Audits critical of city never released

By Mike Zapler
Review-Journal

      Las Vegas officials spent hundreds of thousands of dollars in violation of state law and illegally confiscated property from unlicensed businesses, according to internal audit reports the city has refused to make public.
      The documents, obtained by the Review-Journal, also show the city spent at least $1.5 million more than original estimates to renovate a low-income apartment complex. And Las Vegas' park maintenance expenses are more than double those of seven other Western cities, one study found.
      The reports, written by city auditors and paid for with taxpayer money, never went beyond the city manager's office. Most of them were stamped "draft" or "confidential" and were not released to the public.
      Even some City Council members said they were unaware of the reports.
      "I think it's a serious problem -- there is information that I haven't been receiving," Councilman Michael McDonald said. "I'm a little upset, especially when you start talking dollars and cents I haven't seen justification for."
      Under an arrangement that recently fired City Auditor Susan Toohey lobbied to change, senior city officials must sign off on any audit work before it is released. The audit department examines city functions for inefficiencies and ways to save money, and then issues reports on its findings.
      But at least 14 audits, reports and analyses in the last 2 1/2 years -- many of which describe errors and mismanagement by officials -- were not released after they were completed.
      Although four of the documents were provided last week in response to a formal records request, officials still are withholding the other 10 reports. "We would not consider those public documents," said Deputy City Attorney Larry Bettis. "Until it becomes a final audit, it is not a public document."
      But some of the reports were obtained by the Review-Journal. They detail the following:
      --Officials in charge of upgrading the city's computer system paid Third Wave Corp. $382,520 for fiber-optic equipment without soliciting a public bid, a violation of state law, according to an October 1996 audit. An additional $118,000 in equipment had been provided by Third Wave, bringing the total the city had paid or was obligated to pay to more than $500,000. Of that sum, only $182,000 had been approved by the City Council.
      City regulations prohibit expenditures of more than $25,000 without a vote of the council.
      When asked about the audit, which was stamped "Draft-Confidential--Not for Distribution," Deputy City Manager Steve Houchens, who oversees the audit department, said, "Who gave you that?" He then declined to comment, saying the report is not a public document.
      --Officers in the city's business license department confiscated items -- including ice cream carts, pillows, beer and liquor -- from unlicensed businesses, according to a July 1996 audit memorandum. But the report says city law does not allow officials to seize those businesses' property. The items were donated by the city or thrown away.
      "It must be a felony before property can be seized and forfeited, but noncompliance with business license code is only a misdemeanor," the report states. "The city might face potential legal liability of seizure and forfeiture of property without proper authority."
      Furthermore, city license officers "do not possess adequate education, training and experience to perform these kinds of duties. ... As a result of extensive activity involving seizing and disposing property, the core business of identifying unlicensed businesses had been neglected by the license officers," the report says.
      Jim DiFiore, manager of the business services division, said license officers have since ceased confiscating property from unlicensed businesses. The seizures were not conducted at his direction, DiFiore said.
      --According to a 1997 report, Las Vegas spends more than twice as much as seven other Western cities to maintain its parks. The study found that Las Vegas spends $18,277 per acre on park maintenance. Scottsdale, Ariz., was next at $8,159 per acre, followed by Albuquerque, N.M. ($5,991), Tucson, Ariz. ($4,016), and Phoenix ($3,308).
      City Parks Director Dave Kuiper declined to comment on the report, saying he hadn't seen it.
      "It's like talking to me about Pluto -- I know nothing about it," he said.
      --Officials spent more than $2.5 million renovating the low-income Bel Aire Apartments in central Las Vegas, far exceeding an original 1993 estimate of less than $1 million, according to a January 1997 report. The study found that the city lost $150,000 per year on the property from 1994 to 1997.
      --A July 1996 audit by Arthur Anderson showing how the city could save at least $1.2 million per year by switching health care providers was requested by Mayor Jan Jones. But Human Resources Director Rick Anderson said Jones never was given a copy of the report. Anderson said there was "no need" to give the report to Jones because staff members briefed her on it.
      (At its last meeting, almost two years after the audit was issued, the council voted to change health care providers.)
      --According to a March 1997 report on the city Fire Department, overtime expenditures for the 1996-97 fiscal year exceeded the amount approved by $619,991. Also, the number of fire staff per 1,000 residents and the number of fire stations per square mile decreased from 1993 to 1997, the analysis found.
      Average response times to fires increased from 3.33 minutes 1995 to 3.48 minutes in 1996, the report says. The study cites an increase in the number of gated communities and speed bumps as reasons for the slower responses.
      Houchens declined to comment on the report, but Ken Riddle, deputy chief of operations for the Fire Department, said the audit showed the need for more firefighters. If staff levels continue to drop, the department could lose its top rating by the Insurance Services Office, Riddle said. That rating keeps insurance levels down for city homeowners and businesses, he said.
      The department's slower responses to fires are a result of the city's growth, Riddle said. Las Vegas' average response time is still well below the national average, he said.
      Before Toohey was fired from the audit department in February, she actively sought a more independent audit function for the city. The problem, Toohey said in a recent interview, was that Houchens, City Manager Larry Barton and Deputy City Manager Lynn Macy "were controlling the flow of work by my department. They determined what got out and what was signed and finalized. And I wasn't allowed to make independent judgments, which is contrary to professional standards."
      Houchens conceded that his office examines and approves audits before they are released.
      "As her managers, we went through and reviewed the audits and discussed them with her," he said.
      Houchens said audit reports that were not released either had not been completed, dealt with internal personnel issues or addressed legal issues facing the city.
      Every management decision should not be the subject of public discussion and scrutiny, Houchens added.
      "We've got to run a city, and we're in a fishbowl already," he said.
      But as Toohey tells it, much of her department's work and criticisms of city functions were effectively silenced by the city manager's office.
      "I know of no progressive municipality which keeps the auditor's findings from elected officials and the public," she said. A free flow of audit information, she said, "promotes good government and an open dialogue between the auditor, city managers, elected officials and the public at large."
      Since November, at Jones' request, final audit reports have been distributed to council members, Houchens said.
      One of Toohey's ideas was an independent committee that would oversee the audit department and hold hearings on its findings. Under Toohey's proposal, the committee would have had sole authority to hire and fire the auditor.
      City officials have declined to say publicly why Toohey was fired. But sources who have asked not to be identified said she was abrasive and difficult to work with, and cited her proposal for the committee as evidence that Toohey put her own interests ahead of the city's.
      Toohey's proposal would have made her accountable only to an outside committee and not senior managers, giving her what some believed would be excessive power. Toohey said the committee would have prevented managers from meddling in her department's work and made all audit reports available to council members and the public.
      Many local governments have insulated their audit departments from political influence. In Seattle, for example, the auditor is appointed to a six-year term and can be removed from office only for cause and by a majority vote of the City Council.
      "This gives me independence to do my work without having to worry about alienating someone," said Susan Cohen, acting city auditor in Seattle.
      Gary Blackmer, who has studied the audit function in local governments across the country, said giving the city manager the final say over audit work -- or the authority to fire the auditor -- is a conflict.
      "It's an independence issue: If the auditor is reporting on the performance of her boss, that's a real twist in their relationship, and it's not workable," said Blackmer, who will become auditor in Portland, Ore., in January.
      Commenting on Las Vegas' audit structure, he added, "I wouldn't call it independent if the audits are only released at the pleasure of the city manager."
      Other cities have committees that hold hearings on audits once they are completed, then periodically check to make sure recommendations are implemented.
      "That keeps people aware that the audits have not been shelved," said Trudy Cross, the auditor for Reno, which has an 11-member audit committee of private citizens. "That tends to happen to audits -- they tend to become bookends."