Culver City hires outside agency to review its accounting practices


Culver City has retained the services of Redevelopment Reporting Solutions to review several areas of concern in its redevelopment agency raised last September by a state redevelopment oversight board.

The Brea-based firm was created on Jan.1 this year by Donald L. Parker, a certified public accountant with more than 30 years of experience in redevelopment financial agency accounting and reporting.

Chief Financial Officer Jeff Muir contacted Parker and several other accounting companies last month when city officials began searching for an outside accounting firm to examine a number of potentially problematic findings that were highlighted in a Sept. 30 report by the state Office of Oversight and Outcomes pertaining to Culver City’s affordable housing polices, as well as how it spent its low- to moderate-income housing funds.

In a letter to Parker, Muir indicated that Culver City was seeking a qualified professional to assess its financial accounting process and reporting procedures with the intent of making them effective and efficient. “I know that my expertise will provide the agency with a perspective and suggestions which will allow it to accomplish these objectives,” Parker wrote in response.

The services that will Redevelopment Reporting Solutions perform are the following:

·       Evaluate the agency’s current accounting systems and procedures.

“Since specific concerns have been expressed regarding the application of the Low- and Moderate-Income Housing Fund, I would focus on this operation specifically to determine how charges are being reported and the applicability of those charges generally to the Health and Safety Code requirements,” Parker explained. “This focus would be on the most recently completed fiscal year and would deal with the financial results.

·       Review the accounting/financial portions, of the most recently filed Statement of Indebtedness, Department of Housing and Community Development and state controller’s reporting forms for consistency with regulations and reporting requirements.

“In preliminary discussions, it was indicated that the agency may not have broken down administrative costs into the respective categories present in the [Housing and Community Development reporting],” Parker wrote. “Therefore, if the agency can provide breakdowns of personnel and other costs that compose the administrative costs reported, I will review those breakdowns, agree the amounts with supporting documentation and prepare manual copies of amended HCD and/or state controller reporting forms which could be filed to indicate what the correct reporting would have been.”

·       Develop specific recommendations to overcome deficiencies noted in the systems and reporting reviewed above and to improve financial record keeping and reporting within the operation.

“I have anticipated that the amount of time to accomplish the tasks to be approximately 37 weeks,” Parker wrote to Muir. “These amounts of hours would compute to a price of $65,000.” Redevelopment Reporting Solutions lists their rate at $175 an hour, according to documents obtained by the News.

City Manager John Nachbar said a number of firms were considered before Parker’s company was hired. While retaining an independent accounting firm has been a priority, the decision to protect the agency’s redevelopment assets has taken a great deal of City Hall’s time, he said.

“We’ve been so focused on all of the other workload associated with trying to protect our redevelopment assets. So that’s kind of taken center stage,” Nachbar told the News at a meeting of the Culver City Democratic Club on Feb. 9.

Muir said he is confident that Parker has the qualifications for the tasks that he will be asked to perform, despite the fact that Redevelopment Reporting Solutions has been in business for approximately six weeks.

“He teaches many of the classes for the California Redevelopment Association on reporting and accounting for [redevelopment agencies],” the CFO explained. “So he does have as long of a track record as anyone else out there.

“We are confident in Mr. Parker’s ability to provide the review we have asked for, as well as to provide guidance on anything we might improve going forward.”

City officials decided to obtain the services of an outside accounting firm after the results of an investigation by state Controller John Chiang of the Bell Redevelopment Agency were made public last year. On Dec. 21, Chiang reported that the accounting firm of Mayer Hoffman McCann had been not followed generally accepted fieldwork audit principles in its auditing practices of the Bell Redevelopment Agency, as well as its municipal finances.

The controller said he believes that had the accounting firm acted in a more professional manner, many of what law enforcement agencies say is criminal behavior could have been detected.

“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,” said the controller.

Bell city officials, led by former City Administrator Robert Rizzo, and the city council received some of the highest salaries in the state, and law enforcement authorities accuse them of paying for these lavish salaries through illegal towing of automobiles, charging exorbitant and questionably legal fees to businesses owners and levying some of the highest property rates in the state to its residents.

Rizzo and four members of Bell’s council have been charged with misuse of funds, among other charges.

The News revealed on Dec. 9 that Culver City had also contracted with Mayer Hoffman for its redevelopment and municipal auditing from 2007 until this year.

The state Office Oversight and Outcomes, whose Web site states that part of its mission is “accountability through investigation,” examined 12 redevelopment agencies last year, including Culver City, and found an array of errors by these agencies, including the lack of reporting of redevelopment annual reports.

The oversight probe also points out that under state law, planning and administration expenditures from low- to moderate-income housing funds are limited specifically to salaries and services directly related to affordable housing. “A couple of the 12 redevelopment agencies that we examined spent money in 2007-08 in ways that appear to fall outside of the law,” the document notes, and Culver City is named as one of those cities.

That year, Culver City spent $26,203 of its housing revenues on hiring a public relations firm to create a series of brochures designed to build support for affordable-housing needs. According to city records, the purpose of the advertising campaign was to “put a new face on affordable housing” and “tell our story in terms of our efforts to address the affordable housing needs of our residents.”

That same year, the Culver City Redevelopment Agency’s low- to moderate-income housing fund took in nearly $5 million in property tax money, the highest of any of the 12 agencies selected at random, and held a total of $22.1 million. Yet the oversight office found that during a 13-year period, beginning in 1995 and ending in 2008, Culver City reported only four new units of affordable housing.

“Given the amount of money at its command, the Culver City Redevelopment Agency has done relatively little to create new spaces for low to moderate income people to live,” the report states.

Culver City finance officials maintain that they have done nothing improper and that they have complied with all applicable statutes, regulations and reporting requirements.

Redevelopment agencies have become a flashpoint in California politics of late. In addition to the state oversight board’s findings, Gov. Jerry Brown last month called for the elimination of the state’s redevelopment agencies, which the governor says will save the state $1.7 billion and will direct necessary funds to public safety and K-12 education.

Culver City hires outside agency to review its accounting practices