Anchorage audit finds management set ‘culture of excess’ in Eagle River Parks and Rec division

A recent Anchorage internal audit of city spending at the Eagle River/Chugiak Parks and Recreation Division found what the report describes as a “culture of excess” set by the division’s management, prompting a human resources investigation.

The division’s manager, who is on administrative leave, said in an interview Friday that she disagrees with most of the audit’s findings.

Questionable spending included more than $12,300 for a 2020 Halloween party, “Boo at the Beach,” that didn’t actually happen due to COVID-19, as well as spending on supplies for canceled summer camps, the audit said.

At one point, auditors opened a closet where staff thought no division items were stored, to discover swim toys and games including a “Chicken Fight Pool Game,” a “Jumbo Inflatable Derby Duck” and “Shark Tail Blankets.” Staff didn’t know why the toys were bought or what they were for, according to the audit.

Multiple purchases of decor and supplies for the Beach Lake Lodge also seemed excessive, according to the audit, which was published June 10.

“By and large, after reviewing the Division’s P-Card purchases and physically visiting the Division’s facilities, it appears that the tone set by the Division’s management is a culture of excess,” the audit said.

The audit details numerous issues within the department, including questionable purchases and incomplete or inaccurate records of transactions.

Most of the questionable purchases were made by Karen Richards, the division’s manager.

Richards, who said she has managed the division since 2012, is on administrative leave and her city-issued charge card has been canceled.

Richards said she takes issue with most of the audit’s findings and said she was not given the opportunity during the auditing process to address questions or concerns, or explain findings.

“I have a huge problem with that,” she said.

Others in the division made questionable purchases as well, said Mike Chadwick, Internal Audit Department director.

“The thing that struck us the most was the number of purchases that were made — not that they were all necessarily bad purchases — and the unplanned nature of the purchases,” Chadwick said.

Inside the Eagle River Parks and Recreation Division’s garage on Friday, bins, boxes and items such as Halloween decorations spilled from a storage closet into the hallway, lining either side. Cans of expired paint were piled in an area with the overflow of items, blocking an exit. In the division’s reception area, cardboard boxes and supplies were stacked against a wall.

The audit examined procurement card, or P-card, purchases made by department personnel between January 2020 and February 2021. A P-card is a charge card, similar to a credit card, given to some municipality employees. Employees then can purchase supplies and services for city operations.

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The issues came to light when auditors conducting the annual review of the municipality’s procurement card purchases noticed someone had spent thousands of dollars on supplies for events that had been canceled due to the pandemic, said Scott Lee, principal auditor with the city’s Internal Audit Department.

It prompted city auditors to take a closer look, he said.

“It’s alarming, to say the least,” Anchorage Assembly member Jamie Allard said of the audit during a June Assembly meeting.

Auditors found purchased goods stored in a disarray between multiple rooms, hallways, closets, a garage, horse stables and other areas, without being catalogued. Previously purchased supplies had not been inventoried; inventories are necessary to determine what supplies are needed and to ensure items are not missing, the audit said.

Auditors were told that purchased items appeared unexpectedly without a “clearly communicated purpose,” the audit said.

Richards said she had in place a five-year plan to build out parks and recreation programs and activities in Eagle River. Many of the items she purchased were for that purpose, she said. She purchased items for summer camps with the intent to use them in another program if the camps were canceled.

“I feel that I’ve done a cost savings to the municipality in the years that I’ve been there, so this is hurtful to me,” she said. She said she has worked for the city for about 27 years.

Proper storage has been an issue for the division since the 2018 earthquake, she said. The pandemic made the situation worse because teams could not work together in person to better organize, and the division’s plan to build a new warm storage facility was delayed by a year, she said.

The audit said the issues in the division point to little accountability for spending. The system allowed personnel with P-cards, such as Richards, to review and approve their own purchase transactions, according to the audit, and card transactions were also approved by subordinates, it said.

Allard, who represents Chugiak/Eagle River, called for further investigation.

“Sometimes when audits reveal certain things, it leads into other concerns of fraud, waste and abuse, and those issues have to be addressed too,” Allard, who is on the city’s audit committee, said Thursday in an interview.

“Where there’s smoke, there’s fire,” she said. “So that’s a concern — it’s like the tip of the iceberg.”

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A formal investigation by human resources was initiated on June 14, Parks and Recreation Department Director Josh Durand told the city’s audit committee at a June 30 meeting.

“I do think the outcome of the HR investigation will be influential as it relates to the cure,” he said.

Still, the department has taken some actions already, he said.

After the “offending” P-card was canceled, “all questionable and recently procured items have been returned,” Durand said.

Other fixes include cataloguing the division’s supplies and changing the division’s P-card policy so that the division manager no longer has a P-card and that employees do the purchasing, he said.

Durand said he was not aware of the issue before the audit. The Eagle River division spent $67,000 on operating supplies in 2020, leaving $16,000 on the table, which seemed about right during the pandemic, he said.

David Spiess, deputy purchasing officer for the city, said he was “totally shocked” by the revelations in the audit.

“As long as I am sitting in this chair as a purchasing officer, that person will never get a P-card again as far as I am concerned,” Spiess told the committee.

Crystal Kennedy, another Assembly member representing Chugiak/Eagle River, said the audit is a red flag that begs further questions.

“If it was that bad for something as simple as P-cards, what else was probably not handled properly?” Kennedy said. “That’s my bigger question. What else is out there that we need to get to the bottom of that has created this culture of excess?”

Daily News photojournalist Loren Holmes contributed to this report.