On Aug. 16, the Indy ran an article titled “If You Don’t Get Finances Right, Nothing Else Matters.” This begs the question, is the city getting its finances right? With failing audit reports dating back to 2017 citing the same types of problems, it’s a fair question. As are the following.
Is a functioning audit committee a council priority? When faced with the reality that the public wanted a resident-led independent audit committee, Bob Whalen suggested merging audit responsibilities with the Measure LL committee. When the measure was disbanded, the seven-member combined committee was reduced to a three-member stand-alone audit committee for a short time, until the council added investment advisory responsibilities to create a new combined five-member committee. During its five-month life, the stand-alone audit committee never met, and as a result, to this day, no audit committee has ever reviewed the 2021 year-end financial statements or reported results to the council.
Is the lack of audit expertise on the audit committee an oversight?
The city “audit” committee has never had anyone with credentialed accounting and auditing expertise. When given the opportunity to replace a departing LL member, the council chose one of the two non-CPA applicants rather than one of the three CPA applicants, with Whalen inquiring of one of the CPAs whether she could work well with the existing committee.
When it was publicly pointed out to council that the call for applications for the latest version of the committee did not include a requirement for accounting or auditing expertise, nothing was changed, and no one with accounting or auditing expertise was selected.
Is the failure to get the audit committee involved in auditor selection a coincidence?
In 2017, Whalen suggested removing from the list of proposed audit committee responsibilities the participation in selecting the auditors, suggesting that this was a management responsibility. This suggestion was never adopted as it is not best practice for audit committees. Nevertheless, since its inception, the audit committee has had little to no involvement in selecting outside auditors.
There is hope. New City Manager Dave Kiff has announced that cleaning up issues in the city’s finance department is one of his top priorities. He has already hired a new finance director with an extensive accounting, auditing and finance background. We can help by insisting that councilmembers include getting our finances right as one of their priorities.
Mary Locatelli, Laguna Beach
