New audit says South El Monte an easy target for fraud due to contract practices

SOUTH EL MONTE >> An audit of South El Monte’s dealings with two consultants revealed issues with how the city doles out contracts to private companies, as well as the way the city bills those companies and checks up on their work.

In their report, auditors with Los Angeles-based SingerLewak LLP said the city left itself open to fraud — one contract showed a company billed more hours of work than there are in a day.

The audit was finalized June 21, and was obtained by this newspaper this week.

The document shows City Manager Tony Ybarra executed four contracts with the two consulting companies — three with Arroyo Strategy Group, for a total payout of $110,000, and the other with ECM Group Inc. for $29,376.

All the contracts were adopted without the City Council’s approval, and none of the contracts was subject to a competitive bidding process, the audit said.

Ybarra said the contracts did not first go before the council because they required immediate action in negotiations.

“The City Council understood that, and we eventually brought the contracts back to the council for review,” Ybarra said.

The audit was not on Tuesday night’s City Council meeting agenda, and Ybarra said there were no plans as of yet to add it to a future agenda.

Aside from issues with the contract process, the audit also found issues with the way the contractors conducted business.

Arroyo principal Omar Hernandez told auditors he maintains no physical office location; the only address listed for the company is a post office box in South El Monte. Hernandez also said he also keeps no copies or records of Arroyo’s work, according to the report.

In response to questions from this paper, Arroyo’s Senior Vice President of Operations Jennifer Garcia would not confirm whether Arroyo keeps any records of its contracted work.

ECM principal Hector Castillo admitted to submitting fictitious labor claims for four days of work, the report said.

On the four days in question, ECM claimed 25 hours, 26 hours, 27 hours and 25 hours of work respectively, with one staff member averaging 17.5 hours of work per day, the report said.

ECM did not respond to requests for comment.

The audit report’s findings are “concerning,” said City Councilman Joseph Gonzales.

After auditor Van Lant and Fankhanel LLP first raised concerns about Arroyo and ECM in September, Gonzales requested that the city investigate further. He said he had read the draft of SingerLewak’s audit in February and has been asking for its final, public release since then.

“It’s unbelievable,” Gonzales said. “You expect city management to validate these hours that are being reported for projects.”

In response to the audit sent to SingerLewak on June 2, Assistant City Manager Jennifer Vasquez detailed steps the city has taken to increase city contractor oversight. In March, the City Council voted unanimously to adopt a “purchasing manual” that provides guidelines for city staff to follow when members purchase supplies, equipment and professional services like consultants.

The manual includes specific directions for staff to oversee billable work done by its consultants, Ybarra said.

Despite the fact that a draft of the audit was submitted to the city in February, the City Council voted 3-2, with Gonzalez and Mayor Pro Tem Gloria Olmos opposed, to maintain a list of five grant writing consultants that included Arroyo.

Mayor Luis Aguinaga, Councilman Hector Delgado and Councilwoman Angelica Garcia, who voted to approve the consultant list, did not respond to requests for comment.

Full article at Pasadena Star News, here.