City finds $2.7 million bookkeeping error

Tariq Malik

HUNTINGTON BEACH -- The city did not save as much as it originally

thought during the 1999-2000 fiscal year.

Huntington Beach officials said an oversight in payroll posting during

December 1999 led city departments to think they had a total of about

$2.7 million in unspent funds. Although the payroll, one of three that

month, was deducted from the city’s general ledger, records of individual

department expenses were not distributed accordingly.

“We are still seeing if we can backtrack this to find the cause,”

Huntington Beach Finance Officer Dan Villella said.

The city recently discovered the mistake in January while studying

financial records for an annual audit by the independent firm Deihl Evans

and Co. LLP, and have already updated departmental records. The audit,

required for all cities by law, typically takes between four and six

months, and began after the fiscal year closed in September, said

officials at the auditing firm.

Villella said he believes the payroll posting error went unnoticed

because of its timing.

The city pays its employees 26 times a year, usually twice a month.

December 1999 was one of two months in the year when employees receive

three checks instead of two because of the pay schedule.

“On the surface, the numbers may have looked right because there were

at least two payrolls that month,” Villella said. “Had the error happened

in a shorter month, it would have been much more noticeable.”

City officials had budgeted more than $200 million for the 1999-2000

fiscal year. The city came in under budget, a factor that is unchanged

despite the error, they added.

Nitin Patel, a partner with the auditing firm in its fourth year as

the city’s independent auditor, said Huntington Beach has a history of

bookkeeping excellence.

“In each of the first three years that we did the audits, the city

received awards from the Government Finance Officers Assn.,” he said,

adding that the awards commend exemplary financial management. “And the

city received the same honor for a number of years before we took on the

auditing role.”

The city has been recognized by the association for about 20

consecutive years, city officials added.