Accounting Firm Urges Torrance to Strengthen Investment Controls

An accounting firm, citing the possible loss of $6 million in city money, is urging the city of Torrance to “take immediate and decisive steps” to strengthen controls over how its money is invested.

The report, submitted by the Connecticut firm of Deloitte & Touche, recommends that the city hire an experienced investment officer, improve internal controls and create more clear-cut rules for investing city funds.

The city commissioned the report after learning that $6 million of city money is missing in a scandal involving Steven Wymer, an Irvine-based adviser who handled investment accounts for Torrance and other California cities.

Wymer has pleaded not guilty to 30 counts of securities fraud and other charges. Torrance officials say it is not known if any, or part, of the $6 million in city money invested by Wymer will ever be recovered.

City officials have since been scrutinizing the way city money is invested and are looking for ways to provide more oversight over the investments.

The Deloitte & Touche report was issued Tuesday, four days after City Hall officials issued their own plan for reforming the investment process. Both plans would dilute the responsibilities of the city treasurer by involving more people in investment-related decisions.

Mayor Katy Geissert said Wednesday that the Deloitte & Touche report “dovetails quite nicely” with the city’s own plan.

City Treasurer Thomas C. Rupert, who is currently responsible for investing city funds, said he does not expect the reforms to infringe on his authority. Rupert said he supports the auditors’ recommendation for hiring a city investment officer, who he said would work in his office.

Meeting Tuesday night, the City Council voted 7 to 0 to move ahead with plans to restructure investment procedures. But it postponed acting on specific plans until it can discuss the recommendations at a special meeting next Tuesday.

Deloitte & Touche, an accounting and consulting firm based in Wilton, Conn., issued its 23-page report after reviewing investment polices and practices.

“Overall, we found the city needs to take immediate and decisive steps to implement new and strengthen existing controls over the investment function,” the firm stated.

Although the firm does not directly attack the city’s current process, it observed that “delegating complete investment responsibility to one office violates a fundamental principle of good control, i.e., separation of duties.”

The report goes on to urge the city to assign staff members outside the city treasurer’s office “a day-to-day role in providing internal controls,” such as checking the accuracy of treasury reports.

It suggested that the new investment officer have “an educational background and experience in fixed-income and money-market investments.” And it concurred in a city plan to form an independent Treasury Advisory Committee to step up investment controls.