In L.A., Very Slow Progress in Reforming 2 Utility Nonprofits

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Image Credit: L.A. Department of Water and Power meter, Downtowngal

July 23, 2015; Los Angeles Times

The Los Angeles Department of Water and Power (DWP) has done little to change practices at two utility nonprofits accused by auditors of “cavalier” spending after receiving more than $40 million in ratepayer money, even though they promised reforms months ago, reports the Los Angeles Times.

In May, city auditors found that the controversial nonprofits had paid millions to outside contractors without competitive bids, overpaid their top administrators and allowed employees to charge hundreds of thousands of dollars for travel, meals, and auto expenses without filing expense reports. The nonprofits were created in the early 2000’s to improve safety, training and labor relations.

Even though the DWP’s Commission instructed General Manager Marcie Edwards to start on a list of sweeping reforms recommended by the auditors, her first progress report listed only minor changes, says the paper. One example: Although the nonprofits agreed to start seeking competitive bids for purchases “above a certain monetary threshold,” they have not determined what that threshold should be, and have no idea as to when a competitive bidding process might begin.

Board President Mel Levine said, “I would like to see more changes, I would like to see them quicker, but these are steps in the right direction.”

Auditors also recommended combining the nonprofits into a single entity to reduce staff and streamline administrative costs. Five top administrators are paid about $220,000 annually and provided with credit cards without any spending limits. One of them charged more than $30,000 in gas and carwashes 2010 and 2014.

The DWP said that the nonprofits agree with consolidating the two groups, but said it would require “additional analysis” and is considered a “long-term goal.” They will include gas payments made to employees as income reported to the IRS, have already “hardened” their travel policies, and are considering other changes recommended by the auditors.

City Controller Ron Galperin, who found the nonprofits’ employees had charged hundreds of thousands of dollars for meals and travel, recommended much stricter travel policies and controls on credit card spending. His office said it’s too soon to expect the DWP to have resolved all the many problems plaguing the non-profits and see them making steps to reform.

Edwards surprised City Hall observers in May with her initial negative reaction to Galperin’s audit, in contrast to the reaction of Mayor Eric Garcetti, who appointed her. She then made a public apology. Garcetti has been feuding with the DWP union over the non-profits and other issues since his election in 2013. The union was a big supporter of his opponent in that race.

There is a pending lawsuit to determine if city officials should have full access to the ratepayer-funded nonprofits’ financial records in the future. The recent audits were a compromise between the union and city leaders while the lawsuit works its way through the courts.—Larry Kaplan