Two controversial Department of Water and Power nonprofit trusts have decided to keep more than $11 million as a “rainy day” fund, despite a city auditor’s recommendation that they spend the cash before receiving any more ratepayer money.
The nonprofits, which are jointly run by DWP managers and leaders of the city-owned utility’s largest union, have been at the center of a two-year controversy over how they have spent more than $40 million in public funds since the early 2000s.
The groups receive roughly $4 million per year, but have struggled to demonstrate to public officials what they achieve.“I believe rainy day funds are important, but this is more like a hurricane fund,” said City Controller Ron Galperin. “I don’t see what the point is of these trusts hoarding this money.”
In May, Galperin’s auditors found the nonprofits had paid millions to outside contractors without competitive bids, overpaid top administrators and allowed employees to charge hundreds of thousands of dollars to ratepayer-financed credit cards for travel, meals and auto expenses without filing reports to justify them.
A separate audit by City Administrative Officer Miguel Santana found, among other things, that the nonprofits failed to provide any “real information on the outcomes and effectiveness” of their programs.
The nonprofits became a thorny political issue after The Times reported in September 2013 that city leaders knew very little about how the money was being spent.
Mayor Eric Garcetti and Galperin vowed to bring transparency to the groups, setting off a battle with the union’s politically powerful leader, Brian D’Arcy.
D’Arcy claims the money is no longer public once it lands in the nonprofits’ bank accounts, and therefore city officials have no right to inspect the books.
An ongoing lawsuit will ultimately decide that question, but a compromise between the union and city leaders allowed city auditors to see four years of records in early 2015, the first public accounting of the nonprofits’ spending since their creation in the early 2000s.
In addition to the “cavalier” spending cited by the auditors, the nonprofits had also accumulated a large amount of unspent cash, which Galperin said should be depleted before the city gives the nonprofits more money.
On Tuesday, DWP General Manager Marcie Edwards, who is also a trustee of the nonprofits, appeared to reject that idea. A written progress report she presented to the utility’s board of commissioners noted that the annual payments are required by the city’s contract with the labor union and cannot be withheld.
Therefore, according to the report, the nonprofits have chosen to hold onto the excess cash as “rainy day” funds to cover safety and training programs “in subsequent years when DWP contributions might not be sufficient.”
The current union contract expires in 2017.