As Yucaipa continues to fix issues raised in its annual financial reports, it has extended a contract for an auditor helping staff with the work.
The Yucaipa City Council on Monday, Aug. 23, unanimously agreed to use the services of accounting firm Van Lant & Frankhanel LLP for another year for $30,850.
Councilman Bobby Duncan initially objected because he said the firm should have caught years of alleged thefts by a former employee.
“I thought we had agreed, or at least there was some discussion, about changing the auditing company because of the embezzling,” Duncan said at the meeting.
Martha Amarilys Avalos, of Loma Linda, was charged in 2019 with felony grand theft and has pleaded not guilty. The San Bernardino County Sheriff’s Department said checks made payable to the city had been deposited into Avalos’ personal account. A preliminary hearing is currently set for Sept. 21.
City Manager Ray Casey told the council Monday the firm has been helpful in working with city staff to resolve some issues and the city is now working with a different partner at the firm.
“My recommendation at this point is to wait one more year until we get through these issues that we are engaged in” before changing auditors, Casey said.
The most recent issues were laid out at the Aug. 9 council meeting in the firm’s report for the fiscal year that ended in June 2020.
The first finding was a “significant deficiency regarding the calculation of building and planning fees,” the firm’s Brett Van Lant told the council. Building and planning fees for city services like inspections were not charged in accordance with the city’s master fee schedule.
Ryan Blackerby, the city’s finance manger, told the council that changes are already being made.
Many city fees were too low and not paying for staff time to conduct the services, and were therefore being subsidized by the general fund.
The council later that night approved adjustments to a wide range of city fees.
The second finding was “a material weakness” in accounting for funding sources for infrastructure projects, Van Lant told the council.
Adjustments needed to be made to accounting documents to record revenues and transfers for projects, which caused some deficits.
To correct this “we’ve made big pushes for improved communication between accounting and development staff,” Blackerby told the council.
The third finding laid out on Aug. 9 was that the city has advanced more than $23 million to various development impact fee (DIF) funds “resulting in a significant nonspendable fund balance in the General Fund and a commitment of future DIF funds to repay these amounts many years into the future,” according to a written report to the council.
Staff say they regularly evaluate the repayments made by builders, and comply with the loan agreements.
The firm’s audit report for the previous fiscal year ending in June 2019, which was presented to the council in March 2020, had included some of those concerns and more.
The auditor noted mail should be opened, and payments logged, before being distributed to departments or individuals. Management said they made changes to strengthen internal control.
The auditor also said monthly bank reconciliations need to occur on a timely basis. Management said they were shifting staffing to do so.
At Tuesday’s meeting, Casey said the city is working on resolving the issues, some of which go back three or four years.
“I believe that we made an awful lot of progress on those fronts that have been identified, and again, the auditor has been helpful in making recommendations in our operations to help solve,” Casey said. “So I think we will have resolved those issues this (fiscal) year,” which ends in June 2022.
While the California State Auditor’s release of a risk rating for cities for the fiscal year ending in June 2020 did not include Yucaipa due to a deadline extension, the city has ranked well in the last few years.
The state program identifies “local government agencies that are at high risk for the potential of waste, fraud, abuse, or mismanagement, or that have major challenges associated with their economy, efficiency, or effectiveness,” according to the state’s website.
The previous three years, Yucaipa has had a low overall risk of financial distress based on criteria such as general fund reserves, debt burden and pension costs.
“Residents may expect that the city will continue to provide essential services, such as fire, police, road maintenance, and parks,” the state website says. “Although this city’s overall financial position is relatively strong, all cities must plan for their long-term financial futures.”