News

2 California Cities Still Late on Preparing Financial Audits for 2019

Copy
facebooktwitterlinkedintelegram
2 California Cities Still Late on Preparing Financial Audits for 2019

The California State Capitol building in Sacramento, Calif., on April 18, 2022. (John Fredricks/The Epoch Times)

John Moorlach

John Moorlach

12/20/2023

Updated: 12/26/2023

Commentary
California has 482 cities and towns. They provide audited financial statements of their fiscal status every year, just like publicly traded companies and most businesses and nonprofits of significant stature.
Finance hawks celebrated when the California State Auditor established a dashboard to review the fiscal status of the state’s cities and towns. The cheering subsided when just about everyone noted that some 50 cities were missing. The delinquents either simply failed to post their annual comprehensive financial reports (ACFR) on their websites or (and this is more terrifying) never got around to filling out the legally required document at all.
Obtaining these annual comprehensive financial reports is time consuming. That may be among the reasons the State Auditor recently pulled down this useful tool (see “California State Auditor Removes Fiscal Accountability Dashboard,” Nov. 21, 2023).
Even now, there are laggards. For the year ending June 30, 2019, there are still two relatively small cities in the Golden State that have not released their ACFRs. Like the city of Huntington Park, which had to deal with unscrupulous elected officials (see “How Alleged Corruption Can Stun a City,” Dec. 8, 2023), Amador City and Fort Jones have their own stories.
Amador City, located in its namesake Amador County, has the distinction of being the smallest city in California, with a population of around 200 and a size of only 0.3 square miles. Located in the Sierra foothills, it’s a wonderful destination for gold country enthusiasts. Amador City is only two miles from Sutter Creek, which calls itself “The nicest town in the Mother Lode.”
The other three cities in Amador County are Ione, Jackson, and Plymouth. This county is loaded with California State Historical Landmarks along Highways 16, 49 and 88. Its famous gold camps include Volcano, Lancha Plana, Drytown, Fiddletown, Middle Bar, Clinton, Irishtown, Kirkwood’s, Big Bar, Jackson Gate, and the Argonaut and Kennedy mines. The Indian Grinding Rock State Historic Park is a must-see.
Amador City’s city hall is open on Thursday mornings, between 9 and 11 a.m. Calling then, I chatted with City Clerk Joyce Davidson. She told me they don’t post their ACFRs on the city’s website. To get the document, I’d have to contact Treasurer Holly Groth. She emailed me financial statements for 2021 and 2022. I haven’t heard back on a second request for 2019 and 2020.
Unfortunately, the city’s accountant passed away recently and has not been replaced. This failure to hire a new finance officer may suggest real grief or lack of money—or both. As Marc Joffe of the Cato Institute recently observed, “As one might expect, there’s a correlation between slow reporting and poor financial condition.”
Poor finances are a serious problem for governments of all sizes. Having actually been through a successful Chapter 9 bankruptcy filing with the County of Orange in 1995 and 1996 (see “Silicon Valley Bank Broke 2 Simple Investment Rules,” March 20, 2023), I can tell you that it’s an expensive course to pursue, but renegotiating a municipality’s debts can help it to continue operating.
There is another technique available to struggling cities. They can disincorporate and be run by the county. It’s cheaper and usually seamless, with residents rarely noticing the change—other than taking their concerns to the county Board of Supervisors, because you’ve no longer got local elected representatives. It seems to work in other parts of the state—Alpine, Mariposa, and Trinity, counties with no cities at all.
When I asked Ms. Davidson about the option of disincorporating, she firmly stated “we would not consider it.”
On the flipside, having served as an Orange County Supervisor, some OC residents love being in unincorporated areas, such as Rossmoor, and do not want to be their own city. Maybe Ms. Davidson should form a committee to reevaluate this option. When asked if Amador City could merge with the city of Sutter Creek, she sternly (but likely humorously) replied, “Those are fighting words.”
But if the residents want to remain a city, they must act like one and meet the minimum requirement of performing an annual audit by a Certified Public Accounting firm. In the meantime, Amador City is holding me up from completing the rankings of the cities in the central part of the state. Worse than that, its residents, elected leaders, and neighbors have been left in the financial dark.
Going 312 miles north to the Oregon border is Siskiyou County, where you’ll find seven California State Historical Landmarks. Visiting No. 9, “Captain Jack’s Stronghold,” is highly recommended and one of my favorites (my family celebrated the Fourth of July there in 1989). Landmark No. 317 is the “Site of Fort Jones,” which I visited and photographed on June 16, 2002 (I keep notes). The plaque includes the following: “Companies A and B of the First United States Dragoons established a military post here on October 16, 1852 ... it was abandoned on June 23, 1858.”
The last time the town of Fort Jones had an audit done was in 2018, and then it combined the four years of 2015 to 2018. This is rarely done. I can recall only one other time that happened, when the City of Compton did something similar that same year. Due to several irregularities, the outside independent auditing firm stated, “We do not express an opinion on the accompanying financial statements of the Town of Fort Jones.”
This is also rare—and may explain why a firm has not come to this small city since.
When I recently asked Mayor Mercedes Garcia whether the 2019 ACFR had been completed, she responded, “No, it has not. Estimated time frame is 18 months. Bad record keeping in the past is preventing smooth sailing.”
She then referred further communications to the new city administrator, Joshua Stanshaw, who provided the following response:
“I started with the Town of Fort Jones on 1 November 2023 and am still in the process of orienting myself to the town and addressing issues of priority. One of these issues is financial reporting.
“The most recent audit for the Town of Fort Jones was conducted by Goranson and Associates for Fiscal Years ending 30 June 2018, 2017, 2016, and 2015. There had not been any audits prior to 2015. Given the auditor’s disclaimer of opinion, the significant amount of staff turnover at all levels in the Town of Fort Jones, and the number of fiscal years to be reconciled I cannot give a more definitive timeline for completion of the Town’s ACFRs.
“I cannot speak to what actions were or were not taken in the period prior to my starting as Administrator, only that I have engaged in earnest with consultants and the Town’s Auditor to begin addressing this significant issue. An Accounting Clerk with decades of experience was recently hired and will be dedicating significant time to working on the ACFRs. It is the intention of the Town Council and myself to remedy this situation as quickly and accurately as possible such that the residents of the Town of Fort Jones have full confidence in the financial position and statements of the town.”
I wished Mr. Stanshaw well and let him know that I need the Fort Jones 2019 ACFR to complete my rankings for the northern California region for 2019. When Amador City and the town of Fort Jones finally get current on their accounting, then we can provide a ranking for all of the 482 cities based on factual data.
Every city has a story, but being this delinquent on fiscal reporting shouldn’t be one of them.
John Moorlach

John Moorlach

Author

John Moorlach is the director of the California Policy Center's Center for Public Accountability. He has served as a California State Senator and Orange County Supervisor and Treasurer-Tax Collector. In 1994, he predicted the County's bankruptcy and participated in restoring and reforming the sixth most populated county in the nation.

Author's Selected Articles
California Insider
Sign up here for our email newsletter!
©2024 California Insider All Rights Reserved. California Insider is a part of Epoch Media Group.