Beaumont council members voted 5-0 Tuesday night to accept the city's most recent audit, dated June 30, 2012.
Craig Hartzheim of Moss, Levy & Hartzheim, LLP, Certified Public Accountants, gave a presentation on his firm's audit of city finances, "some of the highlights, lowlights, whatever you want to call them. . . .
"The one anomaly in this audit is that it is qualifying the governmental activities, which you have to kind of break down with your daily operating funds, which are operated under the modified accrual basis of accounting, and the current resource measurement focus, meaning day-to-day you're basically a cash basis, you're operating money in and money out, what can you get in, what can you get out on a short-term basis.
"Back in 2003, 2004 I believe the city was required . . . to create . . . some new reporting guidelines which make you report under full accrual, which is the economic resource measurement focus, which means that it entails all long-term assets and long-term liabilities.
"The one thing the city did not follow through with that . . . they did not do an appraisal or give a value to its infrastructure assets, meaning streets, roads, curbs, gutters, street lights, storm drains, things of that nature. And so our audit report basically qualifies our opinion saying that only your governmental activities under the full accrual method is not in accordance with GAAP (generally accepted accounting principles), and that's the one anomaly, otherwise we give you a clean opinion on all your other funds."
Council member Brenda Knight, in an effort to counter public concerns about city finances, made the following statement after Hartzheim's presentation:
"Craig, I want to share something with you here. A lot of people don't realize that you are not the only person that has audited our city. I think there's a misunderstanding. Our books are open and I spent many years in the finance industry, so my questions and the way I view our bookkeeping is probably a little bit different. The questions I ask are different.
"But those of you out there that have serious questions about the city, I did extensive background looking at our city, because not only did I have a passion for city government, I wanted to understand how it worked and why people had the issues and questions that they did.
"And part of what I discovered, and I think it's important that you all know this. You can pull the records on this.
"In approximately October 2005, the Riverside district attorney was here, the city, looking at the books. And the investigation was completed, terminated, for a lack of evidence of wrongdoing. There's also a voicemail in regards to that.
"In approximately August of 2006, the grand jury was here from Riverside County. The investigation was completed, terminated, for lack of evidence of wrongdoing.
"And these are important things, so please, it'll help you in how and where you look for issues in the city.
"November 2006, grand jury, and this was a different panel from the August one. Left the city, the investigation was completed, terminated for lack of evidence of wrongdoing.
"In August 2009, the FBI was here. Terminated, complete terminated for lack of evidence of wrongdoing.
"In 2009 there was a federal, actually there was a grand jury here, that was actually a federal grand jury. The investigation was completed and terminated for lack of evidence of wrongdoing.
"There was a complaint filed to the state Department of Finance, and completed, terminated for lack of evidence of wrongdoing.
"Now I know there have been other complaints, to other agencies which include the California Attorney General's office. But none has been acted upon, and I think that if you really, seriously look at this it says something about the higher standard that our bookkeeping is here in the city, and that our staff, you know this costs every time we have an audit.
"It takes time away from the staff. It takes time away from the community. It costs. It costs all of us. . . .
"I believe we have our books open. But also there needs to be an understanding our city has been held to a higher standard, just because we've been investigated so many times. So on that note, could you comment on that, where they leave, and they say, just like you, we have a clean bill of health? Now there's human error, but . . . "
Hartzheim responded:
"There are some observations and findings that are usually reported, but nothing
that we consider to be fraudulent or material that would cause the financial statements to be misrepresented. And I have seen nothing of that effect. I'm not familiar with all the arrangements that you just talked about, so . . ."
Knight:
"So thank you. So all of you out there, please, think of the cost, consider the staff. We have excellent staff here. We're very fortunate. They're dedicated to serving our community . . . There's nothing hidden here."
The audit report and City Manager Alan Kapanicas' recommendation that the council accept it are at this link:
www.ci.beaumont.ca.us/DocumentCenter/View/17579
The 88-page June 30, 2012 independent auditor's report was put together by Moss, Levy & Hartzheim, LLP, Certified Public Accountants. They have offices in Beverly Hills, Culver City and Santa Maria.
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