Friday, Dec. 22, 2006 | Why is another delay in the completion of the city’s 2003 audit by KPMG not a surprise?

Will the audit be a less than an “unqualified opinion” audit? I think it will be. What negative impact will that have on Hizzoner’s plan to return to the municipal bond markets by next June?

Just think about the “deadliness” of the footnotes KPMG will have to include in said audit, to wit:

(1) The $1.43 billion deficit in the pension fund and the annual payments that have to be made just to keep that number from climbing higher,

(2) The $1+ billion employee health benefits “hole” with no plan as to how to cover that expense,

(3) The $1 billion of deferred maintenance expenses required to keep city assets from becoming out-dated and unusable,

(4) The $1+ billion of water and sewer department upgrades necessary to comply with federal and state mandates, AND the fact that the city is not in compliance with the conditions in said monetary grants or loans received in previous years, and may therefore have to repay said grants and/or loans,

(5) The city’s cash reserves being lower than the “industry” average, which has a negative impact on liquidity, or the ability to meet cash requirements as they fall due,

(6) The potential call on the city’s cash existent in current litigation should the city lose major lawsuits,

(7) The potential for investors who bought the “tainted” bonds, which were the focal point of the SEC investigation, to sue the city for the fraud perpetrated upon them, all of which is documented in the SEC report and the Kroll Report.

Golly, if I were a CPA at KPMG I’d be having sleepless nights thinking about how I issue said audit in such a manner that I do not get sued too. There is no easy way, i.e. make me bulletproof, to document the financial black hole that is the city’s financial statement!

It just may be a while longer (don’t ask how long) before that KPMG audit sees the light of day in a completed form! Of course, that raises the issue of additional cost to be borne by us taxpayers.

We are in a tsunamis-type whirlpool!

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