Rail Project Needs Audit Oversight, Tuttle Says

Citing financial irregularities and recent turnover in key management posts, Los Angeles City Controller Rick Tuttle on Thursday pressed his call for an audit committee to oversee the $2.4-billion Alameda Corridor.

Although his proposal again received a lukewarm response from the project’s board of directors, Tuttle said an audit team is needed to adequately account for the billions of dollars to be spent over the next three years on the 20-mile toll road--designed to speed rail cargo between the county’s ports and downtown Los Angeles.

It is being built under a joint powers agreement involving the ports and cities of Los Angeles and Long Beach. Each port has committed about $200 million to the project and will assume some of the debt service if there are shortfalls in corridor revenues.

As Los Angeles controller, Tuttle oversees $9 billion in city assets, all municipal debt and $16 billion in city retirement funds.

In compliance with the corridor’s joint powers agreement, Tuttle envisions a cooperative arrangement between the city auditors of Los Angeles and Long Beach as well as the Metropolitan Transportation Authority, which also has provided millions in funding for the project.

The audit committee would meet to explore potential problems, provide direction on audits and assist any state or federal agency with oversight responsibilities.

“It would have a regular agenda and schedule to provide an ongoing assessment of the project,” Tuttle said. “It would identify problems early, preventing unnecessary cost and delay.”

During his brief presentation, Tuttle noted that the Alameda Corridor Transportation Authority has had at least three controllers in the last few months and that the project’s treasurer recently resigned to work for an investment bank.

He said he was particularly concerned about the improper transfer of $3 million in corridor funds into the personal bank account of Nancy Schafer, one of the former controllers.

Schafer, who was responsible for managing and accounting for the corridor’s financial assets, was replaced in March. She blamed the transfer on a computer error.

The district attorney’s office is investigating the matter.

Tuttle said he is dissatisfied with an informal process now in place to involve his office in the corridor project. He told board members that he has received important reports months after they have been completed.

An audit of the Schafer matter was finished on March 29, he said, but his office did not get a copy of it until July 2.

Tuttle said the corridor authority now has the chance to take an important precautionary step “while the horse is still in the barn” and while the agency has experienced few, if any, serious problems.

His counterpart in Long Beach, City Auditor Gary Burroughs, said he will consider Tuttle’s proposal as long as it does not involve the corridor agency in adding a redundant layer of oversight. Unlike his colleague, Burroughs said his office has had good cooperation from the project.

Tuttle’s proposal was first considered by the corridor authority last month, but board members postponed action on the matter until a pending audit of the agency by a private accounting firm was finished.

Corridor officials have resisted further oversight, contending that the project is already monitored and audited by a host of local, state and federal transportation agencies.

“I view this suspiciously,” said Long Beach City Councilman Jeff Kellogg, who is the chairman of the corridor authority’s board. “He is an overly ambitious politician looking for a platform.”

Kellogg said that strong financial controls are in place, including the recent hiring of an internal auditor who will answer to the agency’s chief executive officer, James C. Hankla.

Tuttle, who has not declared candidacy for another elected office, said he did not want to get into a discussion with Kellogg about politics.