Neighborhood Council Responds to Audit: Part 2

The Arroyo Seco Neighborhood Council held a special meeting on Saturday morning to respond to a Department of Neighborhood Empowerment audit of its finances. The following is the second of two stories that recap the lengthy meeting.


How does the Arroyo Seco Neighborhood Council (ASNC) define animal welfare expenditures, and how much did they spend in that area in the 2010/2011 fiscal year?

With a Dec. 16 budget freeze deadline looming from the Department of Neighborhood Empowerment, the ASNC spent nearly two hours on Saturday morning debating that question before admitting they could not agree on an answer. This is the second of two posts detailing the discussion.

, DONE had initiated an audit of the neighborhood council in October after an independent review of "purchase card expenditures" and "questions received from the board" which indicated that "multiple transaction [were] conducted without the approval of the board."

A copy of DONE's Oct. 26 letter notifying the neighborhood council of the impending audit can be downloaded from the media box on the right.

During a November ASNC meeting, DONE representative Lisette Covarrubias told members that they had found more than $4,000 in animal welfare spending, compared to only $1,500 in board approvals. 

Board member Joseph Riser said that DONE had failed to take into consideration nearly $3,000 in animal welfare funds that were approved under the banner of "rescue supplies" and "animal/medical."

"There were two unrelated animal welfare approvals late in the year--totaling $3,000," Riser wrote in an e-mail to Patch. "When both DONE and Treasurer Judy Knapton performed audits, however, they missed the second one in the minutes, and applied all of the $3,000 in spending against only one $1,500 approval."

Saturday's lengthy debate stemmed from a disagreement between former ASNC Treasurer Mark Legassie and Knapton over that alleged accounting error.

According to a reconciliation report provided by Knapton, the council had approved $6,200 in animal welfare expenditures in fiscal year 2010/2011—a number that clashed with Legassie's calculation of $7,650.

Knapton told the council that she had been unable to reconcile a $1,500 expenditure for a “emergency care and first aid for stray dogs and cats within ASNC's boundaries.”

Legassie disputed Knapton's findings, telling the council that “everything [Knapton] says is wrong.”

“I know she's made mistakes, I just haven't been able to find them yet,” Legassie said.

The board eventually voted in favor of responding to DONE's inquiry by stating that they were “unable to determine” the exact amount of funds spent on animal welfare, due to accounting errors.

However, after the meeting, Riser forwarded an e-mail to Patch which showed that a $1,500 expenditure for emergency animal rescue supplies, which was not accounted for by Knapton, had been approved by the board in April.

“This item was not included in Judy [Knapton]'s list of funding requests, although the minutes clearly show it as being approved,” Riser wrote in an email to fellow board members.

Legassie did admit during Saturday's meeting , though, that he had overspent ASNC animal welfare funds by about $600 in 2010/2011 due to a pair of accounting transcription errors. He said that overspending did not cause ASNC to overspend its overall budget, though.

A copy of April's meeting minutes can be downloaded from the box at the right

Personal Attacks Over Initiation of Audit

Saturday's meeting took a turn for the contentious, with Legassie accusing fellow board members of complaining to DONE in order to initiate the audit.

“This is nothing but a kangaroo court,” Legassie said. “It's a witch hunt, done by witches.”

ASNC member Clifford Mosely also accused some of his fellow council members of “stirring up” problems for the board by complaining to DONE.

“You keep saying DONE's asking for this and DONE's asking for that, but the letter does state that the audit was initiated by questions from the board,” Mosely said. “Whoever is running around asking questions needs to knock it off.”

In an e-mail to Patch, Board President Martha Benedict said that Mosely's and Legassie's allegations were unfounded.

“It is not a witch hunt. It is an audit by the Department of Neighborhood Empowerment of the ASNC's finances of 2009/2011. I am very confident they are not looking for witches. They instigated this action; no member of the ASNC board collaborated in that decision,” Benedict said.

Benedict added that that she and Knapton had met with DONE staff, but only after it “became apparent that the former treasurer would not comply with DONE requests to convey his records to the new treasurer.”

“We went to the DONE office on October 20, The DONE staff members told us they had already determined there were “irregularities” and advised us to not act on any spending requests in the areas of animal welfare, public safety and outreach,” Benedict said. “Judy [Knapton] reported this at the next ASNC meeting on October 24, 2011.”

Josie Roth December 13, 2011 at 02:31 PM
Pretty embarrassing. Good luck. Sounds like some power issues surrounding this squabbling. Hope they work it out for the neighborhood.
Alice M. December 13, 2011 at 02:45 PM
"Ruh, roh" Mr. Legassie's accounting last year is in question over an admitted $600 overspending error, but his replacement (and the City's audit), missed finding $1,500 (more than twice that amount) plainly written in the records? Sounds to me like when it comes to accounting skills, it's the blind (Knapton and L.A. City) auditing the visually impaired (Legassie). Maybe the City of L.A. isn't broke after all. Maybe they money's just "lost" somewhere in the paperwork?
Alice M. December 13, 2011 at 03:01 PM
Seriously, though, one does wonder what some of these people do for a living? Obviously every neighborhood council can't expect to get accountants elected to the board, but do either Mr. Legassie or Ms. Knapton have any real experience in bookkeeping. Do the people at that City department have accounting skills? $1,500 is a lot of money to "miss" in only a $50,000 annual budget.
Rob Schraff December 13, 2011 at 04:00 PM
Not “missing,” misspent. In other words deliberate and then covered up - see Ms. Benedict’s magic signature on ASNC reconciliation reports prepared by Mr. Legassie. You don’t have to be an accountant to know this smells.
Arline DeSanctis December 13, 2011 at 04:26 PM
Does anyone know if all this money was really spent on animal welfare? With City budgets down in every department, we certainly need a group looking after the animals' welfare. So many have been abandoned since the recession!! If it truly was spent on animal welfare, it was well worth it. If it ended up in someone's pocket then that shows little oversight, and action should be taken.
Alice M. December 13, 2011 at 05:12 PM
Good question: according to receipts posted by their Board before the meeting (and my handy dandy home calculator), the funds in question, $3,000? - and then some, were spent on animal welfare, at recognizable local veterinarians plus some from supply houses apparently for the "rescue" part. I don't get the sense from any of the City department's posted letters that they question whether they were spent, just whether they were approved by the board at meetings. If one part was the $1,500 approved in the April agenda PATCH attached, and then there is another one that the audit did actually find earler, then everything but Mr. Legassie's admitted overspending by a few hundred was approved.
Martha Benedict December 13, 2011 at 05:16 PM
The $1500 was an oversight in Judy Knapton's voluntary report to the board, which was intended to help them understand the reason for DONE's audit. There are thousands of dollars beyond the overlooked $1500 amount that the board never approved. In the past, ASNC's custom has been to allow the Treasurer to cover operational expenses, typically no more than $100 per board meeting at the most. When you reconcile the board-approved expenditures in the ASNC minutes with what was actually spent according to the financial records from the previous Treasurer, you find unapproved spending totaling over $10,000. DONE is also questioning the legalities of some of the approved expenditures for animal welfare and public safety.The relevant ASNC records can be found at http://www.asnc.us/2011-archives/12-Dec/_1211archives.htm
Alice M. December 13, 2011 at 05:36 PM
Other "smells" seem equally odd, Mr. Schraf, since the same April minutes show that M. Benedict chaired that meeting, probably prepared its agenda (and then approved the minutes with the rest of the board later), why would she not remember that large approval for animal welfare just a few months later?
Alice M. December 13, 2011 at 05:44 PM
If so, why would the "DONE" only be asking in their letters posted that the board explain approval process of the much smaller "animal welfare" funds, and not the very large "$10,000" you explain? That seems very irresponsible on their part to focus on the lesser of the amounts, if there was a problem. And should the use of taxpayer funds ever be governed by "custom"? Is this custom details in some Board documents not yet made public, or in bylaws? And was the last treasurer (Lagassie) explained to about the "custom" if not written some, or just left to his own devices to figure out what he could and could cover?
Alice M. December 13, 2011 at 05:48 PM
(reading back now), He (Legassie - sorry spelled wrong before) and another board member, Riser both seem to be saying the other kinds of funds don't require approval? So perhaps only the president and new treasurer knew this (secret?) board rule? Does the board explain to new board members in advance what can and can't be covered by treasurer's allowances? These are the kind of unstated "rules" that destroy civic minded organizations if there's no institutional history or written rules to guide them.
Rob Schraff December 13, 2011 at 05:55 PM
Because as was discussed in the meeting Saturday, this approval was general, not specific, and the board was led to believe that actual amounts, as required by DONE, had already been approved. Or at least, as I am not an accountant, that is what I understood. The dodge seems to be: approve a budget based on a "budget survey," then approve expenditures in the committee with no votes or attendance taken noted in the committee "minutes" against general budget categories like "animal welfare" or "public safety," then re-present to the board as a lump-sum expenditure against the budget - without specific votes on actual expenditures by the board as required by DONE. Then there are the three instances where the words "Please note that Martha Benedict's signature on the pages of this form was not authorized or placed there by her." appear here http://www.asnc.us/2011-archives/12-Dec/_1211archives.htm . Smelly, indeed. But as long as it was for puppies and kitties and earthquake preparedness, it's OK!
Alice M. December 13, 2011 at 05:59 PM
More questions keep occurring, If the treasurer was giving regular reports like at groups I've belonged to and they were being approved (apparently, like on the April minutes PATCH posted), how could a group of responsible civic leaders not notice that $1 out of every $5 received from the city -- such as $10,000 out of $50,000 was flowing out the doors unapproved? This latest wrinkle from Ms. Benidect is among the hardest to believe. Do minutes for past years treasurers show that all but a $100 or so from each months expenditures were preapproved by the board? Might be worth a look. That might help explain whether anyone else knew about this "custom" written or otherwise.
Alice M. December 13, 2011 at 06:10 PM
I'm not an accountant either, but I have prepared some minutes before and I know that sometimes minutes don't tell the whole story, so I just look back in their archives for the actual agenda item on this missed approval, and found this: "PET SEARCH AND RESCUE SUPPLIES (Animal Welfare) Motion to allocate an amount not to exceed $1500 for the purchase of supplies necessary for the safe search, capture, rescue and return of lost, scared or hurt dogs and cats, either during a routine emergency or after a major disaster when this problem will be rampant. Only qualified, trained individuals will be allowed to use the equipment. The Animal Welfare Cmte will control the equipment for use by trained individuals and groups. [Mark Legassie, Director of Animal Welfare]" That sound very "specific" to me. More specific than many of the community councils in surrounding neighborhoods, who sometimes have desciptions like "Allocate 2,000 for support of Cinco de Mayor parade." And, far more specific than anything you would find on a City Council agenda as they spend millions a day.
Rob Schraff December 13, 2011 at 06:28 PM
You seem to raise yet another controversial issue, the inventory of public safety and other ASNC items, where there also seem to be further discrepancies and explanatory work to be done by Mr. Legassie, if I understood discussion by the ASNC Board and DONE representative this past Saturday correctly. By the way, even though I am not an accountant, I think your Cinco Mayo Parade expense very specific - one check, one expense, one place - what's the problem with that?
Alice M. December 13, 2011 at 07:36 PM
P.S. Ms. B., nothing in the lstters in archives from the DONE mention "legalities" of welfare or safety purchases, in fact "public safety" is not mentioned at all. Is there more to this story, I mean more letters from the DONE not posted?
Rob Schraff December 13, 2011 at 08:26 PM
Yes, indeed. See also: http://highlandpark-ca.patch.com/articles/asnc-at-odds-over-shakeout-spending And: http://highlandpark-ca.patch.com/articles/hermon-eyes-formation-of-new-neighborhood-council I also found this interesting, I got it from Wendi Riser’s blog promoting Hermon identity, “All Things HERMON” : “Hermon Neighborhood Council.....We just heard from the District 14 field office that Councilmember Huizar is supporting us as we go through this City certification process, and so we move forward with the backing of not only our community and councilmember, but communities around us. See you Sunday for this really important meeting…” (you can find the whole thing here: http://groups.yahoo.com/group/ASNCAlert/message/23779) I think it’s swell that maybe $50K more might be spent in our neighborhood. I even appreciate the irony that in Hermon’s case it’s a neighborhood that wants no part of being MY neighborhood. But shouldn’t he make sure that these Hermon-related accounting and ethics issues are resolved before Councilman Huizar endorses these same folks' effort to start their own NC?
Martha Benedict December 13, 2011 at 08:44 PM
I believe the animal welfare and safety expenditures were mentioned in the November meeting by DONE staff. It was mentioned when the current Treasurer and I went to the DONE office in October to pick up the financial records we had not been given by the former Treasurer. In the November meeting the DONE staffer Lisette Covarrubias stated very distinctly that all expenditures must be approved by the board. This instruction is also listed on the DONE template all Treasurers use. http://www.asnc.us/2011-archives/12-Dec/budgetinstructions.pdf DONE provides Ethics training that all board members are required to take within a year of joining the board and re-take every two years after that. There are other optional training videos available online through DONE for those who want to learn more. http://done.lacity.org/dnn/Default.aspx?tabid=100
Alice M. December 13, 2011 at 09:26 PM
Hmmm, well I can see how that could be read more than one way - at least the written part you link to seems to say only the following must be "specifically" approved by the board, i.e, "and reflected in the minutes" -- "specific outreach events" (from the second section), and "specific community improvement projects and neighborhood purposes grants" (from the last section). How much of the alleged $10,000 were for those items, for example? Some might read that to mean that the other types of operational and outreach events need not be "reflected in minutes" (or, voted on by the board), I can't speak to what a DONE staff person said at your meeting, which is not exactly what the above said. But to connect the dots very logically from your earlier message, if would appear that your council's "custom" regard some limited operational expenses has been to regulalry violate the "must be approved by board" part? Or, when did ASNC first learn it was in violation on this custom. Just at these October and November meetings mentioned? If so, to "grandfather" in to last year that requirement (based on just one way to read the template linked to), and hold a previous treasurer responsible can't be right. Can it?
Pat Griffith December 14, 2011 at 06:05 AM
I know both Mark and Judy have done a lot of work, and the Treasurer's job is time-consuming for a volunteer and can be stressful. If the bookkeeping follows standard accounting practices, it would be straightforward for them, or any other interested party, to follow the expenses and reconcile differences. And make an audit 'relatively' straightforward. But it isn't clear how the ASNC books have been kept, and seems that the books will now have to be recreated from information from DONE? If the ASNC feels that they want some independent look at their expenses, they could hire an experienced bookkeeper to take last year's expenses and create this audit trail. This would not be a large expense, and would give the board some answers.
Rob Schraff December 14, 2011 at 03:14 PM
This is an excellent idea. I also think given the scale of this problem, some 20% of the overall budget of the ASNC in this fiscal year alone, that it would be appropriate for both the ASNC and DONE to provide a complete expenditure and minutes audit for at least the last several years. It has also become apparent that the "budget survey" used by the ASNC is fraught with potential manipulation, through poor design and participation as well as by allowing subsequent expenditures by committees against an "approved" budget without specific spending oversight by the board as required. The ASNC should immediately change this very poor practice. It may even be helpful for DONE to audit survey procedures and past tabulations to provide insight into how this lack of appropriate spending oversight and accompanying financial shenanigans occurred.
Susan R December 14, 2011 at 03:54 PM
Funding should be taken away from all the neighborhood councils. The city should be paying directly for things the community needs. The neighborhood council system was set up to be a voice to city hall. That has been lost in many NC's. All the neighborhood council's time is just spent on funding and nothing else. Take the money away!! Speaking only on my own behalf.
Alice M. December 14, 2011 at 10:23 PM
I think I might actually agree with you on that point. While looking through this council's agendas about this dispute it seemed they have had 2-to-3 times as many items about budgets and funding over the last year or so than dealing with all local issues. Is that normal for these councils? But then, if no $$, maybe most of the board would quit if they couldn't give taxpayer funds away.
Susan R December 16, 2011 at 03:33 PM
It is common for most neighborhood councils to spend most of their time arguing over where money should be spent. That was not the intention of what neighborhood councils were suppose to be. Take the money away! We need to concentrate on neighborhood needs. I am a board member of the Greater Cypress Park Neighborhood Council. But I am speaking only on my own behalf. I am not speaking for the board.
Alberto December 16, 2011 at 06:23 PM
Still seems none of the real players is completely open. Why does DONE state the audit was initiated due to Board questions when President M.B., who otherwise links to DONE statements to explain her own actions, argues the Board was only compelled to comply with DONE and did not... OH! she only says she that no Board member Initiated or collaborated on the decision to audit but she Does Not actually dispute having gone to them with questions. Words are important. She also says DONE training is required for new members but doesn't say that she or her members underwent the training. What is required by ASNC to assume Board leader positions - surely you want more than Ethics: bookkeeping, meeting-management, conflict-resolution, are some that come to mind. Question: Is there a Secretary on this NC? Where the heck is their input on policies and procedures, by-laws, etc.? @Rob Schraff: "I think your Cinco Mayo Parade expense very specific - one check, one expense, one place - what's the problem with that?" You can just list that in the minutes, I guess, but you still want to have an actual accounting (receipts/notes) of how that money was spent. You don't want the "parade" to consist of one dude slow-rolling down the street in his new convertible. We don't just hand over a pile of money to mechanics and say, "fix it", but expect a detailed summary of expenses to justify the cost. Trouble is, once you open that door, you invite a flood of questions over the smallest things.


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