Audit is critical of Montebello contracts

MONTEBELLO - State Controller John Chiang on Tuesday released a third audit of the city of Montebello, which he says identified a large evergreen contract that effectively allows all engineering work to be awarded to a single company without any competitive bidding or independent project oversight. "This latest audit reveals troubling management practices which invite self-dealing, the misuse of taxpayer resources and the unlawful borrowing of restricted funds," said Chiang. "The fiscal duress now facing Montebello is, in part, self-inflicted due to years of poor fiscal oversight and inattention to basic principles of public accountability." The audit takes issue with an engineering contract to a private firm, AAE, which serves as the city's engineer. The auditors noted the high risk for conflict of interest when, during the period of time reviewed, AAE contracted all city capital improvement projects to itself. Then, serving as the city's engineer, the firm was solely responsible for oversight on its own work. AAE's awarding of all engineering services to itself also appears to violate a city ordinance, adopted in 2007, that requires all contracts over $50,000 to be bid competitively, Chiang said. During the audit period, AAE received $500,000 to serve as the city engineer, and procured another $2 million in public works contracts from Montebello. The audit recommends that the city do the following: •use competitive bidding for all its future capital improvement projects; •conclude the current engineering contract and employ a competitive bid process to award a new contract; •establish a stronger form of oversight so that the contractor is not in the position of being able to rubber-stamp its own work. The audit also found that $1,700 of state funds were improperly used to bus city employees to a baseball game at Dodger Stadium. When state auditors brought this to the city's attention, the city claimed the misused dollars were repaid, Chiang said. The audit also notes "inappropriate" costs charged to state funds for city administration. The city used an outdated, 18-year-old formula to charge overhead costs to the state transit fund, likely resulting in improper uses of state dollars, auditors said. Cost formulas should be updated annually, and Montebello acknowledged that it is working to update its cost-allocation formula to make sure transit funds are not misused. As in past audits, Chiang noted that transit funds may have been impaired by commingling them with other funds, including the city's general fund. While Montebello officials contend that transit funds were never impaired, they could not provide documentation to prove that transit funds and other restricted-use funds were not used by the city for cash-flow purposes throughout the course of the fiscal year, Chiang said.

********** Published: November 03, 2011 - Volume 10 - Issue 29