Audit Uncovers Cost Overruns in Laguna Niguel

JEFF ANTENORE, Voice of OC Contributing Photographer

Laguna Niguel City Councilmembers conduct city business during a council meeting on Tuesday, September 5, 2017.

A long-awaited audit that looked at 21 Laguna Niguel vendors found a $410,000 cost overrun in a tree trimming contract among problems that affected eight of the city contractors.

After the Sept. 5 presentation to the City Council by the Santa Ana-Based Pun Group accounting firm, Councilwoman Laurie Davies asked Frances Kuo — a partner with the firm — if they found any illegal activity during their research. Kuo said they hadn’t.

However, Councilman Jerry Slusiewicz challenged that conclusion.

“In our municipal code, we have policies and procedures on how we’re doing our purchasing,” Slusiewicz said. He asked Kuo, “if they did go above that (spending cap), then they violated the municipal code of Laguna Niguel, correct?”

“Correct,” said Kuo.

Slusiewicz was referring to the Pun Group’s discovery that department heads and the city manager went over their respective $10,000 and $25,000 spending limits in two of the findings. The city manager can go above a department head’s spending cap by up to $25,000.

The city hopes to halt some contract oversight issues and cost overruns by installing an electronic purchasing system that won’t allow money to be spent if it’s over the contract limit or missing an invoice. The city still uses paper with carbon copies for its purchasing system. The electronic system isn’t expected to be online for about a year.

One contract that far exceeded spending limits was the $410,000 in excess spending that went to vendor West Coast Arborists for trimming city trees.

“That’s the salary of two (Sheriff’s) deputies … because we didn’t follow municipal code of the city of Laguna Niguel,” Slusiewicz said.

The excess spending has been the subject of multiple contentious city council meetings since July.

The audit itself was initially scheduled to be released in mid July, but its public disclosure kept getting postponed, according to Slusiewicz. Unlike a traditional audit, this report focused on purchase orders and contracts.

Ultimately, tensions on the city council led to Slusiewicz resigning as mayor and the tensions continued at the Sept. 5 meeting.

Slusiewicz earlier called for a District Attorney investigation into the tree contract overrun before his resignation last month, but didn’t gain any traction on the council. After he brought the tree trimming contract to light, a former city manager accused him of bullying.

The city has a three-year contract with the arborists — with an annual limit of $140,000 — that it entered in October 2015.

The circumstances that led to the findings of the cost overrun prompted Councilman John Mark Jennings to ask Kuo and Pun Group Managing Partner Ken Pun how the financial group found the overspent contract.

Jennings started to question how many meetings they had with Slusiewicz and Mayor Fred Minagar and when exactly the tree trimming contract came up.

“What about the question with respect to instructions that you received from then-mayor Slusiewicz about West Coast Arborists? Do you have an understanding of how many total meetings…that you had with the mayor and mayor pro tem (Minagar at the time)?” Jennings asked.

“We should actually defer those questions. We need to pull our records to accurately tell you,” Pun answered.

Jennings also asked why the Pun Group withheld the draft report from City Attorney Terry Dixon after he asked for it in July.

Kuo said that’s part of the questions they deferred until a later date.

“I think we know the answer to that. Do you have an answer for it tonight?” Jennings said.

“First of all, the city attorney is still an outside party. According to agreed upon procedures, the specified party is not the city attorney,” Pun said, adding that Slusiewicz and Minagar instructed the group to get management’s responses to the findings before handing the report over to Dixon.

Under the procedures of the report, the accounting firm works with the Mayor and Mayor Pro Tem during their review of financial records and are able to somewhat steer where the report goes.

Slusiewicz, during the council meeting, asked Jennings why he had so many questions about the process used to select contracts to be reviewed by the audit.

“Mr. Jennings, why is it important why we picked West Coast Arborists? Why is that even important?” he asked.

Jennings answered, “One, I’m not going to be interrogated by you on the dais and, secondly, I think it’s very important because I want to know what you were up to. Frankly, it came out of someplace and I want to know where and I want to know why.”

Slusiewicz replied it doesn’t matter why the arborists were chosen, but said he got a tip from a concerned citizen that West Coast Arborists did work at former City Manager Rod Foster’s house and that the company doesn’t typically do residential work.

“So it was just a shot in the dark. We found out that they also got $410,000 in excess spending over two years … it was a stroke of almost pure luck,” Slusiewicz said.

Among the eight different findings in the audit was the discovery of an aggregated $54,766 for recreation brochures, neighborhood newsletters and postcards from Westamerica Communications Inc., which is over the city manager’s spending cap. In this instance, Foster, the former city manager, delegated his purchasing responsibilities to the city’s former purchasing manager.

In the report, the city management’s response to the brochure and newsletter findings is that some of the costs were split between parks and recreation and police newsletters. Some of the purchase orders included in the accounting firm’s total is before the city entered an agreement with Westamerica in February for parks and recreation literature, and the new purchasing manager will be working with the Sheriff’s to bid out their quarterly brochures. The response doesn’t address how the amount went over the city manager’s threshold.

The audit group also found a problem with purchase orders not matching invoices. The accountants found that for fiscal year 2016-2017, the aggregate purchase order amount issued to Triton Air was $10,632 for air conditioning work, while the three separate invoices in that time only total $5,987.

City management agreed with the group’s findings and said the purchasing manager will work with the Public Works Department and issue a contract to a vendor for air conditioning maintenance.

The overall findings and management responses didn’t satisfy Minagar, who said he wanted a concrete conclusion from the Pun Group.

“So no red flags that would constitute illegalities in the city by anyone?” Minagar asked.

“Let me put it this way … we are not lawyers. We can not determine or opine on legality,” Pun said.

Kuo chimed in after Minagar kept pressing for some type of opinion or conclusion.

“In accordance with the professional standard, we cannot provide a conclusion or opinion,” she said.

Spencer Custodio is a Voice of OC reporter who covers south Orange County and Fullerton. You can reach him at scustodio@voiceofoc.org.

  • Ed Romero

    After they have completed this investigation I would like someone to investigation the Cost over Runs at the Orange County Probation Department. When I was employed at the O C Probation Department there was 3 Supervisors and 1 Officer Manager for 12 Employees. One Supervisor would hide in her office and refuse to come out, another one was asleep one day when I called and called her because I needed her assistance, this is the same Supervisor that one day one of her Clerical Staff clocked in and IMMEDIDATELY left the Office to go on a Photo Shoot, when I questioned her where he was at she replied “he’s here have him paged” I have already done that about 5 times (where was she, ASLEEP I guess), he finally returned from his Photo Shoot and IMMEDIDATELY left for LUNCH. The Office Manager on that floor would LOCK her door and never come out. Then there was those 2 Office Managers in the basement, every time I passed by her Office she was BUFFING her fingernails, the other Officer Manager was always CUTTING FOOD coupons from the Newspaper. There was SOMETHING wrong at the Probation Department back then and I understand things are NO BETTER today. I blame those Drug Dealing, Marijuana Smoking, Cocaine Snorting Racist Lesbians that ran our Department, especially that Asst. Chief Probation Officer who Smoked so much Marijuana while on duty that sometimes our Main Office Building looked like a FOGGY day in Fresno, and things were worse at our Los Pinos Detention Center, the Drug Abuse up there was so bad that my co-workers gave that facility the AKA/The Lesbian Drug Den, then there was the Chief Probation Officer Smoking so much Marijuana at her residence in the City of Anaheim that her neighbors would call our Probation Records Unit (I handled one of those calls) complaining about all the Marijuana fumes floating over to their house’s. I believe I made my point SOMEONE was WASTING MILLIONS of Dollars of the Taxpayers money to Hire and Promote a bunch of Drug Dealing, Marijuana Smoking, Cocaine Snorting Racist Lesbians at the expense of the Federal, State and County Governments.

  • LagunaTri

    I can’t imagine tree-trimming would be only $140k in Laguna Niguel. Maybe they went with low bid and were embarrassed in year one, things weren’t getting done, they increased the PO without going through proper procedures. But to make the same mistake the following year? If the firm did work at the CMs house, that’s appalling. I thought most of those good ol’ boys in government pulling that kind of nonsense had retired. We need more females in government management roles. Not only do they get things done, they have higher standards.

    • LFOldTimer

      Females in government are just as crooked as the males. Some even moreso.

      Hillary is a prime example.

      • LagunaTri

        I said “government management roles.” A national politician is hardly a comparison to local government professionals with graduate degrees. Any government management job would be far too much work for someone like Hillary or any politician, for that matter. Politicians are a different breed altogether. Narcissists, all of them.

  • Greg Lamon

    Seems to me the core issue is whether the expenses were justified, value received for value paid. This aspect seems to be missing from this story, instead the focus is on bureaucratic process. Did the taxpayers get the service that was paid for at a fair price or not?

    • LFOldTimer

      No. Didn’t you read the story? The LN Municipal Code was violated. Laws were broken. Government officials can’t play fast and loose with taxpayer dollars. It’s not their money. You can’t spend $410,000 of the public treasure over and above the “do not exceed” clause in the contract without public notice. There’s a reason that law is on the books.

      When common citizens break laws they get punished for it. Why should government officials be held to a lower standard?

    • David Zenger

      It’s a little more complicated than that. The bureaucrats overstepped their spending authority by a huge amount while the elected representatives knew nothing about it.

      The fact that WCA did work at the City manager’s house adds a concerning aspect to the story.

  • LFOldTimer

    As expected, Slusiewicz was right all along. And if Slusiewicz has not discovered and exposed the $410,000 in cost overruns and the violation of the LN Municipal Code – you can bet your bottom dollar this violation would have never seen the light of day if not for Jerry Slusiewicz.

    At the meeting did the new mayor or any council person thank Slusiewicz for being a good guardian of the public treasure? lol. Highly unlikely. The article certainly didn’t report it.

    Quite the contrary, Slusiewicz was removed from his mayoral seat. The bullies dug deep for other sideline excuses to spank and reprimand him. No good deed goes unpunished, Jerry!

    In case you don’t know what a Municipal Code is – it’s a set of laws enacted and enforced (at least allegedly so) by a city.

    Frances Kuo from the audit firm verified that the the $410,000 cost overrun violated the LN Municipal Code. So a law was broken. Do you think anyone in LN government responsible for violating the law will be called out and brought to justice?

    Nah. Laws weren’t created to hold government officials accountable. They were only concocted to keep the peons and little people in line.

    Laguna Nigel is nothing more than just another filthy swamp in the OC swamp family.