AUDIT LISTS ABUSES OF MTA FUND : ACCOUNT USED TO FINANCE PARTIES, FAULTY LIGHTS.

Byline: Chip Jacobs Daily News Staff Writer

A $16 million MTA program to soften subway-construction impacts in Hollywood had such ``inadequate'' management and oversight that transit officials could not determine whether some of the work was completed, a recent audit concludes.

While they didn't unearth any fraud, auditors with the MTA's Inspector General's Office concluded there were no formal policies to effectively regulate the program.

Critics have charged the Hollywood Construction Impact Program bankrolled a number of frivolous expenditures, including $65,350 on a ``Santa's village,'' $25,000 on a museum's cocktail party and $90,000 on street lights that didn't work.

The audit was ordered by Metropolitan Transportation Authority board members after a Daily News story in September outlined some of the charges financed by the mitigation effort.

Established in 1992, the program was designed to help area merchants, landowners and residents survive four years of Metro Rail tunneling underneath Hollywood Boulevard. So far, $3.8 million has been spent.

Hollywood Councilwoman Jackie Goldberg said the audit was on target, and she is ``cautiously optimistic'' the MTA can retool how it offsets Metro Rail work.

``It confirms everything exactly what I've been complaining about, that they were charging everything in the world to (the program) and they were not . . . mitigating anything,'' Goldberg said.

MTA officials acknowledged problems executing their mitigation effort, but defended its goals.

``There is nothing inherently wrong with the program,'' said Rae James, the MTA's executive officer for communications. ``We just have to tighten our administrative procedures before something happens.''

The audit was distributed to board members July 17. MTA Inspector General Arthur Sinai did not return phone calls.

Auditors concluded that the ``MTA has no formal policies and/or procedures regarding the use of HCIP funds.''

They also said 10 of the 12 payments they reviewed lacked clearly written invoices, blaming much of that problem on ``inadequate monitoring'' of contractors by MTA public affairs officials overseeing the program.

For example, the audit states the MTA paid a contractor working on the agency's Dec. 1994 Christmas event for a number of questionable expenses, among them $13,100 for unexplained ``rush'' and ``contingency'' charges and $10,000 for a pinata party.

While they said they found no evidence of fraudulent billings, auditors nonetheless said ``there was no documentation showing that any of the items billed were actually received.''

The MTA board, meanwhile, is slated to vote on a revamped plan next month once Goldberg and county Supervisor Zev Yaroslavsky finish adding their input. Yaroslavsky did not return phone calls.

Under the revision, the MTA wants to give the city's Community Redevelopment Agency control over a $7 million chunk of money for commercial loans, storefront face lifts, improved sidewalks and other repairs. James said transit officials have a ``comfort zone'' with the CRA because of their economic development experience in Hollywood.

Besides special events, the mitigation effort to date has subsidized parking, worksite security, open-for-business signs, street cleaning and various promotions.

Yet it also paid $300,000 for a short-lived trolley program, $147,000 to advertise the subway and $35,000 for water bottles, headbands and other items for the Los Angeles Marathon.

Subway work has stirred community resentment after construction mishaps caused Hollywood Boulevard to subside and a giant sinkhole to open. Property owners, in turn, have sued the agency in a class-action lawsuit, with claims exceeding $1 billion.

Robert Nudelman said he and other area activists are skeptical even redirected mitigation money and the $13.2 million behind it will make a difference.

``People see it as controlled by special interests,'' Nudelman said. ``It can't get any worse at this point.''