Three years after auditors determined the City of Industry’s accounting controls were “effectively non-existent,” State Controller Betty T. Yee said in a report issued Wednesday that little has changed in the tiny industrial suburb.
Yee’s audit team’s follow-up review of Industry’s internal control system found the city continues to operate “without sufficient internal controls.”
In January 2016, the State Controller’s Office issued a report on Industry’s practices during the period from July 2012 through June 2014, finding the vast majority of internal controls inadequate. The report released Wednesday evaluated the city’s reform efforts based on the 2016 recommendations, as well as internal controls in place from January 2016 through April.
Troy Helling, Industry’s new city manager, said the city has already put in place several of the reforms suggested by the report and would continue to add others.
“It’s not difficult to achieve,” Helling said, adding that many of the problematic findings originate in the city’s previous administration. “I welcome auditors to come back and take another look.”
The follow-up review found that:
— insufficient city oversight of the Industry Hills Expo Center has led to annual losses averaging $1.5 million. SCO auditors were not permitted to speak with city contractors charged with managing the Expo Center. Auditors were unable to verify that any Expo Center expenses were for official business including $480,000 in ATM withdrawals and more than 100 unaccounted-for checks;
— the Industry Property and Housing Management Authority has no clear objective or strategic plan, fills vacancies without advertising or justification, and rents homes for below-market rates of $600 to $700 per month to current and former city council members. The estimate to remodel one council member’s rental home was $175,000, while the actual cost of the project ballooned to $788,000. As a result, IPHMA operated at a loss of $398,000 annually on average; and
— only one principal payment of $400,000 (in 2008) and one interest payment of $100,000 (in 2009) have been paid to the city on a $20 million loan made in December 1990 to Industry Convalescent Hospital. The loan balance stands at $44.6 million, including $24.6 million in accrued interest with no plan for repayment.
The controller’s team found that, of eight prior findings from the 2016 review, the city fully implemented three recommendations and took no action on two. On the other three 2016 findings, SCO only could determine that some incremental change had been made because the city did not provide the needed supporting documentation, despite repeated requests.
“The City of Industry’s unwillingness to admit certain failures and to provide documentation to prove proper use of public dollars is deeply disturbing,” said Yee, the state’s chief fiscal officer. “My experienced team of auditors aims to give state and local governments the framework they need to be trustworthy stewards to the people they serve, but those entities also need to put in the hard work to make necessary improvements.”
The San Gabriel Valley city is home to less than 300 residents and more than 2,500 businesses.