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Auditor raises warning flags on spending

City bureaus often face troubling questions in review of fund use
by: CHRISTOPHER ONSTOTT Portland Auditor LaVonne Griffin-Valade criticized the City Council for spending $1.5 million in water rate funds on a new Tom McCall Waterfront Park headquarters for the Portland Rose Festival Association.

Portland City Auditor LaVonne Griffin-Valade insists she is only doing her job and not trying to embarrass the City Council.

'There's no hidden agenda,' she says. 'My job is to gather the facts, review them, and present them to the council and the public.'

Despite her denial, since being sworn into office in June 2009 Griffin-Valade has released a series of high-profile audits that raise troubling questions about how the council is doing its job. Two of the most recent audits addressed issues at the heart of current controversies.

An audit released in March found that the council had spent millions in water and sewer funds on unrelated projects. The findings struck home with water and sewer customers alarmed by rate increases.

'LaVonne has shown guts. She's willing to turn over the rocks and call a spade a spade. She's shone a light on a lot of internal budgeting things that need to be looked at,' says Kent Craford, director of the Portland Water Users Coalition, which represents large water customers concerned about expensive pending changes to the water system.

Then in July, Griffin-Valade released an audit of the city's financial stability that called attention to increasing debt obligations. Among other things, it noted that urban renewal-related debt increased 88 percent from 2001, growing from $280 million to $526 million in nine years.

The audit was released as Mayor Sam Adams prepares to seek council approval of a new urban renewal area to benefit Portland State University - an idea questioned by Multnomah County Chair Jeff Cogen. Because of the way urban renewal works, the city's program cost the county $26 million in uncollected property taxes last year. That amount is expected to increase this year.

'Those are staggering numbers,' Cogen says. 'I had no idea the city's urban renewal debt was growing so fast. It has consequences for other governments that the city needs to take into consideration. I thank LaVonne for pointing it out.'

Griffin-Valade says audit subjects were not chosen for political or publicity purposes. They were picked months ago during staff retreats. But Griffin-Valade is clearly more aggressive about making their results public. Unlike her predecessors, Griffin-Valade has presented audit summaries at the council's regular public meetings. She has also requested a special work session to publicly discuss the financial stability audit.

Upcoming audits promise even more attention-grabbers. The list of agencies scheduled to be audited include two that have been in the news recently. One is the Bureau of Emergency Communications, which has been criticized for mishandling replacement of the 9-1-1 system serving Multnomah County. The other is the Public Safety System Revitalization Program, a division of the Office of Management and Finance that oversaw the selection of the replacement 9-1-1 system.

City Commissioner Randy Leonard recently fired that agency's director, Lisa Vasquez. Her attorney plans to file a state whistleblower lawsuit against the city.

Explosive audits

All governments have auditors that ensure their financial transactions comply with national standards. Only a few governments have an independently elected auditor, however. Portland's auditor has been elected by city voters since 1868. The person who holds the position for the four-year term must be a certified internal auditor, management accountant or public accountant.

The council created the Audit Services Division within the auditor's office in 1986. It includes certified auditors and support staff that conduct the audits, under the supervision of the city auditor. City managers must respond in writing to all audit recommendations. Griffin-Valade says city agencies have complied with 82 percent of the recommendations.

Griffin-Valade is not the first auditor to release audits questioning city spending practices. Her predecessor, Gary Blackmer, released an audit in June 2006 that questioned the benefits of urban renewal spending. It found that employment in five urban renewal areas only increased 1 percent between 1996 and 2004, compared to a 3 percent increase in three control areas outside of the urban renewal areas.

Blackmer also released two audits five years ago criticizing how the Portland Department of Transportation spent its street maintenance money. A July 2006 audit found that the money was not being spent in the most cost-effective manner. An October 2006 audit found that much of the asphalt purchased by the department did not meet its own standards.

Perhaps the most explosive audit released by Blackmer accused the Portland Police Bureau's Sexual Assault Unit of failing sexual assault victims. Released in June 2007, it accused the unit of leaving it to victims to keep cases moving through the system, of closing cases when detectives could not reach victims or witnesses by phone or when they refused to come downtown to be interviewed, and of not using standard techniques to locate suspects.

Those and other Blackmer audits raised serious questions about basic city operations and prompted improvements in bureau operations. If anything, audits released by Griffin-Valade have been even more provocative.

Urban renewal questions

Griffin-Valade was elected auditor in May 2009 after Blackmer resigned to head the Audit Division of the Oregon secretary of state's office. Like Blackmer, Griffin-Valade had served as the elected Multnomah County auditor. She has a masters degree in public administration from Portland State University and is a certified internal auditor and a certified government auditing professional.

One of her first audits found that a city program to help minority contractors was falling far short of its goals. The Sheltered Market Program was created in 1997 to improve opportunities for minority-owned, women-owned and emerging small businesses to compete in the marketplace as prime construction contractors. Instead, the January 2010 audit found that 51 percent of the contract dollars awarded under the program went to companies owned by white men.

Four months later, Griffin-Valade released a scathing audit of the Portland Office of Emergency Management, the bureau created in 2003 to coordinate the city's response to natural and man-made disasters. It found that more than six years after POEM was created, the city had not yet clearly defined roles of the city's emergency response bureaus or created a structure to ensure effective management of emergency management activities.

The audit also found that POEM had not yet adopted a basic current operation plan or sub-plans required by the federal government.

A November 2010 audit revealed that the new computer system designed to operate the city's financial, payroll and human resource program was late and over budget. According to the audit, the cost had increased from $14 million to $47 million and was running 30 months late.

Perhaps the two most timely audits were released this year.

Portland residents, business owners and watchdog organizations have been complaining about increasing water, sewer and stormwater rates for years. Council members have responded by saying they have no choice. A large portion has gone to fund the court-ordered combined sewer overflow project being administered by the Bureau of Environmental Services. The Water Bureau expects its rates to increase 85 percent during the next five years, largely to fund projects mandated the U.S. Environmental Protection Agency.

But a May audit revealed that the council spent millions of water and sewer dollars on projects not related to the agencies. Examples included $1.5 million spent by the Water Bureau to remodel a historic building in Tom McCall Waterfront Park for the Portland Rose Festival Association and hundreds of thousands of sewer rate dollars spent on river programs, including the Office of Healthy River created in 2009.

Although the council approved the spending, the audit questioned the appropriateness and legality of the decisions.

The city's urban renewal program has been growing increasingly controversial. Multnomah County and Portland school officials have long complained that it takes property tax dollars away from them. A watchdog group successfully sued to reduce the scope of a downtown urban renewal area expansion approved by the council. And Cogen has repeatedly questioned Adams' idea of creating a new westside urban renewal area.

Then in July, Griffin-Valade released a most sweeping audit that looked at Portland's fiscal sustainability and financial condition. Although the audit declared the city's current financial health good, it found reasons for future concern.

Among other things, the audit said increasing liabilities and debt levels are weakening the city's ability to provide basic services in the future. It specifically noted that the city was spending 24 cents of each property tax dollar on urban renewal-related debt, up from 16 cents just nine years ago.

Griffin-Valade has requested a council work session to discuss the findings, possibly in September or October. It will be the first time the council has met just to review an audit.

'I think it's important that the council take the city's financial condition and fiscal sustainability into account going forward,' she says.