By Gary Walker

After weeks of facing public questioning regarding its redevelopment agency expenditures as well as the results of the state controller‘s investigation into Bell’s finances, Culver City has decided to seek an independent auditor to review its redevelopment agency audit report for the fiscal year 2009-10.

City Manager John Nachbar announced on Dec. 22 that the city would hire an outside audit firm to examine the agency’s expenditures following the release of State Controller John Chiang’s report on accounting firm Mayer Hoffman McCann and its audits of Bell’s finances.

The News first reported on Dec. 9 that Mayer Hoffman is also the auditor for the Culver City Redevelopment Agency and has also audited its municipal finances.

Chang had harsh words for the accounting firm, which came under scrutiny for its failure to detect serious internal financial controls in Bell that state officials believe in part allowed that city’s officials to enrich themselves at taxpayer expense, as well as permit illegal fees, taxes and questionable assessments to businesses and residents go unchecked.

“Mayer Hoffman McCann appears to have been a rubberstamp rather than a responsible auditor committed to providing the public with the transparency and accountability that could have prevented the mismanagement of the city’s finances by Bell officials,” Chiang said. “Had [Mayer Hoffman McCann] fully complied with the 17 applicable fieldwork standards, it would have led them to identify some – if not all – of the problems my office has uncovered since August.”

On Monday, Dec. 27, the city of Riverside decided it would no longer employ Mayer Hoffman as its auditor.

An additional reason given by Nachbar for the decision to hire an outside accounting company was a report that questioned the use of the Culver City’s Redevelopment Agency’s affordable housing funds and how agencies throughout California were audited by the state Senate Office of Oversight and Outcomes in September.

Culver City was one of 12 cities where the legality regarding how it used some of its low- and moderate-income housing funding was examined by the oversight office.

Nachbar said he and other city officials are confident that they have not violated any state laws and have given a complete explanation to the oversight office. “We are undertaking this additional review by another qualified auditor to provide additional assurance to the agency board and the community,” the city manager explained in a Dec. 22 press release.

“I applaud our city manager John Nachbar for quickly moving toward finding an entirely new CPA firm for the redevelopment agency's annual audit,” said Charles Deen, a Culver City certified public accountant who previously called for an independent reaudit. “I believe that was important for Culver City to extract itself from the Mayer Hoffman McCann situation and its alleged problems with the state of California.”

Chief Financial Officer Jeff Muir also mentioned the city’s desire to assuage any public perception that Culver City has anything to hide as the impetus for having an outside firm review the audit.

Councilman Andrew Weissman said he believes the audit is unnecessary but said he realizes that the city has an obligation to show the public that the redevelopment reports that have been questioned have no irregularities. “I can understand that there may be a feeling among some members of the public that the city may not have been well served by Mayer Hoffman,” he said. “I’m confident that the new review will bear out what we have been saying all along.”

Weismann and Muir pointed out that none of the auditors performing audit work for Culver City worked on the Bell’s redevelopment and city audits.

“While we as staff stand by our financial statements, as well as the work Mayer Hoffman did in Culver City, we understand that this report on Mayer Hoffman might lead certain members of the public to have further questions, particularly as it relates to the issues previously raised by the Senate Office of Oversight,” Muir told the News in an interview. “In order to address these potential concerns, we made the determination that engaging a separate audit firm to provide services on a limited engagement, just looking at the appropriateness of our expenditures in the redevelopment would be in the agency’s best interest.”

Muir added that it would not be a complete reaudit of the 2009-2010 financial statements but will focus on the issues raised in the oversight office report. He said he is uncertain how much another audit would cost but added that he believes that Nachbar, as the executive director of the agency, has the authority to authorize such an expense. “If that is the case, in the interest of expediency, it will not come before the agency for award,” Muir explained when asked if the board would be required to vote on awarding a contract.

Earlier this month, city officials said at the time they saw no reason for an outside auditor when asked by the News before the controller’s report was released. Assistant City Manager Martin Cole did leave open the possibility of reconsidering the city’s position, depending on Chiang’s report on Bell. “At this time, there is insufficient reason for the city to expend taxpayer monies for such a review,” Cole said on Dec. 14. “However, should additional credible and substantiated evidence surface in the future, the city would certainly take that new information into consideration and reevaluate if different action were warranted.”

Mayer Hoffman, which was first hired by Culver City in 2007, was under contract to perform audits and assist with the preparation of financial statements through 2010, Muir said. “We have basically completed the 2009-10 work and should be 100% complete within another few weeks,” he added. “That would conclude their obligations under the existing agreement.”

On June 30, a request for proposal will be initiated by the city to solicit an accounting firm for the same work that Mayer Hoffman performed, and Muir said the embattled accounting firm has the right to apply for another round of work in Culver City.

“There is nothing that would prevent them from responding to the city’s [request for proposal],” he said. “The city will analyze the responses and make a recommendation to City Council that we feel is in the best interests of Culver City.”

Mayer Hoffman’s contract states that beginning in 2007 it was to “satisfactorily provide the financial services for fiscal years 2008-09, 2009-10 and 2010-11.”

Nachbar’s announcement also precedes consecutive weeks where residents have questioned the redevelopment agency on the state oversight report as well as the revelation that Mayer Hoffman audited Culver City redevelopment agency. Councilman Jeffrey Cooper, during a Dec. 13 council meeting, appeared to take umbrage at a comment from a speaker who attempted to connect the city with Bell, saying vehemently, “we are not Bell.”

Charles Deen, a former Parks and Recreation commissioner, said he took exception to the manner in which Cooper addressed residents who inquired about the state oversight report and the revelation that Bell and Culver City have the same auditor. “For Mr. Cooper to admonish Culver City residents for taking their personal time to ask public questions at City Hall about an ultimate public matter - the audit of agency taxpayer funds - is a bit much,” he said. “From personal experience, I do not believe that the absolute phrase ‘we have always been transparent’ could be 100% applicable to the (Jerry) Fulwood administration.”

Fulwood was Culver City chief administrative officer from 2003 until 2006 and after the change in the city charter, he became city manager. He retired last year.

Cynthia Gibson, who runs the Culver City-based public relations firm CKG Communications, said bringing in an outside auditor could help Culver City with any potential public image problems.

“Perception is often reality,” Gibson told the News. “Moving away from the status quo can give people a feeling that you’re trying to be open and transparent.”

Asked if the independent firm’s findings would be released to the public, Muir responded, “The end product will be a report of the auditor’s findings that will absolutely made public.”