The Costa Mesa City Council cancelled a new contract with its longtime auditor, Mayer Hoffman McCann, this week after the firm agreed to pay a fine and be placed on probation over charges that it mishandled its reviews of the city of Bell.
Before casting their votes, members of the council majority said they were concerned that the firm didn’t catch major financial irregularities in Bell, where eight city officials are now facing criminal charges for allegedly awarding themselves exorbitant salaries and misusing more than $6 million in public funds.
“Here’s a city that [was] just doing things that are so outrageous,” said Mayor Pro Tem Jim Righeimer. “It just seems that there would be some tell-tale signs somewhere.”
Council members voted 3-1 to cancel the contract and approve a new one with the firm White Nelson Diehl Evans. Councilwoman Wendy Leece dissented, and Councilman Gary Monahan abstained.
Councilman Steve Mensinger questioned Costa Mesa’s longtime use of a single auditing firm, which, according to city staff, has performed the work in Costa Mesa for about 20 years. The councilman said he’d like auditors to be chosen by a group separate from city staff, like Costa Mesa’s investment oversight committee.
Switching contracts will cost Costa Mesa an additional $21,000 next year but still falls within the $75,000 budgeted for financial auditing, according to a city staff report.
“I don’t think we’re taking a risk” by sticking with Mayer Hoffman, Leece said before the vote.
Mayer Hoffman McCann settled the disciplinary charges with the state Board of Accountancy late last month. It will pay a $300,000 fine, up to $50,000 for the cost of the investigation and be placed on two years’ probation.
The accountancy board’s investigation came after state Controller John Chiang accused the firm of being “a rubber stamp rather than a responsible auditor” in Bell and said the firm “could have prevented the mismanagement of the city’s finances by Bell officials.”
Finance Director Bobby Young told council leaders that if they changed auditors, city staff would have to spend significant time explaining Costa Mesa’s accounting processes to the new firm. He added that Mayer Hoffman McCann has improved their auditing approach after its experience in Bell.
A representative of the firm said the accountancy board had “only found eight relatively minor issues” and that the body used probation for problems that are “not so serious” that a firm’s license needs to be revoked.
“I can assure you that in this changed audit environment that you won’t find a firm that is going to be performing more extensive and expanded audit testing than Mayer Hoffman McCann,” the representative told the City Council.