Mismanagement sinks $23 Million on phantom repairs for Queen Mary

Long Beach, CA – Long Beach City Auditor Laura Doud today released her Queen Mary Report to verify that Urban Commons, the previous leaseholder, and operator of the Queen Mary, used the $23 million as agreed upon to fund the 27 urgent and critical repair projects and to determine whether the City of Long Beach (City) provided sufficient oversight of the funds for these projects.

The Long Beach City Auditor’s Office (Office) directed the forensics accounting firm, Hemming Morse, to perform an analysis of financial transactions and activity between Urban Commons and the City. Based on this analysis, the report includes the Office’s conclusions and recommendations.

The key issues of the report were the following:

  • Missing payment information;
  • Excessive subcontractor markups and management fees;
  • Items purchased were not for urgent and critical repair projects;
  • Lack of vetting subcontractors and a competitive bidding process; and
  • Lack of consistency regarding scopes of work and subcontractor invoices.

“We know the City paid more than necessary for some of the projects due in part to the excessive markups and management fee,” said Long Beach City Auditor Laura Doud. “We cannot tell in detail how much or where all the repair money went due to a combination of missing payment information from Urban Commons and subcontractors and the lack of detail in subcontractors’ vague invoices breaking down labor and material costs. We do know that only seven of the 27 repair projects were completed and that a lack of sufficient management oversight contributed to these problems. The City’s funds were at risk because the City used its own cash as well as City issued bonds for the $23 million in upfront funds and ultimately ended up making the bond payment for $2.4 million when it came due last year since revenues expected to fund this payment were not realized.”

The report recommendations focus on how the City needs to ensure lease agreement terms and oversight are aligned with City policies and procedures.

“Moving forward the City needs to fully implement our recommendations to ensure that the issues detailed in this report are not repeated and that any future funds allocated for the Queen Mary are safeguarded and spent according to best practices,” said Long Beach City Auditor Laura Doud.

The complete Long Beach City Auditor’s Queen Mary Report can be viewed here.