‘No Red Flags’ in Anaheim Chamber Audit, but Questions Remain

An audit of the Anaheim Chamber of Commerce contract to administer a state tax voucher program found no “red flags” despite the chamber’s inadequate staff timekeeping and lack of a reliable paper trail, an outside auditor told the City Council Tuesday night.

The original 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.

The contract had generated controversy throughout last year, with Mayor Tom Tait opposing an increase to the contract before the audit was released publicly, then because of a blog post by Anaheim political operative Matt Cunningham, who is funded by the chamber, that mocked Latino memorial rituals.

Last May, the council majority — Kris Murray, Jordan Brandman, Lucille Kring and Gail Eastman — approved a chamber request for a $1.1-million increase to the contract, citing the need to hire more staff for day-to-day tasks. Tait dissented, saying there should be no contract increase until the audit was finalized and made public.

Things became more muddled when a month after the city granted the contract increase the state Legislature voted to kill the enterprise zone program.

Several months later, the contract-required performance audit by Sacramento-based Sjoberg Evashenk Consulting was released. It 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.

That problem notwithstanding, the audit also found that the chamber met and in some cases exceeded the core requirements of the contract. And the chamber last March implemented a new timekeeping system to solve its tracking issue, according to a city response to the audit.

George Skiles, a manager with the audit firm, told the council that the chamber spent a large amount of resources to complete the contract-required work and that what was produced could be reasonable for what the chamber spent.

“It is evident that the chamber performed the activities they set out to perform and committed significant resources to do so,” Skiles said.

However, Skiles also told the council that auditors couldn’t determine how the chamber’s spending justified the contract increase and that budgeted allocations couldn’t be supported.

“This is part of the problem we had. … From my perspective, the information wasn’t there,” Skiles said.

Tait pressed Skiles about the timekeeping finding and asked several times whether the deficiencies were within a normal range.

“Looking at a lot of organizations, was it within a reasonable range of timekeeping?” Tait asked.

“It would not be what we recommend, no,” Skiles responded.

Skiles placed some of the blame on the city for including in the agreement language that was contradictory and confusing. There was a time and materials provision, which would require timekeeping, and a fixed fee structure, which wouldn’t.

Skiles also said that it was impossible to tell whether the chamber spent enterprise zone funds on other activities.

That is an important finding, because activists have questioned how the chamber funds Cunningham, who outraged many in December 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.

The chamber and Cunningham denied that the chamber was financing the blog. However, required public disclosures show that the chamber paid Cunningham between $10,000 and $100,000 in 2012, and the chamber has not provided documentation as to where that money came from.

A chamber website even referred to Cunningham's blog as the "Anaheim Chamber of Commerce blog." The reference was removed after Voice of OC asked about it.

With the exception of Brandman, who offered no comment from the dais, members of the council majority — whose campaigns were heavily supported by the chamber’s political action committee — brushed aside the timekeeping finding as minor and instead pointed to the chamber’s successful execution of the enterprise zone program.

“The facts are this was a huge success on a very new program,” Murray said.

Kring noted that the state didn’t expect the chamber to process 1,000 vouchers, but the chamber managed more than 1,400, with each one representing a new job.

She then chalked up problems like the inadequate timekeeping to the sloppiness that can arise when doing something successfully and with excitement.

“Sometimes you get so involved in the excitement … you forget about 'Oh, I should dot the I and cross the T,' ” Kring said.

Please contact Adam Elmahrek directly at aelmahrek@voiceofoc.org and follow him on Twitter: twitter.com/adamelmahrek

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