Independent auditors find “significant deficiencies” in City’s financial reporting

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4/12/10 – The auditor’s report ( view ) states that fund balances for both the General Fund and the Redevelopment Fund had to be “restated” ( page 8 ), meaning the City’s books are significantly flawed.

Furthermore, the City was entitled to over a million dollars in Federal Grants in 2008/09   but never asked for the money. The total expenditures of the City that were subject to these grants were $ 1,388,600 ( see page 5 , Federal CFDA # 66.202 ). Under the program the Federal Government would have matched those funds.

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OVER A MILLION DOLLARS IN FEDERAL GRANT MONEY NEVER APPLIED FOR  =  LOST  !

The grants in question were available from EPA, most likely for “green” projects like solar panel installations etc. For an overview of the way this EPA grant was structured, please refer to “66.202 Congressionally Mandated Projects” .

The auditors find that ” the City has not filed the reports outlined in the grant agreement” (“Finding Number 09-3” , pg. 8 ) According to their report, the consequences of not filing for the federal grant are a “delay or negation of the assistance agreement” including “suspension and debarment”. In plain english, it is most likely that the money can no longer be recovered – the City blew it – due to incompetence and/or sloppy oversight by the City Council.

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WHO’S TO BLAME FOR THIS MISMANAGEMENT ?

This disaster happened under the watch of the current City Council, which includes Mayor Botts. Botts appears to be well versed in financial matters  – he once was Chief Financial Officer of Garner Holt Productions, Inc. (view). Why did he not watch the City’s finances ? Is it possible that he was too occupied with other things : like giving money to the Banning Cultural Alliance or bringing us the Liberty Energy Sludge Incinerator  ? or maybe he was busy traveling, staying at luxury hotels and eating a $ 65 steak ?

Further responsibility lies with the other Council members: Barbara Hanna, Debbie Franklin and John Machisic were all on the Council when this happened. In fairness to Don Robinson, it should be noted that he was not yet in office during the first half of the fiscal year in question. However, the Federal Grants were supposed to be filed  bi-annually, so he was present when the City should have filed for the second portion of the grant.

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REALITY CHECK – ONCE AGAIN

We elect our City Council to competently and diligently guard our City’s finances. The auditor’s report confirms that this was clearly not accomplished under the watch of this City Council. After reading this report, can we feel comfortable that this City Council properly oversees the City’s financial matters ?

As the Grand Jury has pointed out , the City of Banning suffers from excessive employee turnover ( view page 2 , finding # 2 ). This may have been a factor in what appears to be incompetence and sloppy oversight of financial matters on the part of the City.

This audit report is yet another “reality check” for the citizens of Banning when it comes to evaluating their City Government.

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STEP BY STEP EXPLANATION

Some readers have expressed difficulties verifying our analysis by reading the audit report. That is not surprising, since the audit is extremely convoluted and seems to complicate  matters much more than necessary. We believe this was intentionally done by the auditors in order to make the City look as good as possible and divert from the true facts – while still meeting the legal requirements for an audit. It takes a little experience in reading these reports to get to the bottom of them. Many citizens lack this experience – so here is a step by step explanation :

STEP ONE : note that all page numbers referred to in this article are actual page numbers of the document, NOT the page numbers that the “pdf” file assigns to the document . So look at the document directly for the page numbers -as if you would have printed it out.

STEP TWO : Now look at page number 8 of the actual document. There you will find “Finding Number : 09-3” in the middle of the page. This is one of the findings that the auditors identified as a “significant deficiency”. “Finding Number : 09-3” refers to a “Federal Program – CFDA  number : 66.202” (make a note of that number). ———   The finding goes on to say that reports under this program were to be filed “semi-annually”.  Then it says “Condition – The City has not filed the reports outlined in the grant agreement”. —–  So now we know that there was a federal grant program that the City failed to file the reports for. ——-  Following this, the “Effect” of not filing the reports are described right below : they  include “negation”, “suspension and debarment”.  ——The only thing we are  NOT  being told when reading page 8 is  the actual dollar amount involved.

STEP THREE : You see, the auditors don’t want to give that dollar figure away, they want to paint a pretty picture. But by law, it must be mentioned in the audit somewhere. That “somewhere” is on page 5.  ——– There we see, a little below the middle,  “U.S. Environmental Protection Agency” Direct Program : Congressionally Mandated Projects” with an asterix for “Major Program” . This program carries the CFDA Number of 66.202 – the same program number as on page 8. That is the program that the auditors call “deficient’ because the City failed to ask for the grant money. The dollar amount stated on page 5 for  CFDA Number of 66.202 is $ 1,388,600.

$ 1,388,600 is the amount the City expended on items that were reimbursable under the federal grant by way of matched funds, meaning 100 %  reimbursement. The audit finds that the City never asked for that money during the fiscal year in question (08/09).