PERSPECTIVE--The DWP GM’s long-awaited report on the status of reforms at the Joint Institutes for Safety and Training, the two non profits who have eaten through over $40M of DWP ratepayer money, was released on May 12th.
As with her first report last September, General Manager Marcie Edwards failed to provide any substantiation of reported progress. This is in direct contradiction of promoting “the purposes of transparency and follow-up,” as she claimed in her cover memo of this latest report.
It only remains to be seen if Edwards, who openly criticized City Controller Ron Galperin’s audit of the trusts, legally changes her name to Marcie D’Arcy.
Before I dive into the report, “Let’s do the numbers,” as Kai Rysdall of American Public Media’s popular Marketplace broadcast says.
Unfortunately, the Trusts have not published their audited financial statements since the end of fiscal year 2013, compelling me to rely on the IRS 990 filings for 2014 data. The 990s are short on detail, but there is enough to point to an increase in cash accumulation of $500K over the previous year.
That brings the total cash for the two trusts to $11.3M, pushing three times the annual contribution they receive from us, the ratepayers. Still no explanation is forthcoming as to what plans there are for this excess funding.
It is worth noting that the trusts are 501(c)(6) corporations.
IRC 501(c)(4), (c)(5), and (c)(6) organizations may engage in political campaigns on behalf of or in opposition to candidates for public office provided that such intervention does not constitute the organization’s primary activity.
It would appear, then, that some of the $11.3M could work its way into political action. The Trusts previously reported they wanted the money for a “rainy day fund.” Not a bad idea, since it would help offset the $4M IBEW Local 18 poured into Wendy Greuel’s failed campaign for mayor.
The rapid growth in prepaid expenses from $75K to $991K over three years in the Joint Safety Institute raises questions. Is it an advance for a major program – or perhaps junkets for the next few years? A reconciliation of the account is in order. Ordinarily, prepaid expenditures tend to level out in most organizations owing to timing (as appears to be the case at the Joint Training Institute).
Edwards’ report pointed to accomplishments, but offered no evidence of what the specific steps were, not even a hint. It alludes to the establishment of formal spending and contracting policies, without sharing so much as a summary; the same for assurances that there would be adequate segregation of duties – a vital safeguard against fraud.
Perhaps the most pathetic admission is the failure to identify duplication of services between the two trusts. At the same time a dedicated manager has been engaged to invest the Trusts’ cash even though the city is capable of handling the role.
No justification was given for the $220K salaries paid to each of the administrators beyond being linked to the DWP pay scale. You would think the jobs could be consolidated.
Edwards did not question any of the assertions.
It is time to authorize another audit of the Trusts by the City Controller. This time, the audit should focus on the reform process and the so-called accomplishments. Otherwise, the report is nothing more than a “trust me” statement.
Would you trust an unaudited report from an organization with an unscrupulous track record?
(Paul Hatfield is a CPA and serves as President of the Valley Village Homeowners Association. He blogs at Village to Village and contributes to CityWatch. The views presented are those of Mr. Hatfield and his alone and do not represent the opinions of Valley Village Homeowners Association or CityWatch. He can be reached at: [email protected].)