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Los Angeles Times

Friday November 09, 2012

L.A. Housing Authority Rife with Fiscal Mismanagement, Audit Finds
The agency has done little to make sure money is properly spent and assets are accounted for, the report says. Officials say they will use the findings to guide reforms.

By Jessica Garrison, Los Angeles Times - L.A. Times

Los Angeles' housing authority, which runs on about $1 billion a year in taxpayer funds, is plagued by bad financial management that causes "questionable practices and poor decisions," according to an audit released Thursday by City Controller Wendy Greuel.

Greuel launched the audit last year amid an outcry over hefty taxpayer-funded restaurant tabs for agency officials and a $1-million-plus payout for the authority's fired executive director. The agency is responsible for sheltering about 75,000 of the city's neediest households.

A previous audit found instances of questionable spending by some agency officials, including double and triple billing for some travel and meal expenses. This audit, which looked at the agency's fiscal operations, did not uncover wrongdoing. But it did find that despite the authority's hefty budget and history of scandal going back decades, agency officials have done little to make sure money is properly managed.

Financial oversight was so lax, the audit found, that the agency's board of commissioners did not receive any financial statements or budget status reports during much of 2011 or the early part of 2012, except for one oral report last spring and one annual financial report that was presented nine months after the year had ended. A proposed budget presented to the board for 2012 was not balanced and contained contradictory statements.

"All of this suggests an agency that is out of control," said Greuel, a candidate for mayor. "The city cannot afford to continue spending its housing dollars irresponsibly."

One tenant advocate, Larry Gross, executive director of the L.A. Coalition for Economic Survival, said the lack of financial information given to the board and public was baffling.

"Whoever was on that board was clearly asleep at the wheel," he said. Many of the board members have been replaced in recent years.

Housing authority officials said they agreed with many of the audit's conclusions and will use the findings to guide reforms. Under recently hired Chief Executive Doug Guthrie, officials said they have already instituted a number of new practices, including financial training for all board members, stepped up financial reporting to the board and public, and the arrival of a new chief financial officer with expanded powers.

"We asked for this audit, we paid for the audit and we worked closely with the city controller's office" as the audit was underway, Guthrie said. "There's a lot of good stuff in the audit that helps us."

Mayor Antonio Villaraigosa released a statement expressing support for Guthrie, who was hired last spring after the previous executive director, Rudolf Montiel, was fired and then paid $1.2 million to settle allegations that he was let go in retaliation for reporting improper spending by board members. Montiel had earlier drawn the ire of city leaders when his agency tried to evict nine tenants who protested the agency's policies outside his home.

"The housing authority has worked diligently to win back the trust of the people," Villaraigosa said.

But some City Council members expressed anger at the latest audit findings.

"There's a lot of problems over there, and obviously, the problems haven't gone away," said Councilman Dennis Zine, a candidate for controller. "Maybe it's time for the grand jury to investigate."

Zine also said he would like the City Council to have more authority over the agency. Under a hybrid governing structure, the mayor appoints the authority's seven board members, but the council lacks the ability to review spending decisions, a power it has over many other city departments.

The audit also found that the agency's list of assets contained at least $100 million worth of property that had been disposed of or no longer had much value, such as refrigerators and stoves that had been purchased in the 1970s. No inventory of its fixed assets had been performed in at least seven years.

In addition, the agency did not always follow its own rules when it came to awarding contracts to vendors, in one case allowing someone to sit on a bid selection panel after he had declared a conflict of interest.

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