Firm will review auditor that overlooked Bell corruption
An auditing firm that has come under scrutiny for failing to uncover corruption in the city of Bell has hired an independent accounting company to review its practices as some government agencies review their ties with the firm.
CalPERS, the state employee retirement fund, has decided not to give Mayer Hoffman McCann any more work until state Controller John Chiang completes a review of Bell’s auditing. Officials in several Southern California cities said they too are waiting to see Chiang’s report before deciding what to do.
Mayer Hoffman conducts outside audits for numerous California government agencies as well as some federal agencies.
Last month, The Times published an investigation highlighting questions about audits performed in Bell and other municipalities hit by corruption scandals. The firm’s audits did not uncover any wrongdoing in Bell even though Los Angeles County prosecutors this fall charged eight current and former officials with widespread public corruption, including misappropriation of public funds.
In an interview Friday, a spokesman for the firm, Joe Crivelli, defended its work in Bell, saying it was not the job of the auditors to uncover the high salaries paid to employees and council members. He also raised the possibility that Bell officials may have concealed information from auditors. “There may have been some collusion here between the city of Bell officials,” he said.
The firm has hired Carr Riggs & Ingram to review its California government and auditing practice and finish its work within 60 days. Crivelli said that the accounting firm conducts peer review every three years. In this case, the firm decided to move up the review. He also said the firm was cooperating with the controller’s review.
In an earlier audit released in September, Chiang said there was a lack of internal controls in Bell, something auditors are usually supposed to check. The Times, using documents obtained from the city, found excessive salaries for top officials, with City Administrator Robert Rizzo on track to earn more than $1.5 million in 2010. The Times also uncovered $1.9 million in illegal loans the city doled out to employees, a car dealer and a foundation without City Council approval, and special fees Bell demanded that some merchants pay to stay in business. None of these issues was noted by auditors.
After The Times’ reports, the controller’s office in a matter of weeks determined that the city had overcharged residents and businesses more than $6 million in taxes and fees. Chiang’s investigators also found that officials had placed $23.5 million in bond funds in a non-interest-bearing checking account, costing the city about $1.7 million in potential interest. Those problems and others could have been found by auditors, according to experts.
Garin Casaleggio, a Chiang spokesman, said the state controller’s office will release its report on the firm’s work in Bell before the end of the year.
“The audit is currently being finalized and will be forthcoming,” he said. The report will include responses from Mayer Hoffman.
Several government agencies that use Mayer Hoffman said they are anxiously awaiting the results of Chiang’s audit.
“If they are found to not have adhered to standards we would have to take a closer look,” said Costa Mesa Assistant Finance Director Colleen O’Donoghue.
Officials at CalPERS said they will also consider their future with the firm after the report is issued. (The organization’s decision to temporarily stop new business was first reported by the Sacramento Bee).
“We may reevaluate the relationship once the investigation is complete,” spokesman Wayne Davis said.
Times staff writer Mike Reicher contributed to this report.
