Oakland City Auditor Courtney Ruby

OAKLAND CITY COUNCIL | Within a two-year period, 14 Oakland city managers and staffers received an estimated $23,000 in improper gifts from vendors associated with the city’s workers’ compensation program, said City Auditor Courtney Ruby in a blistering report released Tuesday. Ruby also reported the city’s worker compensation’s risk division overspent its authorized $13 million budget by $10 million. In addition, the scope of $8.4 million in cost overruns during the same period was never reported to the City Council or to the public, the audit found.

The disclosure of improper gifts to city staff is yet another talking point for good government advocates in Oakland who have long criticized City Hall’s numerous ethical lapses over the decades. However, Ruby’s investigation found city staff, which were identified as city directors, managers and staff may not have been aware they were even receiving gifts, which occurred during two training seminars in 2007 and 2008.

City policy forbids city workers from accepting gifts from those who do business with the city, although gifts in excess of $390 from a single source must be disclosed on state financial interest forms. The audit found 9 of the 14 city staff who received gifts exceeded that amount and failed to report them. Among those who did not disclose benefits were the directors of the Finance and Management Agency, Oakland Police Department and Human Resources, said the report.

At one point, the Workers’ Compensation’s Risk Division labeled the mistake an accounting error, albeit one made two years in a row, the report added. “These explanations demonstrate a significant lack of understanding regarding the City’s gifting policies,” it said. The gifts include payments for hotel rooms, food, wine, spa services, cooking demos, murder mystery entertainment and tours of the Monterey Bay Aquarium.

When it came to the Workers’ Compensation bank account used to pay claims, the audit found no controls existed to monitor use of the account by the program’s Risk Division for non-claim expenditures. “Some of the costs that were paid for through the workers’ compensation
bank account appear to circumvent the City Council’s budget authority,” said the report. Speficially, the Risk Division exceeded its budget for office supplies ten-fold, according to the audit, while also paying $694,368 for an annual self-insurance plan assessment fee this year outside the purview of the City Council’s budget process.

The audit also found over $32,000 in inappropriate expenditures using the Workers’ Compensation program bank account, including $13,267 for non-ergonomic office furniture for the former Finance and Management Agency director. For a 2010 educational training summit, $1,845 was spent on 154 musical instruments for staff, including rasping frogs, ganzas, leaf pod shakers, Conga drums and gourd huiros. A holiday party featuring Italian food and gingerbread house kits added another $1,182 in spending deemed questionable by the auditor.

In response to the audit, Oakland City Administrator Deanna Santana generally agreed with the report’s findings and issued remedies such as ethics training for city staff and better monitoring of the Workers’ Compensation program’s accounting. Santana also noted many of the shortcomings found occurred before the start of Mayor Jean Quan’s administration. “Indeed, as I suspected, this program has significant management issues that span decades of practice which have not been properly administered over time,” said Santana. “Gone unmonitored over the years, these practices have resulted in significant findings and expenditure of public funds.”

The audit this week is the second scathing indictment on Oakland’s city government from Ruby’s office this year. In an audit last March she alleged Councilmember Desley Brooks violated the City Charter’s non-interference rules on 12 separate occasions. The City Council ultimately decided to take no action against Brooks or Councilmember Larry Reid, who was also mentioned in the audit.
This time around, the city appears to be more willing to fix the underlining problem. “While I’m pleased that the City Administration has initiated decisive corrective actions to address these significant issues,” said Ruby. “I am deeply troubled that these funds have been mismanaged for years, spanning several administrations, void of basic internal controls, and in complete circumvention of the City Council’s authority.”