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Citing an abundance of caution, the San Diego City Council took more than seven hours Monday to scrutinize a draft of the long-overdue 2003 financial report as well as the mayor’s nominee for the city treasurer position.
The council offered comments on the 2003 financial statements at Monday’s hearing, although they have no formal role in approving the statements. They voted to postpone a final decision on the treasurer.
During the hearing, councilmembers wrestled with their both role as well as the accuracy of the reports in general.
The hearing came two months after consultants at Kroll Inc. accused five current council members of acting negligently in their role in overseeing the city’s disclosure process in 2002 and 2003, when faulty financial information accompanied the city’s bond offerings. The disclosures errors triggered an investigation by the Securities and Exchange Commission, which is still in progress, and held up the release of audits dating back to the 2003 fiscal year.
Council members used the opportunity to demonstrate a concern with getting the numbers right.
Councilwoman Donna Frye showed up to the meeting with a list of 40 questions she had about the 314-page draft. She spent a significant portion of the day seeking answers to all her queries, which ranged from redevelopment debt to the impact of pending investigations to the cost of deferred maintenance.
“I could have you here for a minimum of 24 hours,” she told Chief Financial Officer Jay Goldstone and Greg Levin, the deputy auditor who is handling the preparation of the 2003 audit.
Both officials said they would return to the council shortly with answers to their questions and would revise the draft audits as they saw fit before sending the documents to KPMG, the firm charged with providing the city with an official blessing over its books for 2003.
Mayor Jerry Sanders said the city is on track to receive KPMG’s certification by Oct. 27, which puts the municipal government on a timeline to begin borrowing from Wall Street again by next June.
Some council members were cautious of the hearing, saying they didn’t want to offer an implicit endorsement of the reports when they did not directly oversee their preparation.
“Even though I’ve gone through 314 pages, I do not comprehend everything in here nor do I agree with everything in here,” Councilman Jim Madaffer said. He continued, saying, “I would never find myself in the situation of approving something I had no hand in preparing.”
Goldstone assured the council that he was only seeking advice from the council, which he said was “critical.”
Also, the council decided by a 7-1 vote to hold off for a week on the confirmation of Gail Granewich to the treasurer’s post after City Attorney Mike Aguirre urged council members to further vet Granewich given federal regulators’ interest in how the city reorganizes its financial practices.
“The SEC is going to be reviewing, in depth, your appointment process and your internal controls,” Aguirre said. He added, “The problem is that you can’t trust the mayor. You have to exercise your own independent judgment.”
Council President Scott Peters voted against extending the treasurer vote a week, saying he thought that the council already had the information it needed to decide whether Granewich was fit for the job.