Accounting firm on local officials' radar

The same accounting firm that audited the city of Bell also audited Newport Beach and Costa Mesa for many years. In the coming weeks, the state controller's office will release a report that evaluates whether the company adhered to government standards when it assessed Bell's records.

Local officials will be watching the results closely.

Mayer Hoffman McCann, a national accounting firm, has audited Newport Beach for about the past 10 years and Costa Mesa for about the past 20 years, officials said. While Controller John Chiang's office is not investigating other Mayer Hoffman jobs, the results of the Bell scandal could affect future local contracts.

"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.

Both Newport Beach and Costa Mesa plan to solicit proposals for auditors next year, a regular process unrelated to Bell.

Newport's auditing contract with Mayer Hoffman was renewed in April for one year, and will be up again next spring for the fiscal year ending June 2011. Typically, the city's auditor has been hired on a four-year contract because of the time and expenses involved in briefing a new auditing company.

During each of the last four years Mayer Hoffman billed the city between approximately $40,000 and $55,000 for auditing and other accounting services.

Some of the Newport City Council members say they were unaware of the company's connection to Bell.

Well-versed in public accounting, Councilman Mike Henn was the chief financial officer of Vons Companies and K.B. Home, and Mayor Keith Curry is a director at a municipal finance company. They both serve on the city's finance committee.

"I'm not aware that any of the issues that may have been involved in Bell have any relevance here," Curry said. "I will ask staff to look at the matter and assure the council that we're receiving top-quality service."

Henn said he personally reviewed the draft financial statements for the past few years and is confident with their quality.

"We've got a good, strong oversight process for the year-end audit," Henn said.

Newport Beach recently received top bond ratings for its new Civic Center financing.

In Costa Mesa, Mayer Hoffman and its predecessor, Conrad & Associates, billed the city approximately $50,000 each year for the last two years, according to O'Donoghue. She said the firm's five-year contract was renewed for a one-year extension earlier this year.

O'Donoghue said she has been satisfied with Mayer Hoffman thus far, and doesn't want to rush to judgment before the state controller's report is released. She added that her office is responsible for preparing material for the auditors.

"I feel comfortable because we prepare all of our own financial data," she said.

Mayer Hoffman announced today that it hired an outside firm to review its California government accounting and auditing practice, and a spokesman said it has passed peer reviews in the prior years.

"We really feel that there has been a rush to judgment," said Joe Crivelli, a spokesman for the firm. He said Mayer Hoffman was not obligated to detect fraud, but that it was to determine whether the financial statements of Bell were free of "material misstatement."

"We stand by our work in Bell and we stand by our work in all the communities that we audit," he said.

Henn said he would rather not make any connections to Bell.

"Bell is Bell, Newport Beach is Newport Beach," he said. "It's two completely separate situations."

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