recommendation: Government workers at all levels should learn from this example, and should try to work out problems right away, before they escalate. Ignoring complaints or adopting an imperious attitude will only lead to costly litigation. Also, since the government has mandated that all buildings be accessible to the disabled, government agencies should be especially attentive to complaints about lack of accessibility.)

  • Lathrop City Council Uses Tax Dollars to Send Holiday Cards. Dennis Wyatt, managing editor of the Manteca Bulletin, reports that the Lathrop City Council recently used scarce tax dollars to send out hundreds of cards with a color photo of the five-member council and a "season's greetings" message.

    Mr. Wyatt writes: "This, of course, cost money and staff time. There's the card itself, the envelope, the postage, and the time it took to stuff the envelopes and mail them. Forget the fact that Lathrop is bleeding red ink all over the place, may face a reduction in police manpower plus other municipal workers, and its civic leaders are seriously pondering a sales tax for fire protection due to financial woes that are threatening the fire district's ability to protect property and lives. There's always money to stroke the collective ego of politicians."

    The writer then says: "It would be interesting to know what the California Taxpayers' Association and the Fair Political Practices Commission would think about the card mailed at taxpayers' expense. It is so blatant that it defies justification." (Cal-Tax: Since he asked We love holiday cards, but we agree that elected officials should use their own money and time to send out holiday greetings. 'Tis the season to be jolly, yes, but 'tis always the season to use tax dollars wisely, and only for legitimate government purposes.) (Source: Manteca Bulletin, December 29.)

    (Cal-Tax recommendation: The Lathrop City Council members should reimburse the city for the money spent on this card, and all elected officials should remember that every penny saved is like another penny of new revenue.)


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