Sun, Jul

Attack on NC Funding from Another Direction

PERSPECTIVE - Regardless of the size of the neighborhood council allocations the City Council approves in the next budget cycle, possible restrictions on the use of the city-issued purchasing cards may make it all moot.

The situation was discussed at last Saturday’s Los Angeles Neighborhood Council Coalition meeting. B H Kim, general manager of the Department of Neighborhood Empowerment (DONE), updated the members.

The cards are currently used for the purchases of goods and services, including monthly and annual operating expenses such as phone messaging, storage, accounting support and web site maintenance.  Non recurring uses for individual services are common for special outreach events – rental of equipment, entertainment – and election activities.

The purchasing card has become the tool of choice for many transactions, because the alternative – the demand warrant – takes months to process….and it is costly to the City.  I have heard it can cost $100 to process one, whether it is for payment of a $10 invoice or $1,000. That point was raised at the meeting; Kim did not dispute it. For that matter, he alluded to the high cost without stating an actual amount.

According to Kim, both City Controller Greuel and City Attorney Carmen Trutanich agree that use of the purchase card for services of any kind is in violation of city policy.  Furthermore, purchases of equipment by neighborhood councils for city departments (including fire and police) require a neighborhood purpose grant.  This type of grant was only instituted last year.

A demand warrant is the only other alternative as it stands now.

Assuming the City has its way, it will be extremely difficult for NCs to operate.

The reality is that part-time volunteers do not have the time to process the same paperwork paid city department employees handle.  Neither Greuel nor Trutanich can comprehend that rules designed for a bureaucracy do not lend themselves to small, loosely-supported, grass-roots organizations.

Merchants are reluctant to deal with NCs if a demand warrant is involved.  I can’t blame them.  Who would want to wait many weeks or months for payment?

It would also be difficult for NCs to plan events not knowing when or if a vendor will be paid.  Any increase in demand warrant volume will further stress the already unacceptable productivity of the Department of Neighborhood Empowerment.

I am not suggesting NCs should be allowed to use the card for everything under the sun.  The city is right to be concerned with controls, and demand warrants are viewed by some members of the City Council and the City Controller as a means to curb potential misappropriation or fraud.

But when the cost of controls outweigh the benefits, everybody loses – especially the neighborhood councils.

Actually, that might be exactly what City Hall wants.  After all, the NC system was a bone the electeds tossed to the citizens to dampen secessionist emotions. [link] Promoting grass-roots democracy or generating interest in local government was a secondary objective at best.  Why on earth would officials encourage citizens to have a forum to question their power base consisting of public labor unions and developers?

You can have controls and still allow the purchasing card to be the primary payment mechanism.  For that matter, the less the city is involved, the better.

DONE should be removed from the funding process.  A Financial Standards and Control Board consisting of NC members with the appropriate credentials and experience should assume responsibility for this important function. There are many talented individuals to choose from, including those with industry experience.

The Board would have the power to authorize funding, train treasurers, negotiate with CPA firms to provide services to NCs that lack accounting capabilities and establish reporting requirements.  More importantly, it would need the power to certify, discipline or sanction NCs.

The cost of services provided by CPAs could be funded by a cutback of staff at DONE - those currently responsible for the accounting process – and flat annual fees levied on each NC as determined by the Financial Standards and Control Board.

It would be money well spent. The city does not have the caliber of employees capable of handling neighborhood council finances efficiently, nor does it have the mindset.

Dedicated neighborhood council advocates have fought tenaciously for every modicum of influence the system has.  I hold these people in the highest regard.  They have achieved much with very little. However, I fear that if the city’s latest move comes to fruition, it will discourage participation.  Veteran NC members will eventually move on with no one to replace them.

It may be necessary for neighborhood councils to take an adversarial stance with City Hall.  The alternative is a slow death.

(Paul Hatfield is a CPA and serves as Treasurer for the Neighborhood Council Valley Village.  He blogs at Village to Village, contributes to CityWatch and can be reached at:  [email protected] ) –cw

Tags: Neighborhood Councils, BongHwan Kim, DONE, Los Angeles Neighborhood Council Coalition, Controller Greuel, City Attorney Trutanich, funding

Vol 9 Issue 90
Pub: Nov 11, 2011