10 Findings Detailing, Incompetence, Misuse of Public Funds, and Illegal Activity
By: Libi Uremovic | Original Article at patch.com
FINDING 1— Lack of proper accounting and records of bond issuances, fixed assets, and inventory
FINDING 2— Questionable Use of a Seller’s Permit
FINDING 3— Questionable Agreement and Transactions with a City Vendor
FINDING 4— Lack of adequate oversight over contract awards
FINDING 5— Deficiencies in Maintaining Supporting Documentation
Lack of receipts for and descriptions of credit card purchases
FINDING 6— Lack of written administrative policies and procedures
FINDING 7— Fund balance and cash balance deficits and cash impairment
FINDING 8— Lack of performance evaluations and specific job descriptions
FINDING 9— Significant control deficiencies over fiscal functions
FINDING 10— Inadequate financial reporting
A contract for centrifuge equipment used at the wastewater treatment plant was awarded to Andritz Separation Inc. without proper competitive bidding. We tested and traced $229,037 of this contract to invoices and checks. The City contends that this vendor is a sole source vendor, but did not provide documents to support its claim.
A contract to provide pumps for the City was awarded to Xylem Water Solutions USA, Inc. without proper competitive bidding. We tested and traced $37,166 of this contract to invoices and checks. The City contends that this vendor is a sole source vendor for this brand of pumps, but did not provide documents to support its claim.
A contract for professional services for the City’s groundwater basins was awarded to Wildermuth Environmental Inc. without proper competitive bidding. We tested and traced $178,156 of this contract to invoices and checks. The City contends that this vendor performed specialized work, has considerable experience working with the City’s groundwater basins, and that legal counsel advised the City that a competitive bidding process was not required; however, the City did not provide documents to support its claim.
A contract to build a new pedestrian bridge was awarded to Paragon Bridge Works, Inc. without proper competitive bidding. We tested and traced $160,967 of this contract to invoices and checks. The City contends that this bridge was custom-made and therefore did not require the City to follow the competitive bidding process. Building a customized bridge can be considered a type of “professional service” and a “public works project,” which should follow competitive bidding procedures.
On December 17, 2013, the City entered into a contract with Urban Logic Consultants (ULC) for engineering services without following competitive bidding process. This contract established a new procedure in which future engineering projects would be processed through “job cards” that would detail the scope of work to be performed and estimated costs would be approved by the City Engineer, Finance Director, and the City Manager. This contract did not require “job cards” to go through the competitive bidding process nor did it require City Council approval.
We could not determine how much the City paid to ULC from 1993 through 2002-03.
From FY 2003-04 through 2013-14, the City paid approximately $38 million to ULC. We could not verify if all these payments went through the competitive bidding process because most ULC records were seized during a raid by the Riverside County District Attorney’s Office. The City should not approve of agreements wherein large projects can be funded without the City Council’s direct approval and for which competitive bidding process can be avoided.
During our review, we found that City management has failed to keep track of invoices paid. The City was unable to provide J.F. Shea Construction, Inc. invoices of $1,091,016.65 for FY 2013-14 because the City was unable to locate them. From FY 2007-08 through FY 2013-14, the City paid J.F. Shea Construction, Inc. approximately $11 million.
Lack of sufficient documentation over note receivable with a private business
The City had insufficient documentation for a note receivable with a private business, AC Propane. The City provided us with an unsigned copy of a settlement agreement between AC Propane and the City’s former Redevelopment Agency. According to the City this note of $26,180 was part of a land sale to the AC Propane.
The City also provided us with three different payment schedules for this note, each with different payment dates. One indicated that the note should be paid off by December 2011, another indicated December 2014, and the third does not indicate when the note will be paid in full. As of the end of FY 2014-15, the note is still not fully paid. We could not determine if there was an official agreed-upon payment schedule between AC Propane and the City. In fact, there were times when the City received a payment that was different from the amount invoiced by the City. It appears that these payment schedules merely served as guidelines.