A long overdue audit of Anaheim Chamber of Commerce spending under a city contract shows that the chamber's expense tracking was so shoddy that auditors could not determine whether the business group spent taxpayer funds on other, perhaps political, activities.
The five-year, $1.8-million contract, awarded to the chamber in early 2012, was to administer Anaheim's enterprise zone, a now-defunct state program that gave businesses tax breaks for hiring people in depressed areas.
Then in May, the chamber received a $1.1-million increase to the contract, citing the need to hire more staff for day-to-day tasks.
The city granted the increase, bringing the contract's total value to $2.9 million. But a month after the city granted the contract increase, the state legislature voted to kill the enterprise zone program.
Meanwhile, a contract-required performance audit by Sacramento-based Sjoberg Evashenk Consulting found that the chamber’s tracking of staff time was unreliable, so verifying the organization’s spending under the contract was impossible, according to the audit.
The audit largely confirmed details of a draft Voice of OC reported earlier this year based on sources who had seen it.
Perhaps the most important issue described in the audit was the chamber’s unreliable timekeeping system. Among other problems, staff was not required to log hours worked on tasks unrelated to the Enterprise Zone, used several different methods, and timesheets couldn’t be verified, the audit says.
“Without requiring timekeeping for the entire workday, the Chamber could not reasonably determine the allocation of time between Chamber activities and Enterprise Zone responsibilities,” the audit reads. “The city cannot be assured that it was receiving the level of services it was paying for, and the city did not have sufficient information to assess the reasonableness of budgeted resources."
The chamber claimed and the auditor agreed that contract language was confusing and ambiguous, combining a “time and materials fee” structure with a contradictory “fixed-fee” structure.
The business group’s assignment of blame to the contract notwithstanding, it implemented a new timekeeping system in March to resolve its staff time recording problems, a city response to the audit states.
However, the audit — which according to City Hall sources was delayed for months because chamber President Todd Ament had delayed his responses to the auditor’s questions and findings — found other problems as well, including potential conflicts of interest, inadequate cost control measures, the hiring of subconsultants without contract-required city approval and advance payments from the city for work not yet complete, among other issues.
The death of the enterprise zone program means that the contract is terminated this week, and it is likely that most of the $2.9 million was not spent and some of the audit’s findings and recommendations are now moot.
But some of the findings, especially those regarding subconsultants, remain relevant in light of recent allegations from activists that the chamber steers taxpayer money to blogger Matt Cunningham. The controversial writer outraged many when he posted a photo of a defaced teddy bear near a Virgin of Guadalupe candle, clearly mimicking memorial sites to young Latinos killed in police shootings.
Cunningham is a chamber consultant, but it is not yet clear whether he was one of the subconsultants the audit states were hired without contract-required city approval. The audit does not identify the subconsultants.
The chamber in its audit response argues its hiring of subconsultants did not violate the city contract because they served merely advisory roles and did not directly do work under the agreement.
The furor over Cunningham's post culminated in a candlelight vigil last week outside City Hall and the chamber’s downtown headquarters. Activists demanded that the chamber end its consulting contract with Cunningham, a Republican Party insider with significant ties to the city’s political elites.
The chamber thus far has refused to explain the nature of Cunningham’s consulting work for the business group, and Ament declared that the organization will not end its relationship with Cunningham.
A response from the business group attached to the audit pointed out that the audit’s findings show the enterprise zone’s core requirements were met and even exceeded. It disagreed with some of the auditor’s findings, saying they are best described as best practices recommendations.