DWP nonprofit standoff said to center on amount of auditors’ note-taking

A long-awaited examination of how two controversial Los Angeles Department of Water and Power nonprofit trusts spent millions of ratepayer dollars stalled over a concern that auditors were taking too many notes, according to City Hall sources.

Under a deal worked out last year and hailed by the mayor and the president of the City Council, the city controller’s office was supposed to get “unfettered access” to internal financial records at the nonprofits, which are co-administered by DWP executives and leaders of the utility’s largest union.

The deal promised an end to more than a year of legal and political battles between Brian D’Arcy, head of the DWP employees’ union, and Mayor Eric Garcetti and Controller Ron Galperin.

At issue has been the transparency of the nonprofits, which have received more than $40 million in ratepayer money since they were created more than a decade ago. The entities have never been required to produce a detailed, public accounting of their expenditures.

The agreement said city auditors would get full access to the groups’ financial records for up to 120 days. But the auditors were barred under the deal from photocopying any documents or removing records from the nonprofits’ offices.

Instead, according to the agreement, auditors would be permitted to “transcribe the relevant content of any documents reviewed.”

Two weeks after the audit began in early December, the nonprofits’ administrators said the auditors were transcribing too much information, according to three City Hall sources familiar with the impasse. No progress has been made on the audit since, the sources said.

There is still time left on the 120-day clock, although exactly how much is hard to say. At one point, it stopped for 20 working days while city officials tried to bring the two sides back to the table, sources said.

Lowell Goodman, a spokesman for Galperin, said he believes a resolution to the dispute will be found. But the controller won’t compromise on his demand for full transparency, he said.

“A substandard audit will not come out of this office,” Goodman said.

City Administrative Officer Miguel Santana and DWP General Manager Marcie Edwards issued a joint statement Thursday saying the agreement on a financial review remains intact and that the sides “are both committed to resuming the work of the fiscal auditors as soon as possible.”

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