Micheal Ali
Richmond

An independent audit shows the city's financial oversight still needs work 

By Shawn Masten
TIMES STAFF WRITER 

RICHMOND -- Despite concerted steps to improve fiscal accountability, the management and oversight of Richmond's finances remain flawed, leaving the city open to substantial revenue losses. 

A routine audit of the city's 1999-2000 budget found 19 problems, including a lack of controls over cash revenues, especially in the city's recreation and parks departments. Some of these problems have come up in audits going back to 1998. 

The city is required by law to have its books reviewed by an independent accounting firm each year. The city's formal response to the audit will be completed in a few weeks, Finance Director Anna Vega said. 

The audit's findings came as a surprise to City Council members who thought fiscal controls had been tightened more than a year ago in response to allegations of financial mismanagement and corruption in the parks department. 

"We were told that everything had been fixed and everything was running the way it supposed to run," Councilman Tom Butt said Tuesday during a council review of the audit. "But this sounds like we haven't made any progress at all, and that concerns me greatly." 

New policies have been implemented, but change is slow, City Manager Isiah Turner said. 

The city's fiscal management and oversight are much improved compared to three years ago, and no malfeasance or inability to account for funds were found during the audit, Turner said. 

"These are minor things when you look at them. It's not like they are going to be ignored, but they're not major compared to three years ago." 

The city has made significant progress in the past year, but weaknesses remain in the areas of financial oversight and cash management, said certified public accountant Gary Caporicci of Caporicci, Cropper & Larson, the city's new auditor. 

Among the findings: 

·  City departments aren't required to report or turn in cash and other revenue to the finance department on a daily basis. Cash receipts are sent at the department's convenience and judgment, often without supporting documents. 

·  Revenue-generating departments also each have their own process for handling cash and other revenues with no overview by the Finance Department. 

·  Employees have too much autonomy over the disbursement of payroll and other checks. 

·  Personnel files maintained by the payroll department are incomplete and salaries are changed without the proper authorizing signature. 

·  The city may be failing to collect some revenue from its business license tax, because its licenses aren't reviewed annually for changes in a businesses' staff size, upon which license fees are partially based. 

·  City supplies and materials are disbursed with little or no oversight or controls, and inventories are not regularly performed. 

The audit found that some of these weaknesses could cause substantial revenue losses for the city. 

Finance director Vega said she didn't dispute the audit's findings. 

Steps to improve the handling of cash revenue in the recreation and parks department were implemented after problems cropped up in an internal audit six months ago, Vega told the council Tuesday. 

"We are working with them to close those loopholes," she said. 

The finance department has instituted new policies and procedures to ensure that it receives cash receipts from the parks department on a regular basis, and the city also is considering hiring an armored car to collect cash regularly, Vega said. 

Parks and recreation routinely charges fees for the use of city playing fields, community centers, parks and the Richmond auditorium. 

"We're getting into a routine of weekly or twice a week submitting cash receivables, but part of the problem is staffing on our end and an increase in business," said Jesse Washington, recreation and parks director. "Our goal is to resolve those issues and make it more businesslike in terms of getting those transactions done. It's still a people-power issue." 

The council on Tuesday approved the hiring of two accountants to help the city's finance department analyze general ledger accounts on a regular basis and to provide more oversight of payroll and other checks. 

Efforts to improve citywide fiscal accountability began in August 1998 after a certified fraud examiner reviewed financial records and other files in the recreation and parks department. 

That probe revealed an operation ripe for fraud, but so many records were missing or inaccurate that it was impossible to determine if a crime had occurred. 

The city since has hired a grant manager and internal auditor to monitor the city's financial activity. It also has installed a multimillion-dollar, state-of-the-art financial and administrative computer system. And general policies and procedures continue to be updated. 

The city has nearly $5 million in reserves. 

"It takes time to turn these things around," Turner said. "But I am quite comfortable in terms of where we are." 

The audit is not so much a criticism but a way of showing the city how to get a better hold on its finances, Councilman Gary Bell said. 

"We've made improvements and we are working hard, but there's always room for more improvements," Bell said.