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Audit prompts L.A. County to seek takeover of First 5 LA

October 25, 2011 |  5:34 pm

Los Angeles County Supervisor Zev Yaroslavsky at a board meeting in July 2009. Credit: Mark Boster / Los Angeles Times
The Los Angeles County Board of Supervisors on Tuesday signaled its intent to take greater control of First 5 LA, an independent voter-approved agency that uses cigarette taxes to fund health, safety and educational programs for children.

Supervisor Zev Yaroslavsky said First 5 LA was sitting on hundreds of millions of dollars of unspent taxpayer funds, and criticized the staff for a lack of transparency, accountability and competitive bidding.

"It's sitting on over $800 million," Yaroslavsky said. "And some of it for good reason, and some of it for no apparent good reason. It's just been sitting there and accumulating." First 5 LA's annual operating budget is about $180 million a year.

An audit by Harvey M. Rose of San Francisco found First 5 LA's commission was unable to monitor money that was being spent "since monthly programmatic expenditures are not presented relative to a budget." Auditors also concluded the agency was overstaffed while under-spending on programs for children.

Additionally, First 5 LA staffers failed to report even basic information to its commissioners, such as details of more than $200 million in contract and grant awards received by the agency in the last fiscal year, the report said. The auditors said the lack of oversight means there is no way to determine if the agency has signed agreements "for inappropriate purposes or with unqualified vendors or grantees."

The audit also said there was an absence of documentation that competitive bidding took place. And while it is First 5 LA's policy that commissioners must approve all new contracts exceeding $25,000, many agreements were approved "only by staff."

"What shocked me … was the lack of information, the lack of relationship, between the executive branch of that agency and its commission," Yaroslavsky said. "The overwhelming majority of contracts that were approved by the agency never came to the commission, whether it was for $5,000, or $500,000, or for $5 million. Commissioners were not aware, and did not cast a vote, and therefore did not have the ability to properly oversee … how funds were being expended….

"That's no way to run an agency. That is a prescription for trouble. And while we have no evidence of malfeasance … we really have no way of knowing anything about where that money went," Yaroslavsky said. "The current situation over there is not healthy."

Supervisors voted 4 to 1 to ask the county counsel to write an ordinance that removes First 5 LA as a separate legal entity and for it to become a county agency. Supervisor Gloria Molina was the lone dissenter, saying she did not see any evidence of wrongdoing so egregious that warranted a county takeover.

Francisco Oaxaca, spokesman for First 5 LA, said that "while the audit did find areas of potential improvement, it did not provide any examples of malfeasance or misuse of funds." He added that the staff looked forward to working with the supervisors to determine how First 5 LA would exist as part of county government.

Currently, the commission overseeing First 5 LA is made up of nine voting members, consisting of the chairman of the Board of Supervisors, one person appointed by each of the five supervisors, the heads of the county departments of public health and mental health, and a delegate of the county Office of Education.

First 5 LA was created after voters statewide in 1998 approved Proposition 10, which levied a 50-cent-per-pack tax on cigarettes to be given to programs to promote the health, safety and education of children from birth to age 5.

Statewide, the tax raises about $590 million a year.


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-- Rong-Gong Lin II at the Los Angeles County Hall of Administration

Photo: Los Angeles County Supervisor Zev Yaroslavsky at a board meeting in July 2009. Credit: Mark Boster / Los Angeles Times