State Controller to Mayor: 'Patience and Understanding Must Have Their Limitations'

A sharply worded letter from State Controller John Chiang tells Dan Romero that it's time to start cooperating with auditors.

[Editor's note: The following letter from State Controller to John Chiang was delivered to city officials Thursday. It is reproduced below in its entirety. See all of Hercules Patch's coverage on the city's financial meltdown.]

Dear Mayor Romero,

I Want to thank you for the commitment you made in your May 13 response to my office’s audit, in which you directed municipal officials to search for the records requested by my office. Your statement represents the most solid commitment We have received to date from the City of Hercules to providing records necessary to account for the spending of more than $2 million of state and federal funds.

My auditors have made 32 separate requests for 107 documents since September 2011, and only a handful of those requests were satisfied. You should know that in the past two years, alone, my office has completed nearly 1,100 field audits throughout California and I cannot recall any that have taken longer than our audit of Hercules in obtaining requested documentation. While our recent local government audits of Bell and Montebello — cities which were similarly embroiled in fiscal crisis and facing demands from multiple criminal and regulatory investigations — ranged from 4 to 6 months, Hercules is running into its tenth. Simply stated, patience and understanding must have their limitations, especially when Hercules has enjoyed twice as much time as other municipalities to produce records detailing how it spent the public’s money.

In the appendix of my office’s audit report relating to the City’s spending of state and federal funds, my auditors summarize their repeated attempts to enlist your staffs assistance in locating 107 specific documents and files that were germane to our investigation. It does not matter if your staff provided our auditors with 50 boxes or 500 boxes of documents if, in the end, we Walk away Without the specific materials necessary to determine the lawfulness and appropriateness of your expenditures. Quantity is a poor substitute for the quality of documentation required for a thorough examination of Hercules’ use of state and federal funds. The very acknowledgement that your staff flooded us with fifty-two boxes of materials containing up to 15,000 documents rather than the specific ledger statements, canceled checks, bank account records, cash reconciliation documents and other pertinent records requested raises questions when coupled with our audit work papers which demonstrate that your staff repeatedly ignored communication requests and failed to attend scheduled meetings.

I understand the terrible difficulties faced by the City of Hercules, which is why my audit team went out of their way to provide extra time for your staff to produce basic records of the city’s expenses. They also shared a draft of their audit with your staff more than three weeks before it went to print. This standard practice of our office affords the audited party a final opportunity to provide information and documents before we publish our findings. City officials did not avail themselves of this last chance.

I respectfully urge you to follow-through with your commitment and to work closely with my staff as they complete their remaining audits into the City’s redevelopment agency and internal oversight controls. The purpose of these four audits is to provide the community of Hercules with reliable, no-nonsense answers for how such a promising city fell into fiscal distress and, more importantly, a roadmap for recovery. Not only are millions of dollars of state and federal funds at potential risk, but recent history has evidenced how the lack of transparency and accountability is a breeding ground for waste, abuse, and malfeasance.

I look forward to working with you.
Original signed by
JOHN CHIANG California State Controller

Giorgio C. May 19, 2012 at 02:03 PM
When I read this, I am reminded of my own public agency employer and so I am sympathetic to one group of city employees, those being the competent, hardworking and ethical folks like ourselves. Posted on my employer's webpage is a scathing audit that even says "we have no credibility with our legislature." It is bad. The good news is that we are now on the road to accreditation. The mess didn't happen over night. And there is no record of those of us who tried to prevent it. Most of us have zero authority being rank-and-file workers, but we tried. Some of us might have some documentation of our efforts. There is no transcript of a meeting held to counsel me in which a superior said my "standards were too high", that I "might be happier working elsewhere." Some of us have letters from a whistleblower agency, thanking us for reporting our concerns. So when I read the auditor's comments about Hercules, I am wondering which employees remain. Hopefully, all of the crooks have vanished, but what about the incompetent, or those with low standards? Do we have any of them on board? If so, to them I say “Please pack your bags. We will fire you. “ And to those who are competent and have high standards, thank you for being who you are. Don’t change and hang in there.
Brent Marin May 19, 2012 at 04:14 PM
G.C. I agree with your statement completely. I should have articulated the point in my statement about current employees that work in City Hall more succinctly, so as to be not misunderstood. I do still have my reservations concerning the handling of the request for pertenate accounting documents that were and continue to be requested by the State Controllers Office. Ten month's from the original request and the Controller still has not been furnished the documents that his office has requested. Really? Could the City not hire from a company like the Robert Half organization or Account Temps that specialize in supplying tempoary certified accountants to help them sort through and find the requested material? This City Council and City Manager should have had a pretty good idea that a request for information would inevitably come from an outside Government body before they were sworn into their respective positions. This is why I stated "No More Excuses".
Susan D.Keeffe May 19, 2012 at 06:06 PM
Kent, Thanks! I think that was one of my better typos!
Douglas Bright May 23, 2012 at 05:31 PM
Glenn, I would suggest you not do anything simply because Chief Goswick believes you should. That kind of mindset led you to (as you've admitted) blindly support Dan Romero and Gerard Boulanger, which you now believe were terrible mistakes. Chief Goswick can not force the city to spend new tax revenue with his department; nor can he make a regressive tax, progressive.
Glenn Abraham May 24, 2012 at 12:45 AM
Douglas, I have a flawless record in selecting liars, schemers, frauds and turkeys. And a horrible record with Gérard (who's thoroughly dishonest but not especially dangerous) and Dan Romero (who has recently proven that he lies, but who probably is otherwise honest; even if honest, he is a schemer, a bully who publicly and privately attacks his own constituents, an autocrat who tries to crush dissent (as with Toni) and stifles opposing opinions, values opacity and disdains the community which elected him, and has a volatile temper...so, less dishonest than Gérard, but much, much more dangerous). I have a proven record of misjudging politicians. So, you're absolutely correct in saying that I shouldn't rely on individuals. But with Bill Goswick, I do think it's different. I first met him 13 years ago, but never got to know him well; however, a number of people who I know VERY well have known Bill Goswick since the 1980s, and they all vouch for him. You gotta trust somebody, and Chief Goswick comes with a lot of very good references. He never pretended to be able to convince the city to spend money on the police, but he is personally convinced that passage of O can help in avoiding further reductions in officers. He knows more than I do, and I put more value in his opinion, on this, than mine.


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