By: Libi Uremovic | Original Article at patch.com
Council will be asked to Approve the 2014 Financial Statements at the April 7th Council Meeting. Council has already paid the Auditing Firm $35,000, but should refuse the Financial Statements as presented and direct Staff and Auditors to Correct the following Material Misstatements:
ADVANCES TO RDA: $21,500,000
There were many discussions at the Audit Workshop regarding the $21.5 Million IOU From RDA to the City and why the City doesn’t simply pay off the $3 Million to the State to ‘receive’ $21.5 Million.
The $21.5 Million Entry first appeared on the 2011/2012 Audit, so the expenses to justify the $21.5 Million all occurred before June 30, 2012.
The letter from the State Controller dated December 2, 2014 states that the City of Beaumont is claiming $9,925,325 in assets AFTER January 1, 2011, of which $6,517,519 are unallowable.
At the Audit Workshop Beaumont Finance Director Bill Aylward stated:
“ When you talk about deficits; it all falls back to the $21.5 that we loaned out that we didn’t really have in the general fund.”
The City never had any money to loan the RDA – the CFDs have always supplemented the City.
White: If the State Controllers’ Office was to come to us and tell us that we have another $6.5 Million in debt that we owe them, how would that effect our financial statements?
86:25 Aylward: First off, we believe that number’s overstated, but let’s say it was correct. If it’s truly interest payments that they say we should have made during those physical years 2011-2012. I would argue that those interest payments are due to the City. We would go from $21.5 Million to $27.5 Million the State owes us.
Aylward’s statement leads one to believe that the $21.5 Million is what the State has already stated was not allowed.
SEWER MACHINERY AND EQUIPMENT: $74,169,020
41:00 Hartzheim: Assets came over prior to when we were even here, from a prior auditor with the value on the depreciation schedule.
Page 35 of the 1993 Sewer Bond lists the Sewer Fund financial statements FYE 1990, 1991, an 1992: http://emma.msrb.org/MS90568-MS65876-MD127415.pdf
The 1992 Financial Statements lists the Sewer Machinery and Equipment at $2,406,727 – all of which would depreciate within 15 years. Total Sewer Fund Assets in 1992 were $7.7 Million.
167:00 Hartzheim: This City, apparently, uses ‘machinery and equipment’ as a ‘catchall’ for all their sewer lines and everything else.
Using the Sewer Funds as a ‘catch all’ is why there is no Title 22 Compliant Recycled Water and why the Sewer Plant isn’t worth $1.00.
NOTE 14 WRCOG TUMF SETTLEMENT
It is the Auditing Firm’s duty of care to confirm information and submit an opinion on the Staffs’ position.
The Interest Rate is incorrect and the City’s theory that it will sue ‘past and future developers’ to recoup $60 Million is ridiculous. The Bonds clearly state that the City agreed to pay the TUMF from the Bond Funds.
157:20 Wysocki: I’ll just add that the interest rate that was fixed by the auditors was reliance on legal advice from me and our trial counsel that the interest rate is based on Civil Code Section 3287(c), which is basically a 10th of 1% annually. That’s based on the Civil Code Section. As we all know and has been discussed previously; Judge Chaffee made a different determination, which is the subject of the appeal.
White: But I thought you had told me and we had agreed that law only went into effect January 1 of last year and therefore the interest rate would still be at the original 7% or whatever the Judge stated was the proper rate up until January 1st, 2014.
Wysocki: No, we believe that the interest rate that was allowed by the Judge was incorrect.
White: So you think the law has a retroactive to ’09 to cover all interest back to ’09?
Wysocki: I think that’s correct.