Audit: 2 LADWP trusts overpaid employees, mismanaged funds

Los Angeles Department of Water and Power is shown in this undated file photo.

Two trusts managed under the Los Angeles Department of Water and Power overpaid employees, allowed for misuse of travel expenses and mismanaged employee credit cards, according to city audits.

Los Angeles City Controller Ron Galperin investigated the Joint Safety Institute and the Joint Training Institute trusts, which were created about 12 years ago to provide training and safety programs for employees.

"These trusts have been less than transparent and long resistant, frankly, to opening up their books," Galperin said. "We now have details on their spending over the last five years."

The audit did not find evidence of criminal wrongdoing, but noted that the trusts operated with little oversight and poor financial controls.

As of June 30, 2014, the trusts racked up a massive cash reserve of more $11.3 million. On average, they spend $3.5 million annually compared to the nearly $4 million they receive in funding.

The audit points out no plans are in place to use the leftover funds for their intended purpose.

Trust employees were also overpaid for their work. Top administrators received $222,000, a significant increase from what they received at their previous DWP posts.

In addition, no formal policies involving employee credit cards exist, which creates an environment that may lead to abuse.

Trust employees charged $421,550 to their credit cards for conference registration fees, airfares, car expenses, lodging and food. One administrator bought $30,000 in gas during the five years studied.

The trusts also failed to solicit competitive bids in their contracts. Auditors found at least 19 cases where this occurred.

Galperin called for city officials to consolidate the two trusts and to make their finances more accountable to taxpayers.

He added the trusts were superfluous as DWP already spends $100 million on safety and training.

"How the work of these trusts differs from other DWP training and safety programs remains an open question," he said in a statement.

The utility agency released a statement in response to the audit: "We remain committed to transparency of the Trusts and have put in place strong management representatives from LADWP that make up half of the trust membership. We expect that they will thoughtfully consider and implement as appropriate the recommendations made by the Controller and City Administrative Officer."
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