City Audit Clears Nonprofit

A draft audit by the city of Los Angeles found no financial irregularities by the Valley Economic Development Center, a city official said Monday.

“Their preliminary findings basically have found that the . . . books are in order and the way they do what they do is appropriate,” said Jasper Williams, director of industrial and commercial development at the Los Angeles Community Development Department.

Valley Economic Development Center, a Van Nuys-based nonprofit, contracts with the city to run a number of programs, including business assistance centers.

The audit was launched in August, after several of the center’s board members raised questions about fees paid to then President John Rooney and then staff member Jim Jacobs. The two men received fees for helping to obtain investment funding for a Canoga Park sign maker.

Rooney had maintained all along that the fees were allowed because of his employment contract with the center’s board.

Williams said the audit essentially confirmed that.

“It was a unique arrangement,” said Williams of the fees. “Most companies don’t operate that way. But they [the auditors] determined that the organization was operating according to agreements it had with its then president.”

“I’m happy that people now know for certain that I operated with the highest integrity,” Rooney said Monday, adding that the findings should also help restore the image of the VEDC.

Auditors also examined a deal in which David Honda, then chairman of the center, accepted a contracting job from a business that had received a VEDC loan.

In the end, according to Williams and Roberto Barragan, interim president of the center, both the Rooney and Honda deals were found to be consistent with agency policy at that time.

“The auditors’ job would have been to decide if there was anything fiscally or policy-wise wrong with any of his [Rooney’s] decisions,” said Barragan. “It was not their job to decide if it was ethically correct or did or did not serve the best interests of the organization. That’s a board call.”

Rooney, Jacobs and Honda resigned their VEDC posts after the questions arose last summer. Honda, who could not be reached for comment, was asked to resign by a group of board members on the grounds that he was interfering with the day-to-day operations of the organization. Rooney said he left after growing weary of the controversy.

Jacobs said Monday that he was not surprised by the findings.

“I’m happy it was finally concluded,” said Jacobs, who is now self-employed as a business consultant. “I don’t understand why they were doing it at all.”

While the audit did not find any malfeasance, Williams indicated that there may be recommendations for “how the VEDC could avoid a similar occurrence in the future.”

“A lot of time, money and morale has gone down the drain in trying to figure out if these allegations were true.”

Barragan said the organization would be open to any suggestions the auditors might have.

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He also said he anticipates that the board will look “in the near future at a policy that will not allow the president or chief executive to receive commissions on any transactions.”

“We don’t want to create even the perception of a problem in the future,” Barragan said.

He also said he hopes to funnel more work to paid staff members, and not consultants.

“That’s purely an issue of being able to keep a majority of the fee within the agency in order to continue to support our nonprofit purpose,” he said.

A written audit report is expected to be presented to the city within two weeks, Williams said.