Deal approved to audit DWP nonprofits’ records

After more than a year of bitter legal battles, Los Angeles city leaders have approved a deal with the powerful Department of Water and Power union that promises the first detailed, public look at how two controversial nonprofits affiliated with the utility spent tens of millions of ratepayer dollars.

The agreement gives city officials “unfettered access” to financial records held by the nonprofits, which will be used to produce the first independent public accounting of the groups’ expenditures.

“For the past year, we’ve worked to bring transparency to these trusts and accountability for ratepayers,” Mayor Eric Garcetti said Wednesday. “With this agreement, the city can open the books and follow the money, which is what DWP customers deserve.”

The 13-0 vote Wednesday by the City Council, which took place without public discussion, also paves the way for release of a roughly $4-million annual payment to the nonprofits. City Controller Ron Galperin had refused to transfer the money earlier this year, citing a lack of public accounting on the use of ratepayer money.

Brian D’Arcy, leader of the International Brotherhood of Electrical Workers Local 18, which manages the nonprofits with DWP executives, said in a statement that the vote assures that a labor agreement reached last year with his union won’t be jeopardized “and that the (nonprofit) trusts will continue to operate to protect and train the work force at DWP.”

“We look forward to collaboratively working with DWP on tackling the challenges that it faces today and into the future,” the statement said.

D’Arcy spent more than a year fending off attempts by top city elected leaders, including Garcetti, to gain access to the nonprofits’ internal ledgers, bank records and other documents.

Officials demanded the records after The Times reported that DWP executives, who manage the nonprofits with union leaders, couldn’t explain in detail how the groups had spent more than $40 million. There had been no public accounting of what the nonprofits achieved, The Times reported.

Union officials, who have 50% of the voting rights on the nonprofits’ boards of trustees and were able to block attempts to release financial records, argued that the nonprofit trusts were independent from city government and therefore not subject to public disclosure requirements.

The nonprofits, the Joint Training Institute and the Joint Safety Institute, were created in the early 2000s after a round of job cuts at the city-owned utility.

The trusts were charged with improving relations between labor and management and were supposed to create and deliver safety programs and address other training needs of employees. Their roughly $4-million annual budget is dwarfed by the $117 million the DWP spends on its own training and safety programs.

The standoff over release of the spending records led to a series of lawsuits and labor grievances, pitting city officials against the union.

Earlier this year, Galperin refused to make an annual payment of roughly $4 million to the nonprofits, saying he couldn’t do so in “good conscience” until he gained access to the financial records.

The union filed a claim with a city labor relations board, arguing that Galperin had flouted the law. At a rally in front of the DWP headquarters, D’Arcy warned the city was headed for “trouble” if it didn’t release the money.

Council members feared a major labor contract signed last year with the utility workers union – which includes a three-year freeze on salary increases – might be in jeopardy.

Under the deal approved Wednesday, Galperin and his auditors will get full access to the nonprofit records so they can conduct an audit covering the five years that ended in June. The auditors also will be allowed to interview current and former staffers of the nonprofits.

The city’s top budget official, Miguel Santana, will be given access to the records, and permitted to conduct interviews and perform his own evaluation of the trusts. Both reviews will be presented at public meetings.

If Galperin or Santana find evidence money has been used illegally within four months of beginning the reviews, the $4-million payment to the nonprofits can be withheld.

Galperin called the agreement “a clear and important step toward greater transparency and accountability to ratepayers at the DWP.”

That view was echoed by Councilman Mitch O’Farrell. “I’ve been woefully unhappy with the mystery that shrouds ... both joint institutes,” O’Farrell said Wednesday after the council vote. “This puts it all behind us ... It gives us the transparency that the ratepayers deserve while preserving the [labor contract] that we negotiated.”

The agreement approved Wednesday was opposed by the Porter Ranch Neighborhood Council, whose vice president Patrick Pope called it “a travesty.”

“There should be a full accounting of the money” for the entire decade-plus period the nonprofits have existed, Pope said. “The only reason the union would stonewall is that they’re hiding something.”

Under the agreement, most of the pending lawsuits and grievances related to the dispute will be dropped when the DWP money is paid to the nonprofits.

The deal does not, however, end one important dispute still pending between Galperin and the union. In that court case, a Superior Court judge has ruled that the city controller has the right to audit the nonprofits and compel testimony from their leaders, including D’Arcy, because the nonprofits’ money comes from public sources.

D’Arcy appealed that decision, which undermines the union’s argument that the trusts are private entities. The 2nd District Court of Appeal stayed the lower court order in May, but has yet to decide the case.

Wednesday’s agreement does end a related standoff over who should represent the DWP on the nonprofits’ boards, by designating that the utility’s general manager or other utility managers should fill the positions.

Union officials had objected when two Garcetti allies -- mayoral counsel Richard Llewellyn and DWP board member Michael Fleming -- were named to the boards, saying they had no experience managing utilities.

The settlement deal requires annual audits of the nonprofits and yearly reports to city lawmakers on their finances and activities.

But it also imposes restrictions on city officials: After Galperin finishes his audit covering the last five years, he cannot do any additional auditing of the nonprofits’ spending in that time period.

“It just ups the ante that the audit has to be very thorough,” O’Farrell said. “You can leave no stone unturned.”

Follow @latimesemily for what’s happening at Los Angeles City Hall