The City of Los Angeles paid nearly half a million dollars for vehicle repair equipment it never received, according to a new report from the City Controller’s Office released Thursday, which found that internal controls were bypassed to authorize the payment.
The report by the Controller’s Fraud, Waste and Abuse Unit found that staff in the Los Angeles General Services Department were directed to mark the equipment as received in the city’s financial system despite it never being delivered, allowing payment to be issued in violation of city rules.
The vendor, Makai Solutions, has since been barred from doing business with the city, and officials have obtained a court judgment ordering the company to repay more than $540,000, though the funds have not yet been recovered.
“Thanks to our office’s tiny but mighty Fraud, Waste and Abuse Unit, the City now has an understanding of the conditions that led to a vendor defrauding the General Services Department out of almost half a million dollars, and the City can now take informed action to prevent this from happening again,” City Controller Kenneth Mejia said in a statement.
According to the report, the Controller’s unit began its investigation after receiving a hotline tip alleging that Makai was paid around $460,972 for the delivery and installation of two in-ground aerial lifts used for vehicle repairs. The city never received the lifts despite multiple attempts to contact the company’s owner.
Investigators found that a General Services Department superintendent, in violation of City Charter rules, verbally authorized advance payment to the vendor. The superintendent cited pandemic-related disruptions and supply chain issues, as well as urgency to install the equipment, as reasons for the prepayment.
City rules generally require that goods and services be delivered by contractors before payment is issued, with limited exceptions that must be documented and approved in advance.
The report found that staff were directed to falsely mark the lifts as received in the city’s financial management system to trigger payment. Without that step, the payment would not have been approved.
The system also lacks accountability controls: although records showed a Hiring Hall employee marked the items as received, investigators said it was nearly impossible to determine who actually made the entry because multiple employees were allowed to share a single login, in violation of city policy.
The report also noted that departments are required to report potential fraud, waste or abuse within 10 days of discovery, but the General Services Department did not report the issue for more than two years.
The superintendent is no longer with the city.
In May 2024, the city debarred Makai Solutions from doing business with all departments for three years after the company failed to appear at a hearing. In a separate legal action, the City Attorney’s Office secured a default judgment in January 2025 after the company failed to respond to a breach-of-contract lawsuit.
The court ordered Makai to pay $460,972 in damages, along with interest and court costs, for a total of $542,260.
The Controller’s office recommended that the General Services Department conduct periodic reviews to ensure prepayment rules are followed and improve accuracy in the city’s financial system, as well as train staff on policies prohibiting shared logins.
In an emailed reply Thursday, Melody McCormick, a spokesperson for the department, said it does not dispute the report’s findings and confirmed that the city has not yet recovered the funds, adding that “the legal process is still underway to reclaim the funds.”
Addressing why the allegation was not reported for more than two years, McCormick said the issue was elevated “after extensive efforts to locate the vendor and resolve the issue at the staff level.”
She added that the recommendations outlined in the report have since been implemented.
Makai Solutions did not immediately respond to requests for comment.
Sean McMorris, transparency, ethics, and accountability program manager with California Common Cause, a nonpartisan group that advocates for government transparency, said the case suggests procurement safeguards may not have been followed.
“What stands out to me is that waste, fraud, and abuse procurement safeguards in law and policy appear to not to have been followed, resulting in paid-for but unreceived assets and services,” he said in an emailed response.
McMorris said the report’s finding that staff shared login credentials, in violation of city policy, could point to either carelessness or “intentional disregard of the law,”
At a minimum, he said, the city should implement the reforms outlined in the Controller’s report.