The California High Speed Rail Authority paid $3.4 million in bills without the paperwork to back them up and isn’t prepared at this point to handle federal stimulus funds, the state’s inspector general reported today.

Inspector General Laura Chick said her audit (which is attached to this post) also found the rail authority paid $90,000 over five months this year for “unsubstantiated and potentially duplicative public outreach efforts” and agreed to another $700,000 contract for work that may have nothing to do with the rail project.

The audit is the latest in a series of critical examinations of the financial workings and oversight of the state agency that is supposed to build California’s $43 billion high-speed rail system.

The purpose of Chick’s audit was twofold: to determine if the Rail Authority has “proper controls and procedures in place to oversee and administer” federal stimulus funds and to evaluate the authority’s progress in implementing recommendations from an earlier, highly critical audit by California’s Bureau of State Audits.

“The Authority is not fully prepared to distribute and monitor ARRA [American Recovery and Reinvestment Act] funds,” the inspector general’s report concluded.

That means that until the authority cleans up the issues raised in the audit, it will not be able to spend $3.2 billion in federal stimulus money that has been set aside for the project.

In addition to the stimulus money, the rail project is scheduled to receive $9 billion in state funds approved by voters in 2008.

Roelof van Ark, the High Speed Rail Authority’s chief executive, noted in his response to Chick’s findings that her inspection was completed at the end of June, only two months after the state’s audit. Not all recommendations made by the state auditor were in place by June, said van Ark, a point that also was included in Chick’s findings.

Chick and van Ark said the rail agency has lacked the staff to do some of the work and has had to rely on its contractors. The overall contractor is Parsons Brinckerhoff, a subsidiary of British engineering firm Balfour Beatty. Because of California’s budget problems, the rail agency still doesn’t have all of the staff it needs.

The audit said the rail authority is working to resolve other issues to ensure it can oversee construction of the planned Anaheim-to-San Francisco rail project.

But its findings showed the following:

  • The authority paid for $3,440,776 (38 percent) in expenditures, out of $8,942,229 reviewed, without obtaining adequate supporting documents.
  • The authority paid $90,000 for unsubstantiated and potentially duplicative public outreach efforts from February 2010 to June 2010.
  • The authority has a $700,000 memorandum of understanding to pay for a consultant who works for the (Southeast Los Angeles County) Gateway Cities Council of Governments and is not responsible for doing work on behalf of the authority.

The auditors were able to retrieve records to support payment of the $3.4 million but said “without adequate documentation when authorizing payment, the Authority cannot verify if the number of hours, and therefore the expenditures, charged to the project is accurate.”

The $90,000 in unsubstantiated public outreach payments occurred, according to the inspector general, when two PR firms — Townsend Raimundo Besler and Usher, and Lucas Public Affairs — kept billing the Rail Authority $8,000 or $10,000 a month for five months after they apparently no longer were doing the PR work.

And the Gateway Cities group, which represents Los Angeles County communities along the border with Orange County, hired professional engineer Jerry Wood to work on their section of the prospective rail line, but he will have no oversight from the High Speed Rail Authority.

His contract presents three problems, according to the inspector general.

“Such an arrangement is problematic for the Authority since it does not allow them to provide effective oversight and accountability over this subconsultant,” said the report.

“Also, it is not clear how the work performed by this subconsultant will provide a benefit to the Authority. Furthermore, no such agreement to provide funds for technical reviews of the Authority’s work was awarded to assist other local governments located along any of the other corridors.”


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