Study Uncovers Irregularities in Regional Panel

A sweeping examination of the Southern California Assn. of Governments has turned up widespread financial, accounting and contracting problems in the multimillion-dollar agency responsible for the planning in a vast six-county region of 16 million residents.

A separate Times investigation of the circumstances that prompted the agency’s Regional Council to quietly commission the study has found numerous instances in which contracts were awarded without competitive bidding. In some cases, they went to relatives, friends or associates of board members or former board members.

Los Angeles County Supervisor Zev Yaroslavsky, who is also president of the agency, said the examination, launched after employees’ paychecks bounced last spring, found a lack of oversight of the contracting process. He said the agency has so many consultants it could be called “Consultants R Us.”

Yaroslavsky, who has held public office for 24 years, said he could not recall another case where a public agency with a budget of millions of dollars bounced checks. “Obviously something was amiss,” he said.

“The scary part is, this may only be the beginning. When you’ve had a lack of accountability of this magnitude . . . there is no telling what’s going on. It’s a very serious matter.”

In fact, The Times found that the agency’s travel contract went to a Northridge travel agency associated with the wife of Los Angeles City Councilman Hal Bernson.

Former San Dimas Mayor Terry Dipple received a consulting contract in 1997 after resigning from office and pleading no contest to forgery charges for taking money from a Meals on Wheels program for senior citizens. Dipple served as an agency consultant in the Malibu, Las Virgenes and Conejo Valley area of western Los Angeles and eastern Ventura County. He is now executive director of the Council of Governments in that area.

The agency’s longtime liaison with local governments in the same area is former Ventura County Supervisor Ed Jones, who was defeated in 1986 after being arrested on suspicion of lewd conduct. He pleaded no contest to reduced charges of public drunkenness and disturbing the peace.

Though relatively low-profile, the planning agency is involved with a broad array of regional issues, including transportation, ride sharing, airport expansion, air quality, and housing in Los Angeles, Ventura, Orange, Riverside, San Bernardino and Imperial counties. It also acts as a conduit to local governments for federal and state planning funds.

The agency itself, which receives the bulk of its $28-million annual budget from federal and state sources, hires numerous consultants.

Competitors Told to Merge Proposal

In one case, two companies with competing bids on a $130,000 contract were instructed to submit a single proposal. The contract to study the movement of freight in the so-called Southwest Passage from Southern California to Texas was then awarded to Jack Faucett Associates and the politically well-connected Cordoba Corp.

Agency records show that Cordoba originally bid only $27 less than Jack Faucett Associates. The records also contain the notation that: “Cordoba Corp. has been asked to serve as a subcontractor to Jack Faucett Associates. Jack Faucett combined with Cordoba Corp. most clearly showed an understanding of the prerequisite transportation planning and institutional/government relations needs of the project.”

The 85-page study, prepared by the consulting firm KPMG, detailed weaknesses in the agency’s financial, accounting and contracting processes and recommended numerous changes to tighten oversight and establish internal controls.

The examination was sparked after the agency’s paychecks bounced last March and its senior financial officer wrote longtime Executive Director Mark Pisano a letter in May alleging problems in the agency’s accounting and contracting operations.

A preliminary $5,000 look at the issues raised in the letter was quickly expanded into an intensive $50,000 examination by the agency’s 71-member governing board, the Regional Council.

Although the agency has a budget of nearly $30 million, KPMG found the agency lacks an experienced chief financial officer. “There is no one designated to ensure the financial stability of the organization, compliance with regulatory requirements, or implementation of adequate internal controls,” the report said.

The examination found that the agency lacks formal policies and procedures that govern key processes. “As a result, few internal controls exist to reduce the risk of management override and staff errors.”

The checks were written against insufficient funds because they were not recorded in the agency’s accounting system in a timely manner, according to the report.

Existing written accounting procedures are generally two or three pages long and “do not provide sufficient guidance to assist staff in performing today’s more complex accounting and contracting duties,” the examination found.

KPMG recommended that the agency increase accountability among its employees. “SCAG should established detailed standards, assign responsibility, provide authority and enforce accountability throughout the organization,” the report says. “For example, project managers currently are not responsible for monitoring or adhering to budget amounts.”

Budget problems forced the agency to alter its overall work program for the current year after Caltrans and federal transportation officials questioned the agency’s ability to come up with the required local matching funds.

And the report says the agency maintains limited procedures that outline the duties and responsibilities of the management and staff overseeing contracts. “Consequently, limited controls exist to minimize contracting risks.” For example, bids are not always sought from all qualified firms. Currently, about 30% of the agency’s requests for bids are sent only to “selected” firms and “may not produce the best value for SCAG.”

Yaroslavsky said he will recommend to the Regional Council that the agency review every single sole source contract and explain why they shouldn’t be put out to bid.

Director Says He Welcomes Report

Executive Director Pisano said he welcomed the report. “It is a road map that will help us improve the integrity of our financial systems,” he said. “I view it as a help to improve the operations of the organization.”

But Pisano defended the agency’s handling of its contracts, including the award in April 1993 of the agency’s travel business to Emerald Travel, an agency associated with Councilman Bernson’s wife, Sandra.

Pisano also defended the agency’s consulting contract with former San Dimas Mayor Dipple, saying his selection was recommended by local governments in the Malibu, Las Virgenes and Conejo Valley area, as was the choice of former Ventura County Supervisor Jones, a former agency president.

Pisano said he reviewed the travel agency issue with the board at the time, and there was no issue of any financial ownership and “we proceeded on that contract.”

Bernson, who lives in Granada Hills, said he never voted on any matter or contract that involved the travel agency that was a source of income to his wife.

“Absolutely not,” he said. “First of all, my wife never received any proceeds from any [agency] commissions or any deal. Neither I nor her ever solicited any account. It was done by one of her previous bosses.”

Bernson said he would not get involved in the contract because of the appearance it might create. “Under the circumstances, if it ever came to me now and they were doing business with that company, I would abstain,” Bernson said.

Bernson refused comment on what he said was an overall “examination” of the agency, saying it was discussed only in closed session.

Times staff writer Patrick McGreevy contributed to this story.

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Trouble at SCAG

An examination of the Southern California Assn. of Governments has turned up widespread financial, accounting and contracting problems and a lack of accountability in the regional planning agency for a six-county area with 16 million residents. The Times found the agency has awarded contracts to relatives, friends, or associates of some past and present SCAG board members.

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L.A. City Councilman Hal Bernson

Chairman of key SCAG committee. The regional agency in 1993 awarded its travel business to a San Fernando Valley travel agency associated with Bernson’s wife. Bernson said he never voted on the contract. The agency’s executive director says records about why the contract was awarded to firm were thrown away.

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Former Ventura County Supervisor Ed Jones

A past president of SCAG, Jones was defeated by voters in 1986 after his arrest on suspicion of lewd conduct. He pleaded no contest to reduced charges of public drunkenness and disturbing the peace. Jones has a consulting contract with SCAG as liaison between the agency and local governments in the Malibu, Las Virgenes and Conejo area.

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Former San Dimas Mayor Terry Dipple

A former SCAG board member, Dipple resigned in 1996 after pleading no contest to forgery charges for taking money from his community’s Meals on Wheels program. Dipple later received a SCAG consulting contract, also in the Malibu, Las Virgenes and Conejo area. He is executive director for that area’s Council of Governments.