Annual Financial Report Says Redev. Agency's Combined Financial Statements Don't Meet U.S. Accounting Principles Because CA Law Requires Including Low & Moderate Income Housing Fund Figures Not Maintained by Agency; Auditors Note No Matters Involving Agency's Internal Control Or Financial Reporting They Consider Material Weaknesses
(September 8, 2005) -- The Annual Financial Report of LB's Redevelopment Agency includes a letter to the Mayor and the City Council from an independent accounting firm and LB's City Auditor Office indicating that "because of the effects of including the low and moderate income housing fund as a separate column in the agency's combined financial statements, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the agency as of September 30, 2004, or the changes in the Agency's combined financial position for the year then ended."
A communication in the report, on letterhead with logos of KMPG and the Office of the LB City Auditor, indicates RDA's Annual Financial Report was prepared under a CA law requiring the inclusion of low and moderate income housing fund figures...and says these figures are not maintained by LB's Redevelopment Agency. The communication adds that the auditors "noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses."
A section of the Report titled "Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards" stated in pertinent part:
We have audited the combined financial statements of the government activities and each major fund of the Redevelopment Agency of the City of Long Beach (Agency), a component unit of the City of Long Beach, CA (City) and of the low and moderate income housing fund as of and for the year ended September 30, 2004, which collectively comprise the agency's combined financial statements and have issued our report thereon dated March 17, 2005. Our report refers to the fact that the Agency has prepared their combined financial statements using accounting practices required by the State of California Health and Safety Code, section 33080.1, which practices differ from the accounting principles generally accepted in the United States of America. The funds included in the low and moderate income housing fund columns presented in the combined financial statements are not maintained by the Agency and accordingly, are not includable in financial statements prepared in accordance with the accounting principles generally accepted in the United States of America. However, state of California Health and Safety Code section 33080.1 requires the Agency to prepare financial statements that include these funds. The effect on these combined financial statements of the inclusion of these funds is apparent in the columns labelled low and moderate income housing fund. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in government auditing standards issued by the Controller General of the United States.
Internal Control Over Financial Report
In planning and performing our audit, we considered the agency's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the combined financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design of operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses.
In July, 2005, the RDA sent its Annual Financial Report to State Controller's office in Sacramento. On August 17, Craig Black, LB's then-Acting Dir. of Community Development, sent RDA's Annual Financial Report to City Manager Jerry Miller for the Mayor and City Council.
On August 22, the RDA's governing board formally voted to transmit the Annual Financial Report (and associated materials) to the LB City Council. An item was agendized for the Sept. 6 Council meeting with the recommendation to "receive and file" (take no further action)...but the Annual Report and related materials weren't included in the Council's agenda pack (and thus wasn't posted online). An insert in the Council agenda pack stated, "Due to the large size of this exhibit, it is not attached to this letter. If you would like to receive a copy, contact Barbara A. Kaiser Redevelopment Bureau Manager [lists phone number].
Veteran LB activist Dan Rosenberg did so, received the Annual Report and spotted the auditors' communications. Although he credited Ms. Kayser for sending him the Annual Report on request, Mr. Rosenberg opined, "I think this Report deserves more than just receiving and filing by the Council. The public is paying for these independent audits and we're entitled to have responses from our elected officials."
Mr. Rosenberg recently formed and heads Community for Affordable and Secure Housing (CASH)> He doesn't have an email address yet, but asked us to post his contact phone number: (562) 591-5793
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