LA may investigate whether Porter Ranch Neighborhood Council official misspent funds

The neighborhood that became famous for living next door to the nation's worst natural gas well leak has a new problem: The Los Angeles City Clerk is investigating how the former treasurer of the Porter Ranch Neighborhood Council spent tens of thousands of dollars in city funds.

Sean O'Rourke, who resigned as the elected treasurer of the Porter Ranch Neighborhood Council last year, has reimbursed the city of Los Angeles more than $27,000 to cover questionable expenditures, City Clerk Holly Wolcott said Tuesday. That's nearly two-thirds of the neighborhood council's annual budget.

"We found that there were funds that were not properly accounted for, so we made some inquiries to the prior treasurer," Wolcott said. She declined to detail how the funds were spent.

Wolcott said she planned to turn the information over to the police for evaluation of whether a criminal charge was warranted.

Reached by phone Tuesday, O'Rourke declined to comment.

Porter Ranch Neighborhood Council President Issam Najm, who joined the board in July, said he was awaiting the conclusion of the city's investigation to comment publicly about the missing funds.

The former neighborhood council president who served at the same time as O'Rourke, Paula Cracium, did not return a call seeking comment.
     
Neighborhood councils were created in 1999 as part of the Los Angeles city charter overhaul to increase community engagement with city government. The city's 96 neighborhood councils each get between $30,000 and $50,000 per year to spend on outreach and community improvements. Last year they got $37,000.

There were signs as early as the January 2016 meeting that the Porter Ranch Neighborhood Council's accounts might be in disarray.
    
During that meeting, O'Rourke told the board that he had prepared three months of expenditure reports, from October through November 2015, but could not find them when he went to print them out, according to minutes from the meeting. At that point, the notes show O'Rourke told the board it had $22,000 left in its account to spend by the end of June. The councils must spend their allotments each fiscal year; they can't roll over any surplus.

During the same meeting, a member demanded to see some of the items the treasurer had said he was buying with the council's money, like wireless microphones.

Wolcott said board members reported anomalies in their accounting, triggering the city clerk's investigation.

O'Rourke was among the residents who chose to stay put after a well ruptured at nearby Aliso Canyon. Thousands relocated, saying the smell from the massive October 2015 gas leak was causing them physical symptoms. But O'Rourke had said his family was not affected. The flow was finally contained in February 2016.

The Department of Neighborhood Empowerment used to oversee the neighborhood councils' finances, but the L.A. City Council transferred that authority to the Office of the City Clerk about six months ago.

The change in oversight was for for administrative reasons, Wolcott said.

"So that Empower L.A. could focus more on outreach and their core function and that the administrative pieces could be handled by professional administrators, which is what we do here at the city clerk," she said. 

Neighborhood councils are expected to adopt a budget that serves a public purpose. The money may not be spent on political, religious or personal items.

Wolcott said O'Rourke gave the Office of the City Clerk a cashier's check totaling $16,791 on Dec. 1 and another for $10,590 on Dec. 8. He overpaid, so the City Clerk's office issued him a $27 refund.

The Porter Ranch Neighborhood Council meets Wednesday night to discuss the money problems.

While some of the problems originated with the neighborhood council's lack of internal controls, a recent city audit says oversight had been lacking from the city's Department of Neighborhood Empowerment, which oversaw neighborhood council finances until July 2016.

The department was not enforcing its financial reporting requirements for Neighborhood Councils or ensuring that councils submitted monthly spending reports, City Controller Ron Galperin said in a limited audit issued Dec. 22.

With only one full-time accountant, the Department of Neighborhood Empowerment was falling behind in its reviews of the accounts. It was also not performing spot audits of a sample of the neighborhood councils, a tactic developed in 2011 to detect questionable spending.

The members of neighborhood councils often don’t have the accounting skills needed to fill out the reports properly, Galperin told KPCC in an interview Tuesday.

“To be the treasurer of a neighborhood council you almost need to be a CPA,” Galperin said. “Overall I would say that they really try hard, but it’s pretty complex for many of these neighborhood councils.”

The neighborhood council boards have to approve all expenditures, and the Department of Neighborhood Empowerment must pre-approve any expenditures over $2,500.

Document: Receipt of reimbursement

Controller document