LOS ANGELES — West Covina, Calif., which requested a
The controller's review found that city leaders in the San Gabriel Valley city of 106,000 didn't have a handle on how much revenue it was collecting or what it was spending. Large contracts were signed without proper bidding and administrators were hired without being vetted. It also lost $1 million on land it illegally sold to a developer.
The new council majority that took office in 2013, along with Assemblyman Roger Hernandez, asked Yee to conduct an independent audit of city finances. In its written responses, West Covina agreed with most of the controller's findings, attributing most problems to limited staffing or previous department heads.
Interim City Manager Thomas Mauk was hired in January to help right the city.
Many department heads had resigned, leaving the agencies without proper oversight, according to the review.
The review, which covered fiscal years 2011-2012 and 2012-2013, found internal accounting controls to be so deficient that they were in effect "non-existent."
The public works, finance directors and city managers in charge during the years in question have since been replaced.
Yee said Thursday she found serious deficiencies in West Covina's administrative and accounting controls. Of 79 control components evaluated, West Covina was found to be adequate in just seven, Yee said.
The deficiencies led to violations of California Public Contract Code section 20163, she said, which could constitute a misdemeanor had the statute of limitations not expired.
"It makes no sense that the statute of limitations for violating state and local contracting laws is one year from when the money is spent," Yee, the state's chief fiscal officer, said in a prepared statement. "I urge the legislature to consider a statutory change if we expect to ferret out fraud and prevent willful abuses of state law and taxpayer dollars."
The Controller's team also found delayed bank reconciliations, inadequate control of the use of city-issued credit cards, questionable hiring practices, and inadequate back-up staffing at critical positions.
On the issue of legal fees, West Covina responded that detailed invoices were secured by the City Manager due to confidential information they contained, but evidence was not provided to the controller's team.
The controller's review also found that the city awarded or extended large contracts without competitive bidding, including a waste management contract extended to 2037 in return for a promise that the contractor would contribute funds each year for the city's Fourth of July celebration and summer concert series.
West Covina settled a breach of contract lawsuit for $900,000 after a real estate deal fell through due to the city's failure to comply with applicable laws and regulations. The city also paid $145,000 in legal fees to the West Covina Improvement Association, which challenged the deal's legality.
After winning a discrimination and hostile work environment lawsuit, West Covina waived its right to recover more than a million dollars in costs and legal fees. Yee's review concluded the city failed in its responsibility to protect taxpayer dollars.
Invoices for $457,015 in legal fees failed to detail the work performed or show payment authorization.
An employee who retired voluntarily received a lump sum severance of $55,000 that was not payment for accrued leave. The controller's review found this constituted a gift of public funds. West Covina contends it is payment for a City Council-approved legal settlement.
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