CITY TREASURY OFFICE STUMBLING AUDIT FLAGS DATED FINANCE OPERATIONS.

Byline: Dan Laidman Staff Writer

Saying Los Angeles' financial operations are ``locked in the '60s and '70s,'' City Controller Laura Chick released an audit Friday that called the Treasurer's Office troubled and neglected.

Despite overseeing $50 billion in cash receipts and disbursements each year and $5 billion in investments, the Treasurer's Office has not received the attention or resources it warrants, Chick said.

``This office needed a spotlight put on it,'' she said. ``The Treasurer's Office was not a priority for the city.''

Unlike previous audits from Chick's office, the report released Friday did not contain allegations of scandal or illegal behavior. Rather, it painted a picture of dysfunction that Chick attributes both to management practices and wider city policies.

While not offering a specific figure, the audit by Palm Desert-based Blue Consulting Inc. said that problems in the Treasurer's Office have kept the agency from earning as much interest income on investments as it could have.

Mayor Antonio Villaraigosa is ``very concerned'' about the issues raised in the audit, said Press Secretary Joe Ramallo, and has asked Treasurer Joya De Foor to prepare a ``corrective action plan'' within 30 days.

De Foor referred questions to the Mayor's Office.

Villaraigosa will ask his newly announced Finance Advisory Cabinet to address the issue at its first meeting Oct. 20, Ramallo said.

The audit credits top management at the agency with trying to reform long-standing problems, but it also blames a stressful working environment for high turnover and low morale.

The department lacks sufficient specially skilled personnel, the audit says, and it has provided minimal training. The report raises concerns about the reliability of the Treasurer's Office cash forecasts for investments, and it notes that projected interest earnings have differed ``significantly'' from actual earnings for the past several years.

The audit also questions the progress being made on implementing computer-based accounting systems.

The flaws should be seen in the wider context of a damaging recent citywide hiring freeze, Chick said, as well as poor communication between departments.

In addition to the Office of the Treasurer, Chick singled out the City Administrative Office and the Personnel Department, as well as former Mayor James Hahn, in a letter she sent Friday to top city officials.

Chick's allegations that they failed to work with the treasurer to solve the problems rankled some in City Hall and drew a strong rebuke from a top official.

``There are several instances in which it's a gross misstatement of the truth of what actually happened,'' said City Administrative Officer Bill Fujioka.

Fujioka said he would have to wait to comment further because the audit differed from an earlier draft and he wanted to read the complete report.

Personnel Department General Manager Margaret Whelan issued a statement saying her agency, the City Administrative Office, and City Council committees have been working to address the problems at the Treasurer's Office. She added that such efforts have been hampered by litigation by Treasurer's Office staffers and by the hiring freeze.

``The Personnel Department is looking forward to completing the reform of the Treasurer's Office working with all concerned,'' she said.

Hahn could not be reached for comment.

Dan Laidman, [phone]

dan.laidman(at)dailynews.com