The general manager of the Department of Water and Power apologized to Mayor Eric Garcetti and others Tuesday for harshly criticizing a recent audit into how two employee union trusts spend the $3.8 million in annual payments from the utility.
The audit, released last week by City Controller Ron Galperin, found that the Joint Safety Institute and the Joint Training Institute "operate in an environment that has lax oversight and inadequate financial controls" over purchasing contracts and travel expenditure.
DWP General Manager Marcie Edwards — who sits on the trusts' governing boards — lashed out at Galperin in a letter responding to the audit. She accused auditors of being "more intent on casting aspersions on the management of the trusts and conjuring up baseless accusations about nonexistent malfeasance than they are with getting their facts right."
The letter — cosigned by International Brotherhood of Electrical Workers, Local 18 Business Manager Brian D'Arcy, who also sits on the trusts' boards — contended some parts of the audit "drift into innuendo and pure speculation," including one passage in which Galperin said the trusts' credit card usage dipped when he began questioning their financial activity.
Edwards wrote that this drop in spending was "in fact" due to boards not having enough members in attendance "to approve the payment of expenses."
Edwards took a conciliatory tone today, saying during a Water and Power Commission meeting that the letter was written out of "frustration" after being told she had three days to review and respond to the audit findings.
"I regret allowing my own frustrations with the audit process overall to lead me to agree with some characterizations which were not appropriate," Edwards said.
"And for that, I apologize to the mayor, the controller and this board," Edwards said.
She added that the management trustees — DWP officials who sit on the trusts' boards -- "plan to embrace both the controller and CAO's recommendations for the trusts and work to ensure that they operate in such a way they provide the greatest benefit to their beneficiaries — IBEW members — and do so consistent with developing and maintaining the public's confidence."
Several Water and Power Commissioners reacted strongly today to the findings in Galperin's audit. Commissioner Christina Noonan called the findings "are an embarrassment to this department" and suggested that credit cards no longer be issued to staff members of the trusts.
"I don't even want them buying bubble gum at a gas station," Noonan said.
Galperin's audit found that more than 19 credit cards were issued in the last five years. One trust administrator used a card to buy $30,000 worth of gasoline for a personal car over the past five years, the audit found.
Commissioner Jill Banks Barad, calling the findings a "public relations nightmare," repeated a call to withhold the annual combined $3.8 million in DWP funding for the trusts.
City officials have said the DWP is obligated to pay the money as part of a labor contract with IBEW, which represents utility workers.
Other commissioners asked if any action would be taken in response to the audits, and if any of the changes suggested by the audit would be adopted. DWP and city officials said some of the recommendations could be adopted by the trustee boards — which are made up of both DWP management and labor union officials.
Other changes would require city leaders to reopen labor talks with the utility workers union.
The trusts were formed in conjunction with a 2001-02 labor agreement to administer training and safety programs for employees.
A report performed by accounting firm BCA Watson Rice on behalf of City Administrative Officer Miguel Santana suggested ways of improve the trusts' purchasing and travel expense policies, and other methods to improve their governing structure.
The CAO's review found that only two of 32 travel filings in the past five years had proof of prior approval and written reports on the trips. There were no formal reports or statements of travel expenses in any of the files, according to the report.
The report recommended a policy requiring travel expense forms to be submitted in a timely manner and to require that travel be preapproved by the entire board of trustees.
The trusts also do not have a formal policy for hiring vendors, even though they have procured $6 million in contracts over the past five years, and there is no indication of a competitive bidding process or written documentation of the need for the contracts, according to Santana's review.
Galperin's audit, which covers five years of financial activity, found that Jon Pokorski, president of IBEW Local 18, receives a $222,000 salary, as do seven other labor and management "administrators" on the trusts' payrolls.
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Each administrator also receives a $500 per month allowance to pay for vehicle costs, on top of using the credit cards, the audit said.
Galperin said trust employees charged a total of $421,550 on the trusts' credit cards for conference and travel expenses, but spending on those cards decreased in the 2013-14 fiscal year at about the time he began looking into the trusts' finances.
