The state controller’s office on Tuesday issued a report that found an outside audit firm for the city of Bell failed to catch a bevy of alleged financial corruption at City Hall.
The finding that, according to the report, Mayer Hoffman McCann “appears to have been a rubber stamp rather than a responsible auditor” is significant because the same firm has been auditing Burbank’s books since fiscal year ending 2006.
Burbank finance officials have said they are confident in the veracity of their record keeping, although the review by state Controller John Chiang could force the city re-do their audits to ensure that its standing among credit rating agencies isn’t called into question.
Burbank City Manager Mike Flad said he would review the state controller’s report and the independent peer review issued by Mayer Hoffman McCann.
“We’ll look and see where they fell short in Bell and see if they fell short in Burbank,” he said.
Burbank has paid $575,731 to Mayer Hoffman McCann over the past five years.
Chiang’s office said the review would be forwarded to the state Board of Accountancy for possible disciplinary action.
Financial Services Director Cindy Giraldo told the City Council during a Dec. 7 discussion of the firm’s connection to the city of Bell that there was “not in any way a reflection in things that may or may not have happened in the city of Burbank.”
At the time, city officials said they would wait for the results of the state controller’s audit before reevaluating its contract with Mayer Hoffman McCann, and at a Dec. 7 meeting, Councilman David Gordon said he wanted to address the firm’s contract.
“If the process done was the same in [Bell] and we’re relying on it here, I think it could raise some questions in the public’s mind,” he said.
On Tuesday, Giraldo said she not yet fully reviewed the report, which was expected to arrive on Wednesday.
“We have requested a copy of the report and staff will fully review its contents,” Giraldo said.
The state controller outlined multiple examples where Mayer Hoffman McCann failed to fully comply with 13 of 17 applicable standards, finding that the firm relied primarily on comparisons to prior-year financial statements and failed to ask for adequate documentation.
Mayer Hoffman McCann spokesman Joe Crivelli said he was shocked at the tone of Chiang’s announcement.
“It was a lot more incendiary than we thought it would be,” Crivelli said. “We have been very responsive to all requests made and, frankly, we were shocked at the comments made.”
He went on to call the audit’s findings “disagreements and differences in opinion” while citing alleged acts of collusion by Bell city officials.
“We hope that our other clients in California will take time to read our responses to their findings,” Crivelli said.
The controller’s office was unsure of the impacts on other cities that may have contracted with Mayer Hoffman McCann to audit annual financial statements.
“When firms contract with public entities, they have a higher standard of performance,” a spokeswoman for the Chiang’s office, Hallye Jordan, said. “They are using public dollars and are entrusted to spend them correctly.”
Chiang has been working with a number of state and local agencies to determine the best legislative action to take to ensure the problems of Bell are not repeated, she added.
“Those avenues could include bill proposals to tighten up oversight at the local level, giving additional resources to the state controller’s office, beefing up county auditing procedures or even conducting thousands of individual audits at the local level,” Jordan said.