An investigation into Long Beach’s city auditor has found that she failed to properly oversee two contracts with outside vendors, despite dinging other city departments for similar issues in her past audits.
The city launched a probe into its longtime auditor Laura Doud in October after an anonymous whistleblower accused Doud of misappropriating more than $1.5 million in city funds through contract payments to two public affairs consulting firms.
Ultimately, a report released Wednesday by a city-hired outside auditing firm called RSM US said it did not find “clear evidence of misappropriation,” but that Doud’s contracts lacked details on the scope of work and that she disregarded city policies.
“Doud failed to follow the best practices she recommended to City departments,” the report said. “Doud published audit reports in which she makes recommendations to various City entities regarding procurement, contracting, and invoicing that she herself does not follow.”
First elected in 2006, Doud is one of just a handful of independently elected city auditors in California. A Long Beach native, she is now running for a fifth term in the city’s primary election on June 7.
Her lawyer, Kate Corrigan, said in a statement that Doud is pleased with the report’s findings and will continue to cooperate with the investigation.
“We stand by the position that there is no misappropriation or wrongdoing, and that substantial work and services were provided,” Corrigan said.
Last year, Doud broke ranks with most city officials when she released an audit that was critical of the city’s oversight of $23 million in critical repair projects for the Queen Mary ocean liner. In the audit, Doud said the projects lacked a competitive bidding process and that subcontractors were not required to provide detailed invoices for the scope of work, leading to excessive markups and overpayment for some repairs.
But the RSM US report released Wednesday notes that Doud in her own contracts with two firms—Kindel Gagan and the Davis Group—failed to provide a detailed scope of work and billable hours.
Since 2006, Doud has paid a total of more than $1 million to Kindel Gagan, a Los Angeles-based public affairs firm, the report said, noting that Doud met the firm’s owner Michael Gagan when they both worked for the water replenishment board in 2003.
Gagan has the expertise to advise Doud on financial or CalPERS matters, the report noted, but the description of the work the firm provided was vague. Gagan could not immediately be reached for comment Thursday.
“Invoices for Kindel Gagan contain generic descriptions such as ‘Professional services’ without detail of deliverable hours worked,” the report said. “Therefore, it is not possible to determine the reasonableness, appropriateness, applicability of the work, or the fairness of the cost to the City for the services of Kindel Gagan.”
The Davis Group also had a long-running relationship with Doud, according to the report. She met the firm’s owners, Rick and Joanne Davis, in 2005 when she hired the group to help with her initial campaign for city auditor. They, also, couldn’t be immediately reached Thursday.
The report said Doud has paid the Davis Group a total of $527,073 since 2006 and enlisted its help for her Queen Mary audit in 2019. But investigators could not determine exactly what work they performed in some situations, with generic descriptions such as “strategic issues management.” Moreover, the report said some of the work appears to overlap with the duties of Doud’s communications officer.
The report said Doud isn’t required to follow some city policies for contract oversight because she is an elected official, but in some cases, she failed to follow her own guidelines on payments.
“As an elected official, Doud is not required to comply with City regulations, however, she disregards multiple City regulations, as well as The City Auditor’s Guide to Payments, which was prepared by Doud’s office in 2008,” the report said.
The report offers several recommendations moving forward, including requiring yearly reviews on city regulations and requiring that contracts with city vendors be in place prior to the start of work. The report also recommends periodic audits of the auditor’s contracts and transactions.
Doud’s lawyer said she will “incorporate the report’s recommendations and will immediately apply and incorporate the recommended best practices guidelines to her future work.”
City spokesman Kevin Lee said in a statement that Long Beach will work to ensure its existing administrative regulations are consistent and up to date.
Any major changes to oversight and duties of the city auditor as recommended in the report would require possible changes to the city charter and action by the City Council.
The Los Angeles County District Attorney’s Office has confirmed that it received a complaint related to the whistleblower accusations. It is being reviewed by the office’s Public Integrity Division, but it is not clear whether it is under investigation.