L.A. Unified Finds Millions Gone to Waste

Revamping an inefficient purchasing system could save the Los Angeles schools up to $75 million a year, and tightening lax payroll practices could save millions more, the district’s top auditor told members of the Board of Education on Thursday.

The 710,000-student district has seven different systems for procuring about $1 billion annually in supplies and significant waste occurs in unnecessary warehousing, said Don Mullinax, director of internal audits and special investigations.

“If a principal wants one red pen, you don’t have to open cases of pens to find one red one,� Mullinax said. “These are some of the things that are going on in this district.�

At the same time, however, Mullinax toned down an earlier comment that had seemed to suggest the district is paying people who don’t exist.

In a confidential memo to chief operating officer Howard Miller that later leaked to the media, Mullinax had said the district’s antiquated payroll system was carrying “ghost� employees.

But Thursday, he told the board’s budget, finance, audit and technology committee that he was referring not to nonexistent employees, but to people who sign in for hours they don’t actually work.

“If they don’t come to work and they get paid eight hours, they are a ghost,� he said.

The district’s payroll system is based on “paper, pen and sometimes whiteout,� he said, showing the board members 66 audits that he said all found abuse of the sign-in, sign-out system.

He said four of those cases would soon be referred to the Los Angeles County district attorney for prosecution.

Mullinax said the district must develop a modern computer system to track employee time.

In the meantime, though, more strict enforcement is also important.

“We’ve got to start hammering some of these people,� he said.

On the procurement front, Mullinax recommended creating a chief procurement position to modernize the system and make it uniform.

A study by Deloitte Consulting concluded that the district could save 5% to 15% on goods and 3% to 7% on supplies, he said, which would translate into savings of $40 million to $75 million a year.

Although the district has been searching for a property on which to build a new warehouse, Mullinax suggested that it might be more useful to cut back existing warehouse space.

Many business and government agencies now buy their equipment through direct ordering systems that eliminate the need for extensive storage, he noted.

“This is what we want,� said board member Caprice Young. “All these warehouses you’re going to get rid of, are you going to see if they would make good primary centers?�

Mullinax also unveiled a draft of a new district ethics policy. It would consolidate scattered rules on conflict of interest, nepotism and general ethics and increase enforcement of violations, he said.

Currently, he said, there is a perception that policies can be violated with impunity.

Mullinax said he has already been authorized to hire an ethics officer. He recommended setting up an ethics commission to hear disputes.

The policy would greatly expand the list of district employees required to file statements of economic interest. Currently only 65 employees are required to do so.

Mullinax said he has asked an ethicist to review the proposal and will bring it back to the board with revisions in February.