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A shameful City audit

Posted on September 26, 2019 by Sonoma Valley Sun

The recently released audit of the City of Sonoma by the auditing firm of Richardson & Co. is nothing the City should be proud of. Its conclusions were that financial activity, procedures, and transactions during the 2016-2017 fiscal year were improper, inadequate and, in the case of transfers from the Water Fund to the General Fund, illegal.

The report confirms the worst suspicions of those who have raised concerns in the past.

Undoubtedly, the absence of proper financial controls under the administration of the city’s previous City Manager, Carol Giovanatto, is largely responsible – but not entirely. When Chris Petlock, himself a finance professional, complained two years ago that the transfer of monies from the Water Fund to the General Fund was improper, his concerns were deflected and rebuffed by the current administration. It turns out that Petlock was entirely correct, according to the auditors. Now the half-million dollars removed from the Water Fund must be returned; the question is, will it be returned to the rate-payers? From our perspective, it should be.

But illegal transfers were only some of the serious problems the audit uncovered. Among the most egregious is the post-dating of checks to the tune of well over one million dollars. There’s simply no excuse for such actions, and it shouldn’t take an audit to detect them. And the use of a rubber stamp to sign checks is a “no-no,”  as any competent accounting professional knows. The lack of written accounting department procedures is shocking. Though the city seems to have had great difficulty in hiring qualified accounting department employees, it makes little sense to hire anyone unless finance department procedures and duties are clearly defined and spelled out. 

Responsibility for the proper operation of the Finance Department falls to the City Manager, Cathy Capriola. Even though the audit was for the 2016-17 fiscal year, the problems identified by the auditors are in many cases current, and should have been corrected long before now. Ultimately, the City Council is responsible for ensuring that the “people’s money” is safeguarded and properly accounted for. There is no higher priority; unless the city maintains control of its financial information, it’s like sailing a ship without a navigator. And that’s dangerous. 

We’ve seen problems like this before. In 1994 the city’s finances were in such a mess that strict procedures were put into place to prevent a recurrence, but many of those procedures have since been ignored. Now the inadequacy of financial department procedures is once again an issue. This needs to be rectified immediately.

The audit has raised other questions, too. For instance, the Cemetery Fund operates as an Enterprise Fund, with its income and expenses accounted for separately from the General Fund. The audit indicates the Cemetery Fund has an accumulated deficit of over $900,000; this raises the question, how has the Cemetery Fund deficit been subsidized? By the General Fund? Is there a loan agreement between the Cemetery Fund and General Fund, and running at deficit, how will the Cemetery Fund ever repay the General Fund?

Within a few months the audit for the 2017-2018 fiscal year will be completed. Perhaps it will provide answers to such questions. What is beyond question is that it is long past time for the city to get its act together. 

Sun Editorial Board

 



2 thoughts on “A shameful City audit

  1. The current City Manager arrived in January 2017, which means we still don’t have a clear up to date accounting of a complete year of things since she got here? That would be for FY 2017/18 and 2018/19: The last of which, FY 2018/19 should be forthcoming about now? One might ask why after two years, why we’re still behind two years?

    What we do know since the current City Manager’s arrival in January 2017 is that: “The report found that cash balances in several funds were understated due to the back-dating of checks. In one instance, $1,675,811 in checks issued in July of 2017 were back-dated to June 30, 2017, placing them in the prior fiscal year”……mistakenly by someone who isn’t with the City anymore. One might ask, why were these checks “allowed” to be backdated?

    And we do know from the Auditor that: “Scheipline, cautioning, however, that an audit of the 2017-2018 books will likely find similar missteps, since best-practice accounting procedures weren’t in place at that time either.” One might ask why best-practice accounting procedures weren’t in place at that time either?

    Given this financial history, along with the City Manager’s track record of how long it took to address wine tasting and cannabis (which still doesn’t have the regulations in place), not to mention the City Manager’s reluctance to start the process of a comprehensive update of the General Plan, Development Code and/or address the issue of an UGB in a timely manner (that would/should presumable occur after updating the entire General Plan) one might ask – “Who’s watching the ranch?”

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