'We're the watchdogs': Oversight and audit committee looks to hold City Hall accountable

El Paso Times
Adam Powell, El Paso Times
June 16, 2023

Posted on a wall at the entrance of city Rep. Brian Kennedy's office are two sheets of paper with the words: "Govern Fearlessly" and "Govern Fairly."

It is the West Side representative's mantra as an El Paso City Council member and, perhaps more importantly, as chairman of the city's Financial Oversight and Audit Committee.

"This is more of a job than I thought it was when I was appointed," Kennedy said, "but I think it is critical for the city. We're the watchdogs."

The oversight committee, a largely unknown City Hall committee until recently, was cast into the public spotlight last month after an internal auditor's report showed "excessive" fuel purchases on city taxpayer-funded gas cards.

Aside from Kennedy, the oversight committee includes Reps. Alexsandra Annello, Art Fierro and Joe Molinar. The panel kicked off its work by investigating how fellow representatives and the mayor are spending taxpayer money on fuel.

The fuel card audit showed that East-Central city Rep. Cassandra Hernandez and former East-Valley city Rep. Claudia Rodriguez accounted for 63% of the fuel purchased by the mayor and eight-member City Council last year.

The report flagged questionable purchases, including multiple purchases on consecutive days, purchases made in other cities and purchases potentially made by someone other than the cardholder.

The ongoing investigation into fuel card usage is only the beginning of the review of city spending, Kennedy said. The committee and Internal Auditor Edmundo Calderon are reviewing procurement card (p-card) expenditures, travel expenses and city 380 tax abatement agreements.

"Our job goes well beyond gas cards," Kennedy said. "It's a pretty big task. All four members of FOAC (financial oversight and audit committee) are super-committed. I think that there is a commitment from every member on the committee to do everything we can to make sure money's being spent right."

Preventing a spending 'scam'

For Kennedy, the key function of the financial and audit committee is "to be a shield so the internal auditor can do his job, keep people off his back and let him do his job."

"I know that sounds almost simplistic," Kennedy explained, "but his job as internal auditor is to make sure there are good systems in place, that systems are being followed and people aren't trying to scam the system."

Under normal circumstances, Calderon and his office conduct regular reviews on a number of city functions, from the hotel tax and municipal courts to Sun Metro and even emergency response funds, by reviewing a sample of expenditures.

If nothing is found in the sample reviews, the audit typically stops there, Kennedy said. If there are any problems discovered, then the auditor will begin digging a little deeper. If during that closer look he finds a serious problem, a forensic audit could be initiated.

In every case, Calderon presents his findings to financial oversight and audit committee members who are then tasked with deciding an appropriate response and presenting their recommendations to the full City Council.

"The FOAC (financial oversight and audit committee) doesn't do anything that doesn't go to City Council," Kennedy said. "They're not decision-makers for the city. Any decisions that have to be made on policies for the city go directly to the full City Council."

Anonymous tip led to fuel card audit

The question of how council members were using their city-issued fuel cards came before Calderon and the financial oversight and audit committee through an unconventional avenue, Kennedy said. An anonymous tip was received via the city's employee hotline.

"Employees know when there's a problem," Kennedy said, adding that someone had left a tip that Rodriguez was using her gas card for her campaign. "That's what started the whole gas card search, was a tip."

Calderon pulled 10% of gas card transactions and "had questions," Kennedy said, so he began looking at all related expenditures and found "additional issues."

"At that time, it turned into a forensic audit," Kennedy said.

But among the first things discovered when the auditor's office began looking at the purchases was the realization that there were "virtually no rules" governing the use of gas cards.

"Absent written rules, it's like, here's a card and we're going to trust your integrity and common sense," Kennedy said. "And those things are going to change."

When Calderon presented his findings to the council on May 11, he recommended that the city adopt a vehicle allowance, rather than a fuel card, as a way to stop excessive spending in the future.

But Kennedy is opposed to council members receiving a fuel allowance.

"I'm not for a stipend, no matter what," Kennedy said. "I think when you got elected, you knew you were going to go to public events, you knew the pay, you knew the job."

And while the financial oversight and audit committee can recommend policy changes, it lacks the power to punish purported offenders.

However, Kennedy noted that the city could ultimately opt to seek criminal charges.

"That's in somebody else's hands besides ours," Kennedy said. "But we will deliver a forensic audit to the police department. It will have a backup with every single transaction."

It will then be up to the EL Paso Police Department to present its case to the district attorney for prosecution.

Kennedy said the excessive spending may also be within the jurisdiction of state law governing how elected officials and government employees conduct business.

Per state penal code, under the Abuse of Official Capacity heading (section 39.02), any "public servant commits an offense if, with intent to obtain a benefit or with intent to harm or defraud another, he intentionally or knowingly ... misuses government property, services, personnel, or any other thing of value to the government that has come into the public servant's possession by virtue of the public servant's office or employment."

The penal code states that it is a state jail felony if the misuse is over $2,500 but less than $30,000.

Hernandez spent nearly $6,700 on fuel last year, according to the audit. She denies violating any city policy, but has since voluntarily paid back the city. Rodriguez, who was defeated in her reelection bid last year, spent nearly $5,300. She has said she would pay back the funds if it could be shown that she violated any rule.

"The whole question is, did you get that because you were in office, number one, and did you get a personal benefit, number two," said Kennedy, a lawyer by trade. "We're going to tighten up all the rules on expenditures, but there is a state law that ultimately addresses this."

Additionally, Kennedy noted, the U.S. Internal Revenue Service quantifies any city money spent on a gas card as a business reimbursement. Without proper documentation, which Calderon reported was lacking in many of the transactions he reviewed, those funds could be considered personal income and therefore taxable.

"So, there is IRS interest in this," Kennedy said.

Still, Kennedy said the committee's work is focused less on punishing bad actors and more on ensuring city processes are being followed properly.

Of particular concern, he said, is the notion that someone may have attempted to intimidate or influence Calderon during the course of his audit. When Calderon presented his findings to the City Council, Mayor Oscar Leeser asked him directly if someone had tried to influence his office — Calderon opted not to answer, but Leeser said he already knew the answer before he asked.

The mayor did not identify who may have attempted to influence the auditor.

Kennedy said Calderon informed him that it was not one of the four members of the financial oversight and audit committee.

"I don't believe (the committee) is as worried about actions against any individual as much as we are about fixing the process," Kennedy said. "My biggest concern right now is the concern that somebody tried to put their thumb on the scale and influence the auditor or intimidate the auditor."

'Aggressive oversight'

The most recent audit reviewed fuel card and p-card purchases for 2022. A total of 342 fuel card transactions were reviewed totaling just over $19,000 for the mayor and council members. A separate review is underway examining 2,309 p-card transactions totaling $543,571.61 by the mayor, city manager and council members.

But Calderon and the committee are already reviewing p-card expenditures — as well as gas card expenditures — from prior years.

"The numbers on the purchase card ... there's more activity on the p-cards than there was on the gas cards," Kennedy said. "A lot of it is valid transactions and there's good, valid reasons to spend it."

Among the findings of the review, which will be presented in full soon, Calderon noticed that Rodriguez made multiple purchases for just under $1,000, sometimes on the same day and in the same store, allowing her to avoid getting preapproval for the purchases.

Additionally, every council member receives $10,000 in discretionary funds, which Kennedy said the committee is also looking into and already finding "concerning data."

Also on the agenda is an examination of city 380 Agreements, tax abatements extended to businesses in exchange for spending a certain amount on construction and hiring a certain number of employees.

"Hopefully, it will be that everybody is doing what they're supposed to do," Kennedy said. "But we'll know now because we checked it."

"We're now just going back to make sure everybody kept their word on what they did," he added.

And while Calderon continues to dig, Kennedy said his committee will be on hand to support him from beginning to end.

"If it's city money and it's being spent, it's his job to make sure it's being spent appropriately," Kennedy said. "I think that we are (providing) aggressive oversight in wanting to make sure that everything is looked at, every tip is run to ground, and that it's done in a way where we're not involved in it, but we want to see the results and then we present the results to City Council."