The series of reported incidents of misconduct in the appropriation and expenditures of public funds for City Council member items continues apace. Government agencies and newspaper reporters are scrutinizing official files to determine the legitimacy of Council grants.

The sins so far discovered include outright embezzlement (which led to the Federal indictment of two Council aides), the hiring of relatives, the falsification of records, the use of recognized organizations as a conduit in transferring funds to previously unnamed groups, the use of fictional organizations to conceal funds to be set aside for secret transfers, and heavy subsidies for groups with unrevealed close ties to Councilmembers, or who make substantial contributions to Councilmembers out of gratitude or reciprocity.

What appears to be the most common offense is the allocation of funds to organizations that do not particularly need the money or are not efficient in carrying out their work. The lines of propriety and legality in these cases are hard to draw. They do not usually lead to criminal prosecution, unless perjury or obstruction of justice is involved. The practice is, however, quite wasteful of tax funds.

It would be difficult, but not impossible, to audit the hundreds of groups that are subsidized by the City Council and by the State Legislature in Albany, where these shameful practices occur on a grander scale than take place at City Hall. The administration of discretionary funds is done by mayoral agencies, and they have occasionally turned down beneficiaries of the Council’s largesse.

There are practical ways to exercise closer oversight over these expenditures. Money saved by scrutiny should be weighed against the expense of supervision. But even if it costs more money to oversee the program than is likely to be stolen or misspent, it is reasonable to check to maintain the integrity of the process. To monitor expenses more carefully is, in a way, locking the barn door after the horse is stolen, but the fact is that more horses are stolen every year, often by the same horse thieves who know how to game the system because they have been doing it so long.
At the same time, we believe that most of the subsidized non-profit groups are totally legitimate, and provide useful services to their clients or members at relatively low cost. The city may be saving here by not providing the service itself. City money is very helpful, not only because you can spend it, but because it assists neighborhood groups seeking recognition and legitimacy with foundations and other grantmakers.

The City Council itself does not send out checks to the agencies it assists; the money comes from the appropriate line agency in the executive branch. It is up to the mayor’s appointees to see to it that the money is properly disbursed. But it is the Council Speaker, on recommendations from the members, who decides who gets the money that the Council puts in the list of city appropriations at the time each June when it approves the annual budget, now close to $60 billion.

One needed reform is the full disclosure of each such appropriation, the amount of money, and the name of the member who proposed it. The state legislature has gone to great lengths to conceal this information, in part because it would show the disparity between what members received, and in part because it would make it easier to identify and investigate the beneficiary organizations and their connections to particular senators and assemblymembers.

Journalists Track Cases

The work in progress of the quest for information was reported in a Daily News article by Frank Lombardi and Greg B. Smith on April 18. It is timely and well-done. The head: “Probers Slog Thru Pile Of Paper In Council’s Cash-Stash Fiasco.” The lede: “Department of Investigation probers are poring through thousands of documents bearing the names of politicians, dollar amounts and a roster of nonprofit groups – some real, some not.”

A thorough, well-researched Times article gives the details on one highly dubious nonprofit with close ties to Councilman Hiram Monserrate. Published on B1 and B4 on April 28, the story by Russ Buettner and Serge F. Kovaleski is headed: “Dysfunction At A Charity That Relies On Council Largess [sic] An Uncertain Mission And Shaky Finances.”
The lede: “Hiram Monserrate, a city councilman from Queens, has supplied more than $400,000 in city funds in recent years to a nonprofit agency that has been run by some of his closest aides and whose financial records have devolved into what its current director calls ‘a mess.’

The organization, Libre, which offers a wide array of programs and services for the Latino community, has not filed a tax return for the past two years. It has never registered as a charity with the state’s attorney general’s office, as required. And its director says unpaid bills and poor record-keeping grew so problematic that he had to all but shutter Libre last year.”

To show that this is a State problem to an even greater extent than it is a City issue, we link to “Cuomo Freezes Albany Pork Contracts” an article by Jacob Gershman on page 4 of the April 30 New York Sun. The story is particularly worth reading because it explores the reasons why some grants fail the smell test.

The lede: “The possibility of widespread fraud in Albany’s pork-barrel spending practices was underscored yesterday by Attorney General Cuomo, who disclosed that his rolling review of legislative handouts to community groups has uncovered hundreds of dubious contracts. Mr. Cuomo, who last year instituted a stricter vetting process for the so-called member items, said yesterday that his office has found problems with almost half of the grants submitted for review.”

Our Suggestion

We recommend that the mayor and the speaker jointly appoint a professional with a financial and social service background to see to it that discretionary items in the city budget are spent for the purposes intended. Expense vouchers would have to be approved by this official, and a small unit assigned to make random checks of service providers to examine their compliance with guidelines for performance and record keeping. The guidelines should be approved by the mayor and the speaker, posted on the internet, and a copy delivered to each group with every check received from the city.

For example, this official would not inquire why Councilmember A has allocated discretionary funds to Little League A rather than Little League B, also in his district. For that decision, the Councilmember must answer to the parents and sponsors of League B, as well as Leagues C, D and E, if they exist.

S/he would, however, check whether League A is spending the city money for bats, balls, uniforms or other necessities for playing baseball, rather than, say, renting a ball field or clubhouse from Councilmember A, his kith or kin, or hiring a buddy as a trainer or league official. It is true that a corrupt league could use the city money legitimately and use the private funds they raise from local businesses for inappropriate expenditures, so one would want to see that no League funds, from whatever source derived, are misspent.

In our judgment, it is not unreasonable for Councilmembers to be allowed to allocate relatively small sums of money to legitimate causes in their districts. It is a form of micro-government, at the grass-roots level, rewarding good programs which a citywide administration would be unlikely to bother with. If the people elect a man or woman to represent them on the City Council, and vote on a $60 billion budget, that official should have the authority to encourage wothwhile projects by providing some financial assistance so the groups can carry out their work.
When I was a City Councilmember (1974-83), I never received any discretionary funds because 1) I was in the Liberal Party and the money was all given out politically. 2) Much less was being dispensed to organizations at that time.
By 2008, the yearly cost for each member’s salary, staff and expenses has multiplied 20-fold, and now approximates half a million dollars (not counting central Council staff under the speaker). A fraction of that half million could be set aside for worthy local groups, some of which might serve as laboratories or incubators for ideas and programs that might later be applied more widely.

First, however, we must get rid of the fraud and waste, the Enronian use of cryptograms for budget accounts, the secret transfers of funds, the conflicts of interest in the employment of members’ staff and relatives, and the entire kit and caboodle of shabby practices that discredit the entire process.

If the Council cannot clean up its act, it should not be permitted to continue to act as a dispensary of the people’s funds to political favorites. Because the Council makes local laws and approves the budget, some members believe they can weather the storm and conduct business as usual. If they have ambitions for higher office, they are likely to be more sensitive to issues involving integrity. Many of them, however, are going nowhere.

Hope remains that recent events and the interest of the media will stimulate the desire for openness and reform, or at least make it clear to the members that conformity to higher standards for spending tax dollars is desirable.
We will watch with interest what the Council does when it is challenged by integrity and due process. Something’s gotta give.

StarQuest@NYCivic.org