DWP trusts paid for steak dinners, trips to Hawaii, Las Vegas, audits find

Two nonprofit trusts created by the Los Angeles Department of Water and Power and financed with more than $40 million from ratepayers paid millions to vendors without competitive bids, overpaid top managers and let them charge personal travel, gasoline and other items without filing expense reports, city audits released Thursday showed.

In five years, a handful of trust employees charged more than $660,000 to their publicly financed credit cards for things such as steak dinners and trips to Las Vegas, Hawaii and New Orleans, City Controller Ron Galperin said.

However, Galperin said, auditors did not find evidence of criminal wrongdoing.

One top administrator, who was making about $220,000 a year, used his trust-issued card for more than $30,000 worth of gas between 2010 and 2014, city auditors found.

The release of the audits ended a more than year-long political and legal battle waged against the city by the nonprofits’ top administrators — particularly Brian D’Arcy, head of the city-owned utility’s largest employees’ union — to keep detailed spending records secret.

After blasting the administrators for “cavalier” spending of public money, Galperin called publication of the audit a victory for transparency. “We were fought tooth and nail on this, and we won,” Galperin said.

The records, including thousands of credit card charges, will be posted on the controller’s website.

In a written response Thursday, D’Arcy said Galperin’s audit was “littered with accusatory innuendo and peppered with contradictory statements.” It also failed, he said, to prove that money was spent on anything other than “improving safety and training of the hard-working employees of the DWP” — or that the nonprofits had “violated any laws or regulations.”

While most of the nonprofits’ dozen or so trustees, administrators and employees agreed to be interviewed by the auditors, D’Arcy did not, according to the report.

The nonprofits — which receive roughly $4 million annually in funding from the city — were created in the early 2000s to promote safety and training at the utility. According to a separate
report by City Administrative Officer Miguel Santana, which was also released Thursday, they failed to
provide any “real information on the outcomes or effectiveness” of their programs.

DWP officials have said they spend more than $117million a year on safety and training programs, dwarfing the amount paid to the nonprofits.

The Joint Training Institute and the Joint Safety Institute, as the nonprofits are known, are administered by DWP managers and leaders of the utility’s largest employees’ union.

They became a thorny political issue for Mayor Eric Garcetti and the City Council in September 2013, after The Times reported that officials could provide almost no information on how the groups had been spending ratepayers’ money.

The audits are the first public accounting of that spending.

Galperin’s review found the nonprofits have essentially been accumulating cash, with more than $11 million in savings.

In interviews with The Times last year, former nonprofit administrators said management and labor sides often struggled to find projects they could agree to spend money on.

“If they’re not spending this money, you have to wonder why we keep giving it to them,” Galperin said. He said he would propose withholding future annual payments until the savings have been spent.

Last year, Galperin refused to make the city’s scheduled $3.8-million transfer until the nonprofits allowed his auditors access to the books.

The reviews also found the nonprofits had paid $6.1million to outside vendors and that the majority of those contracts were written “without any competitive or documented process to ensure reasonable price or value was received.”

Five top administrators currently make about $220,000 each, Galperin’s audit shows. By comparison, employees at the state Public Utilities Commission, who have roughly equivalent jobs, make about $148,000, the auditors found.

Consolidating the nonprofits into one organization and eliminating two of the top positions could save the city nearly $740,000 a year in salary and other expenses, the auditors said.

Other findings include a “transportation allowance” of $500 a month for the top administrators, in addition to being able to use trust-
issued credit cards for gas and car washes.

The use of those credit cards, which had averaged more than $150,000 in the three previous years, dropped to just over $31,000 in 2014 after The Times report sparked a debate between elected officials and union leaders over transparency of the nonprofits, auditors said.

In his statement, D’Arcy said the spending fell because, amid the controversy, the nonprofits’ boards could not muster a quorum to approve payments.

Perhaps the most telling example of the suspicion that has built up around the trusts — originally created to improve labor-management relations at the utility — was the reason administrators gave for using public funds to buy themselves iPads and cellphones.

They needed to have “a secure communications channel” outside devices provided by the DWP, according to the controller’s audit.

“They are used to operating out of public view, and that’s how they like it,” Galperin said. “Transparency is not their favorite word.”

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