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Controller Finds Only Modest Progress in City of Bell

State Controller John Chiang

State Controller John Chiang released a follow-up review of a series of 2010 audits focused on the City of Bell’s internal controls, management of state and federal funds, its dissolved redevelopment agency and use of gas tax proceeds. The review identified nearly three dozen material weaknesses in the City’s financial operations, and noted serious concern with the City’s immediate fiscal condition and cash balances.

“The City of Bell has made some progress since it ejected a corrupt city management two years ago,” said Chiang. “But many of the same fiscal management and internal control lapses that allowed Bell to fail its citizens in the past remain unaddressed today. This review does more than point out problems. It serves as a blueprint to preventing the return of unlawful taxation, abusive spending and backroom deal-making. Some problems are urgent, others are structural, but none can be ignored.”

The 2010 audits by the State Controller found widespread problems, including blatant conflicts of interest and self-serving transactions. It also found unlawful property taxes, which were subsequently returned to homeowners. Local authorities have already prosecuted several of the leaders responsible for the City during that time.

The review shows the City of Bell is facing significant fiscal challenges that, if left unresolved, could lead to a fiscal crisis impacting its ability to meet obligations and deliver critical public services.

For example, the City’s new management acknowledged during the course of the audit that the City could not accurately report its cash on-hand. The Controller’s review shows a possible negative balance in the City’s General Fund of $1.1 million, which represents almost 9 percent of the City’s annual budget.

The City has a more shallow tax base than it previously enjoyed, as a result of correcting property tax assessments and business fees to lawful levels.

The review was a follow-up to the four audit reports released in 2010 in which the Controller recommended 34 corrective actions. The latest review found that the City had implemented one recommendation, taken some corrective action on 12, but had not implemented 21 recommendations.

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