What does the City of Half Moon Bay have in common with the City of Bell?
They both use the same accounting firm and are teetering on the edge of insolvency due to mismanagement by city officials.
"If you’re a small city in California, you probably won’t be looking to Mayer Hoffman McCann to do your audits. If you’re already with them, it’s time to go auditor shopping." -Adrienne Gonzalez
The HMB Review reported that accounting firm Mayer Hoffman McCann has given the City of Half Moon Bay 2009-2010 annual audit report the thumbs up. Representatives from Mayer said the city's books are sounds and meet all state requirements.
The State Controller’s Office is investigating a series of audits Mayer performed for the city of Bell, California. Mayor Oscar Hernandez, Councilwoman Teresa Jacobo and former Councilman George Cole, are facing corruption charges for allegedly looting the city's treasury. Three city officials have requested the city of Bell pay their legal bills and the mayor has yet to resign from his office.
HMB Review reported the following:
Councilman John Muller, who sits on the city finance committee, said local officials were assured the problems in Bell were not the fault of the Mayer firm.
“As best as we could understand it, they were given misleading numbers,” Muller said. “We were confident with the work this firm gave us, and that it had nothing to do with Bell.” A report released last month by the state controller blamed the accounting firm for failing to follow 13 of the 17 auditing standards when it reviewed the finances for the city of Bell.
Officials with the controller’s office say the firm failed to ask basic questions about the city’s financial records, even when certain transactions should have raised red flags. [...]
“We found in our review that big problems surface pretty quickly just by asking a few questions and looking at the books of Bell,” said Jacob Roper, spokesman for the State Controller’s Office. [...]
Representatives from the Mayer firm defended their auditing standards, saying they followed all state guidelines. The company explained that it failed to notice any trace of fraud because the Bell officials colluded to hide it from auditors.
“In the case of Bell, we were looking at financials prepared by the city,” said firm spokesman Joe Crivelli. “If the client wants to hide and misrepresent to put the auditor off the trail … there’s not much the auditor can do.” [...]
The Mayer firm began working for Half Moon Bay last year, giving the city its first audit in years that found flawless bookkeeping.
In the years before that, the Macias Gini and O’Connell accounting firm found a series of small deficiencies in Half Moon Bay’s finances and raised doubts that the city could persevere after paying the $18 million Beachwood settlement obligation. [...]
Could this be why Half Moon Bay city officals chose the Bell audit firm?
The City Council decided to no longer contract services with the Macias firm in 2009.
How could the Half Moon Bay City Council have been unaware that Mayer was under investigation? The LA Times has written extensively about the accounting problems in Bell.
In September, State Controller John Chiang's office said Mayer should have noticed the glaring lack of internal controls in Bell. Chiang's report said Rizzo appeared to have complete control of all financial transactions and activity in the city.
In December Chiang's office released a 153-page review that said Mayer did not look hard enough for documentation and evidence to support Bell's records.
Chiang's office said it was forwarding the review to the state Board of Accountancy for possible disciplinary action.
If the Half Moon Bay City Council had Googled the City of Bell they would have found the following information on Wikipedia:
- A salary people choke on
- Fat pension
- City officials arrested and charged
- "Charter City"
- Bell demanded extra fees from some businesses
- SEC investigating $70 million in bonds issued by Bell
- "Breast Cancer Awareness" funds MIA
- Property taxes, sky's the limit
- Voter fraud
- Illegal sewer fees