Town of Apple Valley accounting update (Lee)

As the red flags keep flying higher on the Town of Apple Valley finances, I thought it was time to put some historical context to how we have arrived where we are today, and feel free to speak up if you spot any errors, omissions, or mischaracterizations.

State Auditor and League of Cities, best practice, and SEC mandate on bonds, that individual independent auditors be changed at least every five years — Town’s auditor is now on about an 11 year run. New state law mandates the every five years, but grandfathered in so same auditor will end in 12-13 years, if they make a change at all.

Back in 2010 town allegedly spent $300,000 for finance software programming. Since 2011 to present another $371,296.31 has been spent on finance and HR software programming. Yet, Finance has continued to present manually prepared warrant registers and Treasurer’s Reports, and manually manipulated budget documents. Warrant registers have been anything but transparent, and approved with such outrageous payments, like $12,000+ petty cash reimbursement. All the lavish funding of multiple employee parties, providing coffee/bottled water and feeding council and staff at all the meetings and a myriad of other spending abuses either through the warrants or credit cards.

Further, vendors are also being paid outside of the public view with the use of an American Express credit card, and not even the credit card payments appear publicly. Therefore the monthly expenditures are a well hidden secret.

Additionally, there is a Cal Card program from the state, which is used at will by Council and staff, with no internal controls. That might explain why there are so many abuses, charges for spouses airfare, meals, and breath mints for staff, and many “gifts of public funds.”

Credit Card Budget FY 18-19 $134,500 — an increase when budget cutting was being implemented

Credit Card Budget FY 17-18 $113,000 — Actual charges $220,503.38

Credit Card Budget FY 16-17 $120,000 — Actual charges $211,733.07

Credit Card Budget FY 15-16 $88,250 — Actual charges $255,543.32

Must I go on?

In February we see the 2016-2017 CAFR and audit report, and learn there was only $220,000 in reserve on 6/30/17, and the Auditor recommends council cut spending to avoid insolvency. That reserve balance was a mere 7 months after the 2016 Election of Bishop and Cusack, who both publicly declared the reserve had over $4 million.

Treasurer’s Reports have been painting a picture each month, allegedly going from a high of $71 million in 2012 down to $28.5 million the end of 2015, and although, at one of the budget presentations this past year, staff indicated they had burned through, I believe it was, $6 million over the last three years, while the Treasurer’s Reports continued to increase each month to an alleged high of $50.3 million at the end of May, 2018, even though “magically” in the April 2018 Treasurer’s Report $7.2 appeared to be transferred into Parks & Rec to make their many years deficit disappear, from some unknown and unidentified source.

Well, none of this was any real surprise to Al and I, since we have been saying for the past two years they need to stop spending because the town was going broke, but we were dismissed publicly by council.

The main finance person, and City Treasurer was on administrative leave while waiting for his felony charges on a hit and run with injury, and ultimately departed in December 2017, and the second in charge of Finance and the new City Treasurer departed last week, and the third highest, Finance Manager, departed sometime between those two, all in a short 7 months. With millions having been spent from reserves, and questionable Treasurer Report figures, and now the following:

Previously, Greg Raven submitted a public records request to obtain all the financial institution documents to validate what is being claimed in the treasurer’s reports, received a response from the Town. The only thing offered were two accounts with the CDs. Consequently, he submitted a follow-up request for the balance of documents, i.e. documents related to bank accounts, money market accounts and all the other accounts identified in the Treasurer’s Reports, with balances as of 6/30/2018. According to the Town’s response of August 20th, “the records do not exist.”

It really does raise the question, with an alleged $50 million, why was the town in such a rush to go into debt for another $10 million? It almost appears as if those $50 million really are not there? Or are those funds that belong to the other agencies the town commingles funds with? Remember, it was Robertson who claimed the missing $19 million in the CAFR were VVEDA and MRF funds. We have not seen another Treasurer’s Report since the May report on 7/24/18, even though State law required the end of quarter report, June, be presented within 30 days, and according to the town’s own policy, a report is due every month, within 30 days of the month end.

And final note, on the last warrant register, there was warrant #129917 on 7/19/18 to the State of California, Betty Yee Controller, for the purpose of obtaining a “2017-2018 REVENUE CONFIRMATION FOR AUDIT.” Why? Seems someone should be asking for that record provided to the town, because it would seem to be a public record.

Do we all remember Puckett’s history upon his sudden departures in past employment, and the messes that were found in the records. With all of the above, and the top three finance people making sudden departures within 7 months of each other, a Forensic Audit most certainly is in order.

Definitely some incumbent Council have some tall explaining to do!

Stay tuned for more details on the last warrant register, on gifting of public funds and expenditures not budgeted for — even though the budget was cut — and allegedly expenditures carefully determined.

Leane Lee

Notes

1) Here is the quote from the Town Investment Policy (Treasurer’s Reports):

Pursuant to the Government Code, the Town Treasurer has the responsibility to submit a quarterly Treasurer’s Report to the Town Council regarding the status of receipts, disbursements, cash balances by fund and investment of cash balances within thirty (30) days following the end of the quarter covered by the report. However, the Town’s Investment Policy requires that a monthly report be submitted to Town Council within thirty (30) days of the end of the month.”

Please note the portions in bold and note NONE of that has EVER been reported.

2) For the past, at least 7 years, the Council adopts the Budget Resolution, which is submitted to the state, and indicates that staff will provide monthly budget status reports.

But, for the past 7 years the Finance Department Budget has put into their goals to accomplish each year, to provide monthly budget status reports.

This is also a recommendation supported by the State Auditor and the League of Cities. However, the reports have NEVER been done. When I made a public records request for those reports, the response from the town was “the documents do not exist.”

Seems they like to create documents that suggest they are doing what they should, when in fact, they are not. That is not transparent, and is deceptive.