The chief executive and staff of Orange County’s fledgling green power agency repeatedly circumvented key procurement policies without sufficient oversight and improperly issued $1.8 million in marketing and financial services contracts, according to a blistering state audit released Tuesday, Feb. 28.
Auditors also determined the Orange County Power Authority is unable to demonstrate that those contracts are in the best interest of its customers.
“Further, the pattern of contracting practices we identified at OCPA that were neither competitive nor accountable to the board’s oversight poses a risk to the organization,” auditors said in the 43-page report.
OCPA officials said in a statement Tuesday they respect the role of the state’s auditors, but believe they didn’t fully comprehend the intricacies of contracts.
“The auditor asserts that criticisms regarding OCPA not sharing certain details of power purchase agreements arise from requesters’ misunderstandings about the confidentiality of the agreements’ terms,” the statement says. “OCPA takes this and all audits seriously and sees them as a resource for OCPA and our board of directors as we strive for continued improvement.
“We are committed to working with our board of directors on an improvement plan that will include consideration of the recommendations contained in the state audit.”
Auditors, who reviewed a dozen OCPA contracts, believe the problems uncovered with the agency’s procurement procedures may be widespread.
The OCPA launched as a green alternative to Southern California Edison nearly a year ago, with the city of Irvine spearheading its creation. Fullerton, Huntington Beach and Buena Park also were early joiners of the county’s first community choice energy program.
However, since its inception, the ratepayer-funded OCPA has been riddled with allegations of mismanagement.
In December, the Orange County Board of Supervisors canceled its contract with the agency for service to the county’s unincorporated areas.
That decision followed three independent audits — including one from an Orange County grand jury — raising questions about OCPA’s management, public communications and pricing strategies.
Shortly after its formation, OCPA established procurement policies that it later circumvented and violated, according to auditors.
In January 2021, OCPA’s board adopted procurement procedures and established parameters for Chief Executive Officer Brian Probolsky’s authority to execute, amend and alter contracts.
No bid contracts issued
According to OCPA policies, contracts totaling more than $125,000 per year require board approval and must undergo a formal bidding process that includes requests for proposals and the submission of qualifications from bidders. Additionally, proposals must be subjected to a set of established criteria and a scoring system.
Auditors identified several instances in which OCPA’s execution and amendment of marketing services contracts violated those policies and skirted the board’s oversight.
For example, in March 2021, OCPA issued a request for qualifications for a marketing and communications services contract totaling more than $125,000, according to the audit report.
OCPA’s chief financial officer told auditors that OCPA received seven proposals, which should have been evaluated according to the power agency’s criteria and scoring system.
According to Probolsky, he and another OCPA staff member — who were the only two employees at the time — evaluated the proposals before making a selection, auditors said.
CEO can’t provide evidence
“Nearly a year later, the chief executive officer asserted to the board that OCPA had reviewed and ranked these seven proposals,” says the report. “However, the chief executive officer could not provide any documentation of this review nor the proposals’ relative ranks.”
After selecting the winning proposal, OCPA further circumvented the requirements of its procurement policy by splitting the proposal into multiple contracts.
“By executing three separate contracts, OCPA also avoided the policy requirement … that it obtain its board’s approval for all contracts of more than $125,000 before their final execution,” the report says.
Furthermore, Probolsky amended two of the contracts in October 2021, extending their terms by an additional eight months and more than doubling the maximum amount of each from $50,000 to $125,000, according to auditors.
“The chief executive officer said that he was unsure whether he had reported the two amended contracts to the board, and our review of minutes and video recordings from board meetings held during that time found no evidence that he did so publicly,” says the report.
The audit also found that, in March 2022, Probolsky requested that the OCPA board approve new contracts with the same three marketing contractors for a combined value of nearly $1 million, but apparently did not solicit competitive bids.
“As we described previously, OCPA could not provide us with evidence of the selection process that the chief executive officer described,” the audit says.
More recently, the OCPA board in December 2022 approved yet another contract amendment that increased its maximum cost to about $230,000 without competitive bidding, the report states
Again, the audit states, “OCPA could not provide us with evidence of the selection process that the chief executive officer described.”
OCPA officials said its board reviewed and approved the majority of the contracts during multiple meetings.
Irvine mulling what to do
A majority of the Irvine City Council voted in December to remain with OCPA, but members were expected to discuss that vote during a meeting Tuesday night.
City Manager Oliver Chi has estimated it would cost Irvine about $145 million to withdraw from the OCPA, but noted the city should be able to recover money through the resale of power contracts.
Irvine Councilmember Kathleen Treseder, who currently sits on the OCPA board and was contacted before Tuesday’s meeting, said she is in leaning toward staying with the agency.
“The audit did place responsibility for some of the concerns on the board not providing close enough oversight of the agency,” she said, describing the report as “valid” and “evidence-based. I’m trying to keep a close eye on all the information that I can get about the agency’s operations and financials and I’m hoping that my other board colleagues will as well.”
Fullerton Mayor Fred Jung, who currently serves as chair of the OCPA board, described the state audit as “the most thorough” to date.
The board is taking a renewed and aggressive approach to implementing the auditors’ recommendations, Jung said. He added that some of the recommendations, including making sure the OCPA’s Citizens Advisory Commission has an increased role in directing the agency, as well as the hiring of a communications director, have already been implemented.
“The state audit, the county audit, and also the grand jury report are all good testaments to how we as an agency need to be moving forward,” Jung said.
OCPA board members plan to address the audit findings in March.
