Audit Reveals Forged Check Warrants, Personal Use of Government Funds By City Officials, Personal Loans to City Officials, Payments of Over $1 Million with No Explanation, and Various Other Irregularities
Index of articles:
Chronological order – latest to oldest
- October 02, 2013 – Missing Bond Fund Accounts
- August 11, 2013 – Sewer Fund Hides $1/4 Million Urban Logic Fees
- August 06, 2013 – City Cashes In Deferred Compensation
- July 19, 2013 – Holding Union Bank Accountable
- July 15, 2013 – Bond Debt Fact Check
- July 4, 2013 – Beaumont City Council
- June 29, 2013 – Heartland Pays $.25 on the $1.00 for Bond Debt
- June 2, 2013 – What & Where Are The ‘Reserves’
- May 18, 2013 – Gas Tax Is A Waste Of Taxpayer Money
- May 7, 2013 – Potrero Bridge Project
- May 4, 2013 – Conspiracy to Obstruct Justice
- May 3, 2013 – Diners’ Club Card
- April 25, 2013 – Fund 35 Mitigation Fees
- April 18, 2013 – RDA Funds 37, 38, 39
- April 11, 2013 – Fund 36 – RDA Capital Projects
- April 10, 2013 – Records Request – 3rd Request – Do It Over & Over Until You Do It Right
- April 5, 2013 – City of Beaumont – Your Time Is Up
- April 4, 2013 – Beaumont Police Department
- March 28, 2013 – Deposits For Year End 2012
- March 21, 2013 – Closing The Books For Year 2011-2012 / Department of Council
- March 14, 2013 – Beaumont Electric
- March 7, 2013 – General Government Managment Services
- February 21, 2013 – Debt
- February 21, 2013 – Urban Logic Consultants
- February 14, 2013 – Office Of The City Clerk
- February 8, 2013 – Electric and Water Utilities
- January 31, 2013 – Transaction 207206
- January 24, 2013 – Checks & Balances
- January 10, 2013 – The Art of Padding Payroll
- January 3, 2013 – Falsifying Employee Benefits
- December 27, 2012 – Forging The Check Warrants
- December 20, 2012 – Records Request – General Fund Bank Statement Documentation
- December 20, 2012 – General Fund Bank Statements
- December 13, 2012 – City of Beaumont Internal Audit: Preliminary Findings
- November 29, 2012 – Records Request To The City of Beaumont: This Is An Internal Audit – Open Your Books
October 02, 2013 – Missing Bond Fund Accounts
The Bond Fund Accounts are the Bank
Accounts listed on the Bonds and held by the Bond Trustee – which
is Union Bank in L.A. The Trustee sets up the bond fund accounts
for each bond to ensure the funds are distributed legally. This
audit focuses on the last six bonds received by the City of Beaumont.
The bond fund accounts are set up with
10-digit account numbers. The 1st four digits on all the
bonds are the same: ‘6711’. The next three digits identify the
individual bonds and the last three digits identify the individual
account. The bond fund accounts I’ve received from the City all make
numerous references to money transfers to ‘xx07’ accounts, but the
City has not disclosed these accounts. The following is an audit of
selected bond fund accounts in the last six bonds received by the
2011 Bond Area 17B $12,145,000: This bond is broken into
two section for Series A and Series B, so it has two xx07 accounts –
6711966807 and 6711966907.
6711966801 = 2011 Revenue Bond
Fund Account. In February, 2012 this account was used to funnel
$144,000 from 6771966807 to 6771966802. In August, 2012 $375,768.76
was transferred into this account from the 6807 account. In
September, 2012 $375,740 was transferred to account 6802 and in
February, 2013 another $375,000 was transferred from 6807 to 6802
through this account.
6711966802 = 2011 Bond Interest
Account. This account is started with $749,273.88 transferred from
account 6807 and $109,052.12 from the City. February does show a
transfer of $144,000 from the 6801 account, but the $375,740.39
transfer from 6801 in September, 2012 AND the $375,749.33 transferred
in February 2013 are NOT recorded on the 6802 fund account. This
leaves a discrepancy of $751,489.72.
6771966905 = 2011
Bond Construction Fund Series A. This account received $25,735.21
from the 6807 account in December, 2011. In January, 2013 $24,736.21
was transferred to ‘PNC Bank Pittsburgh’ with the memo ‘Payment
Tournament Hills’. In June, 2012 $1,237.74 was transferred in from
6808 and $1,500 was transferred out to the 6907 fund account.
2011 Bond Construction Fund Series B. The Bond states this fund
should have $2,563,861.31 in its account to be used for construction.
In December, 2011 $2,092,110.83 was transferred from the 6807
account and transferred to ‘PNC Bank Pittsburgh’ with the memo:
‘Tournament Hills’. In June, 2012 $5,489.12 was transferred in from
6808 and $3,010 was transferred in from 6908.
In November, 2012
$2,365,875.44 was transferred from fund account 6911. $1,182,937.72
was transferred to ‘PNC Bank’ with the memo ‘Pardee Homes San Timateo
Sewer-Desert Lawn Drive’ and $147, 555 was paid to Urban Logic in
three separate transactions.
Urban Logic is
paid every month through the 6906 account: December 2012 = $396,418;
January 2013 = $112,126; February 2013 = $91,951; March 2013 =
$83,350; April 2013 = $44,163; May = $75,366; June 2013 = 143,165.
Urban Logic was paid over $1 Million through this account. Balance
of 2011 Bond Construction Fund Account as of August 2013 = $66.75.
= Special Escrow Fund Account. This account should have $5,510,000
and that amount was transferred in from the 6807 account in December
2011. In November 2012 $2,365,875.44 was transferred to the 6906
account. There is no other activity in the account. Page 38
(46/286) states the use of the Special Escrow Fund.
2012 Bond Area 8C $5,650,000:
6711978601 = Revenue
Bond Fund Account. August 2012 $136,190 transferred in from 8607
account. September 2012 $136,182 transferred to 8602 account.
February 2013 $161,270 transferred from 8607 account to 8602 account.
= Construction Fund Account. March 2012 $1,459,817 transferred in
from 8607 account. May 2012 $1,127,827 transferred to ‘PNC Bank’
with memo ‘Highland Springs Ave Acquisition: Pardee Homes’ and
$287,894 to CitiBank with memo ‘Wastewater Headworks Upgrades: City
$44,058 paid to Urban Logic. August 2012 lists $9,544 transferred in
from 8608 and $2,635 transferred in from 8707.
April 2012 Bond Area 20 $3,265,000:
67119799901 = Revenue
Fund Account. August 2012 $67,878 transferred in from 9907 account.
September 2012 $62,874 transferred to 9902 account. February 2013
$91,000 funneled from 9907 to 9902 account.
= Interest Account. April 2012 $207,301 transferred in from 9907.
August 2012 $62,878 transferred to 9907. February 2013 $91,333
transferred to 9907.
= Special Escrow Fund: April 2012 $1,665,000 transferred from 9907.
November 2012 $650,390 transferred to 0005. July 2013 $1,014,609
transferred to 0005
June 2012 Bond Area 7C $3,655,000:
6711988401 = Revenue
Bond Fund. August 2012 $41,915 transferred in from 8407 account.
September 2012 $41,915 transferred to 8402. February 2013 $31,687
from 8407, $15,378 from 8409, $14,500 from 8410, $28,253 from 8411
and $89,810 transferred to 8402. As of June 2013 the 8402 account
balance was $8.74.
= Interest Account. June 2012 $51,956 transferred in from 8407
account. August 2012 $41,915 transferred to 8407 account. February
2013 $32,703 transferred from 8504 account. $14,500 transferred to
8410 and $26,253 to 8411.
= Construction Fund Account. June 2012 $350,451 transferred from
8407 account. $54,200 transferred to Urban Logic
and $296,249 to City with memo: ‘Transportation
Facilities’. December 2012
$1,825 transferred from 8508, $9,825 from 8507, and $2,383 from 8408
= Series F Construction Fund. June 2012 $759,788 from 8407
account to City with memo ‘Potrero Blvd’.
December 2012 $1,825 from 8512, $8,964 from 8511, and $4,585 from
January 2013 Bond Area 19C
= Expense Fund Account. February 2013 $56,025 to McFarlin &
Anderson, $59,050 to Ron Gunn, $28,000 To Fulbright, $1,202 to Samuel
Norber, $3,749 to Financial Printing, $3,750 to Trustee. April 2013
$30,000 to City for ‘Authority Administrative Expense’. This amount
has its own account – 2408.
= Administrative Expense Fund. Page 16 (24/136) lists the amount of
this fund at $30,000. February 2013 $35,000 paid to Urban
Logic, $25,000 paid for
‘Administrative Expense’, and $25,000 to ‘Special Tax
= Cost of Issuance Fund. January 2013 $40,500 transferred in from
2308. February 2013 $15,000 paid to McFarlin, $15,000 to Ron Gunn,
$7,500 to Fulbright, and $375 to Trustee.
April 2013 Bond Area 17A $10,875,000
6712027011 = Expense
Fund Account. April 2013 $4,250 to Trustee Fees, $87,187 to Ron
Gunn, $58,687 to McFarlin, $28,593 to Fulbright, $1,267 to Sam
Norber, and $4,258 to Printing.
= Administrative Expense Fund. April 2013 $85,000 transferred in
from 7009 account. May 2013 $50,000 to City for ‘Special Tax
Administration’ and $35,000 to Urban Logic.
= Cost of Issuance Fund Account. April 2013 $45,500 transferred in
from 7009 and $375 paid to Trustee, $15,000 to Ron Gunn, $15,000 to
McFarlin, and $7,500 to Fulbright.
Bond Fund Account Monthly Statements for Accounts:
6711966907 from December 2011 to Present.
March 2012 to Present.
April 2012 to Present.
6711988409, 6711988410, and 677988411 from June 2012 to Present.
66712022308, & 712022310 from January 2013 to Present.
6712027009 from April 2013 to Present.
This is not a new
records request as this information was requested over a month ago.
The total amount for copies is under $95.00.
August 11, 2013 – Sewer Fund Hides $1/4 Million Urban Logic Fees
The Sewer Fund continues to be an
accounting nightmare. The City of Beaumont designates Fund 10 to
account for the sewer revenue & expenses, but the sewer revenue
is collected through the General Fund. On July 1st, 2013
the City of Beaumont increased Sewer Fees. This audit captures the
months of May and June; before the rate increase.
The total revenue allocated to
accounting code ’01-0000-0210-0000′ Accounts Receivable Sewer/Refuse
for the two month period was $1,351,200. This amount is overstated
by $1/4 Million.
On May 22nd the City of
Beaumont received $244,300 Sales & Use Tax reimbursement from the
State of California Board of Equalization. This transaction was
Transaction 236349 debited ‘cash’ and
credited account ’01-1200-7155-0000′ for ‘Sales & Use Tax’.
Transaction 236348 debited ‘cash’ and
credited account ’01-0000-0210-0000′ for ‘Acc Rec Refuse/Sewer’.
1200 is the Administration department.
The Sales & Use Tax should not be deposited directly into the
department that now houses the City Manager, Finance Director, and
acting City Clerk, but the Tax absolutely can not be deposited twice.
Including the Sales & Use tax; the
Sewer Fund generated $1.35 Million in a two-month cycle. This amount
gave the City the funds to pay for the $1.35 Million in expenses
generated during the same period. In viewing Sewer Fund Expenses
it’s obvious that a large portion of the billing for Urban Logic
Consultants has been diverted to the Sewer Fund. The expenses
charged to the sewer fund in May & June for Urban Logic
Consultants was $221,691.63.
Let’s review: City incorrectly
deposits $224,000 in Sewer Fund and pays out $221,000 to Urban Logic
Consultants. Coincidence? Not likely.
The City of Beaumont Financial
Transactions Report lists Sewer Fund Revenue was $4.1 Million in
fiscal year 2012. However; if the City was collecting over $1.1
million in a two-month then the total Sewer Fund Revenue should be
over $6 Million for fiscal year 2012.
Fees are collected for the basic needs
of the Community. It is unreasonable for the Citizens of Beaumont
to pay additional sewer fees when the taxes and fees currently
collected are not properly used or accounted for.
August 06, 2013 – City Cashes In Deferred Compensation
Deferred Compensation is part of the
employee’s payroll that is paid at a later date such as retirement
plans. The main benefit of this payroll option is to defer taxes.
Deferred Compensation saves the money in a interest-bearing financial
institution until/unless the employee requests to withdraw the funds.
Deferred compensation is collected just
like a medical benefit; the amount is deducted from the individual
employee and paid to whatever savings or money market fund is holding
the compensation. If the deferred compensation is part of a
retirement fund there would be a check issued to the financial
institution holding retirement funds.
The City of Beaumont uses the
accounting code ‘3026’ to collected deferred compensation in the
departments. The City of Beaumont also has a hidden account code –
‘1195’ that is located on the General Ledger after the personal loans
and before the individual departments. The amount taken from the
departments makes up only 40% of the deferred compensation, the
hidden account makes up 60% .
On April 4th, 2013 an
appendix to the hidden deferred compensation account was added.
’01-0000-1195-0001′ was created for Councilman Deforge with the memo:
‘loan repayment’. There is no amount of loan noted, so it appears
that the loan is for a past transaction that was never repaid.
Most disturbing about the City of
Beaumont’s accounting methods is that the funds are withdrawn, but
they are not being saved in any financial institution.
The Cash account is being credited in a
lump sum, but no check is being issued to transfer the money to a
On May 10, 2013 the City collected
deferred compensation twice:
Transaction # 233811 – $44,656.19
Transaction # 233812 – $44,215.63
Both transactions collected $17,000
from the individual departments and $26,000 from the hidden deferred
compensation account. Both transactions are credited to ‘Cash’, but
there was no check issued to transfer the amount to a financial
It is unclear if any city employees are
actually in the deferred compensation program or if this is just
another method of cooking the books; but what is clear is that the
funds are not being saved for the future – they are being exchanged
for cash in the present.
July 19, 2013 – Holding Union Bank Accountable
In our Democratic system of Checks & Balances the massive bond debt incurred by the City of Beaumont Should have never happened. Although the responsibility to control local government corruption is the Citizens’ duty of care; there are State and Federal Laws to prevent Banks and Financial Institutions from approving debt that can not be repaid.
California Financial Code Section 1322 allows the Banking industry to engage in real estate development because of their ‘expertise’. The ‘expertise’ would be for the bank to know the amount of debt a local government agency can legally acquire and the regulations & requirements for bond debt.
I have filed a complaint with the California Department of Business Oversight and the Federal Securities Commission against Union Bank NA located at 120 South San Pedro Street, 4th Floor, LA, CA, 90012 and their Vice President Stephen W. Boughton.
Union Bank is responsible for allowing the City of Beaumont to incur massive debt. Union Bank has issued the City of Beaumont $300 Million in Bond Debt without voter approval. The Bonds are all poorly written, contain several mathematical & factual errors, and circumvent basic State & Federal laws regarding Debt and Reserve Requirements. Bond Debt should have a 10% Reserve Requirement, but the City of Beaumont can not produce a Statement from Union Bank or any other Financial Institution verifying any Reserves. Fine Print on the bonds state that no reserve fund has been established.
The City of Beaumont’s total tax revenue is only $12 Million/year, yet their bond debt payments are over $14 Million/year and escalating. Union Bank has issued over $44 Million in additional bond debt to the City of Beaumont in the last 18 months knowing that the City is already financially underwater and there is no tax revenue allocated to pay for the debt.
The actions needed are to demand Union Bank NA immediately cease all further issuing of bond debt to the City of Beaumont and any other Government Agency that been allowed to over-extended themselves.
Union Bank should also be fined &
penalized for circumventing California State & U.S. Federal Laws
regarding Local Agency Debt and the Banks’ Duty of Care.
July 15, 2013 – Bond Debt Fact Check
At the July 2, 2013 Council meeting
Council & City Staff were repeatedly asked questions regarding
the bond debt and the People were repeatedly given false statements.
Below are clarifications of Beaumont’s bond debt.
1. Developers Pay The Same Bond
Payment Amount As Homeowners. Incorrect. Only the 1994 Bond
Debt was written to hold Developers liable for the debt that is not
paid by the homeowner or business. All other Bonds are now written
so that the Mello Roos taxes do not take effect on the property
until an ‘Occupancy Permit’ is issued to the homeowner. Even after
the house is built the taxes do not go into effect until there is a
resident to accept & sign for the debt.
2. Everyone Pays the Same Mello
Roos Tax. Incorrect. The Mello Roos taxes have never been
‘equal’. Every bond debt has a different price for individual
homeowners, commercial, and undeveloped property.
3. Bond Debt Forgiven for Area # 5
is Insurance Bonds. Incorrect. If the original developers were
required to purchase insurance bonds it would have been listed in
the bonds AND there would be a money trail if the City was holding
insurance bonds. The bond debt attached to Area # 5 is from the
original 1994 bond debt. The money was spent 20 years ago, not put
aside or invested in ‘insurance bonds’. The bond debt principle &
interest payments for Area # 5 are over $200,000/year. They are
releaving the bond debt because no business will rent/buy a
warehouse that has an additional $200,000/year overhead for 30
4. $21 Million Developer
Contribution = Bond Debt Payments. Incorrect and Insulting.
First of all; the bond debt payment in 2011 was $13 Million. If
the City collected $21 Million in Mello Roos payments for a $13
Million debt the City made $8 Million/year profit from bond debt
payments. If the City is making $8 Million/year profit just from
bond debt then why are they $300 Million in debt.
$21 Million is the additional amount
of bond debt the City took out in fiscal year 2010-2011.
12/22/11 = $12,145,000
03/29/12 = $5,650,000
04/26/12 = $3,265,000
Spinning and twisting a lie doesn’t
change the lie into the truth. If the City is collecting $21
Million/year from Mello Roos, then why is there no money in the bank
to pay the $15 Million bond debt that is due on September 1st? Either the City is spending the taxes collected to pay the debt
or the City is not collecting the funds.
Council needs to make an honest
statement regarding the bond debt. Hiding behind the false
statements of their City Manager is unacceptable. Every member of
Council should be knowledgeable about the debt and able to answer
questions themselves instead of relying solely on the City Manager
It is Council’s duty of care to
understand that they are running up massive debt. Not one member of
Council was able to answer a question or make an honest statement
regarding the bond debt. This is absolutely unacceptable.
July 4, 2013 – Beaumont City Council
I traveled to Beaumont for the 1st time to attend the July 2nd Council Meeting. The surroundings reminded me of the California of my childhood; peaceful environment, small farms, & families living the American Dream.
There are documentaries showing the impact of developers making deals with corrupt governments without regard to the effects on the locals or environment, but the documentaries are usually located in 3rd world countries.
Cities are divided into three (3) Zones: Residential, Business, & Industrial. The residential zone is where the residences live; the business zone is where the businesses operate; and the industrial zone is where industry is located. The only businesses that are mixed with residential zoning are service & retail operations. Industrial Zones are located on the outskirts of cities in areas that have low property values.
Industries’ presence is everywhere in Beaumont, but nowhere is it more heartbreaking than in the Railroad District. The old church and houses are part of Beaumont history and should be preserved. Tourism is a great revenue source and people look for destinations where they can see a glimpse of ‘Old California’.
The Council Meeting was reminiscent of a B movie scene of the Post-WWII Eastern Block. The Citizens spoke to Council from a podium with a 3:00 timer and green, yellow, & red lights to indicate when the citizen is allowed to talk. There is also a buzzer that is used to drown out the speaker.
At the beginning of the council meeting the buzzer started to sound when the speaker had 5 seconds left of their speech. Then the buzzer started cutting people off with 10 seconds left on their speaking time. One man had 25 seconds left to speak when the buzzer started sounding and the Mayor started yelling at him that his time was up.
The Mayor repeatedly violated the Brown Act and disrespected the Citizens. The City Manager repeatedly lied to the Public. The other three members of Council just sat there. They failed at their duty to protect the rights of the People or to requested factual information from the City Manager.
The Citizens have been very vocal about their concerns and have been demanding answers, but not one member of Council has looked into the bond debt and warehouse scam. Councilwoman Knight stated she received a stack of complaints an inch thick, but she didn’t do any homework to address the problem.
Council also has a duty of care to protect the City Employees. Judy chastised Rebecca Deming for being a part of the bond scam, but Ms. Deming is only an employee doing what she is told by her superiors. The City applies the centuries-old strategy of using women to mask their intentions. The Viet Cong used women to approach U.S. Solders, drug dealers use woman as mules, and Beaumont is having women sign documentation and represent the City to mask what is going on behind the scenes.
These woman are just members of the community that took jobs with the city. They are not the masterminds, but they are signing paperwork that will hold them legally liable. Councilman DeForge should be especially sensitive to legal liability of the signatory. DeForge not only has a daughter that is being used as a pawn, but Council has also relieved the Finance Director & City Manager of their legal liability by signing the General Fund Checks.
I don’t know how Council got talked into being the authorized signatory on checks, but I suggest Council google the term ‘Hot Potato’.
I regret that I didn’t speak to any member of Council, but after the meeting no one had the impression that Council wanted to hear from the People unless the people were telling them what they wanted to hear. I attended the meeting because it was listed on the Agenda as a ‘Workshop’. A workshop is a forum with back & forth dialogue and open communication. Beaumont City Council’s workshop was nothing more than an agenda
The People of Beaumont are a slice of 21st century Americana. There are families that have lived in the area for generations mixed with young families struggling to find a safe place to raise their kids. Both
demographics are decent people that want to live in a Democracy, not in a Socialist Regime.
Council voted down the Heartland Warehouse Project, but everyone knows the City will find another reason to create more bond debt. The Citizens pay for government and elect & pay Politicians to oversee government. When the Citizen also has to fight their elected and appointed officials it’s time to change the government.
The Citizens of Beaumont need Council to represent them and tell them the truth about the financial condition of the City. It is the duty of Council to ‘fact check’ their own meetings and city employees.
If Council can not separate themselves from the City Manager the People have no choice but to removeCouncil.
The 4th of July is our Country’s tribute to the People for freeing themselves from an oppressive government. Declaring their freedom from the mother country was not easy, but it was a battle fought so future
generations could prosper. To preserve their future; the People of Beaumont must take back their government today.
June 29, 2013 – Heartland Pays $.25 on the $1.00 for Bond Debt
CFD 93-1 contains Area No. 5 known as the ‘Heartland Project’. This Property is the currently the center of attention because of the Heartland Warehouse Project being proposed, but this property has been part of bond debt since the inception.
Area No. 5 is part of the original 1994 Mello Roos Bonds. Area No. 5 received $2,345,826 or 23% of the original $10 Million Bond Debt and was also assigned another $266,569 for ‘Facility Design’.
In the 1994 bond debt agreement the ten developers/owners of the property agreed to pay the bond debt themselves if there was not enough property tax revenue derived from the homeowners. Page 22 states:
“The District (will) levy in each Fiscal Year the Special Taxes in each Improvement Area in an amount sufficient to pay the debt service on the applicable series of District Bonds and the cost of providing certain Administrative Expenses of the District, Authority, and City.”
The reason the City has to fill out bond debt tax forms every year is because the property owners are supposed to pay for the cost of the bond debt each year.
The Rate and Method of Appropriations for Area No. 5 lists the steps to collect the Special Taxes as:
First: The Special Tax shall be levied in equal percentages on each Assessor’s Parcel of Developed Property up to 91% of the applicable Assigned Special Tax for such Assessor’s Parcel.
Second: If additional monies are needed after the first step has been completed, the Special Tax shall be levied in eual percentages on each Assessor’s Parcel of Undeveloped Property, up to 100% of the Maximum Special Tax for Undeveloped Property.
The Property Owners of Area No. 5 and every other original property owner were responsibility for the Bond Debt and expenses incurred.
Area No. 5 was also a $350,000 beneficiary on the 1996 Sewer Enterprise Bond. On this bond the City is the Purchaser, is piggybacking (refunding) off the 1994 Bond Debt, and the debt is expected to be paid solely from Fee and Tax Revenue.
Page 29 states that a portion of the Sewer Fund bond will be used to refund the 1993 Bonds and specifically states: ” The Purchased Securities are issued on a parity with the 1994 Bonds for Improvement Area No. 5. Currently, approximately $2,111,000 of the 1994 bonds remain outstanding, of which approximately $64,000 are capital appreciation bonds maturing between September 1, 1999 and September 1, 2005.”
This tells us that at least for the first couple years Heartland LTD did pay the Special Taxes on their portion of the bond debt. But who is ‘Heartland Beaumont LTD’ ?
The 1994 Bond Debt states that Heartland Beaumont LTD is a company based Seattle, Washington with 50 employees. Heartland was established in 1984 and purchased Area No. 5 in 1987. Stephen P. Walker, III is listed as Founder and Managing Partner.
On the Warehouse Project the property owner is listed as ‘LV Heartland LLC. The Signatory for LV Heartland is Anthony Barsanti – Managing Director representing Lehman Brothers.
The Sewer Fund Account lists the
following checks under ‘Contract Services’ issued to Lehman Brothers:
Transaction # 75435 – 01/30/07 – $2,983.94
Transaction # 85473 – 06/30/07 – $3,050.99
Transaction # 95951 – 01/17/08 – $3,084.52
Transaction # 106279 – 06/30/08 – $3,042.66
The payments continue in the Sewer Fund, but in 2009 the checks are issued to Barclay’s Capital, Inc.
The 1994 Bond Debt is mentioned in the Heartland Warehouse Project. Item 23 changes Section 4.2.5 of the Original Agreement to give LV Heartland free Wastewater Facilities because Area No. 5 was part of the Original 1994 Bond Debt: “The City guarantees that the number of units of wastewater treatment plant capacity so financed shall be reserved and available to the Owner (Heartland) without further payment.”
Item 26 changes Section 4.10 to relieve Heartland of all past bond debt if they pay $1 Million. The Contract further states the City will use the $1 Million not to pay off the old bond debt, but to fund the Potrero Bridge Project.
The City still has another 10 years to pay on the 1994 Bond Debt with a $9,743,000 payment due in 2023. Area No 5 portion is 23%. Payment amounts for the past two years are as follows:
September 2010 Interest + Premium = $366,141.30
March 2011 Interests Only = $210,045.46
September 2011 Interest + Premium = $382,545.90
March, 2012 Interest Only = $203,036.49
September 2012 Interest + Premium payment = $403,460.41
In the next decade the City will pay another $18 Million for the $10 Million 1994 Bond Debt. Area No. 5 received 23% of the proceeds, but will walk away from the debt by paying $1 Million cash that will be used on the Potrero Project.
Warehouses are traditionally located in areas with low property values because they pay by the square foot. It was never feasible to have warehouses on Redevelopment Property because of the additional taxes, but the City of Beaumont releases Heartland LV of past Bond Debt. Releasing LV Heartland of their 1994 Bond Obligations will result in a $3 Million loss for the City of Beaumont.
Beaumont City Manager repeatedly tells the Citizenry that personally paying off their bond debt is the only way to relieve themselves, yet he cuts Heartland a deal that allows them to pay $.25 on the $1.00 if they put the cash in his hand.
If the Warehouse Project goes through Heartland will pay the City $1 Million and the City will spend the money in a month. But the $4 Million Bond Debt is still be outstanding with no means to pay and no acknowledgment from the City that the debt exist.
The City’s Heartland Warehouse Promotion states that Beaumont needs to ‘get in now’ because a warehouse boom is coming in 10 – 15 years. In 1994 the same people projected that Area No. 5 would be completely built and sold
June 2, 2013 – What & Where Are The ‘Reserves’
The term ‘Reserves’ means that a company/agency has a sum of money separated from the money that is used to fund the activities of the business/agency. Reserves do not included monies in the General Fund or ‘investments’ where the money has no liquidity. Although not a requirement; prudent company/agency would have a large enough amount in reserves to cover daily operations for a few months.
The City of Beaumont should also have a mandatory amount of reserves exclusively for bond debt. Older bonds list the reserve amount at 10% of bond amount, but recent bond purchases by the City list slightly less.
Page 27 of Bond 2009 SERIES B (IMPROVEMENT 8D & 17B) list the reserve fund requirement at $264,000 or 10% of the $2,640,000 bond. However, the last few bond reserves amounts are slightly less than 10%.
2012 SERIES C (IMPROVEMENT NO. 7B & 7C) Bond is $3,655,000 with a reserve requirement of $333,279.09 or 9.1 %.
2013 SERIES A (IMPROVEMENT NO. 19C) Bond is $8,810,000 with reserve requirement of $708,883.76 or 8%.
2013 SERIES B (IMPROVEMENT 17A) Bond is $10,875,000 with a reserve requirement of $854,500 or 7.8%.
The City of Beaumont should have a Mandatory Reserve Fund Balance of at least $25 Million, so where is it?
I have repeatedly requested statements from all financial institutions and we have had a very public discussion on the meaning of ‘all financial institutions’. The City has only produced one (1) reserve fund – the California LAIF Account which has a total of $1.8 Million.
Page 36, Cash and Investments Note 4 in the 2011 GAAP Audit lists the City of Beaumont investments of $25,492,158 with ‘Blackrock Institutional Funds’. I have not received any documentation for this company. This notation also has $207,985,805 in Bond Debt listed as an investment.
On May 16, 2013 Mayor Berg publicly announced the City had $11 Million in Reserves. $11 Million does not fulfill the Reserve Fund requirement nor does it explain why the $25 Million invested in Blackrock has disappeared.
A Records Request for all Financial Statements for Blackrock from 07/01/10 – 05/31/13 and all Financial Holdings for the Reserve Fund.
May 18, 2013 – Gas Tax Is A Waste Of Taxpayer Money
The first thing a Californian notices when they travel out of state is that the fuel prices drop as soon as they cross the border. Currently fuel prices run $3.50- $3.60/gal in California, $3.27 in Nevada, and $3.00 in Arizona.
Why is fuel higher in Cali? Because we have additional state taxes attached to the price of our fuel.
The 1st fuel tax in California was established in 1923 at $.02/galto fund the state highway system. In 1963 fuel tax increased to $.07/gal with $.05 going to counties. In 1983 state gas tax was raised to $.09/gal.
In 1990 the state raised gas tax to $.14/gal to ‘reduce traffic congestion & expand public transportation’ (sin tax) and by 1994 gas tax was $.18/gal with the excuse of rebuilding after the Northridge earthquake.
State Gas Tax is only to be used for ‘transportation-related needs’.
In 2004 voters realized the gas tax money was not being used for the attended purposes and enacted Prop 42 to limit use of funds for ‘nontransportation-related needs’.
Part of the State requirements for gas tax revenue is that the cities must have separate funds established to track the money. Beaumont uses ‘Fund 3’, but the account is in such disarray it is of little value use as a reference. From July, 2010 to January, 2013 the Bank Statements show that the City of Beaumont has received $2,912,551.98 in gas tax funds, but the City only lists receiving $1,492,964.02 on the General Ledger.
In the last three years there is not one entry for any road-related work in Fund 3. The only expenses the City of Beaumont shows in Fund 3 is $86,333.00 for ‘Administrative Overhead’ and $363,018.56 paid to ‘Urban Logic Consultants’.
Page 8 of the State Controller’s ‘Guidelines to Gas Tax Expenditures’ states: “Overhead will only be allowed via an approved cost allocation plan or an equitable and auditable distribution of overhead to all departments.” The City can not claim $1/2 Million in overhead when there was no work performed.
Unfortunately the City of Beaumont is no different than ever other California city. Every City seems to be wasting the Gas Tax Funds instead of using the money for its intended purposes.
The City of Imperial Beach receives $2 Million/year from Gas Tax, but only $300,000 can be traced to items such as ‘street signs’ and ‘asphalt patch’. The other $1.7 Million disappears. Although Citizens have made repeated request, the City of Imperial Beach refuses to do any road repairs. Last year an alley was so deteriorated that the neighbors took it upon themselves to pay for gravel. The City fined them $1,000.00 for the citizens’ attempt to repair the alley themselves.
The current fuel tax rate is $.36/gal. In 2010 the decision to raise fuel taxes were taken from the Taxpayer and given to the California Board of Equalization. The Board has voted to raise gas taxes to $.395/gal on July 1, 2013. The excuse for the increase is “..a $157 Million shortfall in gas-tax revenue in fiscal 2012 and a ‘projection’ that California drivers will consume less.”
The Board of Equalization did not look to see if the current tax revenue money was spent wisely nor consider how the additional increase would impact the citizenry. Their only focus was want of money.
Taxes are collected for specific purposes, but when those purposes are not addressed by the tax increase the correct action would be to stop the taxes, not increase them.
Please contact your State Representatives to stop the additional Gas Tax taking effect on July 1, 2013 and the elimination of additional taxes given to local governments. If local funding is needed it can be voted on by the local voter.
May 7, 201 – Potrero Bridge Project
On Tuesday, May 7, 2013 Council for the City of Beaumont will vote to adopt a Resolution to: ‘Approve the Freeway Agreement with Caltrans and Authorize the City Manager to execute the Agreement’. The Resolution presented to Beaumont City Council includes the following information that shows the Agreement is detrimental to the City and Taxpayers of Beaumont.
Obligations of State: Page 2 of the Construction Cooperative Agreement lists the responsibilities of the City and Caltrans. No. 13 & 14 states the only obligations of Caltrans is to act as ‘lead agency’ for the California Environmental Quality Act and the National Environmental Policy Act. There is no funding or other any obligations from the State during the course of the Project.
Cities do not build state roads because state roads are the property and responsibility of the State. Page 4 No. 34 states: “Upon Obligation Completion, ownership or title to all materials and equipment constructed or installed for the operations and/or maintenance of the State Highway System within SHS right of way as part of the work becomes the property of Caltrans”.
The City is obligating the Taxpayers of Beaumont to fully pay for a state construction project instead of sharing the costs throughout the state or even other cities in the Riverside County.
Obligations of the City: This Contract has several clauses that will obligate and burden the City.
Page 10 Item No. 80 states: “…if there are insufficient funds available in this agreement to place the right of way in a safe and operable condition, the Implementing Agency (City) accepts responsibility to fund these activities until such time as Partners amend this agreement”. This clause forces the City of Beaumont to ‘find the money’ to continue the project.
Page 13 Item No. 97 – 99: These clauses allow the State to force the City to complete the Project and states: “…if any Partner stops fulfilling Obligations, any other Partner may seek Equitable relief to ensure that Obligations continue”. This allows the State to sue the City of Beaumont and force completion of the Project.
Funding: The Agreement is very clear that all funding responsibilities will be the burden of the City of Beaumont. Page 2 Item No. 9 of the Agreement lists the City as: ‘Sponsor for 100% of the Project’ and Item No. 12 states: ‘City is the only Funding Partner’. Page 21 shows a Funding Summary listing the costs and funding of various aspects of the project.
There was $5 Million in Federal Funding for this Project, but the Funding Chart on page 21 shows this money has already been received and spent. There is no other funding sources listed – only ‘City’. The City has not stated how it will pay for the Project and the City can not received funding because Highways are State Property.
The Resolution obligates the City to complete the Project once it’s started, but does not mention how the City will fund the Project. It obligates the City to pay $70 Million in the next three (3) years without listing any revenue sources.
Item 4.b.1 on the Council Agenda is the Financial Update as of February 28, 2012. Total Revenues listed for the 8-month period are $11 Million. Expenses on the Financial Update are listed at $15,828,304, but these are only the expenses to operate the City. The City neglected to declare $8.3 Million Bond Debt paid in September, $3 Million spent through Fund 35, and $1 Million spent through Fund 35 to pay Penalties to the Riverside Auditor/Controller. Actual Expenses for the first 8-months of this fiscal year were $28 Million.
Projected forward; the City will receive a total of $49.5 Million in Revenues in the next three Fiscal Years and incur $71 Million in Expenses for the Basic Operations of the City. Another $45 Million is obligated to pay past Bond Debt. The City of Beaumont currently spends money 2 ½ times faster than it receives money.
This Agreement would obligate the Taxpayers of Beaumont to pay another $70 Million by 2016 and Page 6 No. 45 states: “…If implementing Agency (City) anticipates that funding for work will be insufficient to complete work, Implementing Agency (City) will promptly notify Sponsor (City). This leaves the City open to request more funds ‘if needed’ instead of staying within the Budget.
The City of Beaumont has already spent $10,689,836.92 directly related to the Potrero Bridge Project with the following Vendors:
Department of Fish & Game – $2,101.50
Harmsworth Associates – $49,835.00
Union Pacific – $85,646.86
Natures Image Inc – $148,170.03
Community Bank – $497,218.81
Los Angeles Engineering – $3,157,068.51
Urban Logic Consultants – $6,749,796.21
As of March 1st the City of Beaumont had $7,958,155 in General Fund Checking, $43,199.03 in Savings, and $1.8 Million in the LAIF Account. There have been rumors of $10 Million in Reserves, but there are no additional Reserves. As of this writing the City of Beaumont has not produced a 2012 GAAP Audit.
State highways are for state-wide use and all funding for state highway projects should be paid for with State funding, not burening the Taxpayers of one small City. It is not practical or financially feasible for the City of Beaumont to continue with this project.
May 4, 2013 – Conspiracy to Obstruct Justice
On April 25, 2013 a Public Records Request was filed with the Beaumont Office of City Clerk for copies of March 2013 Statements from all Financial Institutions.
On May 2, 2013 Beaumont City Manager Alan Kapanicas replied to the Public Records Request stating: “Your request for ‘statements’ is too vague. Please clarify what ‘statements’ your are requesting.”
The letter is signed by the City Manager and every Council Member was copied.
The Beaumont Internal Audit has been going on for several months. This is the 4th time a request for all financial statements has been made, but the 1st time the request was ‘too vague’.
The State of California enacted the Public Records Act in 1968 with very specific regulations to control government corruption.
California Government Code 6253 (c ) Each agency, upon a request for a copy of records, shall, within 10 days from receipt of the request, determine whether the request, in whole or in part, seeks copies of disclosable public records in the possession of the agency and shall promptly notify the person making the request of the determination and the reasons therefor. In unusual circumstances, the time limit prescribed in this section may be extended by written notice by the head of the agency or his or her designee to the person making the request….No notice shall specify a date that would result in an extension for more than 14 days.
6253 (d) Nothing in this chapter shall be construed to permit an agency to delay or obstruct the inspection or coping of public records.
Refusing or delaying Public Record Requests is Obstruction of Justice. It is Conspiracy to Obstruct Justice for the City Manager to collaborate with Council to withhold Public Records.
California Government Code 6203: Every officer authorized by law to make or give any certification or other writing is guilty of a misdemeanor if he or she makes and delivers as true any certificate or writing containing statements which he or she know to be false.
The City Manager and every member of Council knows or should know that the letter is false information written to Obstruct Justice. Since the office of the city manager takes direction from council it stands to reason that it was Council that instructed the City Manager to take over the Office of the City Clerk and to.
The United States of America developed a democratic form of government so the People could govern themselves, but democracy is based on honesty and love of Country. Democracy does not account for human nature. Elected and Appointed Government Officials conspiring to circumvent the laws of their state and country for the purpose of …’adhering to its enemies, or giving them aid and comfort.’ is considered Treason.
The City of Beaumont is almost $300 Million in debt. The Federal Government is almost $17 Trillion in debt. It’s time We The People stop accepting our situation as happenstance and start realizing that these are intentional acts that have no other results but to further the destruction of our Communities and Country.
May 3, 2013 – Diners’ Club Card
This audit captures the Diners’ Club Card charges for the fiscal year 2011-2012. The Authorized users for the card are City Manager Alan Kapanicas, Chief of Police Francis Coe, Human Resource Director Elizabeth Urtiaga, and Assistant to City Manager Shelby Hanvey.
The account is under the name of Finance Director William Aylward. It is the duty of the Finance Director to verify the expense and allocate the cost to each department. The General Ledger does not reflect the information on the Invoice. Most of City Manager Kapanicas’s charges are hidden in the Administration Department instead of listed in the City Manager’s Department.
Credit cards are issued to cover additional expenses when staff is traveling, but there are also several monthly charges listed on this card:
ww.izigg.com – This $249.95/month charge started in December, 2011. I see no use for this service to the City and it could be a charge that attached itself to the card and was never noticed or removed.
OnStar Tracking – $28.90/month charged to Chief of Police Coe. If there is one vehicle in the City fleet using OnStar the bill should be paid monthly by check.
Direct TV – 78.99/month charged to Chief of Police Coe. Neither the Onstar or Direct TV billings are listed in the Police Department.
Gotomypc.com – $29.95 charged to Human Resources.
CD-data – $79.95 charged to Human Resources. Both of these are monthly bills that should be paid with invoice.
Sirius Music – $175.01 charged on 04/17/12 and $120.66 charged on 05/17/12. Both of these yearly subscriptions were charged to Chief of Police Coe.
Fastrack – There were also two $100 charges for Fastrack charged to Chief of Police Coe on 11/30/11 and 06/18/12.
Travel and Food: This is where city officials show total disregard for the taxpayers’ money. Travel and food comprised over $42,000 of the $88,000 total Diners’ Club charges. $18,000 was for a Washington D.C. Trip for Brian & Kelsey Deforge, Jeff Fox, Elizabeth Urtiaga, & Gregory Fagan. Their Marriott Hotel rooms for five days were $2,697 – $2,857.04 because they checked in on Saturday, which is the most expensive night of the week.
Hilton Hotel: The Hilton Hotel appears five times in three different cities. City Manager Kapanicas spent six nights and $4,000 at the Hilton Hotel San Francisco in September, 2011. Chief of Police Coe also stayed at the Hilton Hotel San Francisco for one night. Hotel bill was $668.06 and Hilton Urban Tavern bill was $171.56.
Chief of Police Coe stayed at the Hilton Las Vegas on April 23, 2011. The hotel bill was $557.76 and the Olive Garden Las Vegas bill was $953.64.
Chief of Police Coe also has two charges for the Hilton Grand Vacations in Florida. One charge was on 03/30/11 for $934.08 and another on 01/26/12 for $278.88.
There are some day trips taken by city staff and City Manager Kapanicas has two other trips to Sacramento charged to the Diners’ Club card; four night at the Hyatt in March, 2011 totaling $471.91 and five nights at the Sheraton in April, 2012 at $325.82/night. Hotel and food totaled $1,651.29 for the total stay.
The rest of the travel is charged to Chief of Police Coe. He travels to flies without any other city staff to various destinations in Northern California almost every month. There are also numerous charges to gas stations in Beaumont and surrounding cities. It makes no sense for a city employee to charge $60.00 at the Beaumont Chevron.
Another odd charge to Chief of Police Coe is $1,835.60 on 06/24/11 from ‘Classic Restaurant Supply’ in Hartford CT. Of the $88,000 in charges, $38,000 are charged to Chief of Police Coe. Either Coe is using the Diners’ Club Card for personal use or someone is using him as a patsy.
April 25, 2013 – Fund 35 Mitigation Fees
Mitigate means ‘to lessen the impact’. Beaumont Budget describes Fund 35 as: “used to account for the revenues levied on new development projects within the City. The revenues are levied based on development impact fees studies adopted by the City Council and include street, bridge, fire station, emergency facilities, parks, etc.”
2010 – 2011 Budget list Mitigation Fees Fund had a $12 Million Fund Balance on 06/30/10, Revenues are listed at $2.2 Million and Expenses at $13 Million leaving a Ending Fund Balance of $1.2 Million on 06/30/11.
2011-2012 budget lists Mitigation Fees Fund Beginning Balance at $600,000, total Revenue at $501,000; and total expenses at $1 Million leaving a 06/30/12 Ending Fund Balance of $101,000.
2012-2013 Budget lists Mitigation Fees Beginning Fund Balance at Zero ($0). Revenue and Expenses are both estimated at $501,000 to leave a zero Ending Fund Balance. Over $3 Million has already been funneled through this account.
Beaumont’s Budget lists total expense at $14.5 Million, but from July, 2010 to February, 2013 the General Ledger shows over $24 Million passed through this department. The Budgets lists Department 3500 on the Special Fund Detail, but doesn’t list an individual budget to show expenses. The GAAP Audit makes no reference to Mitigation Fees.
Fund 35 has spent $20 Million that was transferred from the General Fund. In the past 2 ½ years the following expense accounts are listed:
TUMF Projects $1,335,827.67
Potrero Bridge $11,338,395.54
Oak Valley Pkwy $3,581.14
650 Magnolia Bldg $23,534.55
General Plan $4,145.00
Mitigation Fees $91,516.32
Basic Services & Facilities $638,809.05
Traffic Signal Revenue $616.00
Railroad Crossing $633.50
Emergency Preparedness $78,444.32
Recycling Water Facilities Fee $3,843.65
Regional Park Fee $4,076.72
TUMF (non CFD) $41,575.36
Basic Services & Facilities: This was paid to Urban Logic Consultants from July, 2010 to June, 2012. The account has not been used in the current fiscal year.
Recycling Water & Regional Park Fee: The Recycling Facilities Fee was collected from October, 2011 to December, 2012. The Park Fee ran from July, 2010 to November, 2012. The collection of both fees stopped when the audit started.
Vendors: Over $15 Million went to 30 Vendors. Of course the big winner was Urban Logic Consultants that made $8.875 Million; Los Angeles Engineering made $3.5 Million. Some oddities are Altura Roofing – $1,850 and ‘Hillcrest Contracting’ had a one-time payment of $100,000.
Contract Services: According to the General Ledger the City spent $2.5 Million on Contract Services and ‘made’ $2.6 Million. Most of the magic happened in December, 2011 when $1.15 Million was credited to the contract services account with the memo “ACH CFD 2009a”.
Over $3 Million has already been funneled through Fund 35 this year. In the past 2 ½ years this account has literally had 1,000 transaction totaling millions of dollars, but there is no mention of this fund in the GAAP Audit.
April 18, 2013 – RDA Funds 37, 38, 39
Last audit was focused on Fund 36 – RDA Capital Projects. This audit will cover the other three (3) RDA Fund Accounts found in the General Ledger from July, 2010 through February, 2013 .
Fund 37 – RDA Debt Service
The Budget states this fund is used: ” to account for the tax increment received for the redevelopment project area and the related expenditure on the debt incurred.” This fund is used to account for revenue collected through RDA and payments made to other government agencies.
2010-2011 Budget projects revenue at $2,260,000. The 2011 RDA GAAP Audit lists revenue at $2,759,063. The General Ledger lists actual revenue at $3,283. The GAAP Auditors ‘missed’ a $2 million discrepancy.
2011-2012 Budget project revenue at $752,000. The 2012 GAAP Audit has yet to be released. The General Ledger lists revenue at $1,682,672.49, but $1,679,359.49 is transferred in and out on 01/13/12 leaving actual revenue at $3,313 FYE 2012.
2012-13 Budget has no revenue or expenses listed. The General Ledger lists no revenue in Fund 37 for the first six months of the 2012-2013 budget and only one expense – $988,826.35 to the Riverside County Auditor/Controller.
In the last two fiscal years this account was used to pay eight ( 8 ) different government agencies. Payments were made on 10/22/10, 05/24/12, and 06/01/12 totaling $1,339,763.26. The payments were made through this account, but the money was transferred in from the General Fund instead of using the tax revenue that is specifically allocated for the debt.
Beaumont Library District – $55,494.06
Beaumont Cemetary District – $374,176.75
Beaumont Unified – $443,021.18
Mt. San Jacinto Jr. College – $124,822.24
Riv Co Super of Schools – $142,873.99
Riv Co Flood Control – $99,422.97
San Gorgonio – $51,602.17
San Gorgonio Pass – $48,349.90
Fund 37 has various random entries listed:
Account Number 7010 – CUR SECURED PERS PROP – This account is located in the General Fund Administration accounts, but in 2010-2011 a total of $2,795,950.12 was transferred through Fund 37 in eleven (11) transactions. In 2011-2012 there were two (2) transactions totaling $1,307,334.43 coded to the PERS fund. As of February there is only one entry listed FYE 2013 in Fund 37 – payment to the Riverside Auditor/Controller for $988,826.35. This close to million dollar payment was not disclosed to the Public or listed on the Check Warrant.
Transaction 207206 – Fund 37 has the following 207206 transactions added to the account:
Cash added – $15,136,625.42
Cash removed – $15,796,555.81
Account Payable added – $645,569.25
Unreserved Fund Balance added – $56,242.64
Unreserved Fund Balance added – $56,242.64 – this entry is repeated twice
Debt Service – The City also laundered $1,700,000 through this account on 06/30/11 by adding to Cash and removing it through code 6900 – Debt Service. There is also $270,727 in Contract Services that is unexplained.
Fund 38 – RDA Low/Moderate Housing
Budget describes this fund’s use: “to account for the 20% tax increment received for low/moderate income housing in the redevelopment project area”.
2010-2011 Budget lists revenue & expenses at $760,000 each; 2011-2012 Budget lists revenue & expenses at $2,251,000 each, and the 2012-13 Budget list no revenue or expenses in this department.
2011 GAAP Audit lists Fund 38 revenue at $699,131 and expenses at $659,987.
General Ledger lists 2011 revenue at $10,186.10 and accounted for the money as ‘Interest’. There is also $691,000 transferred through this fund using account 7010 – Cur Secured PERS Prop.
This Account had only one Contract Services Expense in 2011: $39,144.60 to Beaumont Electric on 05/05/11.
Fund 38 also has four 207206 transactions:
Cash in – $139,161.51
Cash-Interfund out – $1,908,229.02
Unreserved Balance – $1,387,404.04
Unreserved Balance – $1,387,404.04 – this transaction is entered twice.
2012 Budget lists revenue & expense at $2,251,000. The last transactions in Fund 38 are made in January, 2012. The General Ledger FYE 2012 lists $10,186 cash into the account and $2,292,031.52 transferred out. The General Ledger also shows FYE 2012 there was $71,910.63 paid to Urban Logic Consultants, $306,508.85 transferred through Cur Secured PERS Prop, and $2,281,845.52 for Contract Services, but Payee is not listed.
Fund 39 – Not Listed On Budget.
Fund 39 is not listed on the budget or financial statements, but there are transactions coded to fund 39 in the General Ledger. FYE 2011 on 09/10/10 $62,764.18 was transferred into this account and paid to ‘Beau-Cherry Valley’ as ‘Deposit’. On 06/30/11 $263,092.48 Cash was taken from this account and credited to ‘Deposits’, but this account has no cash or funding.
This account also has three (3) 207206 transactions:
Cash out – $874,774.22
Cash interfund in – $156,411.81
Deposits in – $718,359.41
A total of $959,202.78 was spent through Fund 38 in the year 2011-2012 – $120,421.73 Cash taken from the fund and $838,781.05 transferred through the fund to pay $583,916.27 to Christian Brothers Engineering; another $185,272.84 to Beau-Cherry Valley Water Authority; and $69,591.94 to an Unknown Recipient. These transactions are listed on the Check Warrants. Beaumont-Cherry Valley Water Authority Checks #077248 notes ‘Improvement Plan’ and #077662 notes ‘Capital Improvements’ instead of ‘Utilities’.
From 06/30/11 to 05/24/12 total of $2,159,830.66 was moved through this fund account:
Christian Brothers Engineering $561,581.60
Beaumont-Cherry Valley Water $339,963.63
Unknown Recipient $1,258,285.43
Funds to Pay Christian Brothers & Beaumont-Cherry Valley were transferred in from the General ledger. Of the Unknown Recipient $874,771.22 is a 207206 Transaction and $383,514.21 Cash came from an unknown source.
April 11, 2013 – Fund 36 – RDA Capital Projects
Audit XVI – Fund 36 – RDA Capital Projects
Fund 36 was created to track Beaumont Redevelopment Capital Projects. This Audit covers fiscal years 2011, 2012, and part of 2013.
Fiscal Year 2010-11
The last page of the 2010-11 Budget lists a zero balance of funds as of 06/30/10 and estimated revenues and expenses of $2,613,000 – leaving a zero balance of funds in the account as of 06/30/11.
RDA programs generate revenue through tax increments and is not widely used in Beaumont. Page 22 of the RDA Financial Report lists revenues FYE 2011 at $11,391. Expenses for 2011 are listed at $2,239,483.
In 2011 the RDA Audit was separate from the GAAP Audit, but performed by the same auditing firm and should have been completed at the same time. The RDA Audit is dated 12/26/11 and the GAAP Audit is dated 08/01/12.
The General Ledger lists Expenses at $739,482.90: Urban Logic – $293,656.50, Beaumont Electric – $139,074.13, Tyner Paving – $171,716.67, Belair-West Landscaping – $41,893.65, Phoenix Environmental – $21,027.00, JP Stripping – $7,150.00, Acoustical Solutions – $5,887.80, Alhambra Group – $3,964.60. The City also inserted an additional $33,076.00 to ‘Contract Services’.
There is a floating error that runs through this department because of a $31.31 transaction coded to another admin account – ‘Administrative/Legal Services.
The City charges itself $1,616,667 for ‘Administrative Overhead’ – bringing total expenses to $2,356,149.90.
There are seven 207206 Transactions dated 06/30/11 that were entered into the Fund 36 Account in March, 2012:
Cash – added to account – $12,391,666.85
Cash Interfund – deducted from account – $10,473,775.60
Land Held For Resale – added – $21,827.01
Note Receivable – added – $85,990.00
Deferred Revenue – deducted – $9,810.00
Unreserved Fund Balance – deducted – $4,360,657.16
Unreserved Fund Balance – deducted – $4,360,657.16 – this transaction is repeated twice.
Aside from the $31.31 – the Department’s books balanced, but with the additional 207206 transactions added it creates a difference of $6,705,416.06.
Fiscal Year 2011-2012
The 2011-2012 Budget lists Fund Balance as of 06/30/11 at $2,000,000 instead of a zero balance. The City projects $358,000 Revenue and $2,358,000 expenses for another zero fund balance at 06/30/12.
The General Ledger lists Revenue at $24,320.89 and Expenses at $383,364.65 divided between the following vendors: $271,371.91 to Beaumont Electric; $17,570.00 to Urban Logic Consultants; and $93,182.74 to ‘Mamco, Inc.’. The General ledger shows $2,144,258 of transactions for the year. To balance this department the city inserted a cash transaction of $1,679,359.49.
11/01/11 list the 1st Transaction showing repayment of a 1999 Loan from Councilman Castaldo under the memo: ‘AC Propane’. The Payments made are as follows:
11/01/11 – $1,275.00
11/03/11 – $650.00
01/13/12 – $650.00
02/21/12 – $650.00
03/09/12 – $650.00
04/05/12 – $650.00
04/24/12 – $650.00
05/21/12 – $650.00
07/19/12 – $650.00
08/20/12 – $650.00
10/01/12 – $650.00
11/27/12 – $650.00
01/23/13 – $650.00
02/20/13 – $650.00
The General Ledger also shows two transactions on 11/03/11 & 11/28/11 that charged $296.33 interest on the principle for a total of $592.66; but no other interest is charged.
There are no other Transactions listed in Fund 36 from 07/01/12 to Present except the Loan payment from Councilman Castaldo. Repayment from 07/01/12 – Present total $3,900.00.
Total Revenue for Fund 36 from 06/01/10 – 03/01/13 = $40,000.00
Total Expense for Fund 36 from 06/01/10 – 03/01/13 = $4,400,000.00
April 10, 2013 – Records Request – 3rd Request – Do It Over & Over Until You Do It Right
City of Beaumont
April 10, 2013
RE: Request of Public Records – 3rd Request
I am requesting the following items from the City of Beaumont:
Invoices for the following Diners’ Club Cards Checks that were issued by the City of Beaumont.
This Records Request was originally filed on March 18, 2013. The records were paid for, but all that was received was a copy of the checks. Payment of the Diners Club Card is not in question.
Specifically requested is a Printed Copy of Each Page of the Invoices for the Diners’ Club Card Listed Below:
Check Number Date Amount
076353 07/15/11 $6,032.98
076644 08/08/11 $5,001.50
077201 09/30/11 $6,516.36
077493 10/28/11 $10,509.99
078027 12/09/11 $7,477.27
078241 01/06/12 $3,495.71
078380 01/20/12 $3,149.41
078795 02/24/12 $2,732.08
079195 04/05/12 $8,349.57
079462 05/04/12 $21,698.00
079693 05/25/12 $7,958.81
080087 07/06/12 $2,415.00
080249 07/27/12 $4,676.68
The Records should also show the allocation of each expense to the Individual Employee and Department.
This information was requested and paid for weeks ago and the Citizenry should expect it to be released immediately.
April 5, 2013 – City of Beaumont – Your Time Is Up
The records listed were requested have been requested from the City of Beaumont. They have received payment, but have refused to release the records.
Bank Statements – January and February, 2013:
The December, 2012 and January, 2013 Bank Statements were requested the 2nd week in January. I received the December Statement, but not January. In February I again requested the January bank statement along with the February statement, but the City refuses to release the Documents.
The December Bank Statement shows the balance in the General Fund as of 12/31/12 was $677,547.67. The Check Warrants lists a total of $4,755,277.72 checks and automatic deposits issued in the month of January 2013.
Diners’ Club Card Documentation:
Because the General Ledger has numerous incorrectly coded transactions I have requested from the City of Beaumont all Diners’ Club Invoices/Receipts From July, 2011 through June, 2012. These Records were paid for last week, but the City has refused to release the documentation.
Health Care Documentation:
Also requested and paid for is supporting documentation for all Health Care transactions. The following names appear in the General Ledger as receiving Government Health Care, but their health care is hidden with their own accounting codes instead of being listed in the individual Departments with city employees:
Rimmer, Mike – 01-0000-1120-0000
Moorjani, Veena – 01-0000-1121-0000
Overby – 01-0000-1152-0000
Aguirre – 01-0000-1153-0000
Hall – 01-0000-1154-0000
White, Mitch – 01-0000-1155-0000
Smith, P – 01-0000-1157-0000
Acosta, J – 01-0000-1158-0000
Rimmer, – 01-0000-1161-0000
Urban Logic – 01-0000-1162-0000
State Law mandates that Government Agencies have ten (10) days to comply with Record Request. City of Beaumont – Your Time Is Up.
April 4, 2013 – Beaumont Police Department
Budgets are broken into specific departments to track the revenue and expenses. Each department has its own budget. All of the department expenses should be in their budget and no other department transactions should be listed in another department. The Beaumont City Police Department Budget shows massive amounts of irregular transactions.
The Beaumont Police Department has the largest budget in the city. The 2012-13 budget lists projected expenses FYE 2012 at $9,975,000 total: $8,500,000 for personnel, $1,300,000 Maintenance & Operations, and $175,000 for Contract Services. For the last two years there has been no budget allocation for Vehicles & Equipment.
The General Ledger recorded a total of $9,033,414.30 expenditures for the Beaumont Police Department broken down into the following accounts:
OT Credit $125,499.66
Sick Leave $197,884.70
Holiday Pay $268,847.45
Comp Time $168,183.34
Deferred Comp $166,176.87
Life Insurance $4,885.92
Work Comp Non Tax Earng $39,036.39
So Cal Edison $48,867.69
Bea Ch Valley Water Auth $10,836.84
Gas Company $1,300.97
Office Supplies $43,504.91
Health & Fitness $12,979.25
Health & Fitness Plug $20,532.02
Dues & Subscriptions $25,549.61
Live Scan Fingerprints $14,661.00
Vehicle Maintenance $346,583.79
Fuel & Oil $181,308.46
Building Maintenance $44,284.22
CLEAT System $139.26
Booking Fees $4,031.10
Contract Services $155,539.18
Education – Plug $14,053.50
Special Dept Supplies $40,596.64
Computer Supply & Maint $27,431.16
Bldg Maint & Supplies $67,053.39
Equipment Repair & Main $62,920.89
Special Occasion $21.55
Wages & Benefits:
Wages and Benefits total $7.5 Million, but that is not accurate. As I’ve stated in previous audits – the city is attaching additional expenses to payroll. Cigna is $545,736.87, but the funds are diverted to pay for other expenses. Health & Fitness totals $33,500 but $20,500 is a plugged number and of the remaining $12,900 fitness expenses $1,326.20 is for employees in other departments and $1,675 is for people that are not on the city employee rooster in any department.
The City lists Police Education expenses at $33,766; but $14,000 is plugged numbers and $2,100 is people from other departments or not on the City employee rooster.
Building Supply & Maintenance:
These expenses are comprised of monthly maintenance costs: $1,531.20/month for janitorial services, $130/month for the alarm system, and $58.25/month for Cintas. There is another category for uniforms, so I assume this is for the rugs.
Maintenance expenses run a couple thousand per month until the 1st of the year. January expenses total $5,900; February was $9,900; and March was $12,500. these additional expenses include electrical, plumbing, and $1,600 for locks.
The General Ledger also records a total of $7,130.25 to ‘Kreative Kube Office Furniture. The General Ledger shows two entries for $2,842.50 on 02/10/12, but the Check Warrant Register only shows one check issued for $2,842.50. On 02/24/12 the General Ledger shows a $1,445.25 entry, but the Check Warrant lists the check at $1,360.00.
There are many coding errors in the police department. The City has another account labeled ‘Building Maintenance’, but has items such as ‘Sun Badge Co.’ – which is part of the uniforms, not the building. The ‘Sun Badge Co.’ is also found in other accounts.
The City lists tow fees totaling $3,600, but these fees are the private citizen being towed by the police, not expenses for the police department itself.
Diners’ Club transactions total $30,318.43 – $8,295.95 listed under ‘Contract Services’. Even simple transactions like ‘car wash expenses’ are found in multiple locations.
Also note that this audit only includes expenses listed under the Police Department – account ’01-4050′ and does not include their personal loans which is listed under ’01-0000′.
I have still not received the 2012 GAAP Audit to see exactly what was charge to the Police Department, but the City’s projection of $9,975,000 is incorrect.
March 28, 2013 – Deposits For Year End 2012
Revenue is calculated by totaling funds received through taxes, fines, loans, & grants. I have audited the revenue for the City of Beaumont. The total revenue for the City varies depending on the source:
General Fund Bank Statements – $61,242,041.61
General Fund Deposits for July 2011 through June 2012 total $61.2 Million. Even without the Bond Debt, the City revenue was over $40 Million last year.
General Ledger – $62,367,493.55.
The General Ledger has $1.25 Million more in deposits recorded than the Bank. Traditionally the largest deposits of the day are recorded first, but in August, 2011 the Bank changed their statements to list the smallest deposits first in the hopes that someone in the City would notice the discrepancy in deposits.
Basic procedure for the City would be to record the money and deposit the funds, but the General Ledger shows that the deposit entries are made weeks after the money is deposited. Not one day of the general ledger matched the bank records.
Financial Transaction Report – $41,530,704
The City has declared on the Consolidated Statement of Revenue that Total Revenues for the year 2011-2012 were $19.7 Million less than the Bank Statement totals. The Financial Transaction Report is a State mandated document issued by the Office of the City Clerk verifying financial transactions.
2012-2013 Annual Budget – $28,009,000
Page 8 of the 2012-2013 Budget shows the Projected Revenue for 201-2012 is listed at $28 Million. This amount is $13.5 Million less than declared on the Financial Transaction Report and $33.2 Million less than the Bank Statements.
2011-2012 GAAP Audit – Unknown
The City of Beaumont has stated the GAAP Audit for 2011-2012 ” Is not available”.
Now we know how much money came in and we know that $15 Million went to pay off Bond Debt….
…. but where did the rest of the money go?
March 21, 2013 – Closing The Books For Year 2011-2012 / Department of Council
Every year government agencies are required to close their books, calculate their revenue and expenses, and report these findings to various government agencies and to the public. A GAAP audit is required to verify information submitted by the city.
The City of Beaumont closed their books on 06/30/12. How long should it take to ‘close the books’? It varies; a couple weeks is normal. A well run company will close their in books 7-10 days. Three weeks is too long, even for a large corporation.
California Government Code Section 53891 requires the City Clerk to submit a Financial Transactions Report to the State and to issue a Public Notice within six (6) weeks of the end of the fiscal year. I requested a copy of this report on 02/12/13. On 02/22/13 the City published the Financial Transactions Report in the ‘Record Gazette’ newspaper and released a copy to the Public.
The accounting firm contracted to perform the GAAP audit should also receive the financial reports withing six weeks. A GAAP audit would normally be completed 4-6 weeks after receiving the financial reports. The City of Beaumont 2010-2011 GAAP Audit was dated August 1, 2012 – thirteen months after closing the books.
On February 19, 2013 representatives of the accounting firm Moss, Levy, & Hartzheim GAAP attended the Beaumont City Council meeting and stated that the GAAP audit had been performed, the cost was $30,000, and aside from lack of funds; the Auditors assured Council that Beaumont was financially sound.
On 03/07/13 I requested from the City Clerk a copy of the GAAP Audit for 2011-2012. On 03/11/12 the City Manager replied: “The 2012 City GAAP Audit is not available.”
On 03/19/13 I called the City to request the GAAP Audit from the Beaumont City Manager and Finance Director. I was told: “Everyone’s in a meeting”. I left a message, but my call was not returned. I called the Auditing Firm of Moss, Levy, & Hartzheim requesting the GAAP Audit they stated was complete. My call was not returned.
Year End Audit – Department 1050 – City Council
Page 16 of the 2011-2012 Budget lists the City Council and Charitable Foundation on the same budget. This is incorrect. The City has set up ‘Fund 19’ which is not listed on the budget to account for all of the charitable revenue and expenses. The Council Department’s budget for 2011-12 was $138,000. The Financial Transactions Report lists Council expenses at $107,287.
Total expenditures listed on the General Ledger are:
Deferred Comp $4,428.76
Vision Care $354.34
Life Insurance $176.00
Telephone Credit $608.51
Office Supplies $198.74
Discretionary Spending $2,369.61
Travel,Training, Meetings $18,414.56
Contract Services $150.00
The Discretionary Spending is from ‘Jostens’, which the Mayor has stated was for ‘Commemorative Pins’.
Of the Travel,Training,Meeting account a total of $1,800 was used by the individual Councilmen as per diem payouts and individual expenses. Diners Club expenses total $10,171.76. Over $2,000 was paid to ‘Elan Financial Services’, and $1,385 without identifying the Payee.
$49,000 Cigna expenses is charged to the Council’s $26,000 salary. It is not mathematically possible to have more deductions than salary. On the Financial Transactions report Summary the City lists ‘Health’ as $5,791,430 Expenses and $8,123,689 Revenue. It seems that the City is attaching additional health care expenses to the department budgets, depositing the money into another account, and calling it revenue.
Based on the General Ledger the Department of the Council expenses are $58,000 for the fiscal year 2011-2012. An audit of the Charitable Foundation will be separate.
March 14, 2013 – Beaumont Electric
Beaumont Electric is portrayed as a private-sector company that receives contracts from the City of Beaumont through the bidding process. Bids include all parts and labor. From July, 2010 through February, 2013 Beaumont Electric has been paid $863,000.
Accounting Code 01-0000-0503-0000 – DUE FROM BEAUMONT ELECTRIC
The City has set up an account that allows Beaumont Electric to purchase supplies and charge them to the City and Beaumont Electric reimburses the City ‘later’.
Because Beaumont Electric has been involved with the City for years it is unknown how much is owed; but from 07/01/10 – 02/21/13 Beaumont Electric charged $2,677,974.89 in supplies and paid back $2,331,555.02. This leaves a balance due of over $364,000.
The debt was up to $600,000 in December, 2012, but for ‘some reason’ Beaumont Electric paid back $390,000 in January, 2013.
California Public Contract Code:
100. The Legislature finds and declares that placing all public contract law in one code will make that law clearer and easier to find. Further, it is the intent of the Legislature in enacting this code to achieve the following objectives:
(a) To clarify the law with respect to competitive bidding requirements.
(b) To ensure full compliance with competitive bidding statutes as a means of protecting the public from misuse of public funds.
(c) To provide all qualified bidders with a fair opportunity to enter the bidding process, thereby stimulating competition in a manner conducive to sound fiscal practices.
(d) To eliminate favoritism, fraud, and corruption in the awarding of public contracts.
There is no way possible that the City of Beaumont can claim their bidding process is fair when they are bankrolling specific Contractors.
Beaumont Electric is located at 877 W. 4th St. Their website is generic. This is not a legitimate company.
March 7, 2013 – General Government Managment Services
From July, 2010 through July, 2011 the City of Beaumont issued bi-weekly checks totaling over $286,000 to General Government Management Services (GGMS). $67,700 was paid through Fund 14 – Community Facilities District, the remaining was paid from the General Fund. There was also $10,000 in medical expenses paid by the City for this Company in the same year.
From July, 2011 – to present there is no other transactions listed on the General Ledger and no other checks issued from the General Fund for GGMS.
Resolution 2012-23 Page 2, Section 5 lists Designation of Consultants. Two of the consultants listed are requirements of the State of California – Ron Gunn as ‘Financial Consultant’, and McFarlin & Anderson LLP as Bond Counsel. The City also lists General Government Management Services as ‘Special Tax Consultant’ and Urban Logic as ‘Project Engineer’. The titles of Special Tax Consultant and Project Engineer are not requirements of the State of California.
On April 24,2012 Ron Gunn sent an email to the Beaumont City Manager & Finance Director requesting $51,650.63 wired: “..to Union Bank for deposit into the Cash Flow Management Fund”. Ron Gunn also requested invoices submitted for: “$25,000 to the Authority for admin expense and $25,000 to the District (IA 20) for admin expenses and $25,000 to the District (IA 20) for Special Tax Consulting.”
On February 24, 2013 I requested the contracts for GGMS as well Ron Gunn, McFarlin & Anderson, and Urban Logic as stated in Section 5 of Res. 2012-23.
On March 5, 2013 Beaumont City Counsel passes Resolution # 2013-08 removing General Government Management Services as Special Tax Consultant and names other consultants, but does not name another special tax consultant. The other consultants listed are:
(a) Southwest Securities, Inc as underwriter
(b) Harris Realty Appraisal as appraisers
(c) Empire Economic, Inc as market absorption consultants
(d) Fulbright & Jaworski LLP as disclosure counsel
The City of Beaumont states there is not another checking account, but in the last year the City’s General Fund has issued no checks to GGMS, Ron Gunn, McFarlin & Anderson, Southwest Securities, Empire Economics, or Fulbright & Jaworski LLP. The only checks issued for any of the consultants listed is to Urban Logic and three (3) checks to Harris Reality Appraisal issued on 03/08, 03/29, & 04/20/12 for a total of $71,950.00
The last transactions listed for Empire Economics is on 06/30/11 for $4,875. The last entry for Rod Gunn Associates is 01/07/10 for $4,000. Beaumont City Officials state there are contracts in place and emails confirm Ron Gunn’s money requests for services rendered. The only issue is how they are being paid.
All roads lead to a hidden bank account.
February 28, 2013 – Debt
On 05/15/12 the City of Beaumont adopted Resolution No. 2012-23, authorizing another $20 million debt. The California State Treasurer’s Office lists the total bond debt for this town of 35,000 people at $284 million.
How can a town of 35,000 with no revenue stream legally obtain $284 million in long term debt? Legally, it can not.
In the last 20 years the City of Beaumont has perverted the legal loophole California Government Code 53311 – better known as ‘Mello-Roos Community Facilities Act of 1982’. This law was designed to allow local governments to circumvent Prop 13 and incur debt on existing property owners. However the law clearly states:
53345.8 (a) The legislative body may sell bonds pursuant to this chapter only if it determines prior to the award of sale of bonds that the value of the real property that would be subject to the special tax to pay the debt service on the bonds will be at least three times the principal amount of the sum of the following:
- The principal amount of the bonds to be sold.
- The principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to this chapter on property within the community facilities district or special assessment levied on property within the community facilities district.
Resolution 2012-23 Exhibit A lists the Property Descriptions subject to the $20 million debt. The Riverside County Assessors Office lists the total value for these properties at only $2.5 million. This debt should have never been allowed.
The State of California requires the following Checks and Balances:
Underwriter – This guarantees the Securities. The State Treasurers’ Office lists the underwriter for Beaumont as O’Connor & Company Securities, Inc, also known as ‘Southwest Securities’ and ‘Chilton & O’Connor’. Their website boosts of being experts in Mello-Roos and states: “William O’Connor has underwritten more mortgage revenue bonds in California than any other individual.”
Bond Counsel – This Attorney writes an official opinion stating that a local government is legally permitted to issue the bond. The City of Beaumont has used only one Bond Counsel in the last 20 years – McFarlin & Anderson. Their website advertises their expertise in Mello-Roos and affiliation with Southwest Securities.
Financial Advisor – This is another layer of oversight required by the State to protect the people’s money. Ron Gunn Associates, Inc is listed as Beaumont’s Financial Advisor. This person/company has no website. An address for an office space in Huntington Beach can be found. I know this person exists because I have emails from Ron Gunn to Alan Kapanicas requesting money transferred into the Union Bank Account for the “Cash Flow Management Fund”.
I had requested from the City of Beaumont copies of all banking and financial accounts held by the city, but this account was not released. I have requested it again with the specific account number. It is disturbing that there is a hidden account with the financial institution that is the Trustee for the City’s debt.
Trustee – This is the Financial Institution that holds the loans. Beaumont’s bond debt is held by three institutions: BNY Western Trust Co. holds debt incurred from 1993- 2000. Debt incurred from 2001 – 2008 is held by Union Bank of California. Debt from 2009 – Present is held by Union Bank NA.
Union Bank is fully aware of the City of Beaumont’s financial problems because this bank has wired money back into the General Fund when the City’s Bank Account was overdrawn. This is also the same bank account that has numerous deposits like $515,000 on 07/26/12 that was charged to the employee expenses as Worker’s Comp.
Section 5 of Resolution No. 2012-23 lists additional consultants: ‘Urban Logic’ as Project Engineer and ‘General Government Management Services’ as special tax consultant. We already know that Urban Logic is not an independent company, and I can find no proof of life for a business called General Government Management Services.
Twice a year the City makes payments to Union Bank for the bond debt. The September payment was $8 million; $3 million paid on the principal and $5 million paid on the interest. In March the $5 million payment was for interest alone.
In December, 2010 the General Fund Bank Account was overdrawn, so the City withdrew $1million from LAIF – Local Agency Investment Fund to replenish the account. In January the City withdrew another $3 million from LAIF to cover daily expenses in the General Fund. The LAIF account went from $9.8 million on 12/01/10 to $5.8 million by 01/31/11. Authorized Caller that withdrew the funds from LAIF: William K. Alyward.
Resolution No. 2012-23 funding was to develop ‘Area 17C’, which is located northeast of town. Beaumont is surrounded with unfinished development sites. There are vacant lots remaining on most of the previous areas developed. Looking at the Beaumont area through ‘Google Earth’ it’s hard to believe there’s not environmental and erosion concerns. The Town is surrounded by developments that were never finished.
The City sells the projects to the citizenry on the theory that they will not be paying for the debt themselves, the property taxes collected will pay for the debt. But Section 8 of Resolution 2012-23 creates a clause that taxes will not start until the parcel is ‘used for private residence purposes’. Because there are no houses on these properties; there is no tax revenue collected to pay for the debt. All of the property in Area 17C is owned by Pardee Homes, Inc. They list another development site they are selling houses on and a ‘coming soon’ area that looks like it’s been sitting for years, so Pardee will not be developing this property in the near future.
Taxes are collected for the basic needs of the community. Page 63 of the 2011 Financial Report lists total Property Taxes collected at $2,839,632. The City of Beaumont paid $13.4 million for bond debt – $10 million more than was collected through property taxes.
With the collaboration of of the Checks and Balances that are paid to protect the People’s money; the City of Beaumont has placed 35,000 people in $284 million debt with payments until 2042.
February 21, 2013 – Urban Logic Consultants
From July 08th, 2010 through February 1st, 2013 the City of Beaumont has transferred over $14,000,000.00 through automatic debits in the General Fund Bank Account. These transactions are listed on the Check Warrants as ‘Urban Logic Consultants’. The General Ledger also shows Government Health Benefits paid for ‘Urban Logic Consultants’.
The expenses were charged to the General Fund and eight (8) other Special Funds. Although it is the duty of all elected and appointed officials to use exercise caution with the taxpayer dollars, the City has discretion to spend the General Fund as they choose. Special Funds are created for specific uses.
Gas Tax Fund ( 03 ) – This fund is an additional tax collected by the State to be used only for roads, alleys, & sidewalks. The General Ledgers shows that only two expenses are taken from this fund in the last two years – $80,000 in ‘Administrative Overhead’ and $370,000 paid to Urban Logic Consultants for ‘Contract Overhead’. There is not one journal entry in the last two years that shows anything tangible was purchased with these funds.
Sewer Service (10) – There has been $2,237,000.00 attached to this fund in the last two years for Urban Logic Consultants.
CFD Fund (14) – This fund was created to monitor expenses and revenue from the City’s Community Facilities District. Urban Logic Consultants have $1,665,000.00 attached to this fund in the last two years.
Mitigation Fees (35) – This fund was created to ‘account for revenues levied on new development projects’. The 2012-2013 budget lists total expenses for the Mitigation Fees Department at $501,000. There has been $1,163,000 in fees paid to Urban Logic Consultants in the from 07/20/12 – 11/08/12 alone and a total of $8.6 Million paid to Urban Logic in the last two years.
RDA Funds (36) (38) – $383,000.00 was coded to these two funds from August, 2010 through November, 2011.
Urban Logic Consultants website shows a template with no listing of employees or references. http://www.urbanlogicgroup.com. The website lists their office location at 43517 Ridge Park Drive, Suite 200, Temecula, CA 92590. I went to the location, but the offices are empty. I called the phone number listed on the website – (951) 676-1944, but instead of a receptionist answering with the greeting: “Urban Logic Consultants”, a man answered the phone with the greeting: “Public Works”.
There is no evidence that this company exists independently of the City of Beaumont. This company is listed as a private sector cooperation, but it has no office staff, their employees are receiving Health Care Benefits through the City, and most importantly; this company could not possibly be supplying the amount of services to justify the expenses charged.
Urban Logic and the City of Beaumont are intertwined – which is a violation of California Code 87100 regulating conflict of interests in government entities.
City Officials are either using this money to pay off old debt, or they are putting the money in their pockets, but there are no consulting services provided by a private sector company called Urban Logic Consultants.
February 14, 2013 – Office Of The City Clerk
Our system of government is based on checks and balances. The position of City Clerk is designed to be an important separate body of the legislation, not an extension of the City Manager.
City Clerk duties are created by state law and local ordinances. Beaumont Municipal Code lists the city ordinances governing the city clerk in section 2.08.010 – 2.08.040 and names the body of government as: ”..a city council, city clerk, a city treasurer, chief of police, recorder, city attorney, …” The city ordinances have not been updated since 1913 when Beaumont only had a few hundred people.
When the Brown Act refers to the duties of the ‘legislative body’ they are referring to those officers assigned to specific duties listed under California State Law. The duties of one legislative body can not be transferred or assigned to the personal secretary of a separate legislative body.
California State Law lists the duties of the City Clerk under Government Code 40801 – 40814:
40801: The city clerk shall keep an accurate record of the proceeding of the legislative body and the board of equalization in books bearing appropriate titles and devoted exclusively to such purposes, respectively. The books shall have a comprehensive general index.
40802: The city clerk is the accounting officer of the city and shall maintain records readily reflecting the financial conditions of the city.
40804: The city clerk shall cause a summary of the city’s financial report required by Section 53891, in a form prescribed by the State Controller, to be published once in a newspaper of general circulation, pursuant to Article 1 (commencing with Section 6000), chapter 1, Division 7, Title 1 of the Government Code. If there is no such newspaper he shall cause copies of the statement to be posted in three public places in the city designated by ordinance as the places for posting of public notices.
40806: The city clerk shall keep a book marked ”ordinances” and record in it all city ordinances with his certificate annexed to each, stating:
( a ) It is a true and correct copy of a city ordinance.
( b ) The ordinance number.
( c ) It has been published or posted pursuant to law.
40810: The city clerk is the ex officio assessor unless the legislative body provides for the assessment and collection of city taxes by county officers or otherwise.
40811: The city clerk is the custodian of the city seal.
In the City of Beaumont the office of the City Clerk is ceremonial only. Page 33 of the Budget lists the Staffing for the City Clerk Department as one (1) part time City Clerk with total wages of $2,000. The current City Clerk is paid $34.50 every two (2) weeks.
The City of Beaumont has claimed that Shelby Hanvey is the ‘Deputy City Clerk’, but Hanvey is listed on the Employee Rooster as ‘Assistant to the City Manager’ and all of Hanvey’s salary and benefits are derived from the City Manager Department. It is Hanvey that signs all documentation that should only be verified by the city clerk.
I called the City of Beaumont and asked for the ‘City Clerk’. Hanvey came to the phone and said: “This is Shelby.” I stated my name, date, time, and said: “This conversation is being recorded. State your Name and Job Title”.
Hanvey immediately put me on hold again without disclosing her name and job title.
I am then transferred to the City Attorney and I say to him: “This conversation is being recorded. State your name and Job Title”. The City Attorney then twice states: “You can’t record me, it’s a federal crime”. Then he hung up.
A government employee on a government telephone line on the government payroll has no expectations of privacy. It is unclear if the City Attorney was trying to intimidate me or if he simply has no concept of the law.
January 27, 201 – Beaumont Audit VIII: Electric and Water Utilities
Utility bills are generally not examined during an audit because they have little material value. Whether it’s a private company, public entity, or a personal home budget; utility bills can be ‘saved upon’, but not dramatically altered. The City of Beaumont proves that utility bills can indeed be dramatically altered.
The 1st record request was in December, 2012 for copies of the Water and Electric bills for the past year. After a month of stalling the City stated the copies would be over $2,000.00. I then requested three (3) months – August, September, & October. The City of charged $450.00 for the water and electric bills.
The procedure for issuing checks is: The bills are collected and coded to the individual departments that created the expense. When a check is issued a copy of the check with the bills attached are filed.
The Check Warrants should show the check and the amount allocated to each department. The City of Beaumont does not show accounting codes on their check warrants.
When the Taxpayer requests a copy of a check the procedure is to open the filing cabinet, pull out the copy of the check with invoice/receipt verifications attached, and print a copy. This information is verified by the City Clerk before received by the Tax Payer.
Before I could start reviewing the utility bills I had to go through and pull out about 450 of pieces of worthless paper. Apparently every month the City waste time and money purchasing, copying, & filing hundreds of worthless sheets of papers. The City then pays a storage company to store thousands of worthless sheets of papers every year.
Processing worthless papers shows poor management by the Finance Director and City Manager. Attesting to the validity of these worthless pages is considered Forging a Government Document by the City Clerk.
Southern California Electric – Check # 81034 – 10/19/12 – $65,130.43
The check has $32,329.53 charged to the General Fund, $32,427.28 transferred to the Sewer Service Fund, $373.62 to Transit/Vehicle Maintenance.
The Sewer Service So Cal Edison bill is for three addresses.
6301 Plant D-7 $1,147.24
6402 Plant $18,783.45
715 West 4th $12,496.59
The General Fund So Cal Edison bill is divided eight (8) departments:
General government – 550 East 6th St $2,508.38
Community Rec Center – 1310 Oak Valley Pkwy $4,615.81
Police – 550 East 6th $1,455.16
Fire – 628 Maple $622.93
Street Maintenance – 394 W Oak Valley Pkwy $111.28
The spreadsheet attached to the bills list the Maintenance dept. charged $328.41, but the City’s spreadsheet shows the Maintenance dept. has the following addresses with electric charges:
135 Lenora Ct $26.37
1245 Leaf St $26.37
101 gloria $26.50
12942 Potrero Blvd $1,378.45
455 W 4th St $497.08
$248.54 is coded to ‘3100’, but there is no Department 3100 on the Budget.
$22,439.02 is coded to ‘3350’, but there is no Department 3350 on the Budget.
The City of Beaumont codes $23,439.02 to the nonexistent department 3350, lists the location as ‘Various’, and has no receipts for these transactions.
Beaumont Cherry Valley Water – Check # 80557 – 08/31/12 – $191,371.02
This check has 130 bills attached. It’s hard to fathom how a city could use $191,000 in water until you look at the bills. Only about half the expense is for water, the other half is meter fees and Passthru charges.
The Water District charges a ‘meter fee’ that ranges from $18.01 – $828.00. There are many bills that have nothing but meter charges.
Water bill account # 001 4002 001 and account # 001 4003 001 both lists service addresses as: 100′ N of 2 Irr Mtr Xenia.
The 4002 account bill is $12,309.02 and lists $72.05 Service Charge, $3.33 Backflow Administration charge, $2,900.76 SPW Import Water charge, $2,080.98 SCE Import Electricity charge, and $7,251.90 for Water.
The 4003 account bill is an additional Meter charge of $72.05 and Backflow Administration charge of $3.33, but there is no water use. The City pays for two meters when only one is in use.
The following accounts and addresses all charge meter use, but have no water usage:
043 0590 000 – Rangel Park $51.70
045 0713 000 – Palmer Park/Palmer Ave $29.86
045 0781 001 – Area 1 Sewer Lift Station $40.75
045 0990 000 – Morgan & Monte Vista Park $62.52
045 1100 000 – At Park North of Pool $182.37
045 1624 001 – 1245 Leaf Street $62.52
045 0240 000 – Cameron & Pennsylvania $21.80
045 0370 000 – Beaumont Ave/ Brookside Ave $62.52
In this water bill the City of Beaumont paid the follow for two blocks of Seneca Springs Parkway:
Seneca Springs Park Area $3,007.30
Seneca Springs West of Park $1,038.20
30 Seneca Springs $3,855.38
71 Seneca Springs $285.78
70 Seneca Springs $4,353.96
70 Seneca Springs $ 131.77
90 Seneca Springs $5,323.96
94 Seneca Springs $1,403.22
117 Seneca Springs $1,135.20
The total Water Bill for this two block area is $20,534.77. $11,608.89 is Water charges, the rest is meter fees and Passthru charges.
The City of Beaumont has 24 bills with addresses for individual islands along Palm Ave: ‘Palm-1st Island S of 6th‘, ‘Palm-2nd Island S of 6th, etc… These bill total $10,193.44. The Meter Fees alone total $2,157.96.
The City paid $3,736.45 for ‘Sundance CR-1st‘; and $2,799.43 for ‘Sundance CR-2nd‘. This City also list $2,543.94 for ‘1202 Starlight Ave’ – which is front of the Sundance Community. There appears to be several City utility bills inside Home Owners Association Communities.
Ring Ranch Road is another two block ares that has four (4) water bills totaling $7,946.28.
The City blacked out the Service Address on account # 098 1211 001, but the City’s spreadsheet lists the bill address as: ‘Truck 2406’ and the meter charge is listed as ‘Construction’.
There are dozens of meters installed all over the City of Beaumont for water and electric. When a business, agency, or private individual installs utilities they want the minimum number of meters to minimize costs.
The City of Beaumont is wasting thousands of dollars every month through poor utility management alone.
January 31, 2013 – Transaction 207206
The City of Beaumont closes their fiscal year on June 30th . Closing the year simply means all revenue and expenses are tallied. This process usually takes a few weeks and although there will be a few random receipts that must be recorded after the 06/30 deadline, most of the transactions are made in the fiscal year.
In the middle of April, 2012 the City of Beaumont recorded transaction # 207206 and dated this transaction 06/30/11. There are over 300 entries coded to transaction # 207206 that range from $0.00 to over $1/4 million. Some of the entries are double or repeat of the original closing number and some don’t seem to have any basis for their existence. I found the 207206 transactions in 24 different funds, 7 of which are not on the budget.
01 – General Fund: The General Fund account has dozens of entries. Cash entry is plugged in at $54,745,753.38 and the Cash-Interfund is $63,943,957.17. The City twice coded $11,242,073.41 to ‘Unreserved Fund Balance’ claiming to have a total of $22,484,146.82 in unreserved funds.
02 – Gov Access TV: This fund only has two entries, but it is a double entry of $49,369.06 coded to ‘Unreserved Fund Balance’ for a total of $98,738.12.
03 – Gas Tax: This has an entry of $4,862,145.79 transferred in from the General Fund and also has a double entry for ‘Unreserved Fund Balance’ of $1,006,064.59; which would total $2,012,129.18.
04 – AB2766: This fund records a Interfund transfer of $63,028.76, but the Cash is listed at $118,849.33. This leaves a discrepancy of $55,820.57. This fund also has a double entry for Unreserved Cash Fund of $27,308.58 to total $54,617.16.
05 – Not on Budget: There is no listing for this fund and there is no other journal entries listed under this fund except for the two 207206 entries which record $1,771,707.26 transferred from the General Fund and an Unreserved Fund Balance entry of $0.00.
07 – CDBG Fund: This fund recorded $411,613.35 transferred in from the General Fund and recorded Unreserved Fund Balance at $0.00.
08 – Bike & Pedi: This listed Cash at $75.76; Cash Interfund at $10,812.01; Due from Other Govt. Agencies at $142,142.03; and double recorded Unreserved Fund Balance at $.08.
10 – Sewer Service: This fund has the most unbelievable discrepancies. Transaction 198148 records the 1st 06/30/11 entry to ‘Cash with Fiscal Agent 2001 Issue’ at $1,274,332.58.
Transaction 207206 removes $4,155,903.58 from the account. A $1,102,000.00 is added under ‘Note Receivable’ with transaction 207206 and removed with transaction 217207 dated 06/30/12. Land is plugged in at $502,560.06. An entry for Equipment is listed at $69,163,584.11. The Unreserved Fund Balance is entered twice at $51,469,503.73.
12 – Not on Budget: This fund has only bonds and debt listed. There are 17 for ‘Trustee Issue’ with date ranges in the memo from 2004 – 2009. The original 06/30/11 entries are small amounts, but the 207206 entries are in the millions. For example: 2004A Issue 1st 06/30/11 entry is $12.84, but the 207206 entry is $397,038.53. The total added to the bonds is over $15 Million. This fund also has an entry coded to ‘Investment in CFD Bonds’ for $207,985,804.87 and the entry ‘Due to Bondholders’ $225,855,496.15.
14 – CFD Fund: The City recorded a ‘Cash Interfund’ transfer of $76,109,648.03 – which is impossible when the total transfer amount from the General Fund was $63,943.957.17. This department lists 13 more bonds with a total 207206 entries of $2,717,890. It also double enters the Unreserved Fund Balance at $24,263,353.98.
19 – Not on Budget: This fund is not listed on the budget, but it is where they account for the ‘Charity’. There are a total of nine 207206 entries that remove funds from this department.
31 – Not on Budget: The only listings under this fund are the 207206 money transfers of $90,741.00.
35 – Mitigation Fund: This listed a Cash entry of $16,409,862.69, a Cash Interfund of $17,123,788.880, and a double entry of $8,290,725.63 coded to Unreserved Fund Balance
36 – RDA Capital Projects: 207206 entries added $17,123,788.8 to Cash Interfund; $85,990.00 to Note Receivable; and a double entry to Unreserved Fund Balance of $4,360,657.16.
37 – RDA Debt Service: This has a Cash Interfund of $15,796,555.81; Account Payable $645,569.25, and a single Unreserved Fund Balance of $56,242.64.
38 – RDA Low/Mod Housing: This fund received a Cash Interfund of $1,908,229.02 and a double entry for Unreserved Fund Balance of $1,387,404.04.
39 – Not on Budget: There have been 23 entries coded under fund 39 in the last two years. Most of checks issued to ‘Beaumont-Cherry Valley’ & “Christensen Brothers Engineering’. The other three entries are 207206: Cash – $874,771.22, Cash Interfund – $156,411.81, and Deposits – $718,359.41.
40 – Transit Fund: This fund has only two 207206 transactions: Cash – $4,719,117.19, and Cash Interfund – $4,492,567.72
43 – Vehicle Maintenance: This fund adds $202,034.23 to Cash Interfund, repeats the original 06/30/11 entry of $6,907.55 for Accrued Payroll, and attaches $45,657.86 to Sick/Vacation Benefit Liability. Vehicle Maintenance is listed on the Budget as Department 5050, but does not list the department in the detailed budget. The State Controller’s Office lists two employees in this department that make less than $60,000/yr. It is not likely they have accumulated $45,000 is sick leave.
The 207206 transaction recorded a total of $213,669,257.10 in ‘Unreserved Funds Balance’.
When questioned about the internal audit the response from the City has been: “We did a GAAP Audit”.
It is true that a GAAP Audit was completed, but page two of the Audit clearly states “material misstatements’ and ‘do not present fairly’. I originally thought the 207206 plugs were done after the GAAP audit, but the GAAP Audit is dated 08/01/2012.
The City of Beaumont states that they ‘had an audit’, but what they are not acknowledging is that they flunked the GAAP audit.
January 24, 2013 – Checks & Balances
Our government is designed with a system of checks and balances to guard against corruption and misuse of tax payer dollars. It is the legal and moral duties of our elected & appointed officials to work within the constraints given, not to find ways around them. Many are using the economy as an excuse to reduce checks & balances, but Beaumont illustrates how checks & balances pay for themselves.
Money Coming In: In most businesses, public or private sector, the money is counted and recorded by one person and deposited in the bank by another person. City Governments have City Clerks as an additional check on the People’s money.
The August, 2011 Bank Statement shows twelve (12) deposits recorded at ‘$0.00, $.01, or $0.02’. Page 8 of the Bank Statement shows four (4) deposits in a row made on 08/08/11 for $0.01.
Let’s get the visual of four Citizens paying $0.01 on their bill/fee in four different departments on the same Monday in August. That is not a likely scenario. When compared to the general ledger, there is no comparison. I can find ‘some’ deposits on the bank statement that are the same amounts as on the general ledger, but most have discrepancies. There are no journal entries for $0.00, $0.01, or $0.02.
Money Going Out: The General Ledger shows transaction # 210058 on 06/01/12 issues check # 79820 for $7,164.26 to ‘Republic Its’. On 06/05/12 transaction # 210064 records check # 79821 for $809.09 to Wyvona Sibole.
But the General Ledger also shows the following additional transactions:
210059 – $487.83
210060 – $488.28
210061 – $42,591.00
210062 – $23,813.73
210062 – $39,293.68
210062 – $322,660.81
210062 – $51,428.81
These transactions total $480,764.14, but can not be found on the Check Warrants or Bank Statements. The ‘Payee’ line of the General Ledger is blank. Similar transactions can be found throughout the General Ledger and average $1/2 million each month.
In city governments there are three (3) positions designed to oversee taxpayer monies: Finance Director, City Manager, and City Clerk. In the City of Beaumont the Office of the City Clerk is ceremonial only. City Clerks make over $100,000/yr because of the responsibilities assigned to the position and the additional prison time assigned to for failure to perform duties. The City Clerk in Beaumont is only paid $34.40 every two weeks.
The City Clerk duties include verifying all financial transactions, authorization all communications to the public to assure accuracy. Shelby Hanvey holds the job title of Administrative Services Manager, but is performing the duties of the City Clerk. The City and/or Ms. Hanvey’s theory that she is not liable for all duties of the City Clerk because she doesn’t hold that specific job title is incorrect.
Next Layer of Checks & Balances: Our system of government also has additional layers of control to assure the People’s money is secure. Taxpayer money pays for controls on a local, state, and federal level.
On a Federal Level – I have notified the F.B.I in Los Angeles, Palm Springs, and Riverside.
On a State level – I have notified the Controller’s office, the Board of Accountancy, & the Worker’s Comp Medical Unit Division.
On a local level I have notifed the Riverside District Attorney Special Operations unit and the Grand Jury. I meet with the Grand Jury on the 31st.
January 10, 2013 – Beaumont Audit V: The Art of Padding Payroll
I have totaled all Payroll Transactions from the City of Beaumont General Ledger for the months of May through October, 2012. I have compared these totals with the Bank Statements and Council Check Warrants and found the general ledger has $1,301,068.96 more expenses attached to employee payroll than the automatic deposits documented on the Bank Statement.
The City Council Check Warrants have no correlation to either the Bank Statements or General Ledger. The Dates listed on the Check Warrant are not the correct Payroll Dates. The only time the Check Warrant dates and General Ledger dates corresponded was 10/25/12 when the City was shifting so much money it entered the payroll transaction #222921 with the date of 10/25/12 instead of the correct payroll date of 10/18/12.
The Check Warrants do verify that ‘Guardian Insurance’ check dates & amounts correlate with the Bank Statement, but the actual amounts recorded on the General Ledger average $2,000 more than the actual amounts paid.
I have seen the practice of listing alternate dates on the check warrants in other California cities. I have no idea how this ‘procedure’ originated, but each time the Finance Director lists the incorrect dates or amounts they are committing State and Federal felonies.
I audited a total of thirteen (13) pay periods from 05/01/12 – 10/25/12. I also included the General Leger payroll for 11/01/12 on the spreadsheet for reference because 10/25/12 was not actually a pay period.
Total Payroll Per the Bank Statement from May – October was $ 5,750,85.97.
Total Payroll Per General Ledger from May – October was $ 7,051.923.93.
This leaves a Material Misstatement of $1,301.068.96.
There is a difference of $473,080.04 between what the City states on the general ledger and the Bank Statement Payroll Deductions. Every pay date is overstated by at least $10,000.00. Deductions for vision, dental, disability, and life insurance are separate transactions and the check is issued to Guardian to pay for these costs. But the City also takes these deductions from the Payroll Transactions.
For example: 7000 – Transit Department shows the standard monthly Dental deduction of 32.61 was paid on 05/01/12, but the City of Beaumont attached another $150.00 dental deduction to the 05/05/12 payroll.
The largest discrepancy was on 07/27/12 when the bank statement shows payroll was $468,612.36, but the general ledger shows a total of $711,731.73 in payroll expenses. The City padded the employees’ payroll by $1/4 Million on that one pay date alone.
The Month of October was a ‘lost weekend’ for the Accounting Department. Payroll issued on 10/05/12 was ‘normal’; Bank Statement reported $421,431.06 in payroll, City general ledger recordings totaled $437,932.54. This leaves a $ 16,501.48 discrepancy, but for the City of Beaumont, that’s normal.
The Bank shows payroll was issued 10/18/12 for $453,411.42 and shows no other payroll transaction between 10/05/12 and the end of the month.
The General Ledger lists their payroll on 10/25/12 with transaction # 222921 for $459,647.00.
The Beaumont General Ledger does have payroll transactions dated 10/12/12, but these are additional checks issued:
10/12/12 – #219889 – $105,323.91
10/12/12 – # 219909 – $29,702.97
Apparently the City ‘got confused’ when they issued additional checks for $135,026.88.
There are a total of seventeen (17) additional transactions totaling $827,998.92. The checks range in amounts, but every month there is a transaction over $100,000:
# 210440 – 06/08/12 – $107,838.85
#212635 – 06/30/12 – $106,940.65
#215697 – 08/17/12 – $107,434.68
#218901 – 09/28/12 – $103,123.34
#219889 – 10/12/12 – $105,323.91
The above transactions are coded 3020- Medical Insurance with the memo ‘Cigna Health Care’. But there are no Cigna transactions listed on the Check Warrants. The City carries Kaiser and the Guardian Insurance to cover dental, disability, vision, & life.
The City also shows a massive transfers of money listed on the Council Check Warrants as ‘Mutual of Omaha’, but the City of Beaumont doesn’t carry Mutual of Omaha Insurance. On the Bank Statements the automatic debit transactions are listed as ‘MG Trust’.
There was a total of $78,864.54 in payroll charged to a department coded 7100. This department is not listed on the budget.
On 05/17/12 the City posted transaction #209836 giving a FICA credit of $439.14 to department 2000 – Quality of Life. This department does not have any FICA deductions taken from their employee’s paychecks. Any overpayment from FICA should be credited back to the individual department.
The department of the City Manager is the only department to have ‘STD Insurance’. The level of nasty the City Manager must exhibit to require STD Insurance has yet to be determined.
If I can find $1.3 Million addition employee expenses added to payroll in five months, the City of Beaumont is most likely padding their Employee Payroll Account by $3 Million/year.
January 3, 2013 – Beaumont Audit IV: Falsifying Employee Benefits
Government Employee Benefits have been the center of our budget and economic talks – blaming the line workers for our State’s financial problems. This is a lie. The City of Beaumont audit clearly shows that government officials are falsifying employee expenses.
In various departments in the General Ledger I found three (3) reoccurring posts:
Transaction # 208734 – Financial – 05/04/12 – ‘Health & Fitness Reimbursement’
Transaction # 215049 – Financial – 07/27/12 – ‘Health & Fitness Reimbursement’
Transaction # 222921 – Financial – 10/25/12 – ‘Health & Fitness Reimbursement’
This is to reimburse the city employees for gym membership. Regular reimbursement transactions range from $100.00 – $250.00, fall under ‘Purchasing’, and have the employees’ name in the memo, but with the above transactions there is no employee memo and the amounts are heavily skewed. The Street Maintenance Department has the following Health & Fitness Reimbursement transactions:
194764 – Purchasing – 11/04/11 – $178.98 – Employee’s Name
208734 – Financial – 05/04/12 – $4,411.66
215049 – Financial – 07/27/12 – $337.00
222921 – Financial – 10/25/12 – $690.10
Street Maintenance used only $178.98 of their reimbursement, but the City has added over $5,000 more. The padding of the Health & Fitness account for the three dates listed totals $92,084.04. The City also padded the Education Reimbursement and other accounts. On 06/15/12 they took payroll deductions twice – on Transactions # 211306 and 211307.
There is no reasoning or excuses – This is State and Federal Fraud and Embezzling.
I attempted to match the amounts Payroll Dates on Check Warrant to Payroll Deductions on the Bank Statements, but there is no match. Council ratified Pay Period 04/26/12 for $550,744.37 and Pay Period 05/10/12 for $481,586.89 – but the Bank shows payroll on 04/16/12 for $427,416.05; and on 05/03/12 for $532,878.83; and on 05/17/12 for $452.001.97. Council is either ratifying the Check Warrants for the wrong dates and amounts or there is another payroll account.
Another disturbing transaction is # 214406 – 07/26/12 – ‘Worker’s Comp’. This transaction is attached to 15 different departments and totals $ 458,654.00. The Bank Statements do not show a check issued or an electronic debit transaction.
It has been suggested that the “MG Trust’ automatic debits are ‘Mello Roos’, but I’ve found that the ‘MG Trust’ ACH Debits are claimed on the Check Warrants as ‘Mutual of Omaha’ and the dates are incorrect. For example: the 05/15/12 Check Warrant lists four (4) transactions with dates 03/29/12 and 04/12/12, but the Bank Statement shows the transactions occurred on 04/25 and 04/26/12. There are no Mutual of Omaha transactions on the General Ledger.
Another transaction of concern: # 207206 – 06/30/11, but plugged in April, 2012. I have not tracked these transactions fully, but I have noticed three (3) for $9,778,347.78, $4,492,567.72, and $10,473,775.60.
December 27, 2012 – Beaumont Audit III – Forging The Check Warrants
Every financial transaction must be made public. Falsifying the check warrants is considered forgery. State and Federal laws run very deep in this area and have very stiff prison sentences. Stealing the money is embezzlement, but falsely ratifying the checks is forgery and perjury.
03/26/12 – ACH DEBIT – CITY OF BEAUMONT PAYABLES 000001OFFSET Mar 26 – $4,058.45. Warrant List shows transfer # 703 processed on 03/26/12 and transfer # 704 processed on 03/30/12. There are no transactions listed on the Check Warrant to justify this debit.
08/24/12 – ACH DEBIT – CITY OF BEAUMONT PAYABLES 000001OFFSET Aug 24 – $23,623.98. Check Warrant dated 09/18/12 shows transfers total $17,511.48. This leaves a $6,112.50 discrepancy.
Warrant List dated 10/02/12 – EFT000849 – 09/21/12 – STATE STREET BANK & TRUST – $17,720.32. This transaction is not found on the General Fund Bank Statement.
10/02/2012 – ACH DEBIT – CITY OF BEAUMONT PAYABLES 000001OFFSET Oct 02 – $17,720.32 – listed on page 3 of October Bank Statement. The last electronic funds transfer on Warrant List for 10/02/12 is dated 09/26/12 and transfer on Warrant List for 10/02/12 is dated 10/04/12.
Electronic Funds Transfers # 000883 – 000890 – This are not listed on the Warrant Reports. Council ratified transaction #882 on 11/06/12 – and ratified transaction #891 on 12/04/12. The Council meeting scheduled for 11/20/12 was canceled. It is important to note that there is no discrepancy in the check numbers.
The ‘big three’ responsible are the Finance Director, City Manager, and City Clerk that has an extra duty of care to assure the check warrants are not forged. State Law does not mandate that Council visibly view the checks before authorizing the check warrants.
Other entries on the Bank Statement that are not accounted for on the Check Registers:
10/10/12 – ACH DEBIT – MG Trust 142 07C647PX0000142 Oct 10 – $21,417.61
10/10/12 – ACH DEBIT – MG Trust 142 07C647PX0000142 Oct 10 – $21,813.11
10/10/12 – ACH DEBIT – MG Trust 142 07C647CN0000142 Oct 10 – $22,406.51
10/10/12 – ACH DEBIT – MG Trust 142 07C647CN0000142 Oct 10 – $22,670.40
The above transactions are listed in various amounts every month, but there is no accounting for them on the Check Warrants.
Wire Transfers: There are two Wire Transfers shown on the General Ledger that are not found on the Bank Statement:
06/27/12 – 212889 – 35-9350-4060-0000 – $759,788.36
06/27/12 – 212890 – 35-9350-4060-0000 – $296,249.14
Health & Fitness Reimbursement: Every department had three (3) entries added for health and fitness that have no memo and exaggerated amounts.
Transaction Number – Date
208734 – 05/04/12 – Health and Fitness Reimbursement
215049 – 07/27/12 – Health and Fitness Reimbursement
222921 – 10/25/12 – Health and Fitness Reimbursement
Union Bank Of California: I’ve been asked about these transactions; they look like a credit card charge.
175516 – 03/04/11 – $15,618.78 – Union Bank
190742 – 09/09/11 – $16,145.26 – Union Bank
194769 – 11/04/11 – $4,941.12 – Union Bank
199215 – 01/05/12 – $15,894.81 – Union Bank
202962 – 02/24/12 – $30.00 – Union Bank
210503 – 06/08/12 – $15,594.81 – Union Bank
December 20, 2012 – Records Request – General Fund Bank Statement Documentation
I am requesting the following items from the City of Beaumont:
Check Register with Accounting Codes for Check Numbers 510000 – 511500. Check References Attached. This Checks are located in the General Fund Bank Account.
Authorization & Invoices for Expenditures associated with Commerce Bank VISA ending 3423 from 07/01/2010 – 11/30/12 In the General Fund. Reference Dates and Amounts Attached.
Authorizations and Invoices for all ABCBUSOL TRANSFER DEBIT from 07/01/10 – 11/31/12 in the General Fund. Reference Dates and Amounts Attached.
Authorizations and Invoices for all WITHDRAWALS taken from the General Fund Check Register from 07/01/10 – 11/31/12. Reference Dates and Amounts are Attached.
Authorizations and Invoices for the General Fund Bank Statements Listed Below:
11/09/10 – CREDIT ADJUSTMENT – $5,358.00
12/22/10 – DEPOSIT – $1,000,000.00
01/20/11 – DEPOSIT – $2,000,000.00
01/27/11 – DEPOSIT – $12,184,209.45 – memo: for reference # 4
02/08/11 – DEPOSIT – $1,892,465.96
Your prompt action on this request is appreciated.
December 20, 2012 – City of Beaumont Audit – General Fund Bank Statements
I requested from the City of Beaumont all of their Bank Accounts from 07/01/2010 to Present. I received only one – the General Fund Bank Statement. From these documents I found the following irregularities:
ONE BANK ACCOUNT – TWO CHECK BOOKS:
The City of Beaumont has two (2) checking accounts running through their General Fund Check Register, but only Ratifying one set of checks through Council. The checks Ratified by Council and shown with the Agenda are a five digit range: ‘81143’. But the General Fund Bank Statement shows that another set of checks with a six digit range: ‘521143’ are also run through the General Fund.
For the Year End 2011 the hidden checks totaled $320,180.57; FYE 2012 they totaled $432,697.80. From 07/01/12 – 10/31/12 $156,617.50 has been issued from the 2nd checking account.
There are at least two dozen checks issued monthly from the 2nd account. Most of the checks amounts are repeated. Several of the amounts are for ‘$21.31’ – which looks like a life insurance premium. Other repeated check amounts range from ‘$690.00’ to ‘$1,902.93’. Other checks are issued randomly from small dollar amounts to several thousands. The largest check was # 511288 paid on 07/09/12 for $23,467.41.
CBUSOL TRANSFERS AND CASH DEPOSITS
The City of Beaumont has stated that there are only two (2) checking accounts: the General Fund and the Payroll Account. But the General Fund Check Register shows transfers of money with the detail notation: ‘WIRE TO CITY OF BEAUMONT’.
On 08/27/10 a transfer of $7,945,683.25 was made. This dropped the balance of the General Fund from $11.5 million to $3,5 million. On 12/22/10 the General Fund drops below $600,000, and a $1,000,000 cash deposit is made.
On 01/19/11 the General Fund went in the red when ‘Los Angeles Engineering’ cashed a check for $556,795.00. The Bank Account closed <$ 164,000.00>.
01/20/11 a $2 Million deposit was made.
I found a total of 17 wire transfers shifting large sums of money in and out of the General Fund. The most recent was 08/28/12 when $8,357.859.22 was wired through a SBUSOL Transfer to ‘The City of Beaumont’.
VISA CARD ENDING 3423
There is an VISA card being paid through ‘ACH DEBIT’ instead of issuing a check to pay this expense. FYE 2011charges total $397,042.98. FYE 2012 total $253,397.44. From July through October charges are $113,548.31.
In the last two years there have been 25 entries totaling $20,274.59 listed only as ‘WITHDRAWAL’. The withdrawals started small; in the year 2011 there were a dozen withdrawals totaling $2,358.22. From January through October 2012 there have been 12 withdrawals for amounts ranging $780.00 to $2,000 and totaling $17,881.00. No one should have authorization to make cash withdrawals from government funds.
December 13, 2012 – City of Beaumont Internal Audit: Preliminary Findings
An Internal Audit is sometimes called a Forensic Audit because it is a dissection of the entire subject, not an investigation of anything specific. The Budget is the City’s plan on how they will spend the People’s money. The Check Registers show exactly how the money is spent. The Financial Statements should be the totals of the Check Registers. In Internal Audit compares and verifies the information.
All expenses must be approved and coded to the department from which the expense is allocated. The City of Beaumont shows their Check Register with the Council Agenda, but they have the accounting codes blocked out. When I requested a copy of the check registers with the accounting codes their reply was: “We don’t have Check Registers with Accounting Codes”.
My first thought was: ” You Lie” because coding the expenses to the individual departments is a major component in the check writing process. But now that I’ve reviewed their books I believe that they are writing checks without Accounting Codes.
I have received a copy of the General Ledger because the City has stated this is the only documentation showing Accounting Codes. There are payouts of over $1,000,000 with no explanation and there are purchases for $1.00 with the memo ‘candy bar’. There are utilities coded to ‘contract services’ and contract services coded to ‘telephone’.
For example: 09/20/12 – $55.00. This entry is allocated to ‘6100’ – which is a department that is not on the budget, coded to ‘Utilities’ with the memo: ‘Beaumont Unique Flowers’.
Below is a Summary of my Preliminary Findings.
Forging The Check Warrants: Council Agenda Item 3.a.3 list the Check Warrants for the City of Beaumont. These check numbers are five digits – ‘80876’, but there is another set of checks that are six digits – ‘51142’ that being drawn from the same Bank Account, but do not appear on the Check Register.
This is called Forging the Check Warrants and it is a Violation of State and Federal laws. Council ratifies the check warrants, but the law states they don’t actually have to view the checks before they are ratified. The ones legally responsible are the Finance Director, City Manager, and City Clerk who has an extra duty of care to certify all is true and accurate.
Per Department: These are irregularities I’ve found. A more detailed audit will follow.
1350-Community Development: This department budgets $80,000/yr for Contract Services, but spends over $100,000/yr.
01-1410: This Department Code is not on the Budget. An account entry that doesn’t hit the budget is called a ‘Ghost Account’ because the expense is there, but you can’t see it. There is one entry dated 05/27/11 for $3,216.00 coded to ‘Utilities’ with the memo ‘Southern California Association’. The other five entries in the last two years totaling $15,135.00 have the memo ‘Joe Gonsalves & Son’. This is a lobbyist group.
1550-Community Services: This Department is budgeted $50,000 budgeted for ‘Maintenance & Operations, but has a $75,000 entry to ‘M & M Group’ as well as numerous others.
2150-Building & Safety: This Budget lists Personnel Services expenses at $475,000, but the State Controller’s Office lists the maximum these four (4) employees can make is $303,160.
01-3350: This Code is not on the Budget. There was a salary was hidden in this account with the last paycheck dated 06/17/11. There are several hundred thousands of dollars in entries, most are listed under ‘Contract Services’.
6050-Maintenance: The Personnel Budget is projected at $1,683,000, but the State has the budget limits at $1,000,000.
01-6060: This Code is not on the Budget. There was a salary listed FYE 2011 and is still used for fuel.
Personal Use of Government Funds: Tax Payer Dollars and City Time is Never for Personal Use.
Notes Receivable – Beaumont Shooting Range: The City has fronted this private sector business $81,169.00 since the 1st of the year, but has only received one (1) payment for $1,630.70 on 08/31/12.
Urtiaga Gibbs – Resource Director: 08/13/12 wrote a hot check for $3,242.16. On 08/15/12 the amount was credited with the memo: ‘loan’, but there is no loan account set up or payments being made.
Personal Loans: There are several personal loans being floated through the City books – Eight (8) of which are the Upper Ranks of Law Enforcement. Some of these loans are over $10,000. This is absolutely unacceptable.
Ronald Morning: This person received 8,857.70 in loans from 01/07/11 – 04/20/12. but has only paid $4,805.77. This person is no longer on the Employee Rooster.
Jeffery Fox: This Councilman receives $100 – $250 loans every month and the City even gave his son Jeffery Fox Jr. a $200 loan on 10/18/12.
Diners’ Club Card: This card is coded to every department in many different accounts and with amounts ranging from a few dollars to a few thousand. This does seem to be the only credit card hitting the accounts and will need its own audit to verify the transactions.
That is the overview, now I will start to dissect the parts. Every penny of tax payer money is accountable. Every transaction must be documented. All government documents are a matter of public record.
November 29, 2012 – Records Request To The City of Beaumont: This Is An Internal Audit – Open Your Books
November 29, 2012
City of Beaumont
RE: Request for Public Records
I am requesting from the City of Beaumont the following records:
All Bank Statements and accompanying Check Registers for every Bank, Investment, Financial, or any other Institution holding tax payer monies for the dates 07/01/2010 through 06/30/2012.
All Check Registers will have accounting codes showing exactly to which departments each transaction is coded.
This is an internal audit. Every penny of tax payer money is accountable.
Your prompt action on this request is appreciated.
Libi Uremovic libionline.net