Audit Faults Westwood Nonprofit
Shoddy accounting and management’s failure to rein in spending led to hefty deficits for the city-approved entity responsible for improving Westwood Village’s business climate, an audit released Wednesday shows.
The audit, released during a meeting at Westwood Hills Christian Church, uncovered “significant deficiencies” in the internal controls of the Westwood Village Community Alliance, the nonprofit corporation that administered the business improvement district.
In September, Los Angeles Councilman Jack Weiss decided not to renew the district, agreeing with disgruntled merchants that it had failed to improve parking and the area’s retail mix.
As a result, it is no longer authorized to collect assessments from property owners in the area, though its obligations to maintain and protect Westwood Village will continue through June.
Cannon & Co., the Los Angeles accounting firm that spent more than four months examining the corporation’s 1999-2002 records, cited in its audit a number of troubling practices. It said management had failed to reconcile accounts with the general ledger, had written checks out of sequence, had issued checks without recording them and had let some outstanding checks go unnoticed for as long as seven months.
Cannon & Co. also raised questions about the Westwood district’s payroll. It found that the corporation’s executive director, Robert Walsh, was paid more than his contracted amount for two years. Cannon said the overpayment was $10,423 for the 2000 fiscal year and $17,000 in fiscal 2002.
Walsh, who resigned in October and received $40,000 as a severance payment, could not be reached for comment.
Douglas Brown, the treasurer at the time district renewal was denied, acknowledged then that there had been mismanagement. He also acknowledged that the district had not completed audits for three years.
Merchants said the board had failed to oversee district spending. They said the audit raised many questions about hundreds of thousands of dollars in assessments that had been supposed to be used to beautify the area, which has struggled to attract commercial tenants.
“This audit only goes so far,” said Jeffrey Abell, owner of Sarah Leonard Fine Jewelers on Westwood Boulevard. “It doesn’t answer all our questions. It doesn’t compare any of these figures with our budget.”
The audit showed that the corporation’s expenses exceeded revenues in three of the past four years -- by $174,000 in the fiscal year ended Sept. 30, 1999, $6,600 in the 2001 fiscal year and $150,000 in the 2002 fiscal year. For the 2000 fiscal year, the audit showed an excess of revenues over expenses of $143,000.
The audit also showed that the corporation has current assets of about $99,600, though Abell and others said they suspect the actual figure is far less. Abell urged City Clerk J. Michael Carey, who attended the meeting, to delve more deeply into the corporation’s finances. Carey said he plans “to sit down with Cannon & Co. and figure out to whom we owe money.”
One creditor, One Source Inc., a maintenance contractor, has sued the city in an effort to collect nearly $147,600 in fees.
In an interview, Carey said he does not expect to find evidence that management broke any laws. “My sense is they overspent,” he said.
Weiss, however, said he will ask the city attorney to review the findings to identify potential issues of civil liability or criminal misconduct.
Weiss urged revision of the city ordinance that helps communities create such districts. Among other changes, he suggested that all business improvement districts be audited yearly and that they be required to provide receipts to the city clerk to document expenses.
Citing “substantial uncertainty” about the Westwood Village Community Alliance’s future, Cannon & Co. declined to certify the audit. Under a contract with the city, Cannon is to be paid more than $20,000 for its work.
