Long Beach auditor failed to follow her own best practices when contracting with consultants, investigation finds – Press Telegram

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Long Beach City Auditor Laura Doud failed to follow her own advice when awarding contracts to two political consulting firms worth about $2 million, over 15 years, that had language vague and disregarded city policies, an investigation into a whistleblower complaint found.

Doud, through her attorney, Kate Corrigan, said she did nothing wrong and did not misappropriate any funds from the city.

The city commissioned the Doud investigation, the report Press-Telegram obtained this week through a public records request, to examine a whistleblower’s allegations made in September. The whistleblower said Doud, the city’s elected auditor, embezzled city funds and committed contract fraud as early as late 2006, according to the investigative report conducted by RSM US, a security firm. Chicago-based consultancy. The investigation found that she substantiated some of the allegations.

The Los Angeles County District Attorney’s Office has confirmed that it has received a copy of RSM’s report and will consider whether to conduct a criminal investigation.

The city did not disclose the whistleblower’s complaint.

The whistleblower’s allegations, according to the investigative report, centered on Doud’s hiring of two political consultancies, Kindel Gagan and the Davis Group. In hiring these companies, Doud did not define services, terms or deliverables, the whistleblower said, according to the report.

Kindel Gagan did not respond to multiple requests for comment. Rick Davis of The Davis Group declined to comment on Friday, March 4.

The city-commissioned investigation substantiated parts of the complaint, saying Doud disregarded the city’s procurement policies and failed to follow the advice she, as an auditor of the city, had donated to other Long Beach departments. But the investigation also found no clear evidence of embezzlement.

“Doud issued audit reports,” the report states, “in which she makes recommendations to various city entities regarding purchases, contracts, and billing that she herself does not track.”

Both of these companies provided services to the city, Corrigan said.

“We maintain the position that there is no misappropriation or wrongdoing,” she said in an email, “and that substantial works and services have been provided.”

As City Auditor, a position she has held since her first election in 2006, Doud is the city’s watchdog, overseeing city services and recommending best financial practices when paying for services or awarding contracts. of project.

The whistleblower’s complaint was submitted to the Long Beach Human Resources Department, the City Attorney’s Office and the Long Beach Police Department in September, the city-commissioned investigation said. RSM US began its investigation at the request of the city on October 1.

Long Beach spokesman Kevin Lee said costs for the investigation were not available Friday.

RSM conducted interviews with Doud, according to the report, as well as those of the two political consultancy firms, the whistleblower and members of several city departments. He also checked various contracts, invoices and electronic correspondence of the parties concerned from 2006 to September last year.

A copy of the survey was sent to the LBPD. But police spokesman Richard Mejia said Friday the district attorney’s office, not the LBPD, would review the findings of the RSM investigation.

Greg Risling, a spokesman for the district attorney’s office, said the county agency received a complaint against Doud. The bureau will conduct a criminal investigation if there is enough evidence to do so, he said.

Risling declined to answer further questions.

The whistleblower complaint made four major allegations. These allegations, according to the investigation, were as follows:

  • Doud paid Kindel Gagan, a political consulting firm, without a contractual agreement defining the services, terms and deliverables.
  • Kindel Gagan had received $5,700 or $6,000 a month since 2006 without providing any product or service.
  • Doud paid Davis Group, another political consulting firm, $3,000 or $6,000 a month for unclear services to both the whistleblower and his colleagues.
  • Doud overstepped internal controls and evaded city procurement policies.

Corrigan, for his part, responded to the allegations by saying Doud’s goal “is to provide the best possible service to the City of Long Beach and to better meet the needs of the public.”

The first allegation

Doud first met Michael Gagan, of Kindel Gagan, in 2003 when they both worked for the water replenishment district, according to the investigation report. Gagan and his company were hired, according to the report, to help Doud with issues related to city finances and the state’s public pension system for public employees. Gagan’s experience appears to fit such issues, according to the report.

The whistleblower, according to the investigation, said Doud paid Kindel Gagan without a contract defining the services, terms and deliverables. There was a single two-year contract with the company for 2016 and 2017, the whistleblower said.

The report, however, revealed that Kindel Gagan’s bills were paid through several different contracts from 2006 to 2019.

But the report backed up some of the whistleblower’s claims, saying it revealed some bills were paid without a contractual agreement for services from March 2019 until last year. Those invoices also contained generic descriptions with no details of deliverables or hours worked, according to the report.

Through September, Kindel Gagan has received a total of $1,036,200, more than the whistleblower originally estimated, according to the report.

Such a practice – using vague descriptions for invoices – is what Doud has advised against in the past. In her audit of the Queen Mary, for example, she said city staff should require a detailed scope of work when hiring subcontractors.

Corrigan, on behalf of Doud, said the city auditor would incorporate best practices, such as detailed invoice descriptions, into its future work.

The second allegation

The whistleblower also said Doud had paid Kindel Gagan $5,700 or $6,000 a month since 2006 without providing any product or service, according to the investigation report.

The investigation revealed that the company had received these monthly payments since 2006. But RSM said it could identify tangible works and services for some of these payments.

There were other times, however, where RSM could not identify a work product, saying in its report that there were invoices to Kindel Gagan with generic descriptions, such as “professional services”.

The report stated that these invoices did not contain any details or description of deliverables or hours worked, so it was not possible to determine the “reasonableness, appropriateness, applicability of the work, or fairness of the cost to the city of the services of Kindel Gagan. ”

Doud’s attorney refuted that finding, saying Kindel Gagan provided services to the city auditor.

The third and fourth allegations

Doud first hired the Davis Group, a political consulting firm, in 2005 to help him with his campaign for the city auditorship, according to the RSM report. She continued to outsource their services, such as developing strategic messages, once she became a city auditor, according to the report.

The city paid the Davis Group $527,073 from November 2006 to September 2021.

The whistleblower said the Davis Group was receiving monthly payments for services that were unclear.

RSM substantiated part of this allegation, saying in its report that the Davis Group had received $3,000 to $7,500 per month – though not on an ongoing basis – since 2006. As with Kindel Gagan, RSM said there there were times when he could find work and services for such payments. , but other times he couldn’t.

The report said there were contracts and invoices, but they had generic descriptions, according to the report – making it impossible for RSM to determine the value of these services.

Corrigan said the Davis Group provided substantial services.

“Ms. Doud will continue to strive to be conscientious in serving the public,” Corrigan said, “and to ensure that the City continues to benefit from the work of her office.

The latest whistleblower complaint, according to the RSM report, was that Doud instructed city staff to treat Kindel Gagan’s invoices as one-time payments instead of ongoing payments tied to a contract, overriding internal controls and circumventing city ​​procurement policies.

Doud, according to the report, ignored city procurement policies by paying Kindel Gagan with one-time payments. But she didn’t override internal controls, according to the report, because compliance with those policies is recommended, but not required, for a city auditor.

Corrigan said Doud will implement the best practices recommended by the report.

“She will incorporate the report’s recommendations,” Corrigan said, “and immediately apply and incorporate the recommended best practice guidelines into her future work.”

Moving forward

As part of the report, RSM made several recommendations to the city, including that Long Beach’s regulations be updated and consistent. He also recommended that Doud follow the city’s procurement policy.

Most of the recommendations fall outside the city manager’s office or are already required by Long Beach, Lee said.

City staff, Lee said, are ready to help the mayor or city council if any of the recommendations come up for further action.

“For recommendations that fall within the purview of the city manager,” Lee said, “like making sure the city’s existing bylaws are consistent and up-to-date, that’s an ongoing process and we’ll take this opportunity to review and update those as needed based on the findings of the report.

The report also recommended requiring contracts with city suppliers before work begins. Invoices for these contracts, the report recommends, should include detailed pricing, schedule and deliverables.

The report also recommended that the anti-fraud hotline be operated by the city attorney or city attorney’s offices – rather than the city auditor’s office as is currently the case – to ensure more checks. and counterweight.

Finally, the report recommended that the city conduct periodic testing and review of the city auditor’s vendor contracts and transactions.

“She will incorporate the report’s recommendations and immediately apply and incorporate the recommended best practice guidelines into her future work,” Corrigan said. “Ms. Doud will continue to strive to be conscientious in serving the public and to ensure that the City continues to benefit from the work of her office.

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