Stops along paper trail shed light
     on complicated bonus scandal

Problems in the office of Mayor Pro Tem Carol Alvarado have sparked investigations by the city's Office of Inspector General (OIG) and the district attorney, audits by the Controller's Office and lots of soul searching among city officeholders.

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Controller's Perspective  ___________

While there has been extensive media coverage and the criminal probe has broadened since being referred to the DA, the issues are fairly straightforward. Here are some very general answers to frequently asked questions.

Can city employees legally receive bonuses?

Performance bonuses are available to city employees under certain circumstances and through various documentation methods. Bonuses also used to be awarded through an informal method involving temporary increases in base pay. All bonuses, however, require approval of department and Human Resource directors or the mayor. (Each council member is, in effect, director of a small city department, and the bonuses they grant are co-signed by the mayor pro tem.) Standard forms must be filed with an initiating document justifying the bonus attached.

Can staff sign for the director/elected official?

Approval authority for a range of actions resides with the department director, but that authority may be delegated, in writing, to certain subordinates. Such delegation may be restricted by time or type of action, but may also cover all duties of the director. That written delegation is filed with appropriate city departments. The subordinate can then sign, using his or her own signature, for the director/elected official for all actions granted by the document.

How much budget discretion is allowed within a department?

Department directors have authority to move funds among budget categories as long as they remain within overall limits and they document changes with the Finance and Administration Department. While budgets are regularly analyzed on a line-item basis by spending code, they are viewed as being in balance if the total departmental budget is in balance.

How do council budgets differ?

Council members have control over their individual budgets and are expected to keep them in balance. But for reporting purposes all 14 offices, plus the Mayor Pro Tem Office, are shown in the aggregate. A council office might be under or (temporarily) over budget, but the total remains in balance.

F&A monitors each office and keeps the council member or designee informed, providing a monthly record of available funds, amount spent to date, and amounts remaining by spending category. Problems seldom occur except when a council member leaves office at the end of a term, which falls in the middle of the fiscal year, and unexpected bills surface.

Doesn't the city have checks and balances?

Of course. These were not large lump sum amounts, but smaller bonuses, spread out over a period of months across two fiscal years. For each month, appropriate documentation was attached, signed by a staff member with signature authority for the Office of the Mayor Pro Tem, with an initiating memo that appeared to have been initialed by Council Member Alvarado.

The bonus requests were processed by the Central Payroll Division of Finance and Administration. Money was apparently moved among various line items within the budget to cover the large payroll increase, but the overall budget was not exceeded. Controller's Office staff merely performed an audit function to determine whether the expenditure was authorized, there were funds available in that particular category, and that the check issued was correct.

Did anyone raise alarms about the ongoing bonuses?

Yes. When consecutive bonus requests were received, Controllers Office staff requested confirmation from F&A that the bonuses were authorized. When the bonuses continued, they contacted the Mayor Pro Tem office and were informed that the authorizing staffers had full signature authority, which was confirmed.

Eventually, Controller's Office staff contacted a supervisor in F&A and asked that the payment schedule for the bonuses be shifted to the alternate check cycle (opposite from the weeks when municipal paychecks are processed) because they required special handling.

F&A Director Judy Gray-Johnson (left) reported the entire sequence of events to the OIG as soon as she learned about it. Any actions taken by F&A staff prior to that have not been made public.

Could it happen again?

These events have prompted heightened security. However, there is a certain amount of deference and a large amount of discretion extended to elected officials. They have the ultimate authority and are ultimately responsible to voters.

It is difficult to imagine a low-level city employee forcefully questioning an elected official about an expenditure that appears legal.

So, what's the problem?

Council Member Alvarado (right) has asserted that she was never personally notified of the increase in her payroll, did not review any of the monthly budget statements and was, therefore, not aware of the bonuses.

Furthermore, she has stated that she neither initialed the authorizing memos nor approved any bonuses or pay increases. If that's the case, then one or more of her pro tem's staff has violated city policy and various state laws ranging from forgery to theft.

What is the current status of the investigation?

The OIG has turned over all relevant information to District Attorney Chuck Rosenthal. It's now his investigation. The primary focus has been the four employees of the Mayor Pro Tem's Office, Alvarado and any city employees who may have acted improperly. Subsequently, Rosenthal requested information and seized documents related to prior mayors pro tem, council office budgets and bonuses given throughout the city.

At the request of the Legal Department, the Audit Division of the Controller's Office is auditing all petty cash and purchase card activity in the pro tem's office. If asked, the Controller's Office will also assist with other portions of the investigation.