Beaumont’s 2016 Audited Financial Statements
Beaumont’s 2016 Audit contains the $5 Million Transfer and TUMF Settlement, both of which occurred after June 30, 2016.
This is what happens when a bunch of crooks are hired and the Year-End Books are never closed.
The City of Beaumont has released a Draft of their Financial Statements for Fiscal Year Ending June 30, 3016: https://beaumont.civicweb.net/document/10080/Draft%20Audit%20FY15-16.pdf?handle=914912CEE8494B3886DC52CB73B55891
Beaumont’s 2016 Audit prepared by the Auditing Firm of Van Lant Fankhanel is plagued with Inaccuracies and Fraudulent Reporting of the City’s Activities. The Audit doesn’t even correlate with itself and it is not the same information submitted to the California State Controller’s Office. There is no Internal Controls Report or 10-Year Reports.
The Financial Statements should only reflect the operations of the City from July 1, 2015 through June 30, 2016, but Beaumont’s 2016 Audit contains the $5 Million Transfer and TUMF Settlement, both of which occurred after June 30, 2016.
The Auditing Firm of Van Lant Fankhanel prepared Beaumont’s 2016 Audit and gave an Adverse Opinion to Government Activities because the City does not record their Capital Assets on the Financial Statements. The City doesn’t have any Capital Assets to record because they stole all money and haven’t built any infrastructure in a quarter century.
Beaumont Deposits all Mitigation Fees into the General Ledger and spends the money on general operations instead of using the funds for their specific purpose. For example; Beaumont has collected almost $30 Million to build Fire Stations and the City charges the Property Owners in the CFD Development Areas an additional Service Tax to operate the Fire Stations, but the City never built the Fire Stations. Although the money is continually collected to build and operate Fire Stations; the money is deposited into the General Fund and disappears, which results in no Fire Stations to declare as Capital Assets.
The 2016 Audit does not Account for the Mitigation Fees collected throughout the year or the City’s $100 Million General Fund Deficit that is the result of 20 years of spending Mitigation Fees and Special Purpose Taxes. Nowhere in the Audit are the Beaumont Finance Authority or the Community Facility District’s Assets and Liabilities properly recorded.
The Auditing Firm of Van Lant Fankhanel gave the remaining seven (7) Opinion Units Unmodified Opinions, but the Fraud and Material Misstatements are ridiculously abundant and obvious.
The Notes to the Financial Statements are the details of the numbers listed on the Financial Statements. The Financial Statements must match the Notes to the Financial Statements.
Beaumont’s 2016 Audit Financial Statement Notes do not match the 2016 Audited Financial Statement. The 2016 Audit also contains entries that occurred after the close of the Books on June 30, 2016. There are no 10-year Statements.
Note 2, Page 39, correctly records the City’s Cash and Investments as of June 30, 2016, but left out the money remaining in the CFD Bond Construction Funds, which appears to be recorded as ‘Capital Projects’ on page 16, Statement of Net Position:
Cash on Hand (Petty Cash): $4,340
Deposits in Banks: $33,690,653
Bond Reserve: $29,815,138
Finance Authority Bonds: $211,243,475
Bond Construction Accts (Missing): $13,967,685
Pg 16. STATEMENT OF NET POSITION
The Statement of Net Position must list all of the City’s Activities. Beaumont includes the CFD Bond money in the Reserve and Construction Accounts, but does not include CFD Bond Debt or or the Beaumont Finance Department’s Assets and Debt.
Beaumont must account for the City Operations, Sewer Authority, Finance Authority, Transit Authority, Martinez Fund, Evidence Fund, Charitable Foundation, Community Facilities District (CFD), and numerous Mitigation Fees and Special Taxes that Mike Busch from Urban Futures was paid $242,000 in Fiscal Year 2016 to account for the money.
On June 30, 2016, the City had a total of $32,218,638.28 in the Citibank Account. This represents all of the money for the General Fund, Special Funds, and all of the Taxes and Mitigation Fees Collected. The only other Bank Accounts the City had at Year End 2016 was $768,351.54 for Gas Tax, $1,203,238.14 in the Payroll Account, and $15,907,438.93 in their LAIF Account.
$3,177,448 Accounts Receivable. There is no reference to this amount in the Notes.
$2,753,700 Due From Other Governments. There is no reference to this amount in the Notes.
$5,069,509 Internal Balance: This Transaction occurred AFTER June 30, 2016 and should not be on the Statement of Position for Fiscal Year Ending 2016. This entry needs to be removed and only listed in Subsequent Events.
$11,486,534 Cash w/Fiscal Agent. If this is a reference to LAIF, the amount should be $15.9 Million. There’s no other funds with any other Fiscal Agents.
$50,237,479 Capital Assets Net of Accumulated Depreciation. This is the Forged Sewer Machinery & Equipment and must be removed from the Financial Statements. There are no Receipts, no Invoices, and no Sewer Machinery and/or Equipment.
The Beaumont Finance Authority technically owns $201,340,000 in Bond Securities that should be listed with the Assets on the Statement of Net Position.
The Liabilities on the Statement of Net Position must include all of the City’s liabilities and match the Notes. Beaumont’s 2016 Audit has either grossly understated or has completely removed the City’s Liabilities.
Beaumont’s Bond Debt:
Page 87, Combining Statement of Fiduciary Assets & Liabilities records that the Community Facilities District as owning $211,243,475 in Securities and penciled in is $243,568,410 ‘Due to Bond Holders’.
Incorrect in every way.
First of all; the figures are not accurate for Fiscal Year ending 2016.
The list of Bonds provided in the Trustee Transfer from Union Bank to Wilmington Trust in January, 2016, list the Beaumont Financing Authority Bond Debt at $201,340,000.
The list of Bonds provided in the Trustee Transfer from Union Bank to Wilmington Trust in January, 2016, list the Community Facilities District Bond Debt at $205,663,879.53.
The Beaumont Finance Authority and the Community Facilities District (CFD) are two separate Agencies and must be accounted for separately. The 2016 Audit, as in all of Beaumont’s past Audits, does not list the Debt acquired by both Agencies.
All of Beaumont’s Bonds have two (2) sets of Security Debt; one set of Securities is the debt obligation of the Beaumont Finance Authority and the other set of Securities is the debt obligation of the Beaumont Community Facilities District (CFD).
The Beaumont Finance Authority has $205 Million in Assets resulting in their ownership of the CFD Bonds and $201 Million in Bond Debt Liability.
The Community Facilities District has the Assets of $13.9 Million in the Construction Bond Fund Accounts, and $29 Million in Reserves. The CFD has $205 Million in Bond Debt Liability.
The $29,035,138 recorded in Note 2, page 41, represents the Bonds’ Reserve Fund. This money is not available within 12 months or less. Although portions are available each year as the bonds are paid down, most of the Reserve is not accessible for more than 60 months. This Material Misstatement must be corrected.
Beaumont had a $10.9 Million Bond Debt Payment due September 1, 2016, which should be listed as a Liability Due within One Year.
Note 7, Debt Without Government Commitment, incorrectly records Beaumont’s Bond Debt. First of all; the Bonds are absolutely the City of Beaumont’s Obligation and all statements to the contrary need to be removed from the City’s Audits. Not one Property Owner or Citizen of Beaumont voted for or approved the Bond Debt. Beaumont Staff and Council illegally acquired the Bond Debt, they illegally overcharge Property Taxes on behalf of the Bond Debt, and the City illegally spends the proceeds of the Bond Debt on lawyers, consultants, and parties instead of building the Facilities and Infrastructure listed on the Bonds.
REVENUE AND EXPENSES
Very few of the amounts listed on pages 17 and 18 of the City of Beaumont’s 2016 Audited Financial Statements are the same amounts reported to the California State Controllers’ Office.
Beaumont Reported $3,589,014 in Property Taxes to the State, but claimed $3,762,290 on the Audit.
Beaumont Reported $3,730,414 in Sales Tax to the State, but claimed $4,966,331 on the Audit.
Beaumont Reported $213,141 in Transient Occupancy Tax, but claimed $283,999 on the Audit.
The City of Beaumont spent $6.7 Million on Lawyers and Consultants in Fiscal Year 2016. Where these expenditures are hidden is anyone’s guess.
Beaumont’s 2016 Audit page 22 records $7.7 Million in Community Facilities Taxes, but that is only the CFD Taxes overcharged. The City did not record the $15.9 Million CFD Property Taxes collected to pay for the Bond Debt.
The 2016 Audit also plugs in $2 Million in ‘Community Services’. The City has repeatedly been told by the State that they can’t just plug in a number; the amount must correlate to actual man-hours.
$5 Million Transfer of CFD Money from Sewer to General Fund.
To refresh everyone’s memory as to why Beaumont has no Capital Assets; In November, 2014, Union Bank pulled their Letter of Credit on Beaumont’s 2001 Wastewater Bond, which forced the City to pay off the Bond. The City transferred $5 Million out of the CFD Bond Fund Accounts to pay off the 2001 Wastewater Bond.
In September, 2016, Beaumont Staff and Council Forged CFD Bond ‘Certificates of Completion’ claiming that all of the Facilities listed on Beaumont’s CFD Bonds were completed. The City then Transferred $5 Million out of the Sewer Fund and into the General Fund on the pretense that the money was no longer needed to construct any Facilities.
Acting City Manager Richard Warne and Public Works Director Amer Jakher verified that no more money was needed to construct the Roads, Sewers, Fire Stations, or the Wastewater Facility listed in the Bonds. Council ‘Approved’.
The quote of the night came from Attorney John Knox, a Partner with Orrick Herrington in San Francisco, who was paid $895/hr for his ‘expertise’: “I don’t know that there was a ‘promise’ to build a Fire Station.”
WRCOG TUMF SETTLEMENT
Beaumont’s 2016 Audited Financial Statements, page 46, reduces the City’s Liability from $62 Million to $4.1 Million. The $4.1 Million is the amount that the City was scheduled to pay WRCOG by October 1, 2017, but never paid. The City has additional financial obligations as directed in the Judgement.
As of June 30, 2016, Beaumont was still awaiting their Appeal of the Judgement, which the City lost in October, 2016. The Settlement should be disclosed in Subsequent Events and the Settlement listed in the 2016 Audit is not even close to the actual TUMF Settlement.
The Restated WRCOG TUMF Settlement was last presented as Agenda Item 3 at the May16, 2017 Beaumont City Council Meeting: https://beaumont.civicweb.net/…
The Settlement expires upon completion of all obligations or June 30, 2039, whichever comes first. There are obligations for the City to construct the roadways they lied about constructing 10 years ago, transfers of Mitigation Fees to the WRCOG, and monetary payouts of which the City must keep accurate records for the next 22 years.
The City of Beaumont has no separate bank account for TUMF and Measure A Mitigation Fees collected. The TUMF and Measure A Fees are being deposited the into the General Ledger instead of a separate bank account.
Beaumont’s obligations in the Settlement include:
Settlement Agreement 1.2.3. City directs RCTC to give $9.4 Million Measure A Funds directly to WRCOG in increasing percentages of Funds Collected up to 75%. Settlement Agreement 1.2.4 limits the percentage of Measure A Funds to 60% if the WRCOG can collect at least $8 Million from Third-Party Claims by 2022. The City of Beaumont must account for the transfer of Measure A Taxes to the WRCOG.
Settlement Agreement 1.2.5. requires the City to pay $2 Million to WRCOG by October 1, 2017, collected from City Transportation Mitigation Fees.
Settlement Agreement 1.3.2. requires the City to pay $2.1 Million to WRCOG by October 1, 2017, for the Design of the I-10/Cherry Valley Blvd Interchange.
Settlement Agreement 1.3.3. requires the City to deposit $3 Million into a separate bank account for Pennsylvania Avenue by October 1, 2017. The City has yet to establish this bank account.
Settlement Agreement 1.3.3. outlines the financial arrangements for collection of 3rd Party Claims. The City has guaranteed $7 Million in recovery to pay for WRCOG legal expenses to pursue 3rd Party Claims.
Settlement Agreement 1.3.6.b. states that if at least $8 Million is not collected from 3rd Party Claims by July 1, 2022, the City must start making payments to WRCOG for their legal expenses.
Page 18 on the 2016 Audit adds $62 Million as an ‘Extraordinary Item’ to change the City’s Net Position from a negative to positive $77 Million – as if the WRCOG Judgement is a $62 Million revenue source for the City.