Based on Bell, if your city uses Mayer Hoffman McCann, should you audit their work?


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I commend John M. Nachbar, Culver City City Manager, for this effort to reassure his stakeholders that safety and transparency are paramount.

CITY MANAGER’S OFFICE
CITY OF CULVER CITY

9770 CULVER BOULEVARD, CULVER CITY, CALIFORNIA 90232-0507

JOHN M. NACHBAR                                                                  (310) 253-6000
City Manager

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PRESS RELEASE

For more information, Call:                                            For Immediate Release
Jeff Muir, Chief Financial Officer                                        December 22, 2010
(310) 253-6016

CULVER CITY SEEKS ADDITIONAL AUDIT OF ITS REDEVELOPMENT AGENCY’S EXPENDITURES

On December 21, 2010, the State Controller’s Office (SCO) issued its final Quality Control Review report on Mayer Hoffman McCann P.C. for the firm’s audits of the City of Bell and the Bell Community Redevelopment Agency for the Fiscal Year which ended on June 30, 2009. The conclusion (located on pages 2 and 3 of the report) was as follows:

“Mayer Hoffman McCann P.C.’s audits of the City of Bell and Bell
Community Redevelopment Agency were performed in accordance with
some of the standards and requirements set forth in GAGAS, GAAS, OMB
Circular A-133, the California Business and Professions Code, and the
RDA Audit Guide. However, the firm did not comply, to varying degrees,
with the majority of fieldwork auditing standards with regard to audit
documentation, audit evidence, risk of fraud, litigation, claims and
assessments, subsequent events, going concern, and OMB Circular A-
133 requirements for testing federal program internal control and
compliance. In addition, the firm did not comply with the RDA Audit Guide
in testing for allowable expenditures. Finally, the firm did not comply with
section 5097 of the California Business and Professions Code. The basis
for our conclusions are discussed in the Findings and Recommendations
section of this report.
This report is applicable solely to the audit working papers of the City of Bell
and the compliance audit of the Bell Community Redevelopment Agency for
FY 2008-09 and is not intended to pertain to any other work of Mayer
Hoffman McCann P.C.”

The City of Culver City and Culver City Redevelopment Agency (Agency) have engaged Mayer Hoffman McCann P.C. (MHM) for the past three completed fiscal years (2007-2008, 2008-2009 and 2009-2010) to perform legally required audits of the City and the Agency’s financial statements. While none of the members of the audit team from MHM that performed the audit of Culver City and Agency worked on the City of Bell’s audits, it is understandable that there may be some concern from the community. “Preparation of annual financial statements is the responsibility of the management of all cities and redevelopment agencies, and as such, the City and Agency stand by the assertion that our financial statements present fairly, in all material respects, the respective financial position of the City of Culver City and the Culver City Redevelopment Agency”, said Jeff Muir, Chief Financial Officer. The City and Agency have received unqualified opinions from its auditors for many years, including the last three years with MHM. City and Agency staff are confident that the same conclusion would have been reached by any auditor.

The contract between the City, Agency and MHM has reached the end of its term, and the City and Agency will use their normal procurement process to secure a qualified CPA firm to perform necessary and required auditing work in future years.

In light of the September 30, 2010 report issued by the State Senate’s Office of Oversight and Outcomes that mentioned concerns with certain Agency expenditures coupled with the criticism of MHM’s testing for allowable RDA expenditures in Bell in the SCO report, City Manager and Agency Executive Director John Nachbar has directed that another qualified CPA firm be engaged immediately to review the Agency’s expenditures to confirm adherence to the Guidelines for Compliance Audits of California Redevelopment Agencies. It is staff’s belief that the Agency has fully complied with all applicable statutes, regulations and reporting requirements as well as all procedures required before spending affordable housing monies. “Staff has given a complete explanation to the Senate Office of Oversight and Outcomes, and we have never received any notice from that office or any other state official that the City or the Agency is in violation of anything. We are undertaking this additional review by another qualified auditor to provide additional assurance to the Agency Board and the community”, explained Mr. Nachbar.

The City and Agency are halfway through Fiscal Year 2010/2011, and after June 30, 2011 another audit of the City and Agency financial statements will take place. While the Chief Financial Officer does not recommend a re-audit of prior financial statements, Culver City continues to welcome review of the City and Agency’s financial statements by any State agency, audit firm, or interested members of the public.

The full Mayer Hoffman McCann– Quality Control Review Report for the Firm’s Audits of City of Bell and Bell Community Redevelopment Agency from the State Controller’s Office is available at: http://www.sco.ca.gov/Press-Releases/2010/12
2010bellreview.pdf.

The Press Release issued by MHM on December 21, 2010 is available at:
http://www.mhm-pc.com/pdfs/MHM_Statement_on_CSC_report_Dec2010.pdf.

The full text of the MHM response to the State Controller is

The full Mayer Hoffman McCann– Quality Control Review Report for the Firm’s Audits of City of Bell and Bell Community Redevelopment Agency from the State Controller’s Office is available at: http://www.sco.ca.gov/Press-Releases/2010/12
2010bellreview.pdf.

The Press Release issued by MHM on December 21, 2010 is available at:
http://www.mhm-pc.com/pdfs/MHM_Statement_on_CSC_report_Dec2010.pdf.

The full text of the MHM response to the State Controller is available at:
http://www.mhm-pc.com/pdfs/CityofBell_MHM_Full_Response.pdf
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About Larry Gilbert