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The Late Great Audit Of Fiscal Year 2003-2004
March 11, 2006

We City Council members received yesterday five volumes that constitute the FY 2003-2004 audit by Caproricci & Larson. These include:

  • City of Richmond Basic Financial Statements and Independent Auditors’ Report for the year ended June 30, 2004.
  • Richmond Joint Powers Financing Authority Basic Financial Statements and Independent Auditors’ Report for the year ended June 30, 2004.
  • Richmond Redevelopment Agency Basic Financial Statements and Independent Auditors’ Report for the year ended June 30, 2004.
  • City of Richmond Single Audit Reports for the year ended June 30, 2004.
  • City of Richmond Recommendations to Management for the year ended June 30, 2004.
    •

    Inexplicably, these are all dated October 7, 2005 (over six months ago), and unlike any other business correspondence I have ever seen (but consistent apparently with the arcane traditions of the accounting industry) they are signed not by an identified responsible individual but simply by “Caporicci and Larson.”

    Like every audit since I have been on the City Council, these were late – in this case very late. Ordinarily, I am told, a municipal audit should be complete within six months of the close of the fiscal year. In this case, the FY 2003-2004 audits should have been completed by the end of 2004, which makes them over 14 months late.

    If there is any good news in all this, it is summarized by the spin in the accompanying staff report by Finance Director James C. Goins, which states;

    “In the previous audit through June 30, 2003, the City had a negative, unreserved net asset balance of $22.6 million. The attached audit for the year ending June 30, 2004, indicated that this deficit was reduced to a negative, unreserved net asset balance of $627,240.”

    “The audited financial statements through June 30, 2005, are being compiled and should be available to the Council within two weeks. Those reports are expected to further demonstrate the rapid financial recovery of the City.”

    Well, that sounded pretty good, so I though I would take a look inside. What I found was not so good news:
  • “The City has not maintained adequate internal control (and accounting records) for the year ended June 30, 2004.”
  • “Because the City did not maintain adequate internal control (and accounting records), the accompanying basic financial statements may be materially misstated and may not present fairly the financial position and the respective changes in financial position and cash flows for the City for the year ended June 30, 2004.”
  • “Because of the inadequacy of the accounting records, we were unable to form an opinion regarding the amount of capital assets in the accompanying Statement of Net assets and the related depreciation expense in the Statement of Activities.”
  • “Because of the significance of the matters discussed in the preceding paragraphs, the scope of our work was not sufficient to enable us to express, and we do not express, opinions on the City’s basic financial statements for the year ended June 30, 2004.”
    •

    In the “Recommendations to Management,” the auditors cited four deficiencies:
  • “Account Balance Reconciliations … The City was not able to reconcile or support certain account balances reported on the City’s financial statements.”
  • “Internal Controls Deficiencies … The City has not maintained adequate internal controls and accounting records for the year ended June 30 2004.”
  • “Finance and Accounting Personnel Competence … some of the Finance Department personnel did not possess adequate knowledge and technical expertise to enable them to perform their assigned tasks in a satisfactory manner.”
  • “Responsiveness and Sufficiency of Supporting Documentation … experienced significant delays in receiving schedules, reconciliation of account balances, answers to questions and supporting documentation for various account balances.”
    •

    The “Recommendations” section concluded with a summary of the current status of the prior year’s recommendations. Of seven recommendations, four were “not implemented” and three were “in progress.”

    None of this is, of course, a surprise. What is not entirely clear, however, is to what extent these deficiencies have been corrected. Is someone going to go back and balance the checkbook, or did we just close it up and start a new one? These reports may be snapshot in time taken on July 1, 2004, but since they are dated October 2005, this is not entirely clear.

    To put the fiscal year 2003-2004 in historical context, it did not start out well. See Budget Time – Comparing Richmond with Other Cities, June 4, 2003; City Council Ponders Budget Woes, June 12, 2003 and City Adopts "Hail Mary" Budget - Asks Unions For 5% "Give-Back", July 09, 2003. At the beginning of FY 2003-2004, Isiah Turner was city manager and Anna Vega was assistant city manager and finance director. By the end of calendar year 2003, both were gone. Patrick Samsell was finance director, and the fiscal year was concluded under the acting leadership of, first, Assistant City Manager Jay Corey, and later, Assistant City Manager Leveron Bryant.

    Fiscal Year 2003-2004 ended with the adoption of the subsequent year’s budget, 2004-2005, the audit for which is now only 2 ½ months late. For a glimpse of that spot in time, see Budget Presentations Offer Window Into History of Richmond’s Fiscal Problems, June 8, 2004; City's SAP System Remains Under Siege, June 16, 2004 and Whiskey to Beer, June 24, 2004

    This was also the same period of time examined by the State audit (see State Audit Report Slams Richmond, December 8, 2004). The actual audit is still available at

    View the executive summary for this report and View this entire report in Adobe Portable Document Format (PDF).

    Financial management of the City of Richmond has been one of the most disappointing experiences of my nearly ten years on the City Council. Each year has followed a similar pattern of a late audit with adverse recommendations followed by assurances by management that deficiencies have all been addressed. They never were. Essentially we were lied to.

    By all accounts, we now have the most financially astute city manager we have had in perhaps a couple of decades, and presumably the finance director he selected will be the first ever to get on top of this mess. I sure hope so.

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