BID’s audit raises more questions of mismanagement
By Michael Jahina
April 13, 2003 9:00 p.m.
Questions surrounding the accounting practices of
Westwood’s fractured Business Improvement District have left
both the non-profit organization and the Village in disarray.
A portion of the organization’s audit, completed by CPA
firm Cannon & Co., was withdrawn from the complete audit report
released to board members and local merchants Tuesday, upsetting
many merchants.
This section, an actual memorandum addressed to the board of
directors, was then forwarded to BID members later last week,
according to BID Secretary Philip Gabriel, also the owner of Scrubs
Unlimited.
“I had no idea about it,” he said.
The information in the memorandum revealed several facts that
could appear as red flags to anyone interested in investing in the
Village.
Local Councilman Jack Weiss, meanwhile, has already laid
groundwork for a new BID, keeping some members of the previous
BID’s board as its key proponents.
“Councilman Weiss should make it clear that he will not
appoint any of these people to any new BID board for a period of a
number of years,” said Jay Handal, president of the West L.A.
Chamber of Commerce.
According to the memorandum, statements for the original
BID’s various bank accounts were not included on their
general ledger, and checks were written out of sequence.
Several checks written were not recorded and other checks went
outstanding for as long as seven months, auditors said.
Cannon & Co. also noticed that former executive director Bob
Walsh overpaid himself $10,423.14 in the fiscal year ending in
Sept. 30, 2000 and $17,000 in the 2002 fiscal year. He also
exceeded his expense allowance by $4,200 over a three year span,
auditors said.
Walsh has not provided any explanation for the overpayments, and
could not be reached for comment.
The organization completely lacked any sort of checks and
balances, enabling Walsh’s salary to exceed its contracted
value without the discrepancy being detected, auditors said.
“Our audit testing disclosed that there is no established
procedure for prior review and approval of gross pay changes made
to the payroll records,” the audit documents read.
Auditors also said the BID made its cash payments without
recording them through the accounts payable system, which the
auditors deemed inefficient.
The BID experienced operating losses for the last four years. As
of the 2002 fiscal year, it faces $263,084 in current liabilities,
including $15,000 owed to UCLA.
The BID is also facing multiple lawsuits, one being from One
Source, Inc. for $147.552.51 in fees.
On Jan. 13 2003, One Source, Inc. alleged that the BID owed them
$219,653.73 for street maintenance services.
The city of Los Angeles paid One Source, Inc. $56,120 on Feb. 5,
2003, but did not to pay any additional portion of the allegations,
according to the lawsuit.
As of the end of the 2002 fiscal year, the BID had nearly
$100,000 in cash left over, auditors said. But that number has
dwindled with the payment unidentified recipients, including,
according to their lawsuit, One Source.
Currently there is approximately $19,400 left, according to city
clerk Michael Carey.
Gabriel and others believe several people present at
Wednesday’s meeting had prior knowledge of information
disclosed in the memorandum.
Former BID Treasurer Doug Brown made several references to
mismanagement during the meeting, information made clear in the
memorandum but not in any other portion of the audit.
It is unknown whether he was aware of the memorandum and, if he
was, whether he knew other board members had not seen it at that
time.
Brown was unable to be reached for comment.
Although a portion of the audit had been previously concealed
due to no apparent fault on the part of the CPA firm, some
community organizers and accounting experts were dissatisfied with
the audit.
The auditor’s reports for each of the three years were not
certified, citing “substantial uncertainty” to the
BID’s present and future state.
Since there were audits for the last three years, Eric Sussman,
a UCLA accounting professor, believes that at least the first two
should have been certified by the auditor because present
uncertainties would not have any implications on past records of
over a year old.
“What happened to 1999-2000? Weren’t they hired to
do financial statements for those? Something smells funny to
me,” Sussman said.
In the meantime, Councilman Weiss said he would ask the L.A.
City Attorney to investigate any potential issues of criminal
misconduct, according to a Los Angeles Times article.
