Audit of Corruption-Wracked Cudahy Finds Sloppy Management, Too

Wednesday, April 16, 2014

Even before the State Controller’s Office began auditing the small city of Cudahy in southeastern Los Angeles County, it was apparent he wasn’t going to like what he found. And he didn’t.

Cudahy tied with the City of Industry for last place in the 2012-13 Los Angeles County Grand Jury study ranking the existence of internal financial controls in its 88 cities. Two city councilmembers and a former city manager pleaded guilty to bribery and extortion in 2012.

It was the highlight of a string of scandalous behavior that featured the arrest of City Councilman Osvaldo Conde at gunpoint after a five-hour standoff with the FBI outside his office.

On Tuesday, Controller John Chiang released three audits of Cudahy spanning fiscal years 2010-11 and 2011-12. “Our review found significant weaknesses with the City’s accounting and administrative controls system. We found that the potential for waste, fraud, and abuse of public resources is extremely high due,” the controller reported.

He gave them a gentle rebuke for screwing up $32,550 in transportation (pdf) money in one and demanded that the city give the state $22,744,820.00 in transferred redevelopment (pdf) funds―part of an ongoing city-state battle over the now-deceased program―in another.

But Chiang’s most severe assessment was in the review report (pdf) on Cudahy’s administrative and internal accounting controls. He pretty much didn’t find any. The city was rated “adequate” on just 8% of 79 measurements. Cudahy had a zero score on the eight measures related to “Integrity and Ethical Values” and “Commitment to Competence.”

Put another way: “You have to balance your checkbook,” Chiang told KPCC. “You have to understand how much cash you have in place. You have to have contracts that are signed and followed. You have to keep track of your credit card bills.”

That might explain why general fund expenditures exceeded revenues by $332,500 in 2009-10, and then $582,500 and $823,000 in succeeding years. 

The city says it is, or is trying. They argued that it is harder to make changes in a city with a $10 million budget than $500 million and asked for state money and more time to comply.

It’s been a busy week for corrupt cities in the news. Robert Rizzo, former administrator of neighboring Bell, was sentenced to 33 months in federal prison on tax fraud charges and ordered to pay $236,000 in restitution for his leadership role in padding the pay of top officials. He copped a plea, but his second in command, Angela Spaccia, fought the good fight before her conviction. She received 11 years in state prison last week for misappropriating public funds and other crimes.

–Ken Broder


To Learn More:

State Controller's Audit Finds Cudahy Spending Was Out of Control (by Sharon McNary, KPCC)

State Accuses Small City Cudahy of Large Spending Irregularities (by Jeff Gottlieb and Steve Marble, Los Angeles Times)

Cudahy Officials Cop to Pot Shop Bribery, Skate on Election Fraud (by Ken Broder, AllGov California)

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