Archive for May, 2015

I use a term when I am discussing business with colleagues, staff or clients. It is “serious stuff” and I employ it if the subject matter is controversial, eye-opening or impactful.

While I have no idea if Ron Galperin has a similar term, he understands the meaning.

His hard-hitting audits have targeted real cash drains. Just this year we have learned about Workers comp mismanagement and abuse costing the city around $28-million per year; Department of Transportation excessive and unauthorized use of overtime to the tune of $3.3-million per year; exposing the culture of corruption at the IBEW Local 18’s non profit trusts purportedly established to promote safety – the combined entities that have been siphoning $4-million per year, for over 10 years, from the city’s general fund.

These are not fuzzy, hypothetical estimates of inefficiencies. They represent hard, unrecoverable costs which will continue if the City Council and Mayor do not follow through on the audit report recommendations.

Galperin has also made it possible for almost anyone to search the city’s financial records. It is a very easy search, too. For just $100,000 and a few months of time, he oversaw and directed the design and implementation of the Control Panel. In all of my years in the finance and accounting field, I have never seen such a powerful and user-friendly database developed in so short a time and for so little.

It’s hard to imagine that someone believes Galperin is “grandstanding” to advance a political career. That’s what former City Councilman Dennis Zine, a shill for union boss Brian D’Arcy and his operatives, thinks.

If Galperin is grandstanding, then every elected official should drink whatever the controller is pouring and do some grandstanding of their own.

It makes you wonder just what Galperin’s predecessors were doing with their time in the office. Even Laura Chick, who we fondly remember as a critic of Mayor Villaraigosa’s manipulation of a tax to fund a thousand new officers, missed the most egregious, ongoing financial irregularities. The very same disgraceful conditions Galperin is reporting were occurring on her watch. Her heart was in the right place, but, with all due respect, she lacked the technical skills required to effectively manage and prioritize audits, or the analytical acumen to evaluate information. She was a politician first and foremost, without an ounce of geek in her blood.

What about Greuel? Just read my past columns.

Zine was obviously drinking D’Arcy’s Kool Aid when serving on the City Council. He praised the IBEW-friendly DWP contract rushed through in 2009 .

To be frank, it takes some grandstanding to get the attention of the officials and public in this town. Issuing a scathing audit report is one thing; assuring it is in the public view is another. No one has put the City Controller’s office on center stage as well as Galperin.

That’s good.

If our elected officials do not act to end the abuse, then the public can use the reports to punish them at the polls. I’m not expecting anything resembling a revolution, but there could be a couple of incumbents who may have to sweat. We saw a few incumbents and LaBonge’s hand-picked lackey bite the dust on May 19th.

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Did the LAUSD election results signal a change for charter schools?

Perhaps, possibly, maybe.

You can make a decent case that Rodriguez’s victory in District 5 points to strong support for charters.  It was a battle between two well-funded candidates with diametrically opposed views on the issue.  The effectiveness and fairness of charters were the core issues. The fact that the anti-charter candidate was an incumbent and still lost speaks volumes.

Not so clear in District 3.

For that matter, I do not think it was the issue that drove the campaign or had much of an effect on the outcome.

In my neck of the woods, where a popular charter school plays an important part of the social fabric, it was not a subject that came up at any meetings I attended, or in my informal chit-chats with informed residents who are active in Valley Village’s NC and homeowners’ association.

None of the mailers or canvassers played it up either; I assume both candidates stuck to a uniform message throughout District 3’s vast San Fernando Valley footprint.

What seemed to be the prominent concern among the 3rd’s likely voters was the competence of the LAUSD board members, specifically the lack of it with regard to incumbent Tamar Galatzan.  Her opponent, Scott Schmerelson, delivered a message rooted in his extensive experience as an educator, and one who was thoughtful – not a person who would spuriously embrace the idea du jour as Galatzan did with the iPads, or latch on to a figure because he was perceived to be a rising star. As it turned out, a “rising star” who left the school system vulnerable to federal investigations. It makes me wonder if Galatzan has what it takes to serve the public in her other job as an assistant city attorney.

Establishing priorities was not in her wheelhouse. She was part of a culture where oversight was an afterthought. Over a billion dollars were wasted or inappropriately allocated at the expense of vital needs during her two terms on the board.

Schmrelson will not repeat her mistakes.  I anticipate he will concentrate on delivering the best value for the money.  That does not mean every worthy project  will be implemented; it does mean the best, doable ones will be selected.

It is difficult to understand what was behind incumbent Vladovic’s easy victory over Lydia Gutierrez. How did the voters weigh his unprofessional conduct as a board member and track record of wasting money with her alleged Tea Party ideology?  I think that had to be in play.  It is difficult to ignore.

Vladovic  enjoyed strong support from charter advocates, overwhelming Gutierrez’s puny treasury.  You must hand it to her, though.  She earned 45% of the vote against an incumbent despite her lack of funds.  That would indicate a fair degree of public dissatisfaction with Vladovic and could adversely affect his re-election chances for LAUSD Board president.

Overall, Schmerelson racked up the most impressive showing of the night.  His 18,146 votes were nearly double than Vladovic’s and easily surpassed Rodriguez’s total.

Schmerelson just might have the most positive public image of any of his colleagues.

It would position him as a go-to person when it comes to navigating controversial issues.

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Stop and think.

What would you like your favorite baseball player to do in his final career at bat?

Sure, hit a homer, but you might be OK with any other type of hit. Maybe even working the pitcher into a long count and drawing a walk. Even a mighty swing and miss.

How about standing at the plate with the bat on his shoulders while watching helplessly at a called third strike?

I don’t think so.

But that’s what we got from Matt Weiner in Sunday night’s Mad Men finale.

It didn’t help having the hillside singers serenade us with the iconic “I’d Like to Teach the World to Sing” Coca Cola jingle, even though Don Draper undoubtedly would have created the ad had he stayed with McCann Erickson.

I sure hope Weiner doesn’t orchestrate Ken Draper’s farewell when it comes time for him to leave Citywatch behind.

All of the other major characters had satisfactory closure, particularly Peggy Olson, Don’s protege, who found love with her assistant Stan.

The plot did not fast forward to Betty’s funeral as many fans (myself included) predicted, but that was OK, because it provided a classic scene with her and daughter Sally. Betty is last seen smoking away in spite of her terminal lung cancer, while Sally is taking command of the household. A dramatic changing of the guard.

All of that was fine, but the show has always been about Don (Dick Whitman) Draper’s journey. His coda was what the viewers wanted to see more than any other.

To have his final scene – sitting on a bluff, meditating with others at a self-awareness compound in California – brings to mind T.S.Eliot’s oft-quoted, final stanza from his poem, The Hollow Men: “This is the way the world ends. Not with a bang but a whimper.”

It will be the whimper her ’round the world. I expect blogs and entertainment columns to refer to Weiner as a wiener.

I was not expecting Don to go out with a bang. All that nonsense about a D.B.Cooper escape from a plane was just so much tobacco smoke in a Sterling Cooper conference room.

I was not expecting a suicide or fatal accident either.

Instead, the ending was the equivalent of a lobotomy. Don deserved better – even death would have been preferable.

The final frames showed a smiling Don Draper, but it did not pack the same punch as the smiling Don Draper at the conclusion of the penultimate episode, where it was very apparent he had finally found the road to happiness, which echoed his vision of Bert Cooper’s spirit singing the Best Things in Life Are Free.

Weiner should have ended it then and there.

It was a step backward in the plot at the worst possible time.

It brought back the awful memory of the Sopranos’ fade-to-black betrayal of that show’s loyal fans.

I think I would have preferred a spoof of The Bob Newhart Show’s it-was-all-a-dream ending

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The race for the District 3 LAUSD Board seat might be the marquee event on May 19th.

As a resident in the district, which covers a large part of the San Fernando Valley, I have watched the campaign unfold.

Scott Schmerelson has managed his resources well – four canvassers have covered my neighborhood in the past four weeks, and there has been at least one mailer per week.  By contrast, no canvassers from Tamar Galatzan and an irregular flow of mailers. Very few calls from either.

Schmerelson’s outreach seems to be better organized. I am not surprised since he has the teachers in his corner.  It appears Galatzan is depending on typical partisan supporters to spread her empty message.

It’s the message that really counts.

Schmerelson’s campaign literature has focused on his career as a well-rounded educator who is committed to not repeating Galatzan’s costly mistakes – using school construction funds on the ill-conceived iPad rollout, negligence in oversight of those responsible for the design and implementation of MISIS and tacit support for an administrative culture that is bankrupting the school system.

What’s Tamar’s message?

Schmerelson is a closet Republican! Nothing more.

Probably because she has nothing more.

In a race for a seat for which education credentials and management skills are the tools for making the most of limited resources, party affiliation means nothing. I happen to be a Blue Dog Democrat who could care less about partisanship in this race.  I want a well-managed school system that delivers the best possible outcome for the students. I also want a board member who devotes full-time attention to the business of the LAUSD, not a part-timer like Galatzan.

I might add that the Democratic Party has emphatically stated it has not made an endorsement! So much for Galatzan cloaking herself as a party standard-bearer. I scarcely believe that the Americans for Democratic Action would endorse Schmerelson if his party affiliation were an issue.

It comes down to if you want a continuance of failed oversight by a politically ambitious, hand-picked lackey from Villaraigosa’s days, or a true educator committed to fiscal responsibility, one who knows what the classroom is all about.

I urge you to vote for Scott Schmerelson on May 19th.

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My daughter got us hooked on Mad Men.

It was one of those shows I had intended to watch, but it took a little push to get us started. That push was a Christmas gift -the DVD of Season 1 – about four years ago (DVD? How far we’ve come in a few short years!).

The opening scene had Don Draper sitting at a table in a smokey, dimly-lit, restaurant, sketching out some thoughts about a tobacco ad campaign on a cocktail napkin. He then asked the waiter what brand he smoked and why.

The waiter answered, “Old Gold.”

Don’s target client was Lucky Strike. So he asked the waiter why Old Gold was his brand of choice.

The waiter replied that he “loves smoking.”

The maitre d’ walked over and asked Don if the waiter, who was black, was bothering him. He did not stop to think that perhaps a well-dressed executive might engage in a conversation with a black waiter

This simple, short scene offered a gritty, realistic  image of 1960 society and culture – acceptance of smoking and racial stratification as norms. While smoking and race relations were not the prominent themes of the series, they were there in the background to some degree.  They served as a constant reminder of how different life was in the not-so-distant past.

I enjoy period shows that are true to the time and offer an unvarnished portrayal of characters and events.

Along that line, Mad Men delivered.

I have occasionally been inspired enough to refer to the show or its principal character, adverting genius Don Draper, in my articles.

In this, it’s final season, the plot is well into 1970.

How do you end a saga that follows a host of intriguing people over the course of a tumultuous decade?

Regardless of how it plays out this Sunday, I am sure many fans will be disappointed.

Writing an ending is much tougher than developing a plot.  It is tougher when the characters have become household favorites.

I am sure it will not be as disappointing as the final episode of the Sopranos, which cheated loyal fans out of closure with respect to the main character, Tony Soprano.  I can buy into life not always providing closure, but fictional film and TV programs are primarily meant to be entertainment, which means you owe the fans something in the end.  It does not have to be perfect, if perfection is even possible, but it should have an element of finality that one can use to project likely outcomes.

The last few episodes have set the stage for a story line that focuses on the two most important characters of the show – Don and his daughter Sally.  All of the other characters have had what can be described as curtain-call worthy scenes, my favorite one depicting Peggy Olson traipsing into the offices of ultra-corporate McCann Erickson, conveying a bad girl image. It is easy to imagine her as one who will create waves which will either change the firm’s culture or propel her to a new career in advertising elsewhere. Either course is fulfilling to this fan.

Betty Draper Francis, Don’s ex-wife who has always been the most important relationship in his life regardless of his philandering, had the most poignant sendoff.  She was diagnosed with inoperable lung cancer and given nine months to live, the price for a life of smoking, a habit featured throughout the series for almost all the key characters.

The envelope she left for Sally to open upon her death contained explicit instructions about her funeral but, more importantly, an expression of sincere love along with some sound advice about living. Sally, of course, opened the envelope soon after she received it and was deeply touched.  You could sense the inspiration it provided her. It also disposed of the ill-feelings harbored by Sally towards her mother.

Most certainly, all of this points to the plot flash-forwarding to 1971. It was a benchmark year for the tobacco and advertising industries – televised cigarette commercials were banned effective January 1. A fitting point in time for the series to end, made more so given the cause of Betty’s demise.

It would seem Betty will succumb to cancer around June, roughly nine months after the date of her letter to Sally. Therefore, it would be logical for the episode to pick up at or soon after her funeral.  This would also allow for some final farewells among the characters.  With the exception of Roger Sterling and Peggy, who appear willing to pursue a course with McCann Erickson for at least a limited time (probably Ted as well), everyone else appears to be on divergent paths, never to meet again.

This season started with the death of Rachel Menken, the department store mogul who Don respected as an equal in terms of independence.  She goes back to the very first season. The two became romantically involved, but she realized Don was not mature enough to warrant deeper involvement. Beginning and ending the season with memorial services for the two most meaningful women in Don’s life seems appropriate.

But Don must deal with one more challenge in his life.  He is already heading in a healthy direction; however, he is still a father to three children who will soon be without a mother.

The kids’ stepfather, Henry Francis, does not have the mindset or the tenor to be an effective parent.  If anything, he would be unable to cope with Sally’s independence and rapidly- progressing maturity, so important in her developing role as a surrogate mother to her much younger siblings.

Sally will need Don to resume an ongoing presence in caring for the family.  Despite Don’s failings over the years, he has always loved his children….and their mother. Sally will ask for his involvement.

As he has in the past, he will not run away from this obligation.  Over the final season, he has grown beyond seeking self-serving escapes from relationships, notwithstanding the dalliance with the waitress, the reason for which had its roots in the death of Rachel.

Perhaps the family will settle in New York; more likely move to California where he began life anew after returning from the Korean War with the stolen identity of Lieutenant Don Draper. It would not surprise me if that’s the impression left at the end.

Let’s hope Matt Weiner leaves us with a satisfying end to this brilliant series….not an ending that will leave us Mad.

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An excerpt from the DWP press release dated May 5th, containing Ms. Edwards purported apology:

“And finally, it’s important that I share something with you.  The Trustees were advised that their review of the draft audit needed to be completed within three days, and that a response letter was required within that time frame. Since a detailed review and response was not possible in three days, the Trustees responded with a brief letter, stating in part that they needed more time to review, among other comments.

“With respect to those other comments, I regret allowing my own frustrations with the audit process overall to lead me to agree to some characterizations which were not appropriate.  For that, I sincerely apologize to the Mayor, the Controller and this Board.”

What a bunch of weasel words.

What a bunch of lies.

Let’s start with “some characterizations which were not appropriate.”

The seriousness of the findings, the blatant disregard for transparency, and the recklessness with which “business” was conducted, merited something much stronger than “not appropriate” – how about, “I was completely wrong.”

Edwards’ also felt that a response was not possible in three days.

I consumed the contents of the report in about an hour.  It was very clear to me, without being a party to the audit, that a detailed response would take some thought and time. An acceptable statement would have acknowledged the significance of the deficiencies and included a commitment to categorically address them, which would take a while longer (with a target date) given the nature and extent of the findings.

Instead, Edwards tag-teamed with D’Arcy to produce a smokescreen filled with bluster. Where was the Air Resources Board? Surely, there must have been a violation.

Are we to believe frustrations with the audit process were behind Edwards’ excuse for the response dismissing Galperin’s report as “innuendo?”

Who was being frustrated?

How about the ratepayers and the residents.

Who caused the frustration?

Wasn’t it D’Arcy?

If not a liar, Edwards is dense.  I cannot believe she could have risen to her current position if the latter were true. No one does a 180 in a few short days willingly.

Edwards showed her true colors when she co-authored the letter with D’Arcy.  She may as well have changed her legal name to Marcie D’Arcy (no disrespect to the popular character from Married with Children).

She added another layer of indifference and disrespect for the ratepayers when she suggested the two trusts simply be consolidated.  Why not challenge the existence of the trusts? Even the CAO report found that the benefits of the safety programs could not be substantiated.

Whether consolidated or not, the trusts will still draw $4-million of our money annually, will still be managed by the same overpaid goons and overseen by trustees with no concept of oversight.

The trusts were created through labor negotiations.  Mayor Garcetti, Marcie Edwards and the City Council use that as an excuse to surrender to D’Arcy.

But just as we can and should insist upon good performance by the IBEW Local 18 members in the execution of their work, the same standards need to apply to the trusts, too. That has not been the case with the trusts and, absent the removal of those responsible, measurable change is highly unlikely.

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By now, most of you are familiar with the audit report of the controversial non profit trusts issued by City Controller Ron Galperin. If not, take the time to read it – at least the Executive Summary.

The report clearly describes an organization with no effective internal or external oversight; glaring deficiencies in controls; indifferent management; incapable staff.

The audit found no evidence of criminal activity, so the city is now required to resume the transfer of $4-million per year of our money to a good old boys club. That should make travel agents happy along with hotels in Las Vegas and Hawaii. The motto of the Joint Safety and Training Institutes should be high-living is job one, and maybe safety, when we have the time. Grossly overpaid staff, high-end travel and no documentation to support the justification of spending characterize the activities and management style.

I’m not surprised by the absence of criminal activity. IBEW Local 18 boss Brian D’Arcy is much smarter than Robert Rizzo was in Bell. He knows the difference between pigs and hogs.

Despite a damning report that would subject executives to civil suits if it involved an investor-funded enterprise in the private sector, Marcie Edwards, GM of the DWP and one of the city’s appointees to the boards of the trusts, co-authored a rebuttal with D’Arcy that referred to the contents as “innuendo” (see page 71-72 in the report).

I expected a reply like that from D’Arcy, but in view of the seriousness of the findings, Edwards’ reply is shameless and exposes her as a weak representative of the public, unfit to serve our interests. It also calls into question her judgment as the General Manager of the largest municipal utility in the nation, especially at a time when we face crushing rate hikes and tough labor negotiations with the union.

Just as questionable is the role played by the CPA firm of Miller, Kaplan and Arase, who served as the external auditors of the trusts since inception.

CPAs have a responsibility to the users of their clients’ financial statements. It extends to those outside of management and include creditors, the business community, investors and, in the case where public funds are at stake, …..the government – that’s us.

The firm was well aware of the pervasive laxity that defined the operations of the trusts:
-Inadequate segregation of duties
-Books that did not balance
-An almost complete absence of accounting skills
-No procurement policy
-Lack of board quorums needed to conduct business

Galperin’s report provides excellent examples.

Knowing that the deficiencies increased the risk of fraud, loss and lack of transparency, the auditors worked around the deficiencies, presumably by increasing their sample population and other steps to mitigate the effects of cavalier practices and carelessness.

They did this year after year, apparently unphased by the boards’ failure to address the problems. This amounts to playing with fire. Given the highly-charged political environment associated with the union and the DWP, and the history of cash contributions by the union to elected officials, the auditors should have had a heightened sense of awareness for potential sweetheart deals. Understandably, such deals are difficult to uncover, especially given the connections involved. I have doubts as to whether the auditors took enough steps to smoke out illicit activities.

The association with a controversial, poorly-run (if not negligently so) organization amounts to holding a time bomb in the same vein as Enron, World Com and other disasters caused by weak controls and management indifference – only on a much smaller scale. Miller, Kaplan and Arase, in essence, became an unwitting enabler to systemic waste of taxpayers’ monies.

But it is a scale equally important – it concerns the public’s trust in government. You cannot place a dollar value on it. I do not think the firm’s partners grasp that concept. They are probably not alone. The fiscal landscape is littered by costly failures resulting from government negligence where auditors did not raise red flags with the true owners of the entities – the public.

There were reported instances where the auditors own actions were, in my view, unprofessional:
– Failure to report material weaknesses in internal control to the boards for 2013 and 2014
– Did not exercise due care in preparing IRS 990 filings (the non profit equivalent of a 1040)
– Failure to review the upcoming audit, and the results of the previous one, with the boards

I challenge the mayor and the Board of DWP Commissioners to take the following actions:

– Remove Marcie Edwards from the trusts’ boards. Her independence is highly questionable. It appears she lacks the backbone to stand up to D’Arcy.

– Recommend that the boards engage a different audit firm. They probably won’t, but my next recommendation could lead to that.

– Ask the State Board of Accountancy to review the conduct of Miller, Kaplan and Arase for possible negligent or unprofessional conduct in the performance of their public duty. If found wanting, sanctions could be placed on the firm that prevent it from performing future audits of the trusts.

The LA Times’ Steve Lopez nailed it in his column today:
“If Garcetti has a pair of big boy pants, Edwards will be out of a job by lunchtime Monday.”

I’ll make it easier for the mayor. I will gladly offer him a pair of pants that has been hanging in my closet for a long time. My waist was smaller then, so it should fit.

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