Culver City officials are continuing their search for an accounting firm to conduct a review of its redevelopment agency finances for the fiscal year 2009-10, according to the city’s top finance official.
Chief Financial Officer Jeff Muir said the search might take more time than previously anticipated. “We have not yet contracted with a firm, and we are still in discussions,” Muir told the News on Monday, Jan. 10. “It will probably take a bit more time to get someone under contract.”
The independent accounting review was announced on Dec. 22, two weeks after it was revealed by the News that Culver City and the city of Bell employ the same audit firm, Mayer Hoffman McCann, for audit services for their redevelopment agencies.
City Manager John Nachbar decided to seek an outside auditor after the results of an investigation by California Controller John Chiang found that Mayer Hoffman acted as a “rubber stamp” and did not comply with “the majority of fieldwork auditing standards with regard to audit documentation, audit evidence, risk of fraud litigation and claims and assessments,” among many other findings.
Mayer Hoffman also audited Culver City’s municipal finances. The company’s contract expires this fiscal year.
Nachbar’s decision to seek an outside auditor was a wise one, says Jewett Walker Jr., a Culver City political strategist who ran the late Albert Vera’s second city council campaign along with current Culver City Unified School Board member Patricia Siever.
“I think that was an appropriate response [to the state controller’s report], because Culver City is run by a paid staff, not by the council,” Walker told the News.
Cynthia Gibson, who runs CKG Communications, a public relations firm in Corporate Pointe, agrees that bringing in an outside auditor can help shape a message of “We are not like Bell” to the public. “It shows that they are moving away from the status quo and it gives people the feeling that they are trying to be open and transparent,” Gibson explained.
The reasons given for the decision to bring aboard another auditor were twofold, according to Muir. In addition to what city officials say is their commitment to transparency, the new audit is also being carried out to address questions by the public regarding the city’s contract with Mayer Hoffman as well as a report from the state Senate Office of Oversight and Outcomes that questioned some of the agency’s expenditures.
The report, released on Sept. 30, stated that some of the uses of the agency’s affordable housing fund might not be legal, although the agency’s authorities say they have done nothing improper.
“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 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.”
Culver City Chamber of Commerce President Steven Rose views any attempt by some members of the public to equate Culver City to what occurred in Bell is not only wrong, but also distasteful.
“To make an assumption that because one contractor is doing work for one client, that all other clients are corrupt or doing things that are not above board is really a leap of faith,” Rose, a former councilman, said. “To me, that is really bothersome.”
Rose said Nachbar has “stepped up” by calling for Muir to engage an outside auditor to review Mayer Hoffman redevelopment audits. “To me, that is the appropriate and credible way of handling any issue, if there is an issue. Period,” he added.
The controller’s office is not currently investigating the audits conducted by Mayer Hoffman in other cities besides Bell, said Chiang spokesman Jacob Roper.
Walker, who has run successful political campaigns for municipal and state legislators, said entrusting one person, such as a city manager, with the responsibility of running a municipality can invite the kinds of transgressions that transpired in Bell.
Los Angeles and state law enforcement authorities point to Bell City Administrator Robert Rizzo as the architect of much of the illegal fees assessments and financial improprieties that the Bell City Council and Rizzo are now facing. Four of Bell’s lawmakers and Rizzo have been charged with misuse of government funds.
Walker cited a 2006 Culver City charter amendment that shifted the responsibility of running the city from the council to the city manager. Prior to Measure V, the charter amendment, Culver City employed a chief administrative officer, like Los Angeles County. Now, the council has no other choice but to support the decision to pay for an independent audit review, he said.
“The city council put themselves in this position by changing the city’s form of government. What’s the point of having a council if they’re not going to run the city?” asked Walker, who did not support Measure V. “Consequently, they have no choice except to go out and hire another firm.
“The redevelopment agency handles a lot of money, and it’s too easy to entrust that much power to one person,” he concluded.
The audit review will be for 2009-10. Mark Scott and Jerry Fulwood preceded Nachbar as city managers. Fulwood, as executive director of the redevelopment agency, signed the contract with Mayer Hoffman. Nachbar was hired last summer.
In December, when the state oversight board’s questioning of the redevelopment agency’s expenditures and the revelation of Culver City employing Mayer Hoffman came to light, several residents questioned the council about a state investigation as well as the city’s contract with Mayer Hoffman.
Walker said he would counsel a client who was a lawmaker to take a public stand on the new audit. “I would advise my client to say ‘in the interest of transparency, I am supporting a re-audit of Mayer Hoffman,’” the political consultant said.
Rose, who proposed the original idea of having a charter review in 2005, sees nothing wrong with the public asking questions about Mayer Hoffman or the redevelopment agency.
“At all levels, government needs to be watched,” he asserted. “Whether that’s by the press, whether it’s the public or internally (within the government).”
Rose added one caveat: “While everything needs to be looked at, I think there needs to be a level of scrutiny that doesn’t bring up every pencil and piece of paper that is bought by City Hall.”
Gibson said it is a smart idea to make the results of the new audit public, regardless of its findings. “Making the audit public lets people know that [the city government] values transparency,” she said.
Muir has pledged to do so. “The end product will be a report of the auditor’s findings that will absolutely be made public,” he said.
Rose said some residents would continue to question City Hall, regardless of the results of the outside firm’s review. “I believe that because an outside agency has questioned the method of which Mayer Hoffman has done the audit work in Bell, that having someone check their methods here in Culver City is appropriate, to clarify any issues.
“But I would also say, if the second firm says that everything is fine, some of those voices will still not be silenced,” the chamber president predicted.
Walker thinks it is unlikely that the new audit will reveal anything materially different that was not detected in the first examination. “Municipalities tend to run very well, and their codes of conduct and standards are pretty good,” he said. “I would be very surprised if anything substantial comes out of the new audit.”
Gibson thinks the decision to hire an outside audit firm can help to dispel some of the lingering questions that some residents might have about Mayer Hoffman’s tenure in Culver City.
“The public wants to see transparency in government,” she reiterated. “And often, perception is reality.”
