City Council, Mindful of the Recent Embezzlement, Votes Monday on a New Auditor

The Pasadena City Council will decide Monday on a new auditor to replace the firm fired in February which had performed annual audits during four years an embezzlement scam was draining city coffers.

The city may have lost as much as $6.4 million in that scheme, in which a former Department of Public Works employee allegedly funneled millions to an associate out of a City Hall fund generated by a surcharge on residents’ electricity bills. The embezzlement is thought to have transpired over as many as 11 years.

That employee and several associates were arrested in December, 2014 and await trial.

In late January, Finance Director Andrew Green and Public Works Director Siobhan Foster, who together were in charge of overseeing the fund from which money was embezzled, were fired by the city.

Then in February the City’s auditor, Brown Armstrong Accountancy Corporation, was told that Pasadena “did not intend to extend its … contract.”

On Monday night, Interim Finance Director and Assistant City Manager Julie Gutierrez, with the approval of City Manager Michael Beck, will recommend the City Council approve a Brea Certified Public Accoutancy firm called Lance, Soll & Lunghard to audit city finances.

The recommendation specifies that the City Council accept an option offered by Lance, Soll & Lunghard which would lower the the threshold amount by 25% for transactions to be audited, and which would include greater in-depth auditing of non-major city fund accounts.

Gutierrez wrote that the Council’s selection of this option, “which provides for expanded scope requiring audits of all funds, increased sample size, and additional testing.” is recommended “in response to the City’s recent embezzlement.”

The accounting firm said in its proposal that this additional “higher level of testing in all funds” will add about 300 hours of work to their basic service proposal.

In all, Lance, Soll & Lunghard’s bid came in at $501,656 for the next three years ($162,225 for Fiscal Year 2015).

The City Council’s selection will also bind the Rose Bowl Operating Company, the PasadenaCenter Operating Company and the Pasadena Community Access Corporations to the same auditor. The costs to audit these organizations would be in addition to the fees shown above, but would be borne by the individual agencies.

The vote on the new auditor is agendized to be made on the Council’s Consent Calendar on Monday, May 18.