Auditor Again Warns Norwalk That Renewal Agency Violated State Law

An auditing firm has warned this city for the second straight year that its Redevelopment Agency violated state law by operating without a budget during the past fiscal year.

The audit, submitted to the City Council recently by Conrad & Associates of Irvine, also found:

The Redevelopment Agency was not properly maintaining records of land purchases and sales.

The city’s payroll operation was not properly supervised.

The city was not thoroughly monitoring its contractors to make sure they complied with federal wage requirements.

The audit did not reveal any misuse of funds, but the deficiencies need to be corrected, said Michael Harrison, a certified public accountant who supervised the audit for Conrad & Associates. The audit covered the last fiscal year, which began July 1, 1987, and ended June 30, 1988.

“It’s just a matter of good record-keeping,” Harrison said. “We’re trying to nip this thing in the bud before it becomes a problem. There were no improprieties or anything.”

The state and federal government could withhold funds if the city does not correct the problems, but such sanctions would be unlikely because the city has only failed to provide sufficient monitoring and accounting controls and there apparently was no malfeasance, state and federal officials said.

Norwalk City Manager Richard R. Powers said the city has corrected some of the problems and is working on others. Powers, who was hired by the city last summer, said the weak city-administrator form of government that Norwalk used during 1987-88 resulted in sloppy management.

Under the previous Administration, the city administrator, Redevelopment Agency director and controller would each report directly to the council. That resulted in a lack of coordination and tight controls, he said. Now, department heads report to Powers, who is responsible to the council. Powers also directs the Redevelopment Agency.

The previous system leads to “a lot of finger-pointing and a grave chance for error,” Powers said.

Former City Administrator J. Richard Streng retired last July, and former Redevelopment Agency Director Michael J. Wagner was dismissed after Powers was brought in to shape up the city government. Streng said he had not seen the audit report and declined to comment. Wagner could not be reached for comment.

The other official responsible for maintaining the controls under the past Administration is City Controller Wiley Y. Jung. Jung, who still works for the city, was out of town last week and unavailable for comment, a city spokeswoman said.

Mayor Marcial (Rod) Rodriguez acknowledged that the City Council also failed to ensure that some of the problems noted in the previous year’s audit report were corrected. The Redevelopment Agency did not have a budget for 1986-87, and the city was not properly monitoring contractors then to make sure they complied with federal wage guidelines.

In defense, Rodriguez noted that council members are only part-time elected officials, and that they are forced to rely on staff.

“You hope for competency in staff, that they’re putting things together for the city to operate in a positive and legal manner,” Rodriguez said. “With the new management concept that’s come in, hopefully that type of thing is going to be eliminated.”

One of the most potentially serious deficiencies, according to Powers, is that the Redevelopment Agency was, and is, operating without a formal budget as required by state law. Administrative and overhead costs for the agency are included in the city budget, but land purchases and other financial activities are not in the spending plan.

Without a budget, there is less control to keep the directors of the Redevelopment Agency from overspending or making other bad financial decisions, Powers said.

“The impact on the community could be substantial because the elected official does not have the ability to direct the resources of (the Redevelopment Agency) to meet community needs,” he said.

But both Powers and Harrison, the auditor, said the Redevelopment Agency was in good financial shape with more than $5 million in reserves. Powers said he plans next month to present a Redevelopment Agency budget for the current year.

The auditors also noted that records documenting Redevelopment Agency land transactions were scattered among several locations in the city’s administrative offices.

Harrison said all the documents were eventually provided to satisfy the requirements of the audit. Powers said those documents are being organized in a central file in the city’s Finance Department.

Conrad & Associates also suggested that the city assign an employee to review the city’s payroll, which was previously handled by a single clerk. Assistant City Administrator Sanford M. Groves said the payroll operation has been supervised since June.

The city also was lax in monitoring contractors hired by the city with federal funds to be sure they were complying with the Davis-Bacon Act, according to the audit report. The Depression-era law requires that workers receive the prevailing wage for the jobs they are performing.

The city spent $1.3 million in federal funds during 1987-88 for public improvements and rehabilitation loans to area businessmen, among other things. The audit report on 1986-87 also noted lax monitoring of federal wage requirements.

Groves said the responsibility for monitoring Davis-Bacon compliance, which was previously shared, has been assigned to a single employee.

Scott Reed, a spokesman for the U.S. Department of Housing and Urban Development, said his office will monitor the city to make sure improvements are made.