In Wake of City Fraud, Mayoral Candidate Says We Must ask Three Questions

In the wake of the discovery of significant embezzlement of Pasadena city funds, now is the time to ask three key questions – why did it take so long to uncover this alleged theft, how can we make sure such a theft does not happen again, and what are we doing to make sure our budget dollars are being spent both legally and effectively?

According to evidence uncovered in the case, the alleged theft of funds from a special account earmarked to underground utility lines has been going on for more than a decade and all told involves more than $6 million in taxpayer dollars.

A few city officials are patting themselves on the back for the eventual discovery of the alleged theft and let’s give credit where credit is due – it is better to discover the alleged misuse of funds later rather than never.

But the mere fact that the alleged theft was so large, so brazen and took so long to eventually uncover shows that we should take a hard look at the entire budget process and make sure we put internal controls in place to ensure something like this does not happen again. And beyond that, we should be looking at the very best practices in city budgeting to make sure every city dollar is spent both as intended and objectively spent well. Pasadena should be the model for effective budgeting, performance measurement, and oversight.

As someone who works with local government to improve their performance and teaches government reform and management practices at USC, I know there is so much more we can do to be better watchdogs of taxpayer dollars.

The controls in place now are clearly minimal. Sadly, such a condition was probably foreseeable, particularly after the city dissolved its internal auditing unit in July 2010 with City Council’s failure to fund the unit in the FY 2011 budget. While the unit did not catch the fraud in its early years, the lack of an ongoing city audit function only makes it harder to discover misuse or theft of city funds and the recent news shows we need stepped up auditing functions – not minimal to zero internal auditing capacity.
Pasadena of course is not alone when it comes to misuse of city dollars and lax oversight. It should pain us all that we are now being mentioned in the same newspaper columns with the notorious City of Bell, California, where widespread fraud and self-dealing went on for decades.

On one basic level, the comparison is unfair. In Bell the crime was committed by the elected leaders themselves. Here in Pasadena the failure was to find the alleged crime in a timely fashion.

But we should use this moment as a wake up call to tighten our practices and improve oversight, including:

While our city benefits from the county Civil Grand Jury, we also need more transparency so Pasadena residents may play a role in providing consistent oversight on budgets over a certain amount. The city needs to pass an ordinance establishing a citizen’s oversight function putting to work those residents with significant expertise in budget and audit. It should be noted that this special utility fund, financed through a utility surtax, was not established with a citizen oversight committee.

We also must return to an internal full-time auditing function in City Hall, and not just for fraud, but for performance as well. While the alleged theft should command our attention, we should also pay attention to the loss of taxpayer dollars to waste, inefficiency or simply outdated practices. This function was only recently reauthorized by council after the discovery of fraud. We need a long term commitment to highly-effective oversight of all of our contracts throughout all departments.

We must review every contract for performance and compliance as part of the contract itself.

We should make performance the very key to the budget process. There are several ways this is happening around the nation and region, with processes like “performance based budgeting” as one excellent example. But the core value should be to treat every dollar like it is precious (an idea most of us taxpayers would support) and make sure it is being spent wisely.

We have found the alleged theft. That’s good news. But the best news will be that we have acted on this wake up call and put the very best budgeting practices in place, both to prevent future theft but most importantly, to make sure every taxpayer dollar is being spent well.