LAKE ELSINORE —— An auditing firm's final report on expense reimbursements to city staff and council members highlights a series of flaws in the city's oversight of credit cards and spending on travel, education and an employee health program.

City officials released the audit Thursday for review by city council members in anticipation of Tuesday's council meeting and possible action on the report's recommendations.

In a review of the auditor's report by Mayor Bob Magee and Councilman Thomas Buckley, who made up a subcommittee tasked with working with the auditor, they criticized the city's management and the way it handled several employee benefits.

"The results of the audit clearly illustrate that there have been significant lapses in both management and oversight of various benefit programs in the past," they wrote.

Magee said Thursday that the audit shows that city policies and procedures work, "when they are enforced and it calls out a need for additional policies and additional council oversight."

Based on the audit, Magee and Buckley also made a series of recommendations for council action, including:

• Cancelling a health and wellness program benefitting 14 management level employees.

• Making sure that city employees who drive city vehicles or receive an automobile allowance do not also receive mileage reimbursements.

• Creating a new city travel policy that will require strict documentation and justification for all expenses incurred.

• Establishing a city credit card credit limit of $2,500, with employees required to present receipts and the business purpose of all expenditures.

• Ending the practice of the city paying for some services or political publications like the "Limbaugh Letter" and "other expenses clearly not related to city business."

The health-and-wellness benefit that Magee and Buckley want to end was first authorized in the mid-1980s. The benefit enabled five top managers to bill the city $100 a month for limited types of health expenses not covered by their regular city-financed health coverage. Over the years, however, the program grew to cover 14 management level employees and for greater amounts of money: $150 for senior management and $75 for mid-level management.

The original council resolution that created the benefit stipulated that any changes to it could only come through a council-approved amendment. There's no record of a council amendment, but the expansion of the benefit continued. Employees were allowed to accrue benefit amounts they did not spend and cash out the balance when they left their city job. A few employees even began using the benefit to pay for health costs for family members.

After sampling expenses incurred by staff members and council members on city credit cards, Irvine-based Conrad and Associates LLC's audit report noted several cases of employees failing to note the business purpose of meals or the person they were treating at city expense.

In other cases, employees purchased merchandise without documenting the business purpose or the types of goods received —— for example, a $698 purchase from the Rocky Mountain Chocolate Factory.

The auditor also noted flaws in the way travel expenses were incurred and documented. It reported instances of employees staying at hotels at the city's expense for more days than required to complete their city business. A $1,256 five-day stay at the One Washington Circle Hotel in the nation's capital for example, should have only been for four days, the report stated. In other cases, employees failed to document the business purpose of the trip.

The auditor also questioned some employees putting meals on their credit cards while traveling on city business, and then receiving per-diem payments for the same days. Per-diem payments are intended to pay for employees' day-to-day travel expenses for meals and other necessities.

Another issue addressed in the audit report was the reimbursement of some employees for education expenses that were not directly related to their jobs, such as courses on world religious traditions, skills for lifelong learning, and "Beyond feelings —— a guide to critical thinking."

After receiving and reviewing a draft version of the report in January, Magee and Buckley had written a memorandum to council members in which they reported having asked the auditing firm to write a cover letter as part of its final report, "highlighting the fact that the audit found no evidence of any illegal activity."

In the draft version of the report, there was no such statement. However, in the final version of the report, the auditor writes:

"We noted no illegal activities during the course of our testwork. In addition, we did not identify any instances of fraud during the course of our testwork."

An expert on governmental ethics said Thursday that asking the auditor to make such a statement is bad form, at best.

"It could very well be that there wasn't anything illegal, but it looks bad that the mayor or the councilman may have tried to influence the auditor," said Steve Levin, political reform project manager with Los Angeles-based Center for Governmental Studies. "The very nature of an audit is to produce an arms-length, impartial analysis of the city's financial activities."

Both Magee and Buckley, who were the council members who had pushed for the audit starting last spring, denied that anything improper was intended or occurred.

"We did not attempt in any way, shape or form to influence the outcome of the audit," Buckley said Thursday. And, he added, that is shown by the fact that the draft version is essentially the same as the final version of the audit.

"These benefits programs were so poorly managed and there was such lax oversight and lax documentation that simply proving anything was illegal is going to be almost impossible," Buckley said. "That is the core references to the word 'illegal' —— there is a difference between illegal and unethical and wrong."

Magee agreed with Buckley.

"The subcommittee simply asked for clarification; nothing in the body of the report nor in any of the recommendations was modified or changed," he said.

In Magee's and Buckley's report to the council they ask for them to approve their recommendations, saying:

"We as a city now have the opportunity to clear away certain public perceptions as to the mismanagement of taxpayer dollars."

Contact staff writer William Finn Bennett at (951) 676-4315, Ext. 2624, or wbennett@californian.com.