Audit Finds Lax Management of Poverty Agency : Government: Controller reports weaknesses in the Community Development Department’s oversight of contract provisions, city regulations and employee performance.

Weak financial management of the city’s anti-poverty department hampers its ability to disburse state and federal funds used to rebuild Los Angeles’ poorest communities, city Controller Rick Tuttle said in an audit report issued Friday.

In the 78-page report of the Community Development Department’s financial operations over the past 2 1/2 years, Tuttle said the agency’s major weaknesses are in monitoring contract provisions, enforcing city regulations and supervising employee performance.

The audit found two dozen instances in which the department failed to enforce collection procedures when loans became delinquent, to provide adequate monitoring of contractor performance or to comply with policies designed to safeguard city interests and assets.

In one case, the department failed to adequately monitor a $140,000 loan funded in 1990 by one of its divisions to a producer of fruit drinks. Guidelines require that such loans only be extended to firms in city enterprise business zones that will provide one full-time job for every $20,000 increment of a loan.

However, the audit found that the “borrower was unable to provide the seven full-time jobs because production of the product was done outside of the city of Los Angeles.”

The controller’s review is one of a series of department audits that have been ordered over the past two years.

In 1991, an audit conducted by Tuttle’s office found that the department’s oversight of the city’s Neighborhood Development program “was ineffective or virtually nonexistent.” Yet, grants and loans were issued by the program without proper documentation, contracts were not enforced and questionable activities were not reported to high-ranking officials, the audit found.

In July, City Administrative Officer Keith Comrie released a management audit report on the Community Development Department, which determined that the agency’s staff lacked the expertise in some programs to effectively manage and perform required work.

“Taking our audits together with the CAO audit raises some very serious questions about the internal controls of the department,” Tuttle said in an interview.

“When you have serious deficiencies in financial and management controls, there are two losers--taxpayers, whose money is not being spent as well as it should be, and clients who include the poor, disabled and dispossessed in our society,” Tuttle said.

Community Development general manager Parker Anderson could not be reached for comment. But Steven Porter, assistant general manager, dismissed the review as a “routine audit” that “points out what we consider minor deficiencies, most of which have been corrected over the past 2 1/2 years.”

Beyond that, Porter said, “it did not identify a single misspent dollar, and we administer about $200 million a year in state and federal grant funds.”

Nonetheless, a copy of the controller’s audit was forwarded to City Councilman Mark Ridley-Thomas, who heads a council committee that oversees department grants.

“I’m very concerned about it--the issues it raises are significant and can’t be ignored,” Ridley-Thomas said. “The committee can recommended changes in the CDD to the City Council.”

The council is expected to hold a special hearing on Community Development operations in September aimed at finding ways of shaping up the agency’s financial and management controls, city officials said.

Miguel Barrios, an inspector general with the U.S. Department of Housing and Urban Development, which funds Community Development projects, said he also is “very interested in reviewing the audit.”

Meanwhile, Tuttle’s audit includes an array of recommendations to Anderson to correct deficiencies and improve operations.

Among the recommendations are that Anderson provide his managers with updates on the performance of employees and programs to ensure compliance, and that he take action when employee performance is less than required.

The audits were triggered in 1990 by a Times investigation of alleged political influence and misuse of city-funded projects involving the Rev. H. H. Brookins, a bishop in the African Methodist Episcopal Church and an influential supporter of Mayor Tom Bradley.

Later, city investigators alleged that Brookins improperly obtained a $334,000 loan to rehabilitate a Crenshaw Boulevard building that he owned, unbeknown to Community Development officials. The building housed nonprofit anti-poverty programs headed by Brookins.

Citing conflicts of interest, the city sued Brookins to recover nearly $50,000 in rent paid to Brookins’ private company. Brookins has denied any wrongdoing in the case, which is pending in Los Angeles Superior Court.

Addressing the overall concerns raised by the audits, Ridley-Thomas said: “Obviously, there are corrections that have to be made.

“The response from the department has been one that sounds defensive,” Ridley-Thomas said. “The general manager is ultimately responsible for what happens in the department.”