Beaumont’s Forged Sewer Capital Asset List

It’s just Former Finance Director’s William Aylward’s List of Sewer Capital Assets with an Additional $145 Million Plugged in.

Beaumont has forged a total of $400 Million in Capital Assets on their 2017 Audited Financial Statements.

The City of Beaumont has released the List of Sewer Capital Assets used to forge the 2017 Audit. It is former Finance Director’s William Aylward’s List of Sewer Capital Assets with an additional $145 Million plugged in.

The City is claiming they are following GASB 34 Item154 and 156, Determining Major General Infrastructure Assets, as their excuse for forging the City’s Capital Assets.

The rule clearly states that estimates are allowed on infrastructure constructed BEFORE 1980. Beaumont’s Sewer Capital Asset List does include an itemized list of Assets for items purchased in the 1980’s. But by the mid 2000’s the City was acquiring and embezzling so much bond money Aylward just plugging in numbers to try to hide the embezzlement.

The $400 million that should have built Beaumont’s infrastructure was acquired between 1993 to 2015, so estimating is not allowed, the City must show actual receipts and proof of purchase.

Furthermore, the estimates are to comply with the intent of the law and the intent of the law is to accurately account for capital assets. Beaumont’s Bond Fund Accounts and Requisitions prove that the money was paid out to various shell companies formed by the City’s Staff, most notably Urban Logic Consultants.

$133,023,060.90 in Infrastructure Sewer Lines has been added to the Capital Asset List. Approximately $2 Million worth of Sewer Lines was originally on the list of Equipment. The city then plugs in $131 Million as ‘Sewer Line Connections’.

The City also plugged in another $13.47 Million for Lift Stations that are already claimed in the Equipment section of the Capital Asset List.

Former Finance Director William Aylward admitted and release the Bond Fund Accounts showing that that the $60 Million he forged on the Sewer Capital Asset List from January, 2006 through January 2014 was actually paid to Urban Logic Consultants.

On July 5, 2016, Beaumont City Council Agenda Item 3.c Finance Director Melana Taylor presented the Beaumont Utility Authority Financial Report claiming that Engineering Services were classified as ‘Machinery and Equipment’:

When it was pointed out that the Sewer Machinery and Equipment numbers were plugged and all of the money was Embezzled by Urban Logic Consultants Ms. Taylor stated that Engineering Services was considered Capital Assets.

‘Council Approved’ the Forged Sewer Machinery and Equipment entries.

July 5, 2016 Beaumont City Council Meeting Transcript:

26:00 Melana Taylor: I was able to put together a Financial Report, based on information that’s available, just for the Sewer Funds so we can see where it stands. What I wanted to do first is just show you what it is that’s in this Report and we’ll discuss it, tell you what it means, and what the important facets are before we talk about any particulars or special Items that we need to probably look at. First; I took information from the existing Accounting System and I placed it in a ‘report format’ for June of 2011, 2012, 2013, 2014, and 2015 as it stands right now and as it was at the year-to-date for the current year. So we have five full years and a partial, almost full year for this year.

27:00 Melana Taylor: The first Statement, page 1, is the Statement of Net Position; that’s government terminology for a ‘Balance Sheet’. The Balance Sheet has our actual cash balances that has been allocated to this particular fund. It includes pulled cash, some investment cash, and then there is also a small investment because there was a Bond for the Wastewater Fund.

27:30 Melana Taylor: Then there are the Capital Assets; those are the fixed assets or the building, the land, the improvements, any of the machinery, equipment, engineering, anything else that may have been considered a capital asset, not something that would be considered maintenance or repair, which would be expensed. Then we have a short section at the bottom for other assets.

28:00 Melana Taylor: The other assets is where that small investment is because at the time that these were done it was considered a long-term investment that wasn’t going to be going away immediately even though it did, which we’ll talk about as well. There’s the bond issuance cost, the defeasance cost, the deferred loss on refunding, all of those things are related to the bond as well, and so when the bond got paid off; all of those items go away as well. But the Asset side is what we have and it’s at a particular point in time, so it’s not what is it for the last three years. It’s what were the balances as of that date; June 30, 2011, June 30, 2012 and so on. There are also at historical cost; so this isn’t what is it worth now, what’s the value of this. It’s how much did the City pay for, or how much do they actually have held in U.S. dollars at that point in time.

37:00 Melana Taylor: So the things to look at; first is to verify the fixed assets that have been recorded. As I said; that’s going to be a time-consuming process and it will take a while to figure that out. We do need to verify the assets that are held there to determine if they’re still of value or if we need to remove some of them or be replace. We know the wastewater treatment plant needs to have some things done and I’m guessing it probably needs to go hand-in-hand. We don’t want to over-record the books for things that have no value to the sewer at this point. The other thing is the payoff of the bond and it took me a little while, but what happened, what I can tell with the cash flow, is that $5,069,509 increase in cash. That came from the pooled funds held in the CFD funds.

38:00 Melana Taylor: So the money moved over from the CFD in the pooled cash, so it didn’t come from Union [Bank], it came straight around from the pooled cash at Citibank. [big lie] All it is is a simple transfer on the books, so that’s what happened. Originally it was recorded as income to the wastewater fund, and that’s an incorrect way to record that, so instead I recorded it as due back to the City. Wastewater treatment plant can not keep that money, it wasn’t to be used to pay off the bonds, it needs to be paid back. As long as the cash position for wastewater treatment plant stays positive for the end of 2016; I’m showing that we’re repaying the entire $5 Million back by June 30, 2016 to put the CFD funds back whole and keep the wastewater treatment plant in the right state.

39:00 Melana Taylor: That would leave it with a little less cash that we would hope, but it will leave the other funds fully funded back to its original place, it shouldn’t have been taken in the first place.

39:50 Judy Bingham: This is a forged government document. If the City had purchased $2 – 3 Million/year in machinery and equipment for the past 5 years there would be RFPs, Contracts, Invoices, and payments on the Check Warrants.

40:00 Judy Bingham: There are no receipts or invoices to verify the purchase of Sewer machinery and equipment. The City’s Financial Statements define the Life of machinery and equipment as ‘3-15 years’. Former Finance Director Bill Aylward has already admitted several years ago that the amounts entered under ‘Sewer Machinery and Equipment’ were forged – I have copies of them if you want copies of that information, and the money was instead paid to Urban Logic Consultants. The 2001 Wastewater Bond was Called in December, 2014 after it was disclosed that all the money was funneled to Urban Logic and a ‘state of the art’ recycled water facility was never built.

41:00 Judy Bingham: A recent Record Request for the City to verify the forged sewer machinery and equipment numbers returned a response that our Finance Director thinks it is legal to plug forged numbers if it’s the first time she’s seen it.

It is illegal to forge government documents. Period. There are no excuses for forging government documents. The forging this Document is a precursor to forging the Financial Statements. Federal Law required that an Auditing Firm report forged government Financial Statements. SEC 2002 Law Section 10A requires the Auditing Firm to file a Complaint with the Commission when an Issuer is knowingly forging financial statements.

42:00 Judy Bingham: The Auditing Firm of Van Lant & Fankhanel has already received verification, as has your City Manager, that the Sewer Machinery and Equipment numbers are forged. The Auditing Firm has no choice but to report to the SEC the City of Beaumont’s fraudulent Financial Statements. Council can not accept a forged document. You can not continue on with Aylward’s lies.

42:50 Councilman White: I’d like Mr. [City Manger] Warne to address Ms. Bingham’s comments about forged documents, what this document is representing here.

43:00 City Manager Warne: There are no forged documents. No one is intentionally trying to misrepresent, current staff isn’t trying to misrepresent anything. Some things happened in the past and the city’s process of reconciling the various accounts and funds, and that process is ongoing and we uncover things that should have been handled differently. We’re doing it and I think a good example of that is the report that is given by our interim finance director where we determined that $5,069,000 was swept out of the CFD funds and sent to the water fund to make the bond payments. Our investigation showed that could not be justified, there’s no nexus for that, so one of the things that – on our own – Melana has gone ahead and reversed that.

44:00 City Manager Warne: So in 2016 that we’re moving the money back out of the water enterprise fund and back into the CFDs where they belong. As we continue our audits, as we continue to find things, we’re going to make appropriate adjustments. There is no effort to try to hide anything, mask anything, or cover up any particular wrong doing. We can’t speak for some of the things that happened in 2011 or 2012, but if we do uncover anything as far as our audits go; we are making adjustments. We’re currently in the process of auditing the 2014/2015 books and there have been a number of adjustments that have been made by the Auditors to make corrections; so that process is ongoing. If anyone knows about anything that is inappropriate then please come talk Melana and I and we’ll make any adjustments that have to be made.

44:00 Judy Bingham: I’ve given you the information.

Councilman White: Have you seen anything from Ms. Bingham since you’ve taken office? [May 17, 2016]

Warne: Not seen it.

Judy Bingham: I gave it to you the first night you were here. Remember; I handed you a packet about the audit. I gave it to you.

Warne: I don’t recall anything that she has and we’ll do appropriate investigations.

46:30 White: Is there an audit of the sewer fund ongoing?

Warne: Yes, we’re doing the 2014/2015 audit right now, then right after that we’re going to move and do 2015/2016.

53:40 White: You have five years of history here. There’s information, as Ms. Bingham brought up, for machinery, buildings, You said that you dug into accounting details. Where do you get those numbers; 2011, 2012, 2013?

54:00 Taylor: The acquisition of fixed assets; that’s going to be simply the way that’s it’s been journalized in the system, so I can see fixed assets went up $100,000; $50,000 of that was in machinery, and $20,000 of that was in automobiles. But I haven’t gone back and said ‘okay, I have now these journal entries; now go back from there; what ties to the journal entry. Usually I can’t find anything, but I get lucky sometimes and I can find an invoice or I can find notes then I can dig back further to find what was it, what was it actually. As the fixed asset capitalized on the books; one of the things that happens is that we keep a deprecation schedule and there IS one for the City of Beaumont for the wastewater fund. So there’s a list of what was considered assets each year. Unfortunately; it’s a very very generalized description and it doesn’t help me know exactly what was it exactly.

55:00 Taylor: From what I can tell they’re mostly maybe a redefining of what they considered engineering cost for the wastewater treatment plant that they then capitalized as part of the ongoing facility, but I haven’t gotten into that detail to verify what was that cost. What was it, can I find something to support it. I haven’t gone that far.

55:15 White: Okay, and lets say that you are either never able to find documents to support it or you have no confidence in those numbers. What does an Accountant do at that point? Do you just erase all the previous years and start with zero?

Taylor: Well, you can’t do that. If we go to the wastewater treatment plant; it exists. There’s things there and one of the things we need to look at for the city, and we can look at all the wastewater treatment plant, is we need to someone who specializes in determining asset values. Not what it can be sold for, that’s not how it’s done. It’s more what you showed you paid for.

56:00 Taylor: Let’s look at this and see how it matches up. What you have here is 20 years old, it should probably have a remaining book value of; and they figure all of these things and we would have to adjust to some kind of consultant report and go on from there.

White: And your deprecation are based on prior deprecation?

Taylor: It’s on the schedule, right. Most assets will have a 10-15 year life. The buildings usually 20-30. I’d have to go back and see, but I think it was set up with a 20 year, I can’t recall.

57:00 White: Mr. Warne, this is not an audit, right?

Warne: These are not an audited.

White: This is a financial report.

Warne: That is Correct. We’re in the process of finishing the 2014/2015 Audit in process now and the 2013/2014 audit, as I’ve been told, is only in draft form because there was no confidence because of the people that had done the audit. Prior to that you do have audit reports by the prior administration and who they choose.

White: So if we receive and file this, we receive and file it, do we send this Report to someone, put our signature on it and say ‘here’s what we know’..

Warne: No.

White: ..this is confident?

Warne: No.

58:00 White: The process of deciding to pay back the $5 Million the City paid to retire the bond; that normally is not done this way. Normally what would have happened, if I understand it, is at the time the Council decides to pay off that bond that we would at the same time pass a Resolution on how we’re going to repay the city, or the CFD, I know the CFD is restricted. We would have done something that said at certain times we’re going to put money back into the CFD, into the city.

Warne: Well, to pay off the bond and to transfer the money of that magnitude, in my opinion, would require city council action. There would have been an agonized item, there would have been a staff report, there would have been an explanation on what was taking place. I don’t know exactly how they did it, but our analysis shows that it really needs to go back.

1:03:30 Mayor Lara: I’ll make a Motion to Accept and File

White: I’ll Second that.

Roll Call:

Orozco: Aye

Knight: Yes

Condon: Yes

White: Yes

Lara: Yes