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The city of San Diego has handed in to outside auditors a draft copy of its fiscal year 2003 financial statement, a signal that it is inching closer to returning to Wall Street.
The Mayor’s Office made the announcement today and has scheduled a press conference for tomorrow morning to lay out a timeline for the city’s return to fiscal credibility. A major section of the road was cleared last month when consultants from Kroll Inc. released the results of an 18-month probe into city finances.
The draft financials statement still must be certified by KPMG, the city’s outside auditor. The release of the audit has been delayed for more than two years as KPMG has requested an independent investigation into allegations of wrongdoing.
The Kroll report was meant to satisfy KPMG’s desires and it named a number of city officials as having committed securities fraud, breached their duties and caused the city to violate the Clean Water Act. Additionally, the report found that five sitting council members and former Mayor Dick Murphy acted negligently in allowing the release of false information to investors regarding the city’s pension and wastewater liabilities.
City Attorney Mike Aguirre has maintained that the elected officials recklessly or intentionally violated securities laws – a finding that, if agreed to by Kroll, likely would have intensified calls for the elected officials to step down.
It is the city attorney that ultimately writes what is known as the representation letter – a letter than accompanies an entity’s financial statements and details potential legal contingencies.
Aguirre has said that he will offer his analysis as to the council member’s culpability in the letter.
The financial statement is a detailed accounting of the city’s assets, liabilities and cash flow and can be used by potential investors as a yard stick of the city’s fiscal health. San Diego’s financial crunch has been greatly exacerbated the discovery in late 2003 of inaccurate information in the reports. The city’s credit rating was then suspended in 2004 and it has been unable to borrow money on the public markets for basic infrastructure projects, such as the sewer and road repairs and the construction of fire stations.
Mayor Jerry Sanders and CFO Jay Goldstone are expected to brief the media tomorrow at 11 a.m.