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Unaudited Audits

Not many cities have their own internal financial audit committee. San Diego has one. Comprised of three outside finance experts and headed by councilmember Kevin Faulconer (with councilmember Carl DeMaio serving as vice chair), the committee’s mission is to bring some accountability to the fiscal folly that has plagued San Diego politics for years. Of course, accountability also depends on if chief financial officer Mary Lewis and Mayor Sanders cooperate.

At the March 23 meeting of San Diego’s Audit Committee, a lawyer from the city attorney’s office explained the city’s decision to release the comprehensive annual financial report (CAFR) for fiscal year 2008 without the Audit Committee's or city council’s approval.

Referring to a Saturday, March 21, memo, issued to Audit Committee members minutes before the meeting, a lawyer from the city attorney’s office said the financial report was hastily submitted to meet a March 26 deadline set in place by Securities and Exchange Commission guidelines.

“While we’re going to have an executed audit letter from the Macias Firm for the fiscal 2008 financial statements by March 25, we will not have had the audit reviewed by the Audit Committee or received and filed by the city council,” said the lawyer.

Kevin Faulconer was unable to include the item on the committee’s agenda because he wasn’t notified of the audit. “I would just say that if we know in advance, I would certainly always make time on our Audit Committee agendas, but I can’t do that if I’m not aware of it in advance. I’m not quite sure why I’m getting this now…”

“Mr. Faulconer,” interrupted DeMaio, “I share your concern, and I think it’s unacceptable to have this dropped on this committee at such a late date.”

CFO Mary Lewis explained the decision to file the financial report without the Audit Committee’s approval.

“The deadline is the same every year, but we have been out of sync with our annual CAFRs. So, we have been basically issuing financial reports without audited statements.”

“The fact that this comes to the committee at -- worse than the 11th hour -- at 11:59, really is absolutely unacceptable,” responded DeMaio. “This is not how we should be doing business in the city of San Diego, and you would think this message would have sunk in by now. This is an annual date, like Christmas: we know this is coming up. We should have been planning for this.”

“We have been planning on this, sir," said Lewis, "and as a result of the discussion on Friday, it seemed prudent to approach the Audit Committee with the best advice from our disclosure council. I apologize for the lateness. I totally agree with you, and we take responsibility for that.”

“The idea that it just dawned on you Friday, that we should be changing this practice from the prior year… You are going to be doing this without city council approval. I just hope you know that and recognize that. I don’t find this as acceptable business practice.”

For more on the audit committee, go to sandiego.gov.

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Not many cities have their own internal financial audit committee. San Diego has one. Comprised of three outside finance experts and headed by councilmember Kevin Faulconer (with councilmember Carl DeMaio serving as vice chair), the committee’s mission is to bring some accountability to the fiscal folly that has plagued San Diego politics for years. Of course, accountability also depends on if chief financial officer Mary Lewis and Mayor Sanders cooperate.

At the March 23 meeting of San Diego’s Audit Committee, a lawyer from the city attorney’s office explained the city’s decision to release the comprehensive annual financial report (CAFR) for fiscal year 2008 without the Audit Committee's or city council’s approval.

Referring to a Saturday, March 21, memo, issued to Audit Committee members minutes before the meeting, a lawyer from the city attorney’s office said the financial report was hastily submitted to meet a March 26 deadline set in place by Securities and Exchange Commission guidelines.

“While we’re going to have an executed audit letter from the Macias Firm for the fiscal 2008 financial statements by March 25, we will not have had the audit reviewed by the Audit Committee or received and filed by the city council,” said the lawyer.

Kevin Faulconer was unable to include the item on the committee’s agenda because he wasn’t notified of the audit. “I would just say that if we know in advance, I would certainly always make time on our Audit Committee agendas, but I can’t do that if I’m not aware of it in advance. I’m not quite sure why I’m getting this now…”

“Mr. Faulconer,” interrupted DeMaio, “I share your concern, and I think it’s unacceptable to have this dropped on this committee at such a late date.”

CFO Mary Lewis explained the decision to file the financial report without the Audit Committee’s approval.

“The deadline is the same every year, but we have been out of sync with our annual CAFRs. So, we have been basically issuing financial reports without audited statements.”

“The fact that this comes to the committee at -- worse than the 11th hour -- at 11:59, really is absolutely unacceptable,” responded DeMaio. “This is not how we should be doing business in the city of San Diego, and you would think this message would have sunk in by now. This is an annual date, like Christmas: we know this is coming up. We should have been planning for this.”

“We have been planning on this, sir," said Lewis, "and as a result of the discussion on Friday, it seemed prudent to approach the Audit Committee with the best advice from our disclosure council. I apologize for the lateness. I totally agree with you, and we take responsibility for that.”

“The idea that it just dawned on you Friday, that we should be changing this practice from the prior year… You are going to be doing this without city council approval. I just hope you know that and recognize that. I don’t find this as acceptable business practice.”

For more on the audit committee, go to sandiego.gov.

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Comments
2

Why wouldn't the City explain the circumstances to SEC... something like ...over the last few years we have not been very competent, but we're trying to do better...may we please have a two week extension???

Taxpayers get extensions from the IRS all time for filing their paperwork... Mr. Faulconer needs to find his backbone!

March 25, 2009

Carl DeMaio is right. This is TOTALLY unacceptable.

There's no way this wasn't cynically planned out in advance. This stinks to high heaven.

Mary Lewis should be fired for this.

March 26, 2009

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4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
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