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Title:

'Climate of Complacency'

Subtitle:

Task force focuses on managerial mediocrity and calls for a ‘commitment to competence’ at City Hall in the wake of $6.4 million embezzlement

Date:

2015-10-15

Summary:

October 15, 2015 - A climate of complacency led to the $6.4 million embezzlement at Pasadena City Hall. Will the Mayor and City Council be complacent about the report and the problems it examines?

Author:

André Coleman , Kevin Uhrich

Publication:

Pasadena Weekly

Content:

A scathing report prepared by a special task force formed after a former Pasadena employee allegedly stole $6.4 million from a City Hall fund over an 11-year period said complacency and inattentiveness to spending aided in the theft.

“There were in fact processes in place that should have stopped the embezzlement in its early stages. But a climate of complacency appears to have developed and the processes were at best disregarded,” wrote Douglas Kranwinkle, chair of the Task Force on Financial Administration and Internal Controls (TFFAIC). “Perhaps what is most troubling about the embezzlement is not the aggregate amount taken but that it continued unnoticed for over 11 years.”

City Manager Michael Beck, who came to the city from Riverside in 2008, said rules exist for a reason, “but in some instances, staff had become too accommodating,” he said of people who inadvertently helped the person accused of stealing the money, former Management Analyst Danny Wooten. “Their desire to provide better customer service with a quick response to a fellow staff member’s request for expedited reimbursements meant the pre-determined process was not enabled.”

Mayor Terry Tornek said that residents regularly ask him about the embezzlement, 10 months after it was first reported in the press.

“The report is pretty much what I expected,” Tornek told the Pasadena Weekly. “They made a lot of specific recommendations. Some of them will require a cultural shift, which will take longer. I have been meeting with departments individually and letting them know we have our work cut out for us.”

Working with information gathered by two subcommittees — the Financial Subcommittee and the Internal Controls and Auditing Subcommittee — the seven-member task force found that little has changed in city accounting procedures since the money was first discovered missing last November. In fact, the task force found in its Oct. 3 report that the city has yet to hire an Internal Audit Manager, something recommended by KPMG, which discovered the embezzlement during its own audit last year of the city’s Underground Utility Program (UUP).

When asked if she thought the City Hall environment was complacent and inattentive before reading the report, Councilwoman Margaret McAustin, who was among the first officials to question expenditures actually being stolen from the Public Works Department’s UUP fund, said she agreed with the report.

“I did not think we had reached a level of complacency before I read the report, but I think these are legitimate findings and we have a lot of work to do. If this were a report card, the city got a D.”

Shortly after the theft was uncovered, the directors of the city’s Public Works and Finance departments were fired. Four other employees were placed on administrative leave pending an ongoing investigation.

Although the city recently hired a new Finance Director in Matt Hawkesworth, the TFFAIC found that two candidates for the critical internal auditor’s position both declined job offers.

“It was observed to us repeatedly during interviews that the embezzlement could not have occurred in its amount and duration without inattentiveness [or worse] by those in positions to detect it,” the task force report states. In their view, “a vastly improved financial control ‘climate’ or attitude is needed in Pasadena’s city operations.”

The city is now using a Tyler Technologies Munis (TM) Enterprise Resource Planning (ERP) software system to improve accounting and reporting systems, but “while a computer system can certainly enhance a control environment, it cannot stand alone,” the Internal Controls and Audit Subcommittee found.

And that seems to be especially true in the case of Pasadena City Hall, where the “control environment,” or “the tone at the top” created by management through communication, attitude and example, is seriously lacking.

Vendors at Victory Park and the Villa Parke Community Center, for instance, have not been paid on time. City officials told the Weekly that installation of the new ERP system and new vendor verification procedures were responsible for the holdup. The new computer program will correct those problems and help city officials keep better records of invoices at City Hall.

“It appears that significant areas of the ‘control environment’ need substantial improvement,” states the Internal Controls and Audit Subcommittee report.

Other recommendations by the task force include ethics training and competence testing for all employees, development of a stronger management tone at the top, future external audits and the formation of a citizens’ Audit Advisory Committee.

“As part of an overall control environment, the city should develop a ‘commitment to competence,’” the report states.

The recommendations will be taken up at a future City Council meeting.

The task force — Kranwinkle, Robert E. Carlson, Robert Davidson, James Dowling, Donald Nanney, Charlotte Reith and Raul Salinas — was formed by former Mayor Bill Bogaard last March, three months after the arrest of former Public Works employee Danny Wooten.

Wooten, 51, Tyrone Collins, 55, and Melody Jenkins, 46, were arrested on Dec. 30 and charged with embezzlement, conflict of interest and grand theft in a 60-count complaint filed by the Los Angeles County District Attorney’s Office. Wooten allegedly directed $2 million to Collins, owner of Collins Electric in Altadena. Wooten also allegedly gave Melody Jenkins, a temporary employee who once served as his assistant, $40,000. All three are currently free on bond.

Authorities allege Wooten would submit invoices for small amounts to administrators with the Public Works Department, but city employees did not maintain the proper chain of custody after signing the invoices, according to the audit. Instead of taking them, they allowed Wooten to keep them. With the required signatures already in place, Wooten would then allegedly add new pages to the invoices, claim different work had been performed, and place extra digits in front of the first number, increasing the dollar amounts on invoices.

The TFFAIC was not assigned to pursue or determine culpability in the embezzlement scandal or search for any other misdeeds. “Other institutions and persons have been directly pursuing questions of culpability for the embezzlement and the recovery of the embezzled funds. These are, among others, the office of the District Attorney of Los Angeles County; the office of the Pasadena City Attorney; an ad hoc committee of the Pasadena City Council; and an investigator hired by the City to investigate whether others contributed to or had some responsibility for the conditions that resulted in the embezzlement,” the report states.

Instead, the task force reviewed the integrity and effectiveness of the city’s financial reporting and accounting controls, assessed the city’s internal audit function, and made recommendations designed to strengthen the city’s financial administration and internal controls and minimize risk.

The task force also called for easier public access to financial information.

“Only a few of the financial reports are readily identifiable on the city’s website,” the report states. “Other financial materials and reports are available too on the website, but they are difficult to find in the absence of indexing at a single logical web page. For example, some of the financial reports and information can only be found by searching for the applicable meeting where presented to the council as part of an agenda packet, or through the general search window using search terms that may or may not identify the desired materials.”

“We lost some public confidence and we have to work to regain it,” Tornek said. “The Pasadena Way is not whatever it takes to get the job done. It’s excellence and innovation and that’s what needs to be restored. The public is holding us accountable, and they should.”

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