The City Council approved paying $2.2 million more to KPMG for its work on the city’s overdue 2003 audit Monday, days after the firm expressed its confidence that it would wrap up its work by Dec. 22.
With Monday’s expenditure, the city has paid out $6.6 million to KPMG, which has withheld its blessing of the government’s books. Concerns over the honesty of the city’s financial statements has caused enough concern on Wall Street to cut the city off from borrowing there for necessary infrastructure upgrades.
Jay Goldstone, the city’s chief financial officer, cautioned against considering KPMG’s Dec. 22 estimate to be accurate, but said Friday’s memo from the firm boosted his confidence that the end of the audit’s winding journey was near.
Previously, KPMG assured the city that the audits would be completed by Oct. 27. However, the firm returned instead with 114 outstanding questions for the city about the 2003 financial statements.
“They could come back with another list of items that would blindside us, just as when we were blindsided when they came back with the list of 114 comments and questions,” he said.
The council voted 7-1 for the expenditure, with only Councilman Tony Young dissenting.
Greg Levin, the deputy auditor in charge of financial reporting, said that the city had to show KPMG that the city accounts for capital assets that were paid for with loans and accounts for the liabilities in the retirement system’s DROP program before the deadline.
KPMG also requested that Levin, Goldstone, Mayor Jerry Sanders, Auditor & Comptroller John Torell, Assistant Auditor Larry Tomanek and retirement system Administrator David Wescoe sign off on the audit before it is certified, Levin said.
“We’ve heard this before and it hasn’t given me the appropriate comfort level,” Young said. “I’m concerned that we’re essentially being made to look like financial fools.
Young said he would prefer asking the state Controller’s Office to audit the city’s outstanding audits in lieu of paying private companies more money, and asked the independent budget analyst to study whether such a move was possible.
Sanders and his aides have been hesitant to set any new goals since the recent setback, but Goldstone said the KPMG letter instilled in him enough confidence to ask the council for money to pay its audit bills for the first time since the spring.
“The fact that I didn’t bring this contract amendment to you before now shows you how confident I am,” Goldstone said.
The council, by the same 7-1 tally, also approved paying about $532,000 to Macias, Gini & O’Connell for its continued work on the 2004 and 2005 audits in addition to audits of the redevelopment agency and other projects that are required by the state and federal governments.
The council did not authorize the nearly $889,000 that was sought for Macias to perform 2006 audit. That expenditure was postponed.