State controller probing Richmond finance reports

The state controller’s office, saying some of Richmond’s financial reports just don’t add up, is investigating that city’s financial practices and reporting. But city officials say the controller’s office is the agency making mistakes.

Controller Betty Yee notified Richmond City Manager Bill Lindsay of the investigation by her office’s Division of Audits in a letter dated Aug. 25.

In it, she itemizes more than a dozen discrepancies between two different types of financial reports the city submits to the state — and the differences are in the tens of millions, one as high as $113.7 million.

The letter also states that Richmond’s financial transactions report for the 2012-13 budget year failed to include the city’s sewer enterprise fund, a variety of balances and the discontinuation of the Richmond Housing Authority Properties operations.

“I have concluded that there is reason to believe that the Annual Reports of Financial Transactions by the city are false, incomplete or inaccurate,” Yee wrote.

Lindsay, however, blamed the discrepancies on the controller’s office, and said they are easily explained. He said he provided a list reconciling the differences to the auditors.

“It seems like pretty basic things that could have been resolved with a phone call,” said Lindsay.

According to the letter, the investigation will include an analysis of the city’s administrative and financial controls, including the effect of any findings on any local, state or federal programs administered by the city.

If any irregularities are found involving state funds, that department will be notified and could take further action, said John Hill, a controller’s office spokesman. He said the investigation is likely to take a couple of months and result in a list of recommendations on how Richmond can more accurately report its finances.

Hill said the controller’s office reviews the finances of just two or three of the state’s 482 cities a year.

“It’s not an everyday thing,” he said.

Lindsay said most of the discrepancies can be explained by the fact that they were included in separate reports for some city funds — such as the sewer enterprise fund — that were submitted individually to the controller’s office, as city officials thought they were supposed to do.

The controller’s letter also faults Richmond for failing to report the closure of its Housing Authority Properties division after the sale of property holdings. It also says the sale endangers the existence of the division.

Lindsay said the sale of property, which was an investment, has not been completed, so the agency still exists. But the intent, he said, is to close the agency as soon as it receives all the proceeds of the sale.