State Controller’s Office cancels audit of Richmond city finances

After threatening an expensive audit, the California State Controller’s Office let Richmond off the hook Thursday.

The state fiscal agency had warned in August that Richmond’s last financial disclosures revealed millions of dollars of discrepancies. City officials said they could readily explain all the issues, and complained about the “accusatory tone” from Sacramento.

On Thursday, Jeffrey Brownfield, chief of the audit division at the Controller’s Office, sent a letter to Richmond City Manager Bill Lindsay, saying that the special review would be canceled, because the city’s “reconciliations were adequate and supported the city’s position.”

Richmond has been under considerable financial stress from downgraded credit ratings and a recent budget deficit. The audit would have cost the city upwards of $100,000.

“It was also a cost to our professional reputation, and that does have consequences,” City Manager Bill Lindsay said Thursday, adding that some of those consequences may linger.

“We are working on several financial transactions at the moment and this puts a cloud on our financial reporting,” he said.

Work by the State Controller’s Office started in Richmond on September 14. The city presented the state auditors with new numbers a week later, which explained the gap the state initially had identified.

Lindsay said the whole situation could have been avoided by a simple phone call.

“I’m not saying they treated us unfairly, but the (initial) letter they sent was very accusatory,” said Lindsay. “[The cancellation] is great news for the city.”

Two routine reviews into the city’s finances will continue. One will look into the city’s Gas Tax Fund. The other will examine state and federal programs administered by the city. Neither bears any financial cost for Richmond.