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Bell's auditors should have spotted most of the alleged corruption, state controller finds

December 21, 2010 |  2:58 pm

The state controller’s office Tuesday issued a scathing review of the work performed by Bell’s outside auditor, saying that most of the alleged corruption in the Los Angeles County city would have been identified earlier had the firm done its job.

The long-awaited audit said Mayer Hoffman McCann repeatedly failed to follow basic fieldwork practices when it audited the city’s books.

Mayer Hoffman McCann “appears to have been a rubber stamp 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,” state Controller John Chiang said in a news release.

The 153-page review said that Mayer Hoffman did not look hard enough for documentation and evidence to support city records.

Chiang’s office said it was forwarding the review to the state Board of Accountancy for possible disciplinary action.

The review notes that the auditing firm disputes the findings.

Chiang’s report is the latest critical look at a city that has been enveloped by scandal since The Times revealed the enormous salaries paid to administrators and part-time politicians in one of Los Angeles County’s poorest cities.

Bell is now teetering on the edge of insolvency and may have to take drastic steps such as disbanding its police department to balance the city’s finances. The Times has reported that Rizzo also loaned city money to co-workers, council members and businesses and urged police and code enforcement officers to increase city revenue by aggressively citing motorists, residents and business owners.

The controller’s office found that the city had overcharged property owners and businesses more than $6 million in fees and had mysteriously placed $23.5 million in bond funds into a checking account that paid no interest, costing the city about $1.7 million in potential earnings.

In September, Chiang’s office said Mayer Hoffman McCann should have noticed the glaring lack of internal controls in Bell. Chiang’s report said Rizzo appeared to have complete control of all financial transactions and activity in the city.

Hallye Jordan, a spokeswoman for Chiang, said at the time that state auditors were baffled by “how a CPA firm could miss the abuses the controller's office found, and found rather quickly.”

Bell was not the only city with auditing problems. A Times review of state and local records found that the independent audits cities are required to obtain frequently fail to uncover fraud and mismanagement.

Many cities hit with corruption or mismanagement allegations over the past decade, including San Diego, Compton and South Gate, received clean audits, even in cases where officials later were sent to prison.

When firms provide negative audits, they risk being replaced. In the case of Victorville, for instance, the new auditors gave the city a clean rating after the previous auditor found numerous problems.

-- Jeff Gottlieb