Below is a letter from City Manager Bill Lindsay in response to a report from the California State Controller's Office notifying the city of an investigation into its financial practices.
September 22, 2015
Mayor Butt and Members of the Council:
This email is an update on the State Controllers's Office (SCO) audit.
As I previously reported to you, the State Controller's Annual Report is prepared by our external auditor, Maze & Associates. Based on the letter from the State Controller identifying apparent discrepancies between the City's Comprehensive Annual Financial Report (CAFR) and the annual report submitted to the State Controller, our external auditor has completed a complete financial reconciliation, which I have attached to this email.
In sum, the differences between what was reported in the City's CAFR and the annual report of financial transactions to the SCO may be summarized as follows:
1. The major differences in numbers have to do with the fact that the wastewater enterprise transactions were not included on the SCO report. These transactions were reported on a separate report to the SCO which covers enterprise funds. This is consistent with the SCO's required reporting procedure.
2. Other, smaller differences in the numbers reflect a difference in accounting procedures. The CAFR is prepared in accordance with standard accounting procedures (GAAP); the SCO report uses modified accounting procedures. Our auditor prepared the report to the SCO consistent with SCO's accounting procedures.
3. Other, less material changes reflect the fact that there were minor changes to the final CAFR after the SCO report was submitted. These related to Richmond Housing Authority transactions (separately audited by another accounting firm other than Maze & Associates). These are included in the attached reconciliation.
There were other statements identified in the SCO letter that reflect a misunderstanding by the SCO of RHA Properties and the sale of Westridge Apartments. However, notwithstanding confusion by the SCO, transactions related to the sale were correctly reported and the status of RHA Properties is easily explained.
Based on this explanation and the attached financial reconciliation, I will contact the audit team from the SCO in an effort to reduce their scope of work as would seem appropriate.
City of Richmond