City to Give Business Academy Operations Greater Scrutiny : Government: Residents criticize the long-term commitment of public funds to the program.

City Council members scrambled to tighten up their agreements with a controversial city-funded business development program Tuesday night as angry residents lambasted city officials for giving $2 million to the program with virtually no strings attached.

During a stormy two-hour session, the council, acting as the city Redevelopment Agency, voted to continue funding the Entrepreneurial Development Academy of California. However, council members imposed more than a dozen new conditions, including an audit of the academy’s books, the appointment of new academy board members and revised financial agreements to protect the city’s investment.

In the past 18 months, the city has spent $2 million--including a $1.5-million loan--on the academy, which gives free training and office space to start-up businesses. No loan or security agreements have been signed. The city has no receipts documenting how public funds have been spent.

The city also has agreed to give the academy $300,000 a year for 40 years, even though it lacks nonprofit status.

“No one contacted us citizens when this was put into place,” Lynwood resident Claude Law told the council. “There is no way on God’s earth we would have let anyone set up a 40-year plan without any (public) input. . . . Sure, the concept is beautiful but the implementation is something we are concerned about.”

Resident Patricia Carr complained that residents were given no say as to whether the academy should be supported by taxpayers’ money. She urged officials to shut down the program immediately, and said she and other residents are planning to request a grand jury investigation.

Councilman Armando Rea, who cast the sole vote against continued funding to the academy, suggested that a grand jury investigation might be necessary. At Tuesday’s meeting he asked whether there was any evidence city funds have been illegally spent and whether the city’s agreements with the academy are legal.

City Manager Laurence H. Adams Sr. said he could not determine whether public funds had been misappropriated without an audit. In a memo to the council, he acknowledged that the city’s agreements with the academy “fail to adequately safeguard” the city’s investment.

Adams developed the new requirements for the academy after City Atty. Henry S. Barbosa warned the council in a Nov. 9 memo that the vague nature of the agreements with the academy failed to protect the city’s interests.

At Tuesday’s meeting, Adams also called on the city to look for other ways to fund the program, including federal grants. He further suggested an end to the 40-year agreement and instead recommended year-to-year funding. Other recommendations include:

* Incorporating the academy as a tax-exempt, nonprofit corporation.

* Monthly status reports on the academy’s operations.

* Approval of an executive director by the City Council.

* A requirement for all academy businesses to pay rent.

* Limiting academy services to Lynwood businesses and residents.

* The creation of a community advisory board of business and community representatives.

The recommendations were greeted with enthusiasm by a majority of the council, which has expressed solid support for the academy.

“After reviewing the agreements in place I would agree that it’s rather thin, “ said Councilman Paul Richards. “We can and should do better, but we need to put everything in proper perspective. . . . I think we have a star program on our hands.”

Herbert Reed, the academy’s acting executive director, vowed to cooperate with the city, but he maintained that the city has already agreed to a 40-year contract with the academy. He said he hoped that some of Adams’ more stringent requirements on the academy would not “bog it down with bureaucracy.”

“I have agreed in principle to (Adams’ recommendations), but we have not received anything in writing,” he said after the meeting. “I have to go over those items officially with the city manager on where we stand and then communicate with the people on the academy side and tell them what’s going to happen.”

Still, some residents questioned the sincerity of the council’s attempt to clean up the contractual mess. Carr called the recommendations a “grandstand.”

“They’re trying to smooth it over,” she said. “But it’s too late. We have no confidence in them.”

The academy was set up in May, 1991, to create small businesses and jobs in Lynwood. Aspiring entrepreneurs who enroll in the academy are given free business classes, free office space and access to secretarial help, fax machines and conference rooms. In exchange, business owners are supposed to relocate in Lynwood and hire Lynwood residents.

In creating the academy last year, the city agreed to provide $300,000 every year for operating expenses and more than $150,000 a year in lease payments for two buildings occupied by academy businesses.

Currently, 15 businesses operate within the academy, and another 35 enrolled in business courses.

Carolyn Christian Hines, who owns a small marketing company that is part of the academy, defended the program. “All those people complaining haven’t come down to the academy,” she said. “Instead of trying to tear it down, why don’t you come and help us out?”

Times Staff Writer Tina Griego contributed to this story.