By: Libi Uremovic | Original Article at patch.com
Questions Regarding the 2013-2014 Financial Statements
1. Why wasn’t the Financial Statements presented to Council by the Auditing Firm of Moss Levy Hartzheim?
2. The Auditors released the Financial on January 30, 2015, but the Audit and Internal Controls Report were withheld until March. Why was the Audit withheld from the Public?
3. Who is responsible for adding the cover page to the Auditor’s Internal Control Report in an attempt to appear as if City Management had completed the Management Analysis Report?
4. Why has Beaumont City Management refused to submit a Management’s Analysis Report for 21 years?
5. Why has the Auditing Firm of Moss Levy Hartzheim performed the Beaumont Financial Statements for 21 years when good business practices dictates that auditing firms are changed every 4-7 years?
6. How is it possible that the same Firm performed Beaumont’s Internal Controls’ Analysis 21 years in a row and never noticed/reported that most of the Companies used by the City are owned by City Staff?
7. Why is there no documentation in the Internal Controls Report stating that the City of Beaumont has never obtained bid contracts as required by California State Law?
8. Why was it never reported in the Financial Statements that proper Funds and Bank Accounts were never established?
9. Page 4 of the Internal Controls Audit states: “Professional standards require us to accumulate all known and likely misstatements identified during the audit..” yet every year the City ‘misstates’ the LAIF Account, the Sewer Machinery and Equipment, and the $21.5 Million IOU from RDA. Why are these material misstatements never reported?
10. How did the Auditors verify the LAIF Account and Sewer Machinery and Equipment?
11. 12. Page 7 of the Internal Controls Report states: “As part of obtaining reasonable assurance about whether the City’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. …The results of our tests disclosed no instance of noncompliance that is required to be reported under Government Auditing Standards.”
Material Weakness Deficit Unassigned Fund Balance In General Fund
2011-1 = $10,871,054
2012-1 = $4,162,063
2013-1 = $6,866,481
2014-1 = $6,623,679
Management’s Response:
2011-1 “..City has instituted a hiring freeze and overall review of operating expenditures, reviewed and adjusted operating and capital expenditures..”
2012-1 “..City is aware of deficit unassigned fund balance and has implemented a hiring freeze per the last year along with analyzing all expenditures with department heads. Staff is working with the State of California Finance Department on the repayment of loans made to the former Redevelopment Agency ..”
2013-1 “..City is aware of deficit unassigned fund balance and has implemented a hiring freeze per the last two years along with analyzing all expenditures with department heads. Staff is working with the State of California Finance Department on the repayment of loans made to the former Redevelopment Agency ..”
2014-1 “..City is aware of deficit unassigned fund balance and has implemented a hiring freeze per the last three years along with analyzing all expenditures with department heads. Staff is working with the State of California Finance Department on the repayment of loans made to the former Redevelopment Agency ..”
12. Question: How can the City justify a $21.5 Million IOU from RDA when they owe millions every year to RDA?
13. Is the $6,051,679 listed under ‘Developer Contributions’ on page 12, Statement of Revenues, Expenditures, and Changes in Fund Balances, actually the additional Mello Roos property taxes collected or ‘Pay As You Go’?
14. Page 16 on the 2013 Audit list Sewer Revenues at $4.4 Million. The 2014 Audit list Sewer Revenue at $7.8 Million. The $3.4 Million increase is in part because the City recorded Heartland Mitigation Fees with User Fees. Why didn’t the Auditors catch and record this material misstatement?
15. Page 31 lists a total of $9,258,624 in Expenditures that were excess of the Budget. Where did this money come from?
16. Page 32 states Government Securities Mutual Funds, which include CMO’s, can only comprise 20% of the City’s investments. Why is it not reported that the City has violated State Law?
17. Why does the Auditors list “Community Facilities District Bonds” as an Investment authorized by the State with no investment restrictions when this is incorrect? The Authorized Investments were first altered on the 2013 Audit.
18. Page 37, Note 5 ‘Loan Agreement’ with Calimesa, balance $210,672. 2013 balance was $210,221. 2012 balance was $209,595. The City of Calimesa has never paid on this loan. Is Calimesa aware of this transactions?
18. Page 40, Note 8, PERS’ Unfunded Liability was $1.4 Million FYE 2014. What is the City doing to fund their Employee’s Pensions?
19. Page 42, Note 9, General Liability Claims Payable records $18.5 Million settlement in the Hernandez blinding. Why was this settlement never disclosed to the Public? How does the City plan to pay this debt?
20. Page 42, Note 10 Unpaid Workers’ Comp Liabilities, $782,356. How does the City plan to pay this debt?
21. Page 58, Note 14 AB1484 Due Diligence Review, City was fined $3 Million, making payments of $300,000/yr for 10 years. Note 14 also states that the city is NOT ALLOWED to report $21.5 Million IOU from RDA and it is ‘uncertain’ the DOF will allow the $21.5 Million because the City used a 12% interest rate, which is not allowed. Why is this $21.5 Million still on the books when there is no chance of collection?
22. Page 60, Note 19, records Deficit Net Position of $34.8 Million and Deficit General Fund of $6.3 Million FYE 2014. How does the City plan to balance their book?
23. Page 60, Note 19 records the WRCOG TUMF Judgement with an interest rate of $130/day. This is incorrect. Why did the Auditors not verify the correct amount of interest daily, which is $8,000/day.
24. Page 60, Note 19, Management’s Response to the WRCOG states: “is the ultimate responsibility of past and future developers”. Is this Council’s position? Have past and future developers been notified that they will be sued to recoup TUMF fees?
25. Page 61, Note 20, ‘Management believes, in consultation with legal counsel, that the obligations of the former RDA due to the City are valid enforceable obligations….the City’s position on this issue is not a position of settled law.” Who is the Legal Counsel referenced? Is this the same Legal Counsel that thinks they can win the WRCOG appeal?
26. Page 62, Note 20, records $50,000 loan to develop a warehouse in 2009. Note 20 states the loan carries a 5% interest rate, but the recorded balance of the loan is $50,000. Who was this loan made to? Why isn’t the interest recorded and added to the total amount due? Why hasn’t this loan been called ?
27. Page 63, Note 21, Hernandez vs Beaumont, states that City has paid ‘most’ of the $250,000 deductible. This settlement and payment agreement was never disclosed to Council or the Public. How has the $250,000 been paid? From what fund was the money drawn?
Page 63, Note 21 states “Council approved the retirement of the [2001 Wastewater Bond] for $8,270,000. ‘Retire’ implies that it was the City’s option. This Bond was Called. Why doesn’t the Financial Statements properly record this bond’s transaction?
Page 63, Note 22 Administrative Overhead: The City’s General Fund charged its other Funds a total of $6,175,682 in in Salaries and Overhead Expense, yet the City still recorded a $6.6 Million Deficit in the General Fund. How is it possible to charge $6.1 million in administration fees when the total amount of Administrative Salary Expenses FYE 2014 was only $4.5 Million?