Finance consultant: city close nearly finished but auditors, missing entries slow formal audit

South Pasadena Finance Commission Chair Peter Giuliani and finance staff received an update from a finance consultant from LSL that the city’s fiscal-year 2023–24 year-end close is approaching completion but key reconciliation and reporting gaps remain, delaying the formal audit and complicating midyear budgeting.

The consultant, Kelly (finance consultant, LSL), told the commission the team is “probably close to about 90% completed with the year end close for 2024.” She said the finance team has finished bank reconciliations through June 30 and begun July and August, and that one repeating discrepancy of $1,100 has not been found but will be corrected by booking a journal entry.

The update matters because the auditors will not begin fieldwork until the city produces a stable trial balance. “If [auditors] were to start the audit and there were journal entries that were gonna be posted after, the city would end up incurring quite a bit of additional costs,” Kelly said. She said the city and auditors agreed to delay the audit start until the trial balance is stable and estimated the audit could begin in March with financial statements issued no sooner than June.

Why it matters

The commission was told two categories of unposted items are the principal risks to current-year reporting: (1) recurring p‑card (credit card) transactions that were charged against bank accounts but not recorded in the general ledger for portions of 2024 and into 2025 — Kelly estimated those missing monthly postings “are about anywhere between $30,000 and $50,000 a month” — and (2) bulk deposits from third-party processors (referred to in the briefing as Heartland and similar processors) that post to the bank as monthly bulk deposits but have not been recorded line-by-line in the general ledger.

Kelly said those deposits and p‑card items have been identified through the bank-reconciliation process; the City has located supporting receipts and is catching up the postings. She described the $1,100 difference as a single transaction that repeated in the recon for several months and said staff will book it rather than continue consuming time hunting for it.

Commission questions and staff responses

Commissioners pressed for the implications. Commissioner Nevin Stanton Trahan asked whether auditors will be able to begin fieldwork in March; Kelly said the auditors will be given the trial balance to begin the audit but she did not expect final financial statements before June. Commissioners also asked whether delays could affect state or grant funding. Kelly said delays typically do not cause loss of regular state funding but that some agencies — she cited Caltrans for example — sometimes delay payments until audit documentation for federal grants or single audits is available.

On internal controls the consultant stressed staff turnover and understaffing as the root causes rather than missing cash. Kelly said the p‑card charges were paid from the bank and receipts were later located: “Nothing is missing. The cash was taken out of the bank account… It was just a secondary step where all of the departments submit the receipts and let the finance department know what expense account to actually charge those to.” She said staff have assigned responsibility for catching up and put a process in place for future p‑card statement handling.

Public comment and independent concerns

Public commenter Josh Veda told the commission he had submitted a memorandum to the auditors raising “more than 21 items of concern” about internal controls under the former finance director and urged the auditors to investigate potential fraud, waste or abuse. He told the commission the auditors are obligated to consider that information; Kelly and commissioners said CLA (the city’s auditors) and LSL have been aware of concerns and are performing heightened testing because this is CLA’s first year auditing the city.

Operational next steps

Kelly outlined immediate operational steps being pursued: posting the remaining journal entries, completing a beginning-fund-balance analysis, obtaining read-only access to bank portals so finance or consultants can pull daily transaction evidence, and designing a “daily cash” process so deposits are recorded in the general ledger closer to the day they arrive. Finance staff member William said he was coordinating the bank token/access and expected bank access within two to three business days.

Ending

Commissioners directed staff to continue work with auditors, to return with a clearer timeline for audit fieldwork and to present a midyear report that flags the reconciliations and unposted revenue/expense items. Kelly said the team will “keep you apprised of any changes, or anything that would impact that timeline.”