OP-Ed | Finance Director Called to Task by Finance Commission for Mistakes

South Pasadena Finance Director Karen Aceves, Called to Task by Finance Commission for Mistakes and Credibility Issues: she Doubles Down on Misleading Statements in Staff Report to City Council.

FILE PHOTO: SouthPasadenan.com News | Finance Commission meets virtually. (Top Row, L-R): Ed Elsner, Commissioner; Frederick A. Findley, Vice-Chair; Zhen Tao, Commissioner. (Middle Row, L-R): Ellen Wood, Commission Chair; Edwin Choi, Commissioner. (Bottom Row, L-R): Gary Pia, City Treasurer; Robert S. Joe, Mayor, City Council Liaison

By Stephen Rossi: (Credentials Click Here)

Over the past few weeks, numerous questions have been raised regarding the lack of reliability, credibility, or transparency with the City’s 2020/21 fiscal year budget process.

Independent reports and analysis, including those by Josh Betta, William Kelly, and even my own household, have brought to light significant errors and misrepresentations made by City Manager DeWolfe and Finance Director Aceves that culminated in last week’s 4-1 vote to recommend the City Council pass a continuation resolution, holding over the current budget process until the 2018/19 independent audit report can be finalized.

A report that, by Aceves’ own admission, is at least six months late because the Department didn’t even begin the audit process until six months after the normal start date.

With all five commissioners citing significant concerns over the incomplete information provided by Staff, and noting multiple budgeting errors, last week’s meeting was, in no uncertain terms, a vote of no-confidence in the budgeting process.  After an hour and forty-eight minutes of back and forth with Aceves, Commissioner Tao showed her frustration amidst inability to tie out the financial reports, “They just don’t add…there’s so many things that don’t necessarily add…to ask us to make a recommendation…I feel like I’m going in a little blind here.”

Commissioner Elsner, referring to a $7 million discrepancy between the budget presented to the Finance Commission on May 26th and the draft proposal sent to the City Council just three days later,  went even further, “this isn’t something that can be explained by updated projections…at this point it is pretty clear the Finance Department knew this was going to happen. But knowing that, there was no disclosure or explanation to the Commission, there was no disclosure or explanation of this change in the City Council agenda packet, and there’s really no discussion about the change in the agenda report for today’s meeting…There hasn’t been sufficient transparency…and I don’t have confidence in those numbers.”

Contradicting Aceves’ continued implications that these large variations were due to historical errors, committed by prior Finance Directors, in how fund balances were rolled forward from one budget to the next, Elsner observed, “It’s not something that happened before current management. It also happened during current management.”

Appearing in front of the Finance Commission for the second time in just over three weeks, Aceves published a Staff Report to the Commission claiming that the net changes between the two budget drafts amounted to only $50,000 “and are not significant in the overall budget recommendation.”  This statement, publicly filed to the Commission by Aceves, grossly understated the scale and magnitude of the changes between the two drafts, over 127 changes worth $14.3 million in total.  Noting that entire fund accounts had been left off the variance report provided by Staff, Commissioner Tao chastised, “this doesn’t actually represent the changes that happened for the City Council version.”

In her latest Staff Report, this time in the agenda packet for the upcoming June 24th City Council meeting, Aceves again misrepresented key facts, “staff supports the Finance Commission in the request to delay budget adoption to further review concerns regarding historical deficiencies…identified in 2017…”

City Staff continues to blame a deceased former Finance Director for the current administration’s inability to perform the department’s core function: delivering accurate financial reports on a timely basis.  But theoretical, historical accounting irregularities from as much as ten years ago – irregularities that City Staff claim exist but still refuse to provide any evidence to support – would not explain why Staff started the 2018/19 audit six months late, nor would they explain the inability of the Finance Department to present current information accurately.  Also from Commissioner Tao, “Just so we’re clear, none of these really have consistent numbers.  Even the ones that are labeled actual for the prior years are not tied out with the CAFR.  They also don’t really tie up with the actual budget.  So I’m not sure where some of these actual numbers came from…these numbers don’t tie to anything.”

The June 24th Staff Report goes on to claim that holding over the budget process will result in an additional $80,000 of cost for the City: $60,000 to hire a temporary employee for six months to correct the supposed historical deficiencies, and another $20,000 to implement the financial software budgeting module.  This is the latest attempt by DeWolfe and Aceves to obfuscate the conversation.  These additional costs are red-herrings that have nothing to do with whether the City Council votes to pause the 2020/21 Budget.  The proposed continuation would hold the budget over only until the 2018/19 audit is complete, something Aceves claims should happen just a few weeks from now in mid-July.  So why would this proposal require a temporary employee for six months?

As for the budget module, Staff should be using it, and the City Council should approve the expenditure.  But that module has no impact on the accuracy of historical figures or the timely completion of the 2018/19 audit.  In fact, using the module was first recommended to the Finance Department in 2018 by an independent review of Department operations, engaged by the Finance Department itself, and only released publicly this past week.  Why would a desire to close out financial reports from 2018/19 driving a need to use a future looking budget module for 2020/21?

Staff’s attempts to conflate these costs with the recommendation from the Finance Commission is a blatant misrepresentation of the facts.  With each new statement, Aceves further contradicts herself, creating an ever-deepening hole to have to climb out of.  At best, this indicates a level of incompetence that should be unacceptable in our Finance Department leadership.  At worst, an intentional dishonesty and desire to manipulate and mislead the City Council, the Finance Commission, and the residents of South Pasadena.

 

 

 

 

 

 

 


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3 COMMENTS

  1. Unbelievable. Where are the internal checks and balances? Our finance director not only lacks the bare minimum qualifications for the job, she acts like a propaganda arm for our corrupt city manager. Without a doubt they are two sides of the same coin.

  2. “At worst, an intentional dishonesty and desire to manipulate and mislead the City Council, the Finance Commission, and the residents of South Pasadena.” This pretty much sums up the deWolfe administration that’s so blindly supported by Khubesrian and Mahmud.