CM PRESS # 542

NEW MAYOR AND MAYOR PRO TEM
At last night's City Council meeting, Allan Mansoor was selected as Mayor and Wendy Leece became the new Mayor Pro Tem.

MOST CONSERVATIVE COUNCIL IN MEMORY
One activist told the CM PRESS that Costa Mesa now has the most conservative City Council in his memory.

We would add that it's also the most improvement minded Council ever, and we're hoping to see some major improvements in the quality of life for citizens over the next few years.
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GRASS IN SEMI-DESERT COSTA MESA
At last night's City Council meeting, a homeowner told the Council that he had received tickets because his lawn is not green. He wondered why the Council talks about conserving water and then, when a citizen does conserve water and the grass dies, the citizen gets a ticket.

The CM PRESS agrees with this homeowner. Ever since we first moved here, we've thought it absurd that we should try to maintain grass in this climate. The CM PRESS believes the City should make more of an effort to encourage native plants instead of grass.
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UPDATE:---THE TWO FOUNDATIONS--WHO'S MINDING THE STORE?
(Where's OUR money, who's watching it, who's getting it, and for what purpose?)

As we previously reported, when the CM PRESS attempted to write a story about the Costa Mesa High School Foundation, we seemed to hit, if not a brick wall, then at least a bramble bush. All we wanted to know was that citizen money was safe and was being used for proper purposes. What we learned did not reassure us.

Here's the background:

In 2003, as part of the deal to allow the Segerstrom Company to move forward with its Home Ranch Project and the sale of part of the ranch to IKEA, the Segerstrom Company gave the City of Costa Mesa (read the citizens of Costa Mesa), two million dollars to be used to start the Costa Mesa High School Foundation and the Estancia High School/Tewinkle Foundation. Each Foundation got one million dollars.

This two million dollars belongs to the citizens of Costa Mesa. It was bargained for as compensation for the citizens of this city having to put up with traffic and other matters relating to the development of Home Ranch.

The two Foundations were then to put the money in safe investments or the bank and use the interest or proceeds of the money to support various school related projects at Costa Mesa High School, Estancia High School and Tewinkle School. This has worked out to between $ 40,000--$50,000 per year being doled out by each foundation.

No tax forms for 2006 and 2007
For our story, the CM PRESS first took a cursory look at both foundations and immediately discovered that while the Estancia High School/Tewinkle School Foundation had filed all its tax returns (990's), the Costa Mesa High School Foundation hadn't filed its tax returns for the years 2006 and 2007.

No annual reports or audits
We also discovered that the Costa Mesa High School Foundation had never filed a required annual report and audit since the Foundation was started in 2003. We didn't check on the Estancia High School/Tewinkle Foundation in this regard, but it now appears that Foundation also didn't file annual reports or audits.

What the Foundations agreed to do--the letter of the law
Here's the actual language setting forth this reporting requirement from the By-Laws of the Costa Mesa High School Foundation (we believe the By-Laws of the other Foundation are similar or are identical):

Section 5.7 Annual Report and Audit. The board shall cause an annual report to be furnished to the directors and the City Attorney of the City (the"City Attorney") not later than one hundred twenty (120) days after the close of the corporation's fiscal year. The annual report shall be accompanied by an audit thereon of independent certified public accountants which shall be made available to the public. The annual report shall be in conformity with accounting principles generally accepted in the United States of America...." (emphasis added).

We ask the Council to look into this
At the November 18, City Council meeting, the CM PRESS told the Council about the above and asked if the Council would look into it. After getting blank stares and silence from four Councilmembers, Mayor Pro Tem Mansoor jumped in and asked the City Manager to provide the Council with a short memo on the subject. The CM PRESS asked for a copy of any memo when it was prepared.

We get a memo
Early yesterday morning, December 2, after not hearing any more on the subject and after not receiving a memo, we emailed the City Manager's office and asked when we might expect to see such a memo.

Then, about two hours before the start of the City Council meeting, we received a copy of a memo dated December 2, from Marc Puckett, Director of Finance, to the City Manager.

In the memo, Mr. Puckett discusses how an audit might cost $5,500 dollars per foundation, and "Therefore, in light of the audit cost, I agreed to accept the Form 990-PF Return of Private Foundation [tax forms] reports that are required to be prepared and filed annually with the Internal Revenue Service by each foundation in lieu of the audit report." (emphasis added).

WE COMMENT: We're not sure how Mr. Puckett got the authority to agree to this. He's the Director of Finance, not the City Attorney. The reports were supposed to go to the City Attorney (see Section 5.7 above). In addition, an annual report and audit is not the same as a form 990. Furthermore, as far as we know, a city employee can't just decide all on his own to change the reporting requirements set up by the City Council and which are memorialized in By-laws.

Mr. Puckett then writes that the Costa Mesa High School Foundation hadn't filed its 990's for 2006 and 2007.

WE COMMENT: We surmise that Mr. Puckett learned of this from the CM PRESS after we had written about it in an earlier edition.

Mr. Puckett, in his memo to the City Manager, then writes that "[T]he Finance department has CPAs on staff that can conduct an audit and prepare pro forma financial statements for the purposes of fulfilling the requirement in the foundation agreement if the City deemed it necessary to do so."

WE COMMENT: Wait a minute. Section 5.7 requires an annual report and an audit prepared by "independent certified public accountants." It doesn't say the City, that has apparently not been providing oversight of the Foundations,can now prepare an audit. And, why should taxpayers pay for City staff time to prepare such an audit or audits? This should be paid out of Foundation funds. That's part of the deal.

Mr. Puckett continues: "[S]taff...is in the process of assisting in the preparation of a cash receipts journal, cash disbursements journal and pro forma financials for each foundation."

WE COMMENT: Hold on. This isn't the job of City staff. How much time is this taking and how much is this costing citizens of Costa Mesa? The City should provide oversight, not be doing the work. And, the Foundations were set up in 2003, and these things are just now being done--six years later?

Checks over $ 5,000 are supposed to be co-signed
One of the other requirements for the Foundations is that any checks over $ 5,000 must be co-signed by Mr. Puckett.

In a conversation the CM PRESS had with Mr. Puckett on October 1, Mr. Puckett told us that he does sign such checks but that he hasn't seen very many above the $5,000 amount.

However, in his December 2, memo, Mr. Puckett writes: "...Estancia-Tewinkle Schools Foundation has technically violated this section by preparing one check to Estancia or Tewinkle Schools for the sum of grants to be distributed that year and then letting the schools cut individual checks to each of the award recipients. Individual grant awards did not exceed $5,000."

WE COMMENT: Huh? "Technically violated?" You bet. So, who got the money? What year or years are involved? How much money is involved? Is it the full $ 40,000 to $50,000 per year? This could amount to as much as $ 250,000 for just one foundation since 2004.

HERE'S WHAT WE WOULD LIKE TO SEE:

1. Proper audits and reports showing where all the money went and to whom--and we mean with actual names of who ultimately received the money and the specific purpose for the grant.
2. Sufficient detail in the above reports to show that all the money was used for proper purposes. 3. Proper oversight in the future.

City Council can take the money back
If the City Council believes the Foundations are not properly using the money, the Council, as per the agreements, has the right to take the money away from the Foundations.

Ultimately, ensuring that money owned by the citizens of this city is safe and is used properly is the responsibility of the City Council. It is the Council that owes a fiduciary responsibility to the citizens of this city. It is the City Council that should be minding the store.

--DEVELOPING--
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Those are our opinions. Thanks for reading them.