Just cause its fun, I heard a rumor that the Boys from the County are already dividing up Victorville after it goes bankrupt and the County has to step in and take it over. The rumor is that Hesperia will get back the Golden Triangle and Apple Valley will get the northern industrial area, the rest will be County controlled. It's just a rumor, but its a good one. Anyway,the latest is Victorville's auditing firm, Mayer Hoffman McCann was also Bells auditing firm and is under scrutiny.
December 21, 2010
The state controller’s office Tuesday issued a scathing review of the work performed by Bell’s outside auditor, saying that most of the alleged corruption in the Los Angeles County city would have been identified earlier had the firm done its job.
The long-awaited audit said Mayer Hoffman McCann repeatedly failed to follow basic fieldwork practices when it audited the city’s books.
Mayer Hoffman McCann “appears to have been a rubber stamp 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,” state Controller John Chiang said in a news release.
The 153-page review said that Mayer Hoffman did not look hard enough for documentation and evidence to support city records.
Chiang’s office said it was forwarding the review to the state Board of Accountancy for possible disciplinary action.
The review notes that the auditing firm disputes the findings.
Chiang’s report is the latest critical look at a city that has been enveloped by scandal since The Times revealed the enormous salaries paid to administrators and part-time politicians in one of Los Angeles County’s poorest cities.
Bell is now teetering on the edge of insolvency and may have to take drastic steps such as disbanding its police department to balance the city’s finances. The Times has reported that Rizzo also loaned city money to co-workers, council members and businesses and urged police and code enforcement officers to increase city revenue by aggressively citing motorists, residents and business owners.
The controller’s office found that the city had overcharged property owners and businesses more than $6 million in fees and had mysteriously placed $23.5 million in bond funds into a checking account that paid no interest, costing the city about $1.7 million in potential earnings.
In September, Chiang’s office said Mayer Hoffman McCann should have noticed the glaring lack of internal controls in Bell. Chiang’s report said Rizzo appeared to have complete control of all financial transactions and activity in the city.
Hallye Jordan, a spokeswoman for Chiang, said at the time that state auditors were baffled by “how a CPA firm could miss the abuses the controller's office found, and found rather quickly.”
Bell was not the only city with auditing problems. A Times review of state and local records found that the independent audits cities are required to obtain frequently fail to uncover fraud and mismanagement.
Many cities hit with corruption or mismanagement allegations over the past decade, including San Diego, Compton and South Gate, received clean audits, even in cases where officials later were sent to prison.
When firms provide negative audits, they risk being replaced. In the case of Victorville, for instance, the new auditors gave the city a clean rating after the previous auditor found numerous problems.
-- Jeff Gottlieb
Firm will review auditor that overlooked Bell corruption
State retirement fund says it won't give more work to Mayer Hoffman McCann until state completes an examination of its practices.
By Richard Winton, Los Angeles Times
December 11, 2010
An auditing firm that has come under scrutiny for failing to uncover corruption in the city of Bell has hired an independent accounting company to review its practices as some government agencies review their ties with the firm.
CalPERS, the state employee retirement fund, has decided not to give Mayer Hoffman McCann any more work until state Controller John Chiang completes a review of Bell's auditing. Officials in several Southern California cities said they too are waiting to see Chiang's report before deciding what to do.
Mayer Hoffman conducts outside audits for numerous California government agencies as well as some federal agencies.
Last month, The Times published an investigation highlighting questions about audits performed in Bell and other municipalities hit by corruption scandals. The firm's audits did not uncover any wrongdoing in Bell even though Los Angeles County prosecutors this fall charged eight current and former officials with widespread public corruption, including misappropriation of public funds.
In an interview Friday, a spokesman for the firm, Joe Crivelli, defended its work in Bell, saying it was not the job of the auditors to uncover the high salaries paid to employees and council members. He also raised the possibility that Bell officials may have concealed information from auditors. "There may have been some collusion here between the city of Bell officials," he said.
The firm has hired Carr Riggs & Ingram to review its California government and auditing practice and finish its work within 60 days. Crivelli said that the accounting firm conducts peer review every three years. In this case, the firm decided to move up the review. He also said the firm was cooperating with the controller's review.
In an earlier audit released in September, Chiang said there was a lack of internal controls in Bell, something auditors are usually supposed to check. The Times, using documents obtained from the city, found excessive salaries for top officials, with City Administrator Robert Rizzo on track to earn more than $1.5 million in 2010. The Times also uncovered $1.9 million in illegal loans the city doled out to employees, a car dealer and a foundation without City Council approval, and special fees Bell demanded that some merchants pay to stay in business. None of these issues was noted by auditors.
After The Times' reports, the controller's office in a matter of weeks determined that the city had overcharged residents and businesses more than $6 million in taxes and fees. Chiang's investigators also found that officials had placed $23.5 million in bond funds in a non-interest-bearing checking account, costing the city about $1.7 million in potential interest. Those problems and others could have been found by auditors, according to experts.
Garin Casaleggio, a Chiang spokesman, said the state controller's office will release its report on the firm's work in Bell before the end of the year.
"The audit is currently being finalized and will be forthcoming," he said. The report will include responses from Mayer Hoffman.
Several government agencies that use Mayer Hoffman said they are anxiously awaiting the results of Chiang's audit.
"If they are found to not have adhered to standards we would have to take a closer look," said Costa Mesa Assistant Finance Director Colleen O'Donoghue.
Officials at CalPERS said they will also consider their future with the firm after the report is issued. (The organization's decision to temporarily stop new business was first reported by the Sacramento Bee).
"We may reevaluate the relationship once the investigation is complete," spokesman Wayne Davis said.
richard.winton@latimes.com
Times staff writer Mike Reicher contributed to this report.
Victorville's auditing firm under scrutiny for Bell reports
September 23, 2010 4:57 PM
Brooke Edwards
VICTORVILLE • The same firm that’s handled Victorville’s audits for four of the last five years is now under scrutiny itself for financial reports Mayer Hoffman McCann prepared for the embattled City of Bell, according to officials with the State Controller’s office.
State Controller John Chiang on Thursday released the first of three audits focusing on Bell’s mismanaged finances, focused largely on actions taken by Robert Rizzo, former CAO for Bell and Hesperia’s original city manager. The report found Bell’s internal controls were “virtually non-existent,” resulting in the city making inappropriate payroll, illegally raising taxes, mismanaging bond funds and entering into questionable contracts and land purchases.
“Our audit found the city had almost no accounting controls — no checks or balances — and the General Fund was run like a petty cash drawer,” Chiang said in a statement.
Mayer Hoffman McCann was retained in November to audit Bell’s finances. Now Garin Casaleggio, spokesman for the Controller’s office, said financial reports prepared by the firm are the subject of a separate audit, due out by the end of October.
“It’s hard to believe a CPA firm could miss the abuses we found,” Casaleggio said by phone Thursday. “And we found them rather quickly.”
A call to Mayer Hoffman McCann wasn’t immediately returned Thursday afternoon.
Victorville rehired Mayer Hoffman, which had audited the city’s financial records from the 2005-06 fiscal year, in May 2009 to complete an audit that was already four months overdue.
The move came in the wake of a delayed and highly critical review of Victorville’s 2007 financial statements by auditors Caporicci & Larson. That firm declined to even issue an opinion on the city’s finances, stating Victorville had “not maintained adequate internal control and accounting records.”
Newly rehired Mayer Hoffman McCann gave the city an unqualified or “clean” opinion for the 2007-08 fiscal year, putting a couple hundred million dollars worth of assets that were stripped away by Caporicci & Larson back on city books.
The firm did express doubts about whether Victorville could continue to stay afloat, in a caution repeated on the city’s 2008-09 audit.
Mayer Hoffman McCann is still at work on Victorville’s 2009-10 review, due out in January.
City spokeswoman Yvonne Hester said Thursday that Victorville had no comment on the situation, or on Mayer Hoffman McCann’s performance.
If the Controller’s office finds evidence of deficiencies in Mayer Hoffman’s work relative to the City of Bell, Casaleggio they could turn that information over to the California Board of Accountancy for possible disciplinary action against the firm.
Brooke Edwards may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.
