JOE NELSON, Staff Writer
Posted: 07/01/2011 12:35:09 PM PDT
San Bernardino International Airport has engaged in questionable practices in regards to its finances, construction management and how it awards developer contracts, according to the annual San Bernardino County Grand Jury report released Thursday.
The civil Grand Jury commissioned the audit of the airport following complaints it received in July 2009 of irregularities occurring there. Among the key findings:
The San Bernardino International Airport Authority, a joint powers authority composed of the county of San Bernardino and the cities of San Bernardino, Colton, Loma Linda and Highland, entered into multiple contracts with Scot Spencer, a convicted felon who has served time in federal prison for bankruptcy fraud and has been banned from the aviation industry.
The U.S. Department of Transportation fined Spencer $1million and banned him from the aviation industry in connection with business he had conducted at San Bernardino International Airport. The fine remains unpaid.
The airport authority fast-tracked and increased the scope of an airport terminal construction project based solely on projections given by the developer, creating a "clear conflict of interest" because increases in project costs equate to increased compensation for the developer.
http://www.redlandsdailyfacts.com/news/ci_18391229
Between January 2006 and January 2011, the cost of the terminal project grew from $22million to more than $100million, and costs continue to escalate.
Airport interim Executive Director Donald Rogers is a founding
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partner of an accounting firm hired to conduct the airport's annual audits and special compliance reviews. On some occasions, the compliance reviews omitted major areas of concern for the airport.
When a nationally recognized airport management company did not respond to a proposal from the airport authority to operate the airport, Rogers negotiated a contract with Spencer.
Under a 25-year agreement, the airport authority guarantees payments of $500,000 a year to Spencer's company, San Bernardino Airport Management LLC, reimbursement of most major operating costs, and the receipt of 50 percent of net operating income. The airport authority continues to absorb all financial risk.
"The evolution of these sole source relationships between (San Bernardino International Airport Authority) and Mr. Spencer, and the growth in the involvement of the companies he manages, raises serious questions," according to the Grand Jury report.
The Grand Jury has recommended airport staff review its contracts with Spencer and make any revisions necessary to protect the Inland Valley Development Agency, which oversees development around the airport, and the airport authority from potential future risk.
It has also recommended that the airport develop comprehensive policies and procedures, especially in regards to its business processes and transactions, within the next year.
In addition, the Grand Jury is recommending the airport rotate financial auditing firms every five years and hire a reputable, independent auditing firm to examine all expenses incurred from the terminal project and other projects.
Reached by telephone Thursday, Spencer, who has led the charge in the development of the airport since 2003, said he was reluctant to comment on the findings because he had not had time to review the report and because the airport authority had yet to respond to the Grand Jury's findings.
"At first blush I'm disappointed that there appears to be quite a few factual errors in the report. I spent a lot of time taking them around the airport, showing them equipment and talking to them in my office," Spencer said. "Opinions are one thing, but these are just black-and-white factual errors."
In other matters, the Grand Jury determined that retirement plans for the Board of Supervisors are excessive when compared to retirement plans of other counties.
One supervisor's retirement benefits, according to the report, exceed $85,000, and more members of the board are enrolled in more retirement plans than supervisors in Riverside, San Diego and Ventura counties. In addition, the car allowance for supervisors is excessive, the Grand Jury said.
The Grand Jury recommended that car allowances for supervisors follow federal guidelines and that county Chief Executive Officer Greg Devereaux continue his efforts to adjust the salary and benefit ratio to be competitive.
Supervisor Neil Derry said he proposed in May 2009 a cut to benefits increases approved by the board in 2007, a proposal the board approved.
The 2007 ordinance boosted vehicle allowances for supervisors and increased the county's contribution to elected officials' retirement plans, among other things.
While Derry's proposal reduced benefits, it did not impact the vehicle allowance perk approved by the board in 2007.
Derry said Thursday that some supervisors, including himself, have large districts with rough terrain that call for the increased vehicle allowances.
"These are things that should be taken into account. Doing a flat comparison between counties is probably not entirely reasonable," Derry said.
- joe.nelson@inlandnewspapers.com, 909-386-3874
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