Improper auditing often to blame for abuse

November 17, 2010

Our Wednesday Waste series has highlighted the rampant waste, fraud and abuse committed by city officials in Bell, CA. We noted the pension “double dipping” that’s occurring in Arkansas. Regrettably, it’s safe to assume there is abuse of power by elected officials across the nation. But how are so many getting away with it for so long? According to Los Angeles Times, it’s often poor auditing that allows the abuse to run rampant.

Below is an excerpt from the story; please click here to read the entire article.

Many cities that have been troubled by public corruption or mismanagement during the last decade — including San Diego, Compton and South Gate — got clean audits, even in cases in which public officials were later sent to prison.

There has been a widespread failure by auditors to make sure that cities are properly spending hundreds of millions of dollars in redevelopment money. Each year, approximately 100 of the state’s 391 municipal redevelopment agencies fail to file annual reports as required by law. Auditors are supposed to flag that failure as a major audit violation subject to review by the attorney general’s office, but auditors catch the problem in fewer than 20% of cases, according to a recent report from the state Senate Office of Oversight and Outcomes.

“The audits of municipal governments in California … are more creative than reality” based, said former San Diego City Atty. Michael Aguirre. “They come in and help cover up what has been going on in a city so they can issue a clean financial statement, for which they are charging lots and lots of money.”

The Bell city scandal, which was unearthed by LA Times, shone a light on improper auditing practices that occur all over the state.

The Times, using documents obtained from the city, found excessive salaries for top officials, with Rizzo on track to earn more than $1.5 million in 2010. The Times also uncovered $1.9 million in illegal loans the city doled out to employees, a car dealer and a foundation without City Council approval, and special fees Bell demanded that some merchants pay to stay in business. None of these issues was noted by auditors.

Sen. Alan Lowenthal (D- Long beach) lends a harsh dose of reality by telling LA Times, “Nobody is watching anybody.” He also goes on to say “I don’t think people understand the enormity of the problem.”

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