Friday, June 4, 2010

SLO County Grand Jury report slams city treasurer

Posted: Friday, Jun 4th, 2010
BY: Aaron Crutchfield

The city of Atascadero is working on a response to the San Luis Obispo County grand jury defending its financial policies and city treasurer after a grand jury report released at the end of April had harsh things to say about treasurer Joseph Modica Jr.

"We determined that Atascadero has been lax in adhering to state government code requirements and that their elected treasurer shows little interest in the financial oversight responsibilities that are part of his job," the grand jury said in the report.

The report also chastised Arroyo Grande treasurer Janet Huwaldt. It was positive toward Paso Robles city treasurer Mike Compton, but still recommended that all three cities appoint a treasurer instead, as is done in other general law cities in the county.

Grand jury foreman Steve Martinez said the report was self-initiated, rather than coming about as the result of a citizen complaint.

Among the grand jury's findings: elected city treasurers sometimes lack the technical skills and professional experience to perform the duties of the office; health benefits alone may be sufficient to attract unqualified persons to run for the job, leaving the work to city staff and costing the cities health benefits for persons performing no useful function; efforts to convince voters to approve making the job appointive have failed in all three cities; communication is minimal between the Atascadero treasurer and the other city officials who have financial oversight responsibilities; and Atascadero officials failed to complete and provide the council with the state-required monthly financial reports in a timely manner for the period of April 2008 through November 2009.

"I don't know if I even want to comment on [the report]," said Modica, who runs a tax and financial service in town.

Atascadero City Manager Wade McKinney and Administrative Services Director Rachelle Rickard wrote a memo to the city's Finance Committee dated May 11, discussing the grand jury's recommendations and possible city responses to them.

The memo blames the gap in reports from April 2008 to November 2009 on a lack of staffing, but said all internal fiscal controls and financial reconciliations remained in place. The memo also said the delayed reports were approved by the City Council at a special meeting on Jan. 7, 2010.

The Finance Committee discussed the grand jury report on May 11 based on the information in the memo from McKinney's office.

"We took each of [the grand jury's] recommendations and explained what we've already done," McKinney said. "That's what we did at that meeting, is explain what the memo says and then the council directed us to put that into a response and bring it back to the city council. We'll do that before we're required in July and then we'll send that off to them. I imagine our response would look a lot like that memo."

The Atascadero City Council is required to respond to the report by July 29.

According to the report, Modica signs off on financial reports prepared by city staff, which the grand jury said supposed to be prepared monthly. The report said Modica hasn't appointed anyone else on the city's staff to do that job or others required of his post. The most recent financial report the grand jury said it could get from the city's website was from March 2008, although an unsigned copy from September 2009 was provided to the grand jury.

The report stated that the Atascadero City Council's approved investment policy dates back to 2006 and calls for the oversight of investments to be conducted by the city manager, the director of administrative services and the treasurer. The city maintains a safekeeping trust account for paperwork and processing investments. All three of the officials with oversight duties can access the money in that account.

Jeri Rangel with the city's Finance Department said that any expenditures from that account require two signatures, in addition to other safeguards put in place.

The elected treasurer invests city funds in certificates of deposit. He is paid $200 a month plus health benefits valued at about $8,000 a year. Modica was first elected to the post in 2002 and re-elected in 2006, running unopposed both times. His post will be up for election again this year and he is not expected to run for re-election, according to the report.

Modica was managing investments of about $9 million in certificates of deposit, $924,000 in government securities and $25.8 million in Local Agency Investment Funds in September 2009, according to a report prepared by the city finance department and provided to the grand jury. The director of administrative services, although not deputized, oversees the rest of the city's funds, most of which are invested in the state's Local Agency Investment Fund. The remainder of the city's $37.2 million was held in cash accounts, according to the monthly report provided to the grand jury.

The report also said that neither the city council nor city manager meet with Modica every three months as the council's investment policy calls for, and Modica does not attend council meetings.

The report said that the Arroyo Grande treasurer performs none of the functions of her job but instead has deputized her boss in the city manager's office, who lives outside the city limits and is thus ineligible to run for the office, to do the job. The report said the elected treasurer in Paso Robles is fully qualified and attentive to the discharge of his duties.

The report recommended that all three cities with elected treasurers appoint them instead.

"The three cities could benefit from appointed treasurers," the grand jury said in the report. "At a minimum, the cities should do a better job of informing the public of city finances and the important oversight role that treasurers are assigned in maintaining the financial health of the municipality. That said, they need to be trained and attentive. There is continued risk of electing treasurers who can win office with a political agenda and no qualifications."

There are five recommendations that apply to Atascadero, all of which are addressed in the memo from McKinney's office.

In response to recommendation one, that city councils should make their investment policies as air-tight as possible and assure those policies are carefully and continually followed, the memo stated that the city has a strong investment policy which has long been effective at keeping the city safe from the misuse of powers by elected treasurers, and the policy is followed and reviewed annually. The policy requires quarterly reports on investments; the December 2009 investment report was approved in February and the March 2010 report was presented to the City Council on May 11.

In response to recommendation two, that city councils and city managers should require that treasurers provide all reports required of those offices at the time designated in state law, the memo said the city is in full compliance with local and state laws, which don't require monthly reports but rather give city councils the choice of whether to require reports, either quarterly or monthly...

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