Tuesday, March 6, 2007 | The lawyer hired to oversee the city’s financial reform delivered his first report Monday in an address that laid out his near-term plans for inspecting the city’s bookkeeping but was light on analysis of the government’s current situation.
Also, the City Council briefly discussed a self-assessment Mayor Jerry Sanders released last week regarding the city’s implementation of the recommendations issued in August by consultants at Kroll Inc. Sanders claimed 44 percent of the recommendations were carried out or are close to being completed, but several areas he touts as accomplishments still face considerable uncertainty.
In his first report since being hired as an independent monitor in January, Boston securities attorney Stanley Keller refrained from airing his first impressions of the city’s financial reporting practices. Instead he shared his roadmap for fixing them.
“It’s so early in the process that I doubt I’ll make any judgmental statements at this time,” Keller said. “It would be unfair to draw conclusions.”
Rather, Keller used his first report to present checklists of people he has met, documents he’s reviewed and remediation measures he has been involved in. He noted that the approximately $150,000 he has billed in work so far is on pace with the $4 million budget for his projected three-year tenure, and he detailed several projects he intends to undertake in the coming weeks.
Keller’s hiring was part of the city’s November settlement with the Securities and Exchange Commission. The settlement ended a lengthy securities fraud investigation that focused on the city’s downplaying of pension and retiree health care deficits to investors. The SEC agreed to end its investigation of the city as an entity — although a probe of individual city officials continues — and to not impose fines on the cash-strapped city, but the city was forced to hire at its own expense an expert to oversee its reform progress.
So far, Keller said he has been involved in the formation of the City Council’s Audit Committee, the panel that will oversee the city’s financial reporting and disclosures. Additionally, he said he is working with the city’s internal audit staff on the long-overdue 2003 audit and developing guidelines for the council and the Audit Committee to follow when they review annual financial reports.
Keller said he will provide his initial opinion of the city’s financial situation in mid-May, right as the SEC’s 120-day deadline for issuing such a report expires. In the meantime, he will also begin analyzing the city’s financial accounting systems, internal controls, whistleblower hotline and the mayor’s five-year financial forecast. He said he will also inspect the operations of the city’s retirement system and participate in discussions over revising the city charter to better comply with the reforms suggested by Kroll and others.
Those Kroll reforms were the subject of another report the council received Monday, as Sanders boasted that the city has completed or is close to finishing 53 of the 121 recommendations the group, led by former SEC Chairman Arthur Levitt, laid out in a report last summer.
But Sanders’ touted success drew skepticism from one council member, who said that the accomplishments the mayor professes are in many instances debatable.
Among the highlights Sanders listed in a press release were the hiring of Keller, the creation of an Audit Committee, the release of a five-year forecast, and the tightening of internal controls.
However, Sanders’ vision for the Audit Committee is still in limbo. Because it would require a change to the city charter, his plan will likely need to go before voters in 2008. In the meantime, the City Council has appointed three of its own members to the oversight panel.
The five-year plan that Sanders unveiled is a detailed catalogue of the massive long-term debts faced by the city. However, it doesn’t offer a full plan for paying for those debts. He has deferred specifics on plugging the estimated $87 million gap for the coming fiscal year, which begins in July, until this spring’s budget hearings.
Councilwoman Donna Frye said she disagreed with the mayor’s self-assessment on at least one of the accomplishments he lists. In one suggestion, Kroll stated, “In order to maintain current service levels and address issues such as deferred maintenance, the City must reduce expenditures by improving efficiency, increasing the current revenue base, and seeking alternative revenue sources.” The mayor has ambitious designs on shrinking the city’s costs through layoffs and the streamlining of city services, but has ruled out generating new revenues through taxes and fees.
Sanders’ report Monday proclaims “mayoral action complete,” describing the five-year forecast his office released last fall as a “tool” that will help guide officials through financial decisions such as the upcoming budget season, which begins in April.
Frye called the mayor’s claim “a fairy tale.” She continued, “I can’t accept pretending anymore. It’s not complete, it’s not even close to complete.”