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Bell scandal results in new bills to toughen financial oversight

February 8, 2011 | 11:49 am

State auditors would be given new power to dig into city financial books to ferret out the kinds of fraud and financial abuse alleged in the city of Bell, under a package of bills introduced Tuesday by state lawmakers.

State Controller John Chiang said he is sponsoring the five pieces of legislation to address shortcomings in the state’s ability to identify financial irregularities in cities such as Bell, where eight current and former city officials have been arrested and charged with misusing funds.

“The City of Bell has been a vivid illustration of the devastation that can occur when there is little accountability over how local dollars are spent in our communities," Chiang said. It is time for the state to have a role in making sure sound fiscal management is being practiced at the local level so that all public dollars are protected.”

Chiang said his office has received about 50 tips about questionable activities in other local agencies, leading the controller to believe the Bell scandal is "the tip of the iceberg."

The state is limited to launching audits of cities, counties or special districts when annual reports filed by those agencies provide evidence that state or federal funds have been misused, or when the agencies themselves invite state auditors in, Chiang said.

SB 186 would expand the controller’s power to perform discretionary audits that look at how local tax, fee and bond money is spent, according to Sen. Christine Kehoe (D-San Diego), who introduced the bill.

"The public’s faith in our government is shaken, and with good reason," Kehoe said at a Capitol press conference with Chiang and other legislators. "In order to restore the public trust and protect our hard earned tax dollars, the controller must have greater authority to audit spending."

Other legislation announced Tuesday would:

-- Allow the state auditor to establish a "high-risk local government agency audit program" to identify, audit, and issue reports on any local government agency that the auditor deems to have a "high risk for the potential of waste, fraud, abuse, or mismanagement." The cities would be designated "high risk" in consultation with the state controller and attorney general.

-- Require cities to file their annual financial audits with the state controller within nine months of the audited period, and increase fines when cities file late. Currently, reports can be filed a year or more after the audit period.

-- Create a Committee on City Accounting Procedures by the Controller, which would come up with guidelines to make sure the annual city audits use uniform standards. In Bell, the audits were found to be inadequate.

-- Allow the controller to convene a Local Agency Financial Crisis Intervention Committee to provide assistance to local agencies that seek help in averting or managing a financial crisis.  

-- Patrick McGreevy

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