AUDIT FINDS EIDC LAVISH IN SPENDING.

Byline: Beth Barrett Staff Writer

In a sweeping indictment, City Controller Laura Chick reported Thursday that public officials failed to provide oversight of the Entertainment Industry Development Corp. as it spent $1.3 million on entertainment activities and $500,000 on consultants in a two-year period.

Chick's audit found that the EIDC and its ousted head, Cody Cluff, spent $1.3 million of the controversial agency's funds on tickets to sporting events and concerts, gifts, cigars, private club memberships, limo service and a $22,200 athletic sponsorship for Covina High School, attended by at least one of Cluff's children.

In addition, the EIDC hired consultants costing more than $500,000 while running up steep deficits.

The first comprehensive look at the EIDC's books found little documentation to justify how the funds generated by permits issued to film movies and television productions in public areas were used.

``The list took my breath way,'' Chick said. ``I found it stunning in a negative way. These do not seem reasonable or appropriate.''

The EIDC, started in 1995 by merging city and county agencies, is the target of a district attorney's criminal investigation into possible misuse of public funds. Most city and county elected officials sit on its board and were supposed to provide oversight into the EIDC's operations.

The audit, performed by Thompson, Cobb, Bazilio & Associates, showed there was ``enough blame to go around here,'' Chick said.

She said the EIDC's contract needs to be renegotiated to safeguard the city, as well as the film industry. Since 1998 the industry has not automatically been reimbursed when companies overpaid for city services.

``We haven't been asking any of the right questions in all the years since EIDC was created in terms of watching the dollars go back and forth.''

The audit faults the city administrative officer - formerly Keith Comrie, now the EIDC's special consultant, and currently Bill Fujioka - saying that person is the EIDC's contract administrator. And Chick criticized her own office for failing to notify city departments of EIDC money owed them.

Comrie and Fujioka both said that as city administrative officer they only monitored the EIDC's performance, not the fiscal accounts, which Comrie said was the controller's responsibility. The auditors said the EIDC submitted recent budgets to the city that failed to detail expenditure plans.

The auditors said that while the EIDC, a nonprofit corporation, did streamline the issuance of permits for location filming, it ignored its city contract obligations.

``EIDC's operations, particularly its fiscal operations, were conducted like a private business that had no public accountability,'' the audit concluded.

Councilwoman Wendy Greuel, an EIDC board member who worked in the entertainment industry, said the audit underscores the need to renegotiate the contract.

``(Location managers) don't make decisions on gift-giving, they make it on the bottom line, and the cost of doing business and the ease of doing business,'' Greuel said. ``From the wine tour and yoga to the cigars and limousine service and the memberships highlight there was no expenditure policy.''

County investigators have scrutinized hundreds of thousands of dollars in political contributions the EIDC made to city and county officials, as well as $10,000 contributed to help the Pittsburgh Film Office's fund-raising efforts as part of a criminal investigation into alleged misuse of public funds. EIDC attorneys claim the entity is a private, nonprofit group.

Mark Werksman, Cluff's lawyer, called the audit ``an ambush.''

He said Cluff didn't have enough opportunity to explain the questioned expenditures, charging that the audit's release was political.

``They drew faulty conclusions from wildly inaccurate assumptions about how things were done or should have been done,'' Werksman said.

Mayor James Hahn's spokeswoman Julie Wong said the mayor, who sits on the EIDC's executive committee, believes the agency's new management is headed in the right direction but he wants all elected officials removed from the board, with the city represented by staffers.

``The EIDC has taken a number of steps toward the kind of reform suggested by the controller's audit,'' Wong said.

City Attorney Rocky Delgadillo said lawyers have taken steps to renegotiate the EIDC contract.

``We need to take steps that serve the industry, protect the city's interest and eliminate the needless, extravagant expenditures by EIDC personnel,'' Delgadillo said.

The auditors said that between July 1, 2000, and June 30, 2002, much of the nearly $1.3 million in entertainment-related expenditures ``appear abusive to the prudent person,'' either in the amount or because of a questionable business purpose.

Topping the list was $357,743 for sporting events and concerts; $8,312 for flowers and specialty food; $24,840 for gifts, cigars and liquor; and more than $57,000 for dues and memberships.

Political contributions topped $82,000, while meals and drinks for business meetings totaled over $91,000. There was a $435 bill for a ``wine tour and yoga.''

The auditors said the EIDC paid $501,748 for consultants in 2001 and 2002, but that there was no documentary support justifying the need for them. ``Nor did it show how the consultants were evaluated and selected.''

The EIDC ran a deficit despite a 1998 amendment that allowed it to keep any overpayments from production companies that were not expressly claimed in writing. By June 2001, the unclaimed deposits amounted to $826,067.

The agency charged film production companies a $450 ``application coordination fee'' for each film permit, but added additional fees for ``compliance monitoring,'' and notifying neighborhoods. The auditors said the EIDC might not have had the contractual authority to impose those fees.

Comrie said the controller's audit is based on ``quite old'' numbers, and that a series of fiscal steps taken by the new management - freezing hiring and expenses - has allowed the corporation to pay most of its bills, and to have about $2.7 million in the bank.

EIDC AUDIT HIGHLIGHTS

Here is a sampling of EIDC expenses that were deemed ``questionable'' or ``unreasonable'' in an audit released Thursday by City Controller Laura Chick:

Concerts/sporting events $357,743

Contributions/donations $152,869

Sundance Film Festival $138,729

Business meeting meals, drinks $91,207

Political contributions $82,700

AICP Show $69,024

Independent Film Festival $60,090

Grammy Awards $50,300

Cannes Film Festival $37,836

Gifts, cigars, liquor $24,840

Limousine service $22,253

Covina High School athletic sponsorship $22,200

Pittsburgh Film Office $10,048

Wine tour and yoga $435

SOURCE: City Controller's Office

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EIDC AUDIT HIGHLIGHTS (see text)