June 30, 2014 - From the July, 2014 issue

LA City Controller Galperin’s Priority Is Transparency!

In Ron Galperin’s first year as Los Angeles City Controller, he has focused on bringing transparency to city government by conducting audits, along with making data on payroll, expenditures, and revenue more accessible to the public. Galperin recently elaborated on his work with MIR, delving into Control Panel LA, access to DWP records, and his views on LA’s fiscal health. He also addresses the purview of the Controller’s Office and the ongoing challenges.


Ron Galperin

“We’re looking at the [city’s] procurement process, which is very broken in many ways...The city’s whole approach makes everything about entering into a contract, not necessarily doing a deal. You have to be in a much more business-like...mode, especially when it comes to technology.” -Ron Galperin

Since taking office, you have vigorously pursued access to records of the DWP’s Trust funds co-managed by IBEW. Would you comment on your rationale, the challenge, and your office’s legal authority?

Ron Galperin: One of my biggest priorities has been opening up city government, providing data to the public, and creating some transparency. Not that transparency in and of itself solves every problem, but it’s the beginning of being able to see how the money is being spent. 

In the case of DWP, there are two trusts that are jointly managed by representatives of DWP and representatives of IBEW. There was a piece in the LA Times last year that pointed out a number of issues—this was soon after I took office. I began by asking for some information. Perhaps it was a little naïve on my part to think that I would get it quickly. I asked again and again. And then, when that did not happen, we ended up serving subpoenas. Those subpoenas were not honored. 

IBEW went to court and sued us. We prevailed in that suite. It has now been appealed. I feel quite confident that we are going to prevail. The legal process is a little long, but as a lawyer I believe in it. 

Regarding access by the Controller’s Office to the financial records of the DWP/IBEW Trusts, why should the public care?

These are trusts that are made up of ratepayer money. They were created for a good reason, supposedly, which is to encourage training and to encourage safety. Those are good things—we want a lot more of them. Of course, the amount that these two trusts spend is dwarfed when it comes to the safety and training expenditures of DWP as a whole, but it’s perfectly reasonable to want to know how that money’s being spent. 

There has been, I think, a misguided effort on the part of IBEW and, notably, Brian D’Arcy, to seek to block that. 

Could you comment on the history of your office’s audit jurisdiction post charter reform? Your predecessor—some believe from day one of her tenure—lost authority, for example, to fully audit the City Attorney’s Office when attempting to investigate its use of funds. What today is the status of the controller’s jurisdiction to audit city departments and proprietary agencies such as DWP?

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First of all, when it comes to every city department, there is absolutely no question as to what our jurisdiction is. When it comes to these two trusts, I believe there’s really no question either. The judge in the superior court agreed with us wholeheartedly, as did the city attorney. The city attorney has been a really big help, assigning some of his best attorneys to work on this. 

What are your main responsibilities as the city controller, and how are you prioritizing those responsibilities?

Pretty much every dollar that the city spends passes, in one way or another, through this office. We’ve got what’s known as demand audit—different than the typical audit that you think about in which we look to make sure that all these various things are in place so that we can issue the payment. We do payroll for the city’s employees, which is an unbelievable task given the complexities of all the MOUs that exist and how they’re changing all the time. It’s a relatively old system. 

We produce many of the financial reports of the city. And we’ve got a waste, fraud, and abuse unit. Of course, we do many of the performance and financial audits of the city. We do that all with a staff of about 150 people.

How do you juxtapose the city controller’s responsibilities with those of CAO Miguel Santana’s office?

It’s really the charter that lays out the respective responsibilities of the controller and of the CAO. The job of the controller is to be extremely independent. The CAO serves at the pleasure of the mayor and council. He is there to counsel them. I’m working with everybody in the city, but it’s also my job to be very independent and, when necessary, to call out anybody and everybody.

Transparency has become one of your office’s high priorities. Control Panel LA is how you have branded your efforts. Please describe Control Panel LA for our readers.

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Even before I took office, one of my greatest frustrations was wanting to understand how the city’s money is spent. You could find a good amount of that information, but you had to dig to do so. 

We partnered with a company called Socrata, which has created a number of transparency sites around the country. We were told it was going to take a year. We were told it was going to take a million dollars or more. And we did it all in two and a half months at a very small fraction of that cost. There’s a virtual checkbook where you can search by vendor, search by department, and search by a whole bunch of different things. There are also details on payroll—going pay period by pay period—and every detailed element of what payroll is, as well as other kinds of benefits and expenditures on the part of the city. 

We came out with a Special Funds report, which is really important because all of these special funds—there are about 970 of them—make up about 89 percent of the balance of the treasury of the city at any given moment, which is roughly in the $8 billion range give or take a few million on any given day. 

Shockingly, there hadn’t been a comprehensive accounting of those Special Funds, so we now have those details. We have 40 columns of information on each of them, and they’re going to be updated on a regular basis. There is money that we believe either is not necessarily being spent correctly, is not being spent, or could be put to better use. That’s the point of putting that out. Mind you, data in and of itself doesn’t tell you everything about those funds, but it does tell you which ones you want to start looking at in depth. 

We also have a lot of tools for data “hacktivists,” and for a lot of people who have been anxious to volunteer with our office. We’ve done “hackathons,” but now we’ve got the Controller’s Bullpen—which is bringing in a bunch of coders interested in taking our data, helping us better understand it, matching it up against data in other jurisdictions and in the private sector, and making use of it. Again, data in and of itself is not everything. It’s what you do with it.

So the hactivists are working on the analytics to bring meaning to the numbers collected?

Yes. First of all, I want every expenditure linked with the RFP, the RFQ, the contract, the contract amendments, the invoices, and anything else that’s relevant to that expenditure. When it comes to other information that we have, I want to employ all sorts of analytics, including predictive analytics. We’re not there yet, but that’s the direction that we’re going in.

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This interview began with a focus on the DWP trusts and your pursuit of transparency. What other audits are currently in process by your office?

I have a list of about 500, growing every day. It seems for every item I cross off the list, I add another 10. We actually have one which is coming out within the next week to 10 days on street services, where we’ve examined the payment preservation plan of street services. Is it working? Why are our streets so pot-holed? Why can’t we seem to get our act together to re-pave our streets? It also looks at various sources of revenue that we may not have fully capitalized upon to do that. 

We’ve got a forthcoming audit on the ever-so-sexy subject of intergovernmental transfers. They represent about 40 percent of the General Fund budget of the city. We have, up until now, in the city looked at what we get—not what it is that we should get. Do we better cooperate and collaborate with the county, which collects a bunch of money, or the courts, etc.?

We’re also going to be looking at various assets of the city and how, I believe, they’re underutilized. We’re looking at the procurement process, which is very broken in many ways, unfortunately. The city’s whole approach makes everything about entering into a contract, not necessarily doing a deal. You have to be much more business-like and in a much more deal-like mode, especially when it comes to technology. By the time we get our act together to actually acquire technology, it’s outdated.

This is related to procurement?

This is related to the systems that we have, up and down, in every department in the city.

No interview of LA city controller should neglect the LA 2020 report. That Blue Ribbon Citizens’ report comprised two documents: “A Time for Truth” and “A Time for Action.” Was there anything in either of value to your agenda and responsibilities?

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I remember when I was running for office, just as an exercise for my own edification, I looked at different numbers that are indicators of how the city is doing. Then I took two different pieces of paper. First, I took those numbers and was able to paint a scenario that things are not so bad. Then, with the exact same set of numbers, I painted a scenario showing that things are in dire shape. How you approach the state of things in the City of LA is a matter of some perspective. 

Having said that, I think there were a number of good recommendations in the LA 2020 reports, some perhaps more politically doable than others, some of which might yield different results. I don’t know where all of those recommendations are in the council.

They talked a lot about transparency, which I think is absolutely vital, and I couldn’t agree more. Personally, I think that’s a good argument for providing the resources to the City of LA Controller’s Office so that we can do our job.

The Planning Report followed publication of the LA 2020 Report with a candid interview of LA CAO Miguel Santana regarding “Staying the Course”—which was quite critical of LA’s current budget process and reporting. The CAO cautioned those relying on the city budget’s forecasts to pay attention to the assumptions: “Costs are driven by pensions, healthcare, and workers’ comp,” assumptions that may not turn out to be true. How does the public know whether these budgetary assumptions are real?

Before the budget process begins, our office issues a report, and we also interview economists to give their perspectives on what they think the numbers are going to be. Then we come up with a reasonable estimation of how right they are. Some of it is admittedly a guessing game, as economics can be as a whole. So much of the budget is subject to the vicissitudes of the economy, because the vast majority of what we pay for the non-proprietaries is related to everything having to do with personnel costs, healthcare, that which is paid toward retirement, etc. 

That means you are left with a relatively small amount of the budget that is somewhat more discretionary. And even that is not very discretionary. Just small changes in the economy can put you in bad shape.

You focus in your answer above on the overall economy, which relates to the budget’s revenue assumptions. Miguel was also talking about the vicissitudes of labor negotiations and pension reform on expenditure projections. Frankly, many critics fault City Hall for not having a serious budgetary process and full debate over the assumptions embedded in the adopted budget. Many critics have complained about how difficult it is for the public to discern when their local government is acting with fiscal responsibility. How might transparency and your office play a larger role in the city’s budget process?

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If you go onto our Control Panel, one of the things you are able to do for almost all the line items is see what the budgeted numbers were and what the actual numbers were. You can make those comparisons. You can see the budgeted numbers for certain types of collections—be they dog licenses or parking tickets—and then look at what the actual numbers were in almost real time, which is very informative.

Regarding the City of LA’s current budget, is there a structural deficit? While the answer in not part of your official job responsibilities, as controller, your answer would be welcomed.

Officially, the city does not have a deficit, not like the federal government does. We have so-called “shortfalls” and a series of budget gymnastics that allow you to balance the budget every year.

But in reality, that has come at the cost of not investing in our infrastructure. Look at the condition of our infrastructure overall—the conditions of our streets, our technology, and a bunch of different things. If you were to really be honest about our shortfall, it would be much more than the numbers that actually get reported. Then the longer you push things off, the more expensive they become to fix.

How can you tell if the City of LA’s budget assumptions about wages, costs, and pensions are realistic and being honored in practice?

The way that it is most manifest is by looking at various line items in the budget and looking if they came to pass with some reasonableness or not.

The mayor’s budget or the adopted budget?

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There’s a potential to look at all of the above. What we have online is adopted versus actual, going back several years. This then gives you an idea of how close you are, and we can easily crunch the numbers on those categories that the city was closest on and those they were furthest from.

How would you assess the council and mayor’s now adopted 2014-15 budget in terms of supplying the controller’s office with the infrastructure resources needed to be a productive contributor to the city’s overall fiscal health? 

I think that over the years the controller’s office got eviscerated. There used to be a lot more people and a lot more auditors. Having said that, I don’t believe that more bodies necessarily equals more productivity, and I’ve been pretty careful about who we bring on. I’ve been careful about how we bring new people on board and what requests we’re making for resources. I actually want to prove what it is that we’re doing.

First of all, what good is any audit if you don’t have change and results that come out of it? I think that just pointing out what is wrong in a department is not necessarily a recipe for getting it fixed. I’d like to think that I’ve taken a different approach to the type of audits we do, how we do them, the kind of results that we want to see, and the kind of recommendations that we’re making. They’re more practical.

In terms of the budget, there are never sufficient resources to meet my needs, and I have a lot of needs. Are there resources tolerable enough to meet my needs for this year? Yes. Will I be asking for more next year? Yes. But I’ve been very careful and circumspect about how I ask for it, because when you ask other departments why something hasn’t happened, the inevitable answer is, “Well, we need more people. Just give us more money, and we will fix the problem.” I don’t believe that that is the answer to all that ails us.

Elaborate on the nexus of productivity and technology, and the resources for this office to meet its responsibilities.

We have a pretty aged, but well-operating, payroll system—although at some point in the future it is going to need a significant upgrade. There have been many nightmare payroll system stories in government entities, and I don’t want to have that problem. I want to be sure that whatever we do is smooth. That’ll take a lot of planning.

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I recently learned how much paper we still go through in this city for just about everything, including in this office, and it needs to be much more digitized. Even the number of ink signatures needed to get a check approved is ridiculous. We’ve been working with the city attorney’s office on reducing that and having electronic signatures. Just providing more wifi in city buildings is a step forward so that people are not so chained to their desks. With mobile devices there are things that used to take a pile of paperwork that can now be done sometimes with an app—not that it’s always that simple, but we’re behind the times.

You served on the appointed CORE city commission before seeking election as city controller. Could you elaborate on your role as chair of that commission and whether you learned anything of relevance to your current responsibilities? 

The CORE commission was one of two in which I participated. The one with David Farrar was the Commission on Revenue Efficiency. I became obsessed with collections in the City of LA and was wondering why we were doing such a bad job of it. So I proposed the Commission on Revenue Efficiency—actually, back then Garcetti had asked if I wanted to be on the city’s Ethics Commission, and I said, “Thank you very much. That would be really nice.” But I had a lot of chutzpah, and I said, “Instead, I want you to create a brand-new commission, which will be focused on debt collection.” He said, “Make me a proposal,” and I already had it prepared. We talked about it over pizza, and it got created with some really smart people on it.

We went into great depths on a whole bunch of different subjects, most of them closely related to collections, but also including sales tax expenditures of the city, where we’re making our purchases, and how, in many cases, we’re shipping sales tax on the things we buy out to other jurisdictions. That was an experience through which I got to know a lot of people in the city. 

What’s happened to those CORE recommendations?

We came up with a whole series of recommendations. A good number of them have actually been put in place, and one of the things that we recommended was the creation of an inspector general for collections. We saw that as something that would be for an interim period of time because we didn’t want to be a commission that makes a bunch of recommendations that are shelved. This was sort of our tool to see that it continued its life.

The commissioners and I were very engaged in trying to see these recommendations move forward. There are a number of them that are still in-process, and there are a number of them that have not been fully put into action. One of the nice things about being controller is that I now have a position from which I can push to see them happen. 

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The ultimate goal of CORE was to find additional revenue through collections. Has progress been made? 

Yes. I believe that progress has been made. First of all, a lot of what we did was identify what we thought was collectible, and what wasn’t. We also aimed to create better processes and better protocols. Having said that, we had to pay a brush clearance fee, and the deadline was for this past weekend. You look at the notice that we got for the bill, and it’s so difficult to actually find the website address where you can go online and pay by credit card. That website address happens to be an incredibly complicated one—if you make any little mistake as you type it in, then you’re not going to get to it. That shouldn’t happen. It should be a really easy, one-stop, payment center—which is one of the things we recommended. I know there’s some work going on around that, but not quickly enough for my taste.

Who’s the constituency for the services you perform as city controller? 

Everybody is a constituency. Every city employee who wants his or her paycheck correctly and smoothly is a constituent in one way or another. Every department that we can audit, or we process payments for, is a constituent in one way or another. Every neighborhood council that operates and depends on being able to make payments is a constituent. Every person who lives in the city and wants to see better services is a constituent.

I think everybody gets that we need much better technology. I remember from my first couple days in office how surprising it was to see how stuff was done like it was in the 1970s. People are ready for a change.        

If we were to chat again in 2015, what would be different about our conversation? What would be the successes to date and challenges before you? 

I think that right now we are in a good moment relative to the past in city hall. There are some good relationships between various parties, and there’s a lot of collaboration going on, not just between elected officials but also between their staffs. I think there’s a hopefulness that people feel out on the street, that we are moving forward. But I think the further we go into all of our terms, people are going to want to be able to say—my grandmother used to use this Yiddish word, “tachles,” meaning what’s the result that you are getting? We have to translate the progress we are making into actual results that people experience—a smoother street, a cleaner city, one with better responsiveness, where city hall can fix a problem. That’s going to be the real test.

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© 2014 The Planning Report | David Abel, Publisher, ABL, Inc.