Oxnard accounting meltdown starting to solidify, covered at Fiscal Policy meeting (video included)

By George Miller

At the 3-9-16 Fiscal Policy Task Force meeting, we received the current audit status and internal audit plan status and were treated to a lively discussion.

Audit Status Summary

• Audit still not complete, potentially inviting more state action, Controller’s audit, breaking bond covenants, affecting credit rating
• Several outside firms engaged to help with researching acctg/audit data, catching up.
• Auditors had previously departed and are now returning
• Discrepancies have been narrowed down but still exist. Some documentation hasn’t been located
• Although there were huge asset discrepancies, the actual revenues/expenses and cash part is no longer that far off. It is possible to do day-to-day business and even develop at least some semblance of a budget.
• Target date for audit is mid-April, but auditor can’t guarantee that due to continuing unknowns with accounting data. They didn’t seem very confident of this.
• Target date for final CAFR (Comprehensive Annual Financial Report) is no later than 5-30-16, but this is depend on the audit.

It’s been known for quite a while that there are major problems with Oxnard’s bookkeeping. Not only did an inability to complete last year’s audi emphasize that, but Oxnard has not been able to properly close last year’s (July 1, 2014- June 230, 2015) books. An operational audit revealed 128 significant systemic problems, many in the Finance Dept. The former Director retired, a new one was hired. Now he, too has left and there have been multiple Interim CFO’s. Currently Asst. City Manager Maria Hurtado has been assigned that uneviable task. While she seems a capable executive who shows great initiative, she is not a financial professional. Her background is in social work.

An audit was underway. The year end deadline is long past. The State Controller is breathing down Oxnard’s neck, demanding answers to long lists of questions. Auditors were very frustrated in not being able to get the information they needed to complete the audit, since it was missing or wrong, They actually left because there was nothing left for them to do until they got usable information. Now, they are coming back, to join three other companies already here- MuniServices, The PUN Group/Urban Futures, Inc. and MV Cheng and Associates-  hired by the city to help clean up the mess. The audit is to re-commence on March 21.

An audit schedule gantt chart was presented which showed 61 activities, with only 18 completed. Auditors and staff did not tell us what the critical path is.

Auditor Eden Casareno told us that internal controls were basically nonexistent, construction projects were kept on the books years after completion, variances not written off and that capital assets have been the biggest problem. She estimates that two weeks of field work are required, followed by 3-4 weeks of analysis and testing and that they will start writing the audit report in April on the findings, internal controls, the State Controller’s 79 points (which is a separate exercise). It will include the golf course, Riverpark, etc. Also mentioned were a review of attorney letters and claims against the city. George Miller asked what is the total of all lawsuits, claims and potential claims, via legal channels and claims to the city for employees outside firms, etc. No answer was forthcoming, yet. No new projections on the Mandalay Bay seawall repairs and cost sharing either, which could run $60+ million (city and homeowners required).

Prior year error corrections will change starting balances. Records are being dragged out of the archives for review. The old accounting software does not have the ability to create “as of” date reports, so they must be laboriously reconstructed.

After announcing at the last meeting that policies were written, but not being well-adhered to (I’m sure of this because this was asked and answered twice), we are now told “accounting policies not always documented (i.e. allowance policy, capitalization).” This was also mentioned at a council meeting in mid-February.

Maria Hurtado, City Manager Greg Nyhoff, Eden Casareno and an outside vendor all complimented Controller Christine Williams for taking on a huge workload as audit liaison and also holding down the fort with day to day activities.

Phil Molina said that bank reconciliations should be done by the Treasure, per state law, asking if this was true,when he already knew the answer was probably no. The answer was that accounting does it and she oversees it and is the signatory. Phil Molina asked how many bank accounts there were. It sounded like 10-11, including the general account, successor agency and 8-9 smaller accounts. This probably does not include enterprise funds (utilities, etc) which are treated as separate entities.

Here’s the meeting agenda

Here’s the auditor’s presentation material 3-9-16

Here are the Audit Schedule Gantt Charts 3-9-16

Here’s the meeting video by our photographer Dan Pinedo:

Next proposed Fiscal Policy Task Force meeting for April 13, 2016 at 9 a.m

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