IS IT TRUE March 26, 2012 Part 3

1. Removed by Editor

2. OC Watchdog ~ Your tax dollars at work

   Would you know if your city pulled fiscal wool over your eyes?
   March 22nd, 2012, 9:40 pm · · posted by Teri Sforza, Register staff writer

   The eggheads who pore over the ledgers of Orange County’s cities and special districts are paid more than $1 million every year to poke around the public money pots, and issue what almost always are squeaky-clean bills of fiscal health.

   Welcome, friends, to the tangled tale of the annual municipal audit. Despite the cost — about $20,000 a pop, per agency, per year — the outside experts hired to do these audits can miss some very, very big things:

   Remember the Orange County bankruptcy? “Oops, what do you mean investment earnings shouldn’t comprise more than 5 percent of the county budget? There’s something wrong with pulling in 35 percent?!” (The county sued auditor KPMG Peat Marwick for failing to detect and warn of the risks posed by Bob Citron’s investments strategies, which culminated in what was then the nation’s biggest municipal bankruptcy. KPMG eventually settled with the county for $61.4 million.)

   Remember Bell? The city manager was pulling in more than $800,000 a year, the city was giving dubious loans to insiders and slapping locals with illegal taxes, but Irvine-based outside auditor Mayer Hoffman McCann passed it with flying colors. (The state concluded that Mayer Hoffman “appears to have been a rubberstamp rather than a responsible auditor committed to providing the public with the transparency and accountability that could have prevented the mismanagement of the City’s finances by Bell officials.” Mayer Hoffman heartily disagreed: The firm was subjected to massive fraud by city officials, it said.)

   There are plenty more examples of audits-gone-awry, both large (shortly before the city of San Diego fessed up to a $1.5-billion hole in its pension system, auditors had concluded all was well) and small (little Los Banos sued its auditor for failing to detect that an employee had stolen more than $1.5 million). The Los Angeles Times did a great overview on audit problems shortly after the Bell scandal – problems which include firing the auditor when the review doesn’t come back all clean and pretty.

   It can be a tricky game. As Mayer Hoffman — Bell’s Irvine-based auditor – stressed, it’s awfully hard to combat an agency that’s determined to yank the wool down over your eyes.

   Robert Rizzo, former Bell city manager

   “Mayer Hoffman McCann conducted at least 17 different audit procedures designed to address the risk of fraud, including numerous tests, analysis, inquiries, and representations by multiple City officials, from its accounting staff to the City Council itself, as well as third parties,” said the company’s president, Bill Hancock, in a prepared statement more than a year ago. “At every step of those procedures, individuals misrepresented and gave false audit evidence that concealed the abuses…. This collusion to evade our audit procedures was not limited to one or a few City officials, but rather was conceived and executed in concert by individuals at all levels of City government, including those who themselves were responsible for the design and implementation of the City’s internal controls and fraud prevention policies.’

   “The collusion and abuses at Bell raise broad, profession-wide issues concerning fraud risk in financial statement audits,” Hancock’s statement continued. “There is a tension between the economic and scope limitations inherent in the audit process, and the self-evident objective of government agencies to operate in an environment free of fraud, which we believe the current standards do not completely reconcile.”

   IS THERE A BETTER WAY?

   Why, yes. Yes, there is.

   Quietly — long before Bell but shortly after bankruptcy — the little city of Laguna Niguel began building a better mouse trap. Its approach features extra layers of examination — and an element of surprise.

   And the state controller has been pushing a package of good-government bills on how to keep cities from pulling the wool over the public’s eyes in Sacramento (which, strangely enough, hit a bit of a brick wall after he docked the Legislature’s pay for failing to pass a balanced budget on time).

   We’ll tell you about that in coming days. After all, folks should get something useful for $1 million, shouldn’t they?

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3. just like they gave that hotel group money and still no hotel downtown

4. City council has just voted down John Friend’s attempt to table the EarthCare proposal until April 9th. They then proceeded to vote it out of the finance committee, and will vote on the project yet this evening.

   During the break between voting it out of committee and the start of the regular council meeting the microphones were picking up the conversations of council members, just another example of how inept and unprofessional this council is.

   I have no idea which way the vote on this project will go, but is apparent that the minority community is solidly behind this project.

   With the lack of verifiable information that has been offered to date, I would not go anywhere near this project.

   Lets see what our elected representatives come up with.

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5. tell us how it comes out, I’m stuck at work and can only check during breaks

6. The Evansville City Council vote on the EarthCare Energy Project incentive package and loan went this way:

   McGinn Nay

   Mosby Yea

   Riley Nay

   Friend Nay

   Lindsey Nay

   Adams Yea

   O’Daniel Yea

   Weaver Yea

   Robinson Yea

   Conor O’Daniel’s vote being the big surprise, it passes the council.

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   • Celebration to begin at the Main Gate Bar and Grill immediately. Have not heard if Al Lindsey will be attending, but after his vote, I would guess no.

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     • The truth will be revealed if you follow the money.

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7. The work “machine” comes to mind.

   • Yes it gets traded around, Friend one time, O’Daniel another, but it always comes out to just enough votes to get it passed. Same machine politics in its 9th year now.

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8. This will be another triumph in GAGE’s very unsuccessful record.
   The money will end up going the way of the Freedom Festival once GAGE took over.

9. Bagbey the leading candidate? He is probably the least likely to get it. Brown, Hart, Mosby and Bagbey in that order.

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