California disciplines accounting firm that missed Bell irregularities

The state has reached a disciplinary settlement with the accounting firm that failed to detect financial irregularities in Bell despite money problems that pushed the city to the brink of insolvency and led to a public corruption scandal.

Mayer Hoffman McCann must pay a $300,000 fine and as much as $50,000 for the cost of the investigation, according to the settlement with the California Board of Accountancy. In addition, its license is suspended for six months, although that was stayed, meaning the firm can continue practicing in the state while it serves two years’ probation.

The settlement was reached May 29, five days after the Board of Accountancy filed a 13-page accusation against the firm.

“We have taken the events at Bell and the findings … very seriously, and we have used this as an opportunity to renew our commitment to high-quality audit services,” William Hancock, president of Mayer Hoffman McCann, said in a prepared statement.

Bell Mayor Ali Saleh criticized the settlement as “a slap on the hand. The punishment is not proportional to damages and does little to reform the system of checks and balances. Once again it feels like due process has failed the residents of Bell.”

The settlement follows a highly critical report from the state controller that called Mayer Hoffman McCann’s audits little more than a “rubber-stamp.”

When his office released its report, Controller John Chiang said that if the accounting firm had followed auditing standards, “it would have led them to identify some — if not all — of the problems.”

Among the problems the controller found was that Bell had overcharged residents and businesses more than $6 million in taxes and fees and that city officials had placed $23.5 million in bond funds in a non-interest-bearing checking account. Experts said those were among the problems auditors could have caught.

Eight former Bell city leaders are facing public corruption charges.

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