Amazon's Future Is Not in Selling Stuff — And That's a Good Thing

During Amazon’s wonkish earnings call this week, Chief Financial Officer Tom Szkutak revealed a number that offered a surprising glimpse into the company’s ambitious future — a future where Amazon doesn’t sell stuff. At least not directly.

In the Q&A with analysts, Szkutak said that a full 39 percent of the “product units” sold on Amazon during the most recent quarter were from third-party sellers, up from 36 percent a year earlier. In other words, more than a third of everything sold on Amazon during the last three months wasn’t sold by Amazon itself, but by someone else selling through Amazon.

Szkutak went on to say that unit sales on Amazon overall grew 32 percent during the quarter. Third-party sales rose at an even faster clip — more than 40 percent.

When I shop on Amazon, I tend to check price first, then reviews, then whether the thing I want to buy is eligible for Prime. Only then do I tend to check the actual seller, which Amazon lists below whether the item is in stock. From the success of third-party sales on Amazon, I’m clearly not the only person indifferent to who has title to the merchandise I’m buying. If it’s on Amazon, I tend to think of it as from Amazon.

That might not always be wise, since third-party sellers might, for instance, have a different return policy than Amazon’s standard guidelines. But that kind of variation seems less and less likely as Amazon makes standardization the most appealing option.

The company’s not-so-secret secret to smoothing the path for third-party sellers is Fulfillment by Amazon, the Amazon Web Services of non-digital stuff. In the same way that Amazon leveraged its own existing digital infrastructure to become the backend of many of the web’s most popular sites, Fulfillment by Amazon offers up the company’s existing physical infrastructure to third-party sellers who want to outsource such joyless tasks as warehousing their inventory, shipping orders and handling returns.

While Fulfillment by Amazon gives even small mom-and-pop sellers access to Amazon’s global visibility and reach, the arrangement also works to Amazon’s advantage. Last year, Amazon opened up 20 new fulfillment centers and has plans for several more, including one near San Francisco and three planned for Texas, each more than 1 million square feet in size. By investing so much in shelf space, Amazon has every incentive to keep those shelves filled. And the more third-party stuff Amazon can move through its distribution hubs, the better, since that’s all inventory Amazon doesn’t have to pay for itself. As analysts at Baird Equity Research point out, third-party sales are 100 percent gross margin for Amazon. In other words, the only cost to Amazon of providing third-party fulfillment is money they would have spent anyway on the infrastructure, labor, transportation and whatever else they need to support their direct sales operation.

Considering these advantages, third-party sales loom as an important part of Amazon’s business future. Last year, sales of services — including commissions on third-party sales — accounted for about 15 percent of Amazon’s total sales. If current trends continue, that percentage will rise, giving all the more reason to stop thinking of Amazon as a seller of stuff and to start thinking of the world’s biggest online retailer as a platform for stuff — an API for the material world.

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Justin Timberlake launches music comeback with Grammy performance

LOS ANGELES (Reuters) – Justin Timberlake, making his pop music comeback with a new single and album, will perform at next month’s Grammy Awards for the first time in four years, Grammy organizers said on Wednesday.

Timberlake, 31, will take the stage at the music industry‘s biggest night in Los Angeles on February 10, ahead of the scheduled March release of his first album since 2006.

“The 20/20 Experience” marks Timberlake’s return to music after several years in which he has focused more on acting and business ventures, including a clothing line and a partnership in social networking site Myspace.

At the Grammy Awards ceremony and show, Timberlake will join performers and country music nominees Miranda Lambert and Dierks Bentley, singers Taylor Swift and Carrie Underwood, and bands Mumford & Sons and FUN.

Elton John will also duet with rising British singer Ed Sheeran, and the Grammy ceremony will be hosted by rapper LL Cool J. Other performers will be announced in the next 10 days.

(Reporting by Jill Serjeant; Editing by Will Dunham)

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Well: Waiting for Alzheimer's to Begin

My gray matter might be waning. Then again, it might not be. But I swear that I can feel memories — as I’m making them — slide off a neuron and into a tangle of plaque. I steel myself for those moments to come when I won’t remember what just went into my head.

I’m not losing track of my car keys, which is pretty standard in aging minds. Nor have I ever forgotten to turn off the oven after use, common in menopausal women. I can always find my car in the parking lot, although lots of “normal” folk can’t.

Rather, I suddenly can’t remember the name of someone with whom I’ve worked for years. I cover by saying “sir” or “madam” like the Southerner I am, even though I live in Vermont and grown people here don’t use such terms. Better to think I’m quirky than losing my faculties. Sometimes I’ll send myself an e-mail to-do reminder and then, seconds later, find myself thrilled to see a new entry pop into my inbox. Oops, it’s from me. Worse yet, a massage therapist kicked me out of her practice for missing three appointments. I didn’t recall making any of them. There must another Nancy.

Am I losing track of me?

Equally worrisome are the memories increasingly coming to the fore. Magically, these random recollections manage to circumnavigate my imagined build-up of beta-amyloid en route to delivering vivid images of my father’s first steps down his path of forgetting. He was the same age I am now, which is 46.

“How old are you?” I recall him asking me back then. Some years later, he began calling me every Dec. 28 to say, “Happy birthday,” instead of on the correct date, Dec. 27. The 28th had been his grandmother’s birthday.

The chasms were small at first. Explainable. Dismissible. When he crossed the street without looking both ways, we chalked it up to his well-cultivated, absent-minded professor persona. But the chasms grew into sinkholes, and eventually quicksand. When we took him to get new pants one day, he kept trying on the same ones he wore to the store.

“I like these slacks,” he’d say, over and over again, as he repeatedly pulled his pair up and down.

My dad died of Alzheimer’s last April at age 73 — the same age at which his father succumbed to the same disease. My dad ended up choosing neurology as his profession after witnessing the very beginning of his own dad’s forgetting.

Decades later, grandfather’s atrophied brain found its way into a jar on my father’s office desk. Was it meant to be an ever-present reminder of Alzheimer’s effect? Or was it a crystal ball sent to warn of genetic fate? My father the doctor never said, nor did he ever mention, that it was his father’s gray matter floating in that pool of formaldehyde.

Using the jarred brain as a teaching tool, my dad showed my 8-year-old self the difference between frontal and temporal lobes. He also pointed out how brains with Alzheimer’s disease become smaller, and how wide grooves develop in the cerebral cortex. But only after his death — and my mother’s confession about whose brain occupied that jar — did I figure out that my father was quite literally demonstrating how this disease runs through our heads.

Has my forgetting begun?

I called my dad’s neurologist. To find out if I was in the earliest stages of Alzheimer’s, he would have to look for proteins in my blood or spinal fluid and employ expensive neuroimaging tests. If he found any indication of onset, the only option would be experimental trials.

But documented confirmation of a diseased brain would break my still hopeful heart. I’d walk around with the scarlet letter “A” etched on the inside of my forehead — obstructing how I view every situation instead of the intermittent clouding I currently experience.

“You’re still grieving your father,” the doctor said at the end of our call. “Sadness and depression affect the memory, too. Let’s wait and see.”

It certainly didn’t help matters that two people at my father’s funeral made some insensitive remarks.

“Nancy, you must be scared to death.”

“Is it hard knowing the same thing probably will happen to you?”

Maybe the real question is what to do when the forgetting begins. My dad started taking 70 supplements a day in hopes of saving his mind. He begged me to kill him if he wound up like his father. He retired from his practice and spent all day in a chair doing puzzles. He stopped making new memories in an all-out effort to preserve the ones he already had.

Maybe his approach wasn’t the answer.

Just before his death — his brain a fraction of its former self — my father managed to offer up a final lesson. I was visiting him in the memory-care center when he got a strange look on his face. I figured it was gas. But then his eyes lit up and a big grin overtook him, and he looked right at me and said, “Funny how things turn out.”

An unforgettable moment?

I can only hope.

---

Nancy Stearns Bercaw is a writer in Vermont. Her book, “Brain in a Jar: A Daughter’s Journey Through Her Father’s Memory,” will be published in April 2013 by Broadstone.

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Growth in Consumer Spending Slows

WASHINGTON — American consumers increased their spending in December at a slower pace, while their income grew by the largest amount in eight years, the Commerce Department said Thursday. Income surged because companies rushed to pay dividends and bonuses before tax increases.

The 0.2 percent rise in consumer spending last month was slightly slower than the 0.4 percent increase in November.

Income jumped 2.6 percent in December from November, the biggest gain since December 2004.

Economists expect consumer spending, which accounts for about 70 percent of economic activity, to slow this year. That’s because consumers are receiving less take-home pay starting this month.

Congress and the White House reached a deal on Jan. 1 to prevent income taxes from rising on all but the wealthiest Americans. But they allowed a temporary reduction in Social Security taxes to expire this year. That means a person earning $50,000 a year will have about $1,000 less to spend in 2013. A household with two high-paid workers will have up to $4,500 less.

The diminished pay could slow consumer spending and economic growth at a precarious moment.

The economy unexpectedly shrank in the October-December period at an annual rate of 0.1 percent, the government said Wednesday. The dip was a reminder of the economy’s vulnerability as automatic cuts in government spending loom.

Some analysts have estimated that the roughly $120 billion in higher Social Security taxes could subtract up to 0.7 percentage point from growth this year.

Separately, the Labor Department reported Thursday that the number of Americans seeking unemployment aid rose sharply last week but remained at a level consistent with moderate hiring.

Weekly applications for unemployment benefits leapt 38,000 to a seasonally adjusted 368,000, the government said. The increase comes after applications plummeted in the previous two weeks to five-year lows.

The volatility reflects the government’s difficulty adjusting the data to account for layoffs after the holiday shopping season. Job cuts typically increase in the second week in January as retailers dismiss temporary employees hired for the winter holidays. Layoffs then fall in the second half of the month.

The department attempts to adjust for such fluctuations but the January figures can still be volatile. The four-week average, a less volatile measure, ticked up to 352,000, just above a four-year low.

On Friday, the government is scheduled to issue its January jobs report. Analysts forecast that it will show employers added 155,000 jobs, the same as in December. The unemployment rate is expected to remain at 7.8 percent for the third straight month.

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Economy unexpectedly contracts in fourth quarter

Holiday shoppers crowd the sidewalk outside Macy's department store in New York City. (Victor J. Blue / Bloomberg / December 23, 2012)

By Jim Puzzanghera

January 30, 2013, 6:25 a.m.

WASHINGTON -- The U.S. economy shrank at a 0.1% annualized rate in the last three months of 2012 amid fears about the fiscal cliff, the Commerce Department reported Wednesday.

It was the first time economic growth contracted since the end of the Great Recession in mid-2009 and showed how much the concerns about large tax hikes and federal spending cuts weighed on businesses as last year drew to a close.

A last-minute deal in Washington averted most of the tax increases and delayed the automatic spending cuts. Economists say they believe that will lead to economic growth in the first three months of 2013.

But Thursday's report -- the government's first estimate of fourth-quarter economic activity -- was a surprise.

QUIZ: Test your knowledge about the debt limit

Economists has projected that the gross domestic product -- the nation's total economic output -- would expand about 1% in the fourth quarter, a slowdown from the 3.1% growth in the July-through-September period.

But a drop in inventory investment by businesses, federal government spending and U.S. exports led to the first contraction since the economy shrank 0.3% in the second quarter of 2009.

Leading the drop in government outlays was a 22.2% drop in defense spending.

"The economy ended 2012 on a very sluggish pace, even though one-time factors put the number below the trend," said Kathy Bostjancic, director for macroeconomic analysis at the Conference Board.

"While the inventory runoff and the steep decline in defense spending in the fourth quarter made economic activity look weaker than it really was, the underlying demand from consumers and businesses kept moving forward at a moderate pace," she said.

ALSO:

U.S. economic growth in third quarter is revised upward

Scrap the debt limit, some lawmakers and economists say

Dow falls short of 14,000 but closes at highest level since 2007 [Video chat]

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Affordable Injection Molding Transforms Tinkerers Into Tycoons

While everyone is talking about the 3-D printing industrial revolution, Protomold is helping tinkerers become tycoons by making mass-production injection molding technology accessible for easily customized short-run batches — and their recent expansion of materials lets designers produce almost anything they need.

3-D printing something like a cellphone case can take hours — unacceptable when makers need mass quantities. In order to cost-effectively produce products in big batches, traditional manufacturing processes like injection molding are still the best option. Unfortunately, companies that specialize in these processes want to work on huge-volume projects, leaving the little guy, or even a moderately successful Kickstarter project, with few options.

Protomold has stepped in to provide servicing to those makers who need small orders by being able to produce 50-5,000 injection-molded parts in one business day with prices starting at $1,495 for a production tool, and each produced part costing a couple dollars or less. The experience isn't much different than ordering business cards online. A designer uploads their CAD file, chooses from a few preset options, and shelf-worthy injection-molded parts arrive on their doorstep.

The company has been successful, operating since May 1999, while continuing to grow their service. They've just added new materials to their list, including injection molded steel, stainless steel, magnesium, copper. Their newest is the option to mold parts in high temperature, medical grade resins, giving garage entrepreneurs the ability to produce parts for medical devices and high performance applications. Protomold is focused on helping turn big ideas into big companies.

Protomold is able to move so quickly because they optimize their offering for small businesses. While some companies treat moldmaking as an artform, with each production tool cherished like a Toulouse-Lautrec painting, Protomold is more like a Thomas Kincaid canvas used to cover a hole in the wall. This means mold cycle times are a few seconds slower, tools are made out of aluminum instead of steel, and need to be simple enough to be produced on a CNC milling machine. "We can't make everything," says CEO Brad Cleveland. "But the things we can make, we make faster than anyone."

What started as a single engineer looking to solve his own problem has turned into a publicly traded company with a billion dollar market cap and 511 workers filling 160,000 square feet of office space producing parts 24 hours a day.

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Ke$ha bringing her “crazy beautiful life” to MTV series

NEW YORK (Reuters) – Singer Ke$ ha is coming to cable television with a new reality series that promises to document the “drama, madness and euphoria” of her professional and personal life, MTV said on Tuesday.

“Ke$ ha: My Crazy Beautiful Life,” will premiere on MTV in April, the network said.

“You might have heard my voice on the radio, seen me onstage or in a music video, but that’s only a part of the story,” the 25-year-old singer, known for hits including “Tik Tok” and “We R Who We R,” said in a statement.

“With this documentary series I’m revealing a more complete picture of what my life is really like. It’s not all glamorous but it’s all real,” she added.

MTV said the “no-limits” series would depict the music star “as she navigates the drama, madness and euphoria of her professional and personal life while recording a new album and traveling the globe.”

The show was shot over two years by the singer’s brother Lagan Sebert, working with minimal crew, providing what MTV said was an unfiltered, “real and raw” look at her life.

Lagan, a journalist, said that as he watched his sister’s ascent, “I soon realized that the most amazing story was happening in my own family and it became my mission document it … I set off on a two year long journey to tell my sister’s story.”

Ke$ ha has sold 3 million albums and 30 million singles worldwide and has won MTV Europe‘s best new act award. Her most recent album was 2012′s “Warrior.”

(Reporting by Chris Michaud; Editing by Jill Serjeant and Cynthia Osterman)

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The New Old Age Blog: For Some Caregivers, the Trauma Lingers

Recently, I spoke at length to a physician who seems to have suffered a form of post-traumatic stress after her mother’s final illness.

There is little research on this topic, which suggests that it is overlooked or discounted. But several experts acknowledge that psychological trauma of this sort does exist.

Barry Jacobs, a clinical psychologist and author of “The Emotional Survival Guide for Caregivers” (The Guilford Press, 2006), often sees caregivers who struggle with intrusive thoughts and memories months and even years after a loved one has died.

“Many people find themselves unable to stop thinking about the suffering they witnessed, which is so powerfully seared into their brains that they cannot push it away,” Dr. Jacobs said.

Flashbacks are a symptom of post-traumatic stress disorder, along with feelings of numbness, anxiety, guilt, dread, depression, irritability, apathy, tension and more. Though one symptom or several do not prove that such a condition exists — that’s up to an expert to determine — these issues are a “very common problem for caregivers,” Dr. Jacobs said.

Dolores Gallagher-Thompson, a professor of psychiatry at the Stanford University School of Medicine who treats many caregivers, said there was little evidence that caregiving on its own caused post-traumatic stress. But if someone is vulnerable for another reason — perhaps a tragedy experienced earlier in life — this kind of response might be activated.

“When something happens that the individual perceives and reacts to as a tremendous stressor, that can intensify and bring back to the forefront of consciousness memories that were traumatic,” Dr. Gallagher-Thompson said. “It’s more an exacerbation of an already existing vulnerability.”

Dr. Judy Stone, the physician who was willing to share her mother’s end-of-life experience and her powerful reaction to it, fits that definition in spades.

Both of Dr. Stone’s Hungarian parents were Holocaust survivors: her mother, Magdus, called Maggie by family and friends, had been sent to Auschwitz; her father, Miki, to Dachau. The two married before World War II, after Maggie left her small village, moved to the city and became a corset maker in Miki’s shop.

Death cast a long shadow over the family. During the war, Maggie’s first baby died of exposure while she was confined for a time to the Debrecen ghetto. After the war, the family moved to the United States, where they worked to recover a sense of normalcy and Miki worked as a maker of orthopedic appliances. Then he died suddenly of a heart attack at the age of 50.

“None of us recovered from that,” said Dr. Stone, who traces her interest in medicine and her lifelong interest in fighting for social justice to her parents and trips she made with her father to visit his clients.

Decades passed, as Dr. Stone operated an infectious disease practice in Cumberland, Md., and raised her own family.

In her old age, Maggie, who her daughter describes as “tough, stubborn, strong,” developed macular degeneration, bad arthritis and emphysema — a result of a smoking habit she started just after the war and never gave up. Still, she lived alone, accepting no help until she reached the age of 92.

Then, in late 2007, respiratory failure set in, causing the old woman to be admitted to the hospital, then rehabilitation, then assisted living, then another hospital. Maggie had made her preferences absolutely clear to her daughter, who had medical power of attorney: doctors were to pursue every intervention needed to keep her alive.

Yet one doctor sent her from a rehabilitation center to the hospital during respiratory crisis with instructions that she was not to be resuscitated — despite her express wishes. Fortunately, the hospital called Dr. Stone and the order was reversed.

“You have to be ever vigilant,” Dr. Stone said when asked what advice she would give to families. “You can’t assume that anything, be it a D.N.R. or allergies or medication orders, have been communicated correctly.”

Other mistakes were made in various settings: There were times that Dr. Stone’s mother had not received necessary oxygen, was without an inhaler she needed for respiratory distress, was denied water or ice chips to moisten her mouth, or received an antibiotic that can cause hallucinations in older people, despite Dr. Stone’s request that this not happen. “People didn’t listen,” she said. “The lack of communication was horrible.”

It was a daily fight to protect her mother and make sure she got what she needed, and “frankly, if I hadn’t been a doctor, I think I would have been thrown out of there,” she said.

In the end, when it became clear that death was inevitable, Maggie finally agreed to be taken off a respirator. But rather than immediately arrange for palliative measures, doctors arranged for a brief trial to see if she could breathe on her own.

“They didn’t give her enough morphine to suppress her agony,” Dr. Stone recalled.

Five years have passed since her mother died, and “I still have nightmares about her being tortured,” the doctor said. “I’ve never been able to overcome the feeling that I failed her — I let her down. It wasn’t her dying that is so upsetting, it was how she died and the unnecessary suffering at the end.”

Dr. Stone had specialized in treating infectious diseases and often saw patients who were critically ill in intensive care. But after her mother died, “I just could not do it,” she said. “I couldn’t see people die. I couldn’t step foot in the I.C.U. for a long, long time.”

Today, she works part time seeing patients with infectious diseases on an as-needed basis in various places — a job she calls “rent a doc” — and blogs for Scientific American about medical ethics. “I tilt at windmills,” she said, describing her current occupations.

Most important to her is trying to change problems in the health system that failed her mother and failed her as well. But Dr. Stone has a sense of despair about that: it is too big an issue, too hard to tackle.

I’m grateful to her for sharing her story so that other caregivers who may have experienced overwhelming emotional reactions that feel like post-traumatic stress realize they are not alone.

It is important to note that both Dr. Jacobs and Dr. Gallagher-Thompson report successfully treating caregivers beset by overwhelming stress. It is hard work and it takes time, but they say recovery is possible. I’ll give a sense of treatment options they and others recommend in another post.

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Prior Problems In 787 Battery Set Off Concerns Boeing Was Aware of 787 Battery Problems Before Failure

Toru Hanai/Reuters

All Nippon Airways, the biggest operator of 787s, is holding jets at Haneda airport in Tokyo.

Even before two battery failures led to the grounding of all Boeing 787 jets this month, the lithium-ion batteries used on the aircraft had experienced multiple problems that raised questions about their reliability.

Officials at All Nippon Airways, the jets’ biggest operator, said in an interview on Tuesday that it replaced 10 of the batteries in the months before fire in one plane and smoke in another led regulators around the world to ground the jets.

The airline said it told Boeing of the replacements as they occurred but was not required to report them to safety regulators because they were not considered a safety issue and no flights were canceled or delayed.

National Transportation Safety Board officials said Tuesday that their inquiry would include the replacements.

The airline also, for the first time, explained the extent of the previous problems, which underscore the volatile nature of the batteries and add to concerns over whether Boeing and other plane manufacturers will be able to use the batteries safely.

In five of the 10 replacements, All Nippon said that the main battery had showed an unexpectedly low charge. An unexpected drop in a 787’s main battery also occurred on the All Nippon flight that had to make an emergency landing in Japan on Jan. 16.

The airline also revealed that in three instances, the main battery had failed to start normally and had had to be replaced, along with the charger. In other cases, one battery showed an error reading and another, used to start the auxiliary power unit, failed. All of the events occurred from May to December of last year. The malfunctioning batteries, made by the Japanese manufacturer GS Yuasa, were serviced by All Nippon maintenance crew members.

Japan Airlines, which operates seven 787s, said Wednesday that there had been “several cases” in which maintenance crew members needed to replace 787 batteries after irregularities, but the carrier declined to give details. The switches were not considered a safety risk and were conducted “within the scope of regular maintenance,” said Kazunori Kidosaki, a company spokesman.

Kelly Nantel, a spokeswoman for the National Transportation Safety Board, said investigators had only recently heard that there had been “numerous issues with the use of these batteries” on 787s. She said the board had asked Boeing, All Nippon and other airlines for information about the problems.

“That will absolutely be part of the investigation,” she said.

Boeing, based in Chicago, has said repeatedly that any problems with the batteries can be contained without threatening the planes and their passengers.

Boeing officials said the need to replace the batteries also suggested that safeguards were activated to prevent overheating and keep the drained batteries from being recharged. Company officials said the batteries can drain too deeply if left on without being connected to power sources.  Trying to recharge such batteries could generate excessive heat, so safety mechanisms lock out any attempts to do that.

Boeing officials said that improperly connecting a battery can also render it unusable.  And they acknowledged that some of the new batteries were not lasting as long as intended. They said that could cause airlines to replace them more frequently but did not pose a safety problem.

A GS Yuasa official, Tsutomu Nishijima, said battery exchanges were part of the normal operations of a plane but would not comment further.

The Federal Aviation Administration decided in 2007 to allow Boeing to use the lithium-ion batteries instead of older, more stable types as long as it took safety measures to prevent or contain a fire. But once Boeing put in those safeguards, it did not revisit its basic design even as more evidence surfaced of the risks involved, regulators said.

In a little-noticed test in 2010, the F.A.A. found that the kind of lithium-ion chemistry that Boeing planned to use — lithium cobalt — was the most flammable of several possible types. The test found that batteries of that type provided the most power, but could also overheat more quickly.

In 2011, a lithium-ion battery on a Cessna business jet started smoking while it was being charged, prompting Cessna to switch to traditional nickel-cadmium batteries.

Matthew L. Wald contributed reporting.

This article has been revised to reflect the following correction:

Correction: January 30, 2013

An earlier version of this article misstated the action taken by All Nippon Airways with 10 lithium-ion batteries it replaced on Boeing 787 jets between May and December of last year. The malfunctioning batteries were sent to the airline’s maintenance department for service, not to the maker, GS Yuasa.

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Sheriff's response time is longer in unincorporated areas, audit finds

It took Los Angeles County sheriff's deputies a minute longer to respond to emergency calls from unincorporated parts of the county than from cities that contract with the department for police services, according to a county audit.

The finding comes days after Supervisor Gloria Molina accused Sheriff Lee Baca of "stealing" police resources from residents in unincorporated neighborhoods and threatened to hire "independent private patrol cars" to backfill cuts in sheriff's patrols. She has accused Baca of providing better service to contract cities than to unincorporated areas.

According to the audit, which examined the last fiscal year, it took deputies, on average, 4.8 minutes to respond to emergency calls in contract cities compared with 5.8 minutes in unincorporated areas.

Sheriff's officials said the extra minute was because neighborhoods in unincorporated areas are more spread out and have more difficult road conditions.

The audit also found that Baca provided 91% of promised patrol hours to unincorporated areas, compared with 99% for cities and agencies that buy his services. Sheriff's officials blamed the difference on deep budget cuts imposed by the board that caused the department to leave dozens of deputy positions unfilled.

Adjusted for those cuts, the department was much closer to its goal — averaging 98.5% fulfillment of its pledged patrol hours, according to the audit.

The findings by the county's auditor-controller are expected to add more fuel to the ongoing debate between the sheriff and the board about whether the sheriff is shortchanging county residents who live outside city borders.

Baca and his predecessors have long wrangled with supervisors over funding and patrol resources.

Although the board sets the sheriff's budget, Baca, an elected official, has wide discretion on how to spend it. The Sheriff's Department polices about three-fourths of the county. Along with the unincorporated areas, Baca's deputies patrol more than 40 cities within the county that don't have their own police forces. The patrol obligations for those cities are set in contracts with the department, so county budget cuts are more likely to affect unincorporated areas.

On Tuesday, the board is expected to discuss Molina's idea to empower unincorporated neighborhoods to negotiate police contracts with the Sheriff's Department or some other agency — the same way incorporated cities do.

According to the audit, it costs the sheriff about $552 million to provide police services for contract cities and agencies, but the department gets approximately $371 million back. The auditor-controller suggested pursuing changes in state law or board policy to allow the sheriff to recoup more.

State law prohibits sheriffs from billing contract cities for non-patrol services provided countywide. So the department has provided a broad range of services — such as homicide and narcotics detectives, bomb squads and the county crime lab — at no extra charge.

Sheriff's spokesman Steve Whitmore said those rigid agreements — with contract cities, the county's courts, community colleges and public transit lines — limited where the sheriff could slash in the face of county budget woes.

The board has cut the sheriff's budget — now at $2.8 billion — by $128 million in 2010, $96 million in 2011 and $140 million last year, according to Whitmore.

The sheriff has already reassigned about two dozen gang enforcement deputies to patrol in unincorporated areas and has identified more than 90 other deputies to do the same, Whitmore said.

Molina's spokeswoman declined to suggest other areas where sheriff's officials should slash in light of funding cuts from the board but said that services to unincorporated areas should not be one of them.

"We respectfully request they go back to the drawing board," spokeswoman Roxane Márquez said.

robert.faturechi@latimes.com

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