Internal control ‘deficiencies’ cited in Laguna Beach financial audit have been addressed, report says

Laguna Beach’s Citizens’ Audit Review and Measure LL Oversight Committee presented the results of the city financial audit for the 2017-18 fiscal year on Tuesday.

The committee, composed of seven residents, does not conduct the audit, report on or oversee the city’s budget or provide financial oversight.

Its responsibility focuses on reviewing the results of the annual financial audit, performed by White Nelson Diehl Evans, a certified public accounting firm based in Irvine that the city retained in 2017.

Auditors reviewed the city’s financial reports, ledgers and internal controls between October and December 2018 and expressed an “unmodified,” or satisfactory, opinion of the financial statements for that fiscal year but identified internal control weaknesses regarding bank reconciliations, capital assets, accounts payable and refundable project deposits, according to a staff report prepared for Tuesday’s City Council meeting.

City staff said the committee confirmed that the city implemented new internal controls to address the issues and that the effectiveness of the controls would be reviewed in the following fiscal year’s report.

“To summarize, the result of the audit is outside CPAs ensure that the financial statements are fairly presented, that the auditors found no instances of non-compliance and that the deficiencies identified have been addressed by management, meaning [the City Council] should be able to rely on the financial statements for analysis and comparison,” said Gavin Curran, the city’s finance director.

The committee recommended that the city implement previous suggestions, such as development of hotline protocols, appointment of an independent investment committee and having a third-party entity select the firm that will conduct the review.

The council moved Tuesday to adopt the recommendation to have an entity outside the city’s treasury select the auditing firm for the current fiscal year. It also addressed residents’ request that the council require at least one member of the committee to be a CPA.

Councilwoman Sue Kempf, a committee liaison, said she didn’t necessarily agree that, as openings are available, a new member should be a CPA, adding that she would want the most qualified applicant.

The council adopted language that an expert in the subject matter is desirable in the event of an opening on the committee.

The committee will return before the council in April for a report on Measure LL — a ballot initiative approved by voters in November 2016 to increase the local transient occupancy tax rate from 10% to 12% — for the 2018-19 fiscal year.

In July, it will present the results of the city’s 2018-19 comprehensive financial report.

Committee and board appointments

The City Council on Tuesday also appointed 18 people to positions on the city’s Recreation Committee, Design Review Board, Heritage Committee, Environmental Sustainability Committee, View Restoration Committee and Parking, Traffic & Circulation Committee.

The terms for all appointees will begin April 1 and run through March 2022.

The appointees are:

• Design Review Board: Meg Monahan (incumbent), Donald Sheridan
• View Restoration Committee: Bob Earl (incumbent), Jeffrey Feldman (incumbent)
• Heritage Committee: Dan Rosenthal, Scott Sumner (incumbent)
• Parking, Traffic & Circulation Committee: Tyler Russell McCusker, Lauriann Meyer, Susan Shea
• Recreation Committee: Halley Cruz Corbett, Michele Hall (incumbent), Joe Mackay, Monica Silva-McCusker (incumbent), Nia Evans
• Environmental Sustainability Committee: Shelly Bennecke (incumbent), Mina Brown, Daniel Lichtenberg, Brandon Ryan Menchaca

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