[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