Audit: Bell Failed To Spot 'Unprecedented Collusion'

BELL (CBS) — Bell's private auditing firm failed to follow proper standards in its reviews of the city's finances and should have spotted fiscal improprieties that have led to criminal charges being filed against eight current and former officials, according to a state audit released Tuesday.

But the private auditing firm —Irvine-based Mayer Hoffman McCann —fired back at the state Controller's Office report, saying the company's auditors were "subjected to a massive scheme of collusion that reached through every layer of city government, to undermine the audit process and deceive the auditors."

KNX 1070's Bill Polish reports

The Controller's Office report blasts the work done by Mayer Hoffman McCann in its roughly four years of work as Bell's independent auditor.

"MHM appears to have been a rubberstamp 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. "Had MHM fully complied with the 17 applicable fieldwork standards, it would have led them to identify some — if not all — of the problems my office has uncovered since August."

The city of Bell has been in turmoil since it was revealed that top administrators and elected officials were earning exorbitant salaries.

Subsequent investigations have uncovered allegations of contracts being awarded without property city approvals and improper loans of taxpayer money being provided to city officials.

Eight current and former Bell officials, most notably former City Administrative Officer Robert Rizzo, have been charged with misappropriation of public funds. Rizzo is also charged with conflict of interest and falsification of public records.

Also charged are former Assistant City Manager Angela Spaccia, Mayor Oscar Hernandez, City Council members Teresa Jacobo and George Mirabal, and former council members Luis Artiga, George Cole and Victor Bello.

According to the state Controller's Office, the private auditing firm did not look for documentation and evidence to support the city's records and failed to document the reasons for deficit balances, management's plans for dealing with the financial conditions or the adverse effect of deficit balances. Instead, the firm primarily made comparisons to prior year financial
statements in search of irregularities, the audit found.

The firm's review of Bell's payroll was limited to comparisons with prior years, and auditors failed to review funds other than the city's General Fund, even though salaries were being paid to city official from a variety of sources, according to the state.

Mayer Hoffman McCann issued a statement defending its work, contesting the allegation that its auditors failed to follow proper procedures.

"Mayer Hoffman adheres to the highest standards, and we have forged a reputation for integrity and quality throughout our 50-year track record of service," he said. "But in those 50 years we have never seen anything like the pervasive collusion of so many individuals acting in concert to deceive auditors, as happened at Bell."

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