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Greuel calls for greater scrutiny of neighborhood councils' spending

January 12, 2010 |  6:30 am

After conducting a months-long audit of the city’s system for funding 89 neighborhood councils across Los Angeles, City Controller Wendy Greuel said there had been a “systematic failure” in basic financial oversight of the groups and called for greater scrutiny of their spending.

The accounting problems at the Department of Neighborhood Empowerment, which tracks the expenditures of the city’s neighborhood councils, were documented by the controller’s office in a 2006 audit. Greuel’s new report shows that many of those issues persist.

Last year, The Times reported that six neighborhood councils were accused of misspending $250,000 and that five treasurers or presidents of the groups had been charged with felonies for misusing taxpayer money.

The controller’s new report estimates that those groups made $276,000 in questionable expenditures.

“We need to put in checks and balances to ensure that doesn’t happen again,” Greuel said.

The voters approved a system of neighborhood councils as part of the city’s new charter in 1999 to give communities a greater voice in governance. But the Department of Neighborhood Empowerment has struggled to stay abreast of spending. Until this year, when city officials reduced the annual allotment to neighborhood councils by $5,000, the groups were given $50,000 annually for events and projects, which could be carried over for three years.

Greuel’s auditors found that the Department of Neighborhood Empowerment was unable to identify each neighborhood council’s available balance, according to the report. And although each neighborhood council is required to turn in a quarterly financial report detailing expenditures, five submitted their last report in 2006, according to Greuel’s audit.

The Department of Neighborhood Empowerment — which has just one auditor — currently has a backlog of 364 quarterly financial reports yet to be reviewed. The controller’ s office reported that it could find no evidence that the department has been reviewing neighborhood councils’ budgets to determine whether their spending is appropriate.

As The Times reported last year, credit cards are routinely issued to neighborhood council treasurers without background checks, and there have not been controls in place to ensure that the councils adhere to credit card limits or a rule limiting cash advances to $500 a month.

Greuel said replacing the cash advance privileges with a petty cash system could create more accountability. Auditors in the controller’s office also did spot checks of the equipment inventories of 14 neighborhood councils. Five of the groups could not account for some of the items purchased, including cameras, computers, microphones and translation machines.

Greuel plans to outline her findings at a news conference this morning ,

-- Maeve Reston at L.A. City Hall