Get the Facts: $160 million in waste, fraud, and abuse

Eric Garcetti and Jan Perry are lying to voters about Wendy Greuel's record of finding waste and abuse

Eric Garcetti and Jan Perry are attacking Wendy over her numbers. What's clear is that Wendy has identified $160 million in wasteful spending, fraudulent activity and abuse of city resources — and apparently Eric and Jan don't think that's a problem. Instead they're trying to distract voters from the fact that on the City Council, they've done nothing to stop the waste.

As City Controller, Wendy has been the taxpayer’s watchdog and has made government more accountable and transparent. She and her auditors have conducted more than 77 audits that have uncovered more than $160 million in waste, fraud and abuse. You can see exactly how the money has been wasted here.

Get more facts and help set the record straight about Wendy Greuel.

The accusations and the reality:

Accusation: Wendy Greuel has not found $160 million in waste, fraud and abuse.

Reality: False. Wendy has identified more than $160 million in wasteful spending, fraudulent activity and abuse of city resource. You can see a full breakdown of exactly where the waste is coming from.

And since most audits only cover a short period of time, Wendy believes that’s just the tip of the iceberg.

Wendy and her civil service auditors have performed more than 77 audits, investigations and reports of departments and programs across the city. The $160 million Wendy and her auditors have identified is real. And if the City doesn’t move swiftly to implement her audit recommendations, Los Angeles will continue to lose millions in the future. In many cases, the City Council has stood idle.

Wendy’s investigations have uncovered everything from millions of dollars in fuel that went missing or was stolen from the city, to Housing Authority officials who spent city money on lavish meals and fancy hotels.

As mayor, Wendy will make sure these audits are acted on. That’s why she’s earned endorsements from more than 20 labor organizations, Los Angeles police officers and firefighters, the Los Angeles Area Chamber of Commerce Jobs PAC and the Valley Industry and Commerce Association PAC, and the Los Angeles Daily News.

And that’s why former Controllers Laura Chick and Rick Tuttle have endorsed Wendy.

Accusation: Wendy has only recovered $239,000.

Reality: Eric Garcetti is misrepresenting the facts. Wendy has uncovered more than $160 million in waste, fraud and abuse, and that only scratches the surface.

Unfortunately, Eric is making excuses for his failed tenure as City Council President. Under his watch, the City has seen job losses and layoffs, huge deficits, and cuts to crucial services. The millions of dollars the city squandered? Much of it also came under Eric’s watch. If he had done more to stop the waste and implement reforms, we could have saved millions of dollars.

Accusation: Most of the dollar total in her claim relies on two audits that depend on an accounting maneuver and a revenue projection her own office said was unrealistic.

Reality:

False. These two audits represent huge amounts of money the city has lost to waste and inefficiencies in the past. And the audits found that the city will lose even more in the future unless the City acts.

One audit on Real Property Trust Funds, examines money the city and individual councilmembers get after certain kinds of property sales. Wendy’s audit found that over 12 years, nearly $25 million that could have gone to the general fund was instead being funneled to City Council slush funds.

Over the last twelve years, $13.5 million has been deposited into the Real Property Trust Funds from oil pipeline franchise fee revenues and from sales of surplus property proceeds. If these monies had been deposited into the General Fund, the monies would have been available to use on expenditures, which were deemed to be a high priority for the City and would benefit the City as a whole, instead of being restricted to certain discretionary uses. Page 10/Observation #1

Over the last 12 years, $11.2 million has been deposited into funds which receive 100% of the net proceeds from the sales of surplus properties. Page 13/Observation #3

That’s money that could have helped balance the budget during the fiscal crisis.

Our audit concluded that the City should initiate actions to revise City ordinances so that all revenues from the sales of surplus properties and from oil pipeline franchise fees are deposited entirely into the General Fund. This would be consistent with the purpose of a general fund, which is to account for a government entity’s general revenues and expenses. In addition, for sales of surplus properties, it is likely that the properties were originally purchased by the General Fund. Therefore, any proceeds from the sales of these properties should be accounted for as general fund revenues. Page 2/Summary of Audit Results

The second audit investigated a 20-year contract to put advertising on street furniture around the city. Wendy found that because of the way the contract was negotiated, the City has lost out on tens of millions of dollars, and stands to lose tens of millions more if the contract is not changed.

The audit looked at street furniture advertising revenues under a contract awarded to CBS Decaux. The City’s 20-year, $150 million deal was in its 10th year when the Controller’s office investigated its performance.

In 2001, the Board of Public Works (BPW), on behalf of the City, executed a 20-year agreement with a term from January 2002 to December 2021 with Viacom Decaux LLC (now called CBS Decaux LLC) to operate the City’s Coordinated Street Furniture Program. Page 1/Executive Summary

Wendy found that CBS Decaux had gotten away with paying the City at a honeymoon rate that was intended only to apply to the first two quarters of the first year of the contract (2002) – ten years into the contract.

The Contractor credits the City with only the number of ad panels permitted through the first two measurable time periods of the PRS, defined as P1 and P2, even though the agreement is well into its 10th year. (Page 19/CBS DECAUX’S 2011 MAF CALCULATION*

P1 and P2 represent the first two quarters of the first year (2002) of the contract. Page 19/Footnote

Wendy’s auditors projected that the City would collect a staggering $57 million less than expected over the remainder of the contract because of this rate.

Regarding “unrealistic” projections, it’s true that Wendy criticized the lofty revenue projections in the original contract. But if the process is reformed, the city does have the potential to make up revenues that would otherwise be lost in the future. Over the second 10-year period there is a potential $97 million to be earned from the contract, $57 million or more of which is directly tied to improvements suggested in the audit.

This situation will result in an additional lost revenue opportunity that could exceed $57 million. Because of the significance of this potential revenue loss, this matter requires immediate consideration by City officials. Page 23/FINANCIAL IMPACT OF THE CITY REMAINING IN P2 FOR THE CONTRACT TERM

Page 33/STREET FURNITURE PROJECT ROLLOUT SCHEDULE – P2

The City could remain in P1-P2 throughout the life of the agreement, resulting in an additional lost revenue opportunity that exceeds $57 million. Page 3/Summary of Audit Results

News coverage of CBS Decaux:

Real Property Trust Fund Coverage:

Get more facts and help set the record straight about Wendy Greuel.