San Bernardino’s financial crisis

Ryan Hagen, Staff Writer
Posted: 07/13/2012 08:10:29 PM PDT

SAN BERNARDINO – The city’s financial statements in the years before its authorization of a bankruptcy filing showed no sign of falsification but clearly indicated increasing deficits, the city’s auditors said Friday.

San Bernardino-based Rogers, Anderson, Malody & Scott LLP was hired to make sure the city’s financial statements were free from material misstatement and that controls were in place to prevent fraud, said Terry Shea, a partner at the firm.

“We don’t audit the budget, the preparation of the budget or what’s in the budget,” said Shea, who was on the team that prepared San Bernardino’s Comprehensive Annual Financial Report.

Financial statements look at the fiscal year that has ended, while budget documents are projections for the coming fiscal year.

At Tuesday’s City Council meeting authorizing a filing for bankruptcy protection in the face of a $45 million deficit, City Attorney James F. Penman said that 13 of 16 years of budgets were falsified to indicate a surplus when there was a deficit.

Penman declined to elaborate.

“I don’t know what he was talking about,” Shea said.

Shea said reports prepared by the auditors – who were hired to analyze the fiscal years ending in June of 2007, 2008, 2009, 2010 and 2011 as well as several years beginning in the mid-90s – did not find any evidence of wrongdoing.

The audit for fiscal year 2010-2011 has not been completed.

San Bernardino would sometimes turn in documents late – which Shea said was because the city was understaffed – but otherwise the financial statements did not indicate any problems, said Scott Mannow, another partner at the firm.

“They were operating in accordance with generally accepted accounting principles,” Mannow said. “They knew they were having problems, but we did find they could continue as a going concern,” meaning bills could be paid for 12 months from the time the report ended.

To read entire story, click here.