An internal review of a number of Culver City redevelopment actions that were questioned in a state oversight report last year has been postponed until October, the News has learned.
Culver City Chief Financial Officer Jeff Muir said the summer-long debate regarding redevelopment agencies, their viability and their possible elimination forced the city to delay the review of what the state Senate Office of Oversight and Outcomes called irregularities in some of the development agency’s actions in 2008 that are listed in a report from Sept. 30 of last year.
“Due to all of the uncertainty and other scrambling that was required by the governor’s threat to kill redevelopment, I delayed this project,” Muir told the News. On July 11, Gov. Jerry Brown signed Assembly Bills 1x 26/27 and Senate Bill 15, effectively putting an end to state redevelopment agencies.
Culver City decided to authorize hiring the services of an outside audit firm following a Dec. 21 announcement of the results of an investigation of the Bell Redevelopment Agency by state Controller John Chiang. Chiang reported that the accounting firm of Mayer Hoffman McCann had not followed generally accepted fieldwork audit principles in its auditing practices of the Bell Redevelopment Agency, as well as its municipal finances.
The failure of Mayer Hoffman to detect and report these practices are what prosecutors believe allowed the Bell city government to charge exorbitant fees for businesses licenses, engage in illegal towing practices and questionable assessments to businesses and residents in order to pad the salaries and benefits of the City Council and high-ranking city executives at taxpayers expense over several years.
The discovery of these alleged crimes last summer led to the indictment of former Bell City Administrator Robert Rizzo, his assistant, the former mayor and three ex- members of the Bell City Council, who are on trial for misappropriation of funds, falsification of records and conflicts of interest.
“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,” Chiang said.
Last Dec. 9, the News revealed that Mayer Hoffman had been Culver City’s auditor for its city and redevelopment finances for three years.
“We are undertaking this additional review by another qualified auditor to provide additional assurance to the agency board and the community,” City Manager John Nachbar explained in a Dec. 22 press release.
Muir added that review would not be a complete re-audit of the 2009-2010 financial statements, but will focus on the areas of concern raised in the oversight office report.
Redevelopment Reporting Solutions of Orange County was retained in January to conduct the internal examination. The firm is run by Donald L. Parker, a certified public accountant with more than 30 years experience in redevelopment financial agency accounting and reporting.
“I have spoken with Mr. Parker recently, and we anticipate that he should be able to come in [by] October,” Muir said.
Last October, Culver City was one of 12 cities named in a state oversight office probe that found that several certified public accounting firms hired to audit redevelopment agencies did not report the failure of some municipalities to file annual redevelopment reports to the controller’s office, which the Office of Oversight and Outcomes called “a major violation.”
In 2008, the report indicated that the Culver City Redevelopment Agency’s low- to moderate-income housing fund collected nearly $5 million in property tax money, the highest of any of the 12 agencies selected at random.
The fund held $22.1 million that year. During a 13-year period, Culver City reported only four new units of affordable housing. It did report the substantial rehabilitation of 31 other units and the agency acquired the covenants of 12 housing units that are set aside for low- to moderate-income tenants.
By comparison, in neighboring Santa Monica, nearly 750 units of affordable housing were built within the same sample period. Santa Monica redevelopment officials also substantially rehabilitated 100 units and acquired 165 units covenants of low- or moderate-income households.
“We need to do a better job of creating affordable housing,” Councilman Christopher Armenta acknowledged after the report was released.
Culver City has two recent development sites pending, one on Irving Place and another at Globe Avenue, where there will be newly built moderate-income units.
In addition, officials from the Department of Housing and Community Development told the oversight office that local offices should not use housing funds to pay for expenditures such as legal advice on housing discrimination, which they say may not be a legal use of the money. But the report states that Culver City appears to have done just that, along with paying nonprofit groups to match elderly residents with roommates and install safety devices such as smoke detectors.
Parker plans to focus on these areas, as well as a few other matters of concern.
“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,” he explained in a letter to Muir in January. “This focus would be on the most recently completed fiscal year and would deal with the financial results.”
City officials deny any wrongdoing and stand by their redevelopment reports.
City leaders enacted a series of measures to protect its redevelopment assets in January after learning of Brown’s plan to abolish the state’s 397 redevelopment agencies and divert the $1.7 billion used to fund them for public safety and education.
“These actions were based upon the desire by the City Council to keep local tax revenues here in Culver City rather than have them transferred to the State or a successor agency, which would not be elected by and accountable to the residents of Culver City,” said Assistant City Manager Martin Cole.
The League of California Cities and the California Redevelopment Association filed suit against Brown’s action and the state Supreme Court stayed most of the provisions of AB 26 X1 and AB 27 X 1 on Aug. 11. Both are seeking to declare the new laws unconstitutional.
“The city applauds the California Supreme Court’s action,” Cole said.
Muir said the late start would give the city a bonus of sorts when Parker begins his work.
“This will also allow us to leverage his assistance with our filings for the current fiscal year [that] just ended,” he said.