Culver City taxpayers should feel shocked after reading some parts of the 515-page “Culver City Proposed Budget FY 2020/2021” (Budget). First, the section dealing with the 2019 Enterprise Risk Assessment (ERA) report reveals senior management’s fears of corruption and retaliation. Second, another section deals with Culver City’s lack of an effective fraud, waste, and abuse (FWA) hotline and an associated cover-up. Third, the section dealing with Culver City’s Municipal Fiber Network (MFN) reveals Staff’s long-held belief that it is a money pit.
Enterprise Risk Assessment: Culver City handsomely paid Moss Adams LLP (Moss)—Culver City’s Internal Auditor—to produce the ERA report.
Pages 53 and 57 of the ERA reveal that almost one-third of the responding “supervisor level and above employees” believe there is a “moderate,” “moderate to high,” or “high” risk of fraud, waste, or abuse in Culver City government. Pages 40-42 reveal that nearly one-half of Culver City’s supervisors, managers and director level employees do not feel safe from retaliation if they whistle-blow. Such fear of telling the truth to power, alone, plays havoc with implementing an effective means to prevent FWA.
FWA Hotline: The Budget informs us, “With the auditor’s recommendation, the hotline for reporting [FWA] of the City’s resources was setup and made available to residents and employees on the City’s website in October 2019.” However, Staff re-designed the FWA Hotline to fail.
As of Sept. 9, 2019, pursuant to a 2017 recommendation of Moss, Moss would process complaints received through Culver City’s FWA Hotline. Everyone totally agreed. They considered Moss as “neutral.” Then, City Manager John Nachbar and City Attorney Carol Schwab caused the “neutral” to be booted. They installed a low level Staffer in place of the “neutral.” He had no prior FWA-Hotline experience. Ultimately, that Staffer reports to the City Manager.
This creates a definite conflict of interest. The City Manager would not want fraud, waste or abuse discovered on his watch.
Municipal Fiber Network: Staff says, in effect, from the get go, Staff warned the City Council that the MFN would be a financial fiasco; so, don’t blame Staff. The Budget states, in part:
As indicated in the Nov. 12, 2017 Council Report, a twenty-year construction loan in the amount of $11,500,000 and a twenty-year working capital loan of $3,400,000 is due to begin being repaid in June 2018 [sic]. That same staff report also stated that Council has the power to forgive the annual construction loan payments, and can also defer the annual working capital loan payments if the Municipal Fiber Network Fund is not generating adequate revenue. Staff has stated from project inception that the construction loan may not be repaid. However, the loan was established in anticipation of the possibility.
Staff is thereby requesting City Council approval for the following actions to be recorded in FY 2019/2020:
• Write off the FY 2019/2020 annual construction loan payment $709,669.21
• Record a deferral of FY 2019/2020 annual working capital loan payment $292,660.01
This is and has always been Culver City’s version of corporate welfare. That’s 15,000,000 taxpayer dollars shot to Hades so that residents would involuntarily subsidize the business community.
The Wall Street Journal recently noted that cash-rich investors are currently eager to buy fiber networks. Culver City should sell the MFN to cut our losses. On the other hand, the MFN might be such a loser that anyone who could do financial analysis would pass.
It is time for the City Council to investigate these matters promptly and thoroughly, and report the findings transparently and publicly. To do otherwise would breach their fiduciary duties to taxpayers.
— Les Greenberg, Esquire
