California audit questions documentation of contract work on high-speed rail project

The California high-speed rail project has paid millions of dollars to engineering and environmental consultants without adequate documentation to verify the expenditures, according to a state audit released Wednesday.

Of $8.9 million in payments reviewed by the office of Inspector General Laura Chick — a former Los Angeles city controller — about $3.44 million, or about 38%, was paid out in May and June without records showing how many hours the consultants had worked.

In addition, auditors found that the California High-Speed Rail Authority spent $90,000 more for potentially duplicative public relations efforts and questioned an agreement to set aside $700,000 for a consultant who works for a council of local governments but not for the project, something that could create oversight problems.

The findings add to similar questions about the agency raised by other state audits and legislators who have oversight responsibilities. The Times also recently reported that the agency had not filed required records describing overseas trips taken by authority officials and paid for by foreign governments interested in helping homeland firms get business from the new rail system.

“The authority continues to lack written policies and procedures for day-to-day activities such as contract administration, information security, and fiscal and human resources administration,” Chick’s auditors stated in a 14-page report.

The inspector general office noted, however, that the authority’s management is improving under new Chief Executive Roelof van Ark, who has been implementing recommendations made in April by the Bureau of State Audits.

Since replacing Mehdi Morshed in May, Van Ark has changed the agency’s public relations contracts to avoid duplication and has hired a contract manager, who has tightened financial controls and saved $2.6 million by renegotiating contracts.

“The old regime was doing business the same old, same old,” Chick said. “The new regime seems to be taking things more seriously. How they are running things and watching people’s money has greatly improved.”

In a prepared statement and in written responses to Chick, Van Ark said that substantial progress has been made during the last several months, including better oversight of the project.

Steps have been taken, Van Ark said, to monitor the engineering and technical consultant who works for the Gateway Cities Council of Governments, which represents 27 municipalities southeast of Los Angeles. Some of the group’s members are situated along the proposed high-speed rail line.

The authority is planning to build a 220-mph rail link between Southern California and the Bay Area at an estimated cost of $43 billion. Officials want to finance the project with $9 billion in bonds approved by voters, government assistance and private investment.

So far, the federal government has approved almost $3 billion for the project, including $2.25 billion in economic stimulus funds from the American Recovery and Reinvestment Act.

Chick’s office concluded that the authority is not fully prepared to distribute and monitor the federal funds or ensure that the project complies with the Recovery Act. The report warns that if the federal requirements are not met, the project may become ineligible for stimulus funds.

Van Ark agreed with the conclusion but said the contracts to date have involved engineering and professional services that are not subject to the Recovery Act.

dan.weikel@latimes.com