Pasadena Water and Power should gain control of embezzled program, report says
|August 24, 2015 - The long awaited auditor's report on the $6.4 million Pasadena embezzlement will be discussed by the City Council's Municipal Services Committee on Tuesday. The report also includes fourteen recommendations to tighten up invoicing and payment procedures to ensure such scandals don't happen again.|
|Jason Henry, San Gabriel Valley Tribune|
|Pasadena’s Underground Utility Program, which a former public works employee is suspected of bilking for $6.4 million, lacked strong oversight because of a confusing division of authority between the Public Works Department and Pasadena’s Water and Power division, according to a report by a consultant.|
The report, which recommends the city give control of the program to Water and Power, found that Pasadena’s employees operated in a vacuum with few knowing what roles their colleagues filled or what policies were in place, according to Management Partners, the firm hired to help the city shore up its policies following the embezzlement’s discovery last year.
“In some ways you can say Danny Wooten had too much control — and he did and that was one of the problems — but no one had full ownership of the program,” said Margaret McAustin, chair of the Municipal Services Committee. “Nobody saw the whole picture and had responsibility for it.”
The report notes, for example, that if the accounts payable staff “understood the nature of the UUP, they would have been more likely to identify unusual activity.” such as payments to churches or recurring invoices for payments not in line with the program.
Danny Wooten, a former public works employee, was arrested after officials found 296 questionable invoices — to churches and contractors tied to Wooten — over an 11-year period.
The $6.4 million was meant for work that moved overhead power and communications underground, but much of it was never performed. Pasadena’s taxpayers pay $30 a year for the UUP fund.
City staff has recommended the Municipal Services Committee accept Management Partners’ 13 recommendations at their 4 p.m. meeting Tuesday. Those recommendations include establishing new policies and procedures; conducting training on the roles of employees in the program; regularly auditing vendor compliance; evaluating home owner rebates; and hiring analytical staff to assist in financial monitoring.
The consultants’ key recommendation is for the city to give PWP control of the UUP’s finances.
Currently, PWP handles most of the planning and engineering, while Public Works is in charge of the administrative work.
Eric Klinkner, interim director of PWP, said his department would need to hire support staff to handle extra work but that he doesn’t expect any strain on the utility. Much of the specifics of the transition — if approved — still need to be ironed out, he said.
“There’s a lot of detail in there in just making sure the program runs as smoothly as possible and as efficiently as possible and that all the controls are in place to make sure the taxpayer dollars are spent wisely,” he said.
Many of the Management Partners’ recommendations have already been instituted or are in the process, according to a staff report.
Two of the largest holes were the city’s lack of a master list of vendors and its hazy chain of command for authorizing payments.
Wooten allegedly faked invoices, forged signatures and bypassed certain checks and balances without detection for years. He autonomously approved payments to companies then shifted the money back to him.
The city is now developing a master list of vendors, after instituting a new computer system in July that blocks payments to unauthorized vendors. The system requires staff to sign off on checks and invoices digitally, leaving a trail that makes it harder to commit fraud. The finance department also instituted new guidelines for signers, the staff report states.
An ongoing underground utility project on Hill Avenue is following many of the city’s new protocols, according to McAustin. One policy requires a single contractor to oversee the work instead of hiring contractors for each individual job, she said.
The changes added after Wooten’s embezzlement have sped up work, but cost more, McAustin said, adding that the council in September will review whether the UUP should be discontinued.
“We have to talk about why we are doing it — is it just for aesthetics or is there a public purpose being served?” she said. “We’re definitely going to take a look at it.”
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