Following is the text of a letter I sent to the Beaumont City Council Members on Monday July29th.
Mr. Berg, Mr. Fox, Mr. De Forge, Mr. Castaldo and Mrs. Knight,
I have been closely following a citizen financed informal audit of the city’s financials, based on documents obtained through public information requests. Following are the issues that I am most concerned about which have led me to request an audit of the city’s internal controls:
1) Checks & Balances: Who is authorizing, signing and ratifying checks?
2) Payroll: Are wages, expenses and deductions adding up?
3) City Partners: Is the city purchasing supplies, processing payroll, providing healthcare benefits to owners and employees of third party, private sector companies?
4) Bond Debt: Is the current level of bond debt and the scheduled payments placing a strain on city resources? Is the accounting of the debt following general accounting practices?
5) Capital Assets, Accumulated Depreciation, or Depreciation Expense: Is the city properly accounting for capital assets, accumulated depreciation, or depreciation expense?
6) City Financial Annual Audits: The time lag for completion between the end of the fiscal year and the completion of the audits over the 3 most recent years is increasing.
2009-2010 audit - 9 months
2010-2011 audit - 13 months
2011-2012 audit - 13 months and counting
I don't believe any of these issues indicate fraud, criminal or unethical behavior. Unfortunately, my opinions, and the opinions of most citizens in Beaumont, are not based on any understanding of the accounting practices of a city government. Very few of us have any idea of how a city’s books are maintained and completed. We have to rely on the opinions of Certified Public Accounting firms.
I have reached out to a Certified Public Accounting Firm with the concerns I have regarding these issues. I learned my concerns should be whether the contracts, documented relationships, and the city’s charter authorize the policies and practices the city is employing. In other words, are the internal controls the city has in place being followed and are they generally accepted accounting practices?
For example, check authorizations and signing approvals should be outlined in the City’s Charter and Organizational Charts. The contracts, amendments, and any documented relationship agreements between the city and private sector businesses approved by the city council, should establish clear guidelines as to what the city’s obligations are to their third party private sector partners. Future balloon payments on bond debt, and the city’s short term vs. long term liabilities may be disconcerting but doesn’t indicate inappropriate activity. Reviewing the charter of the authorizing agency created by the city council will help to indicate if treatment of the debt is following the council’s intentions. Without seeing a complete list of capital assets and how the depreciation is being reported, an auditor is unable to make a valid judgment.
I also learned that I am right to be concerned with the time lag between the fiscal year end; the official close of the books; and the final audit. The timeframe appears to be exceptionally long and the fact that it is increasing each year is not comforting. I think we need to know the City’s expected timeframe for audits to be completed. And, if the recent audits are taking longer than expected? If so, why?
I believe the time has come for a third party to take a look at the city’s internal controls. I believe an audit of the City’s internal controls would be in the best interest of the people of Beaumont as well as in the best interest of you, the council members. Once you know the quality of the controls put in place by earlier councils, you will be better able to determine if, and where, changes need to be made. A better understanding of the inner workings of the finance department and how business decisions are being made, would give you, and the public, more confidence that the plans are being followed.
Our city manager and council members have been telling us for years how our city is operated more like a business than a government. Any business who has lost the confidence of the customers they serve would first take a look at their internal systems and controls instead of telling their dissatisfied customers that everything is just fine.
This is a formal request that you place the question for a third party independent audit of the City’s internal controls in an agenda item for an upcoming council meeting. An agenda item will allow for public comment and exhibit the transparency each of you have supported and citizens deserve. If you approve this audit request, I’d like ask you have the City Manager send out an RFP (Request for Proposal) to a number of firms and include the Big 4 Accounting Firms.
Thank you for your consideration.