MOORLACH CAMPAIGN UPDATE — SB 1273, Beaumont & Part Three — May 23, 2016

The guest column in the first piece below is in yesterday’s OC Register Commentary section. If I could edit the submission, the beginning of the first sentence would read "After years of set backs." I worked diligently on obtaining a 200-bed year-round homeless shelter, only to be derailed by the potential host city councils of Fullerton and Santa Ana. See MOORLACH UPDATE — Santa Ana Homeless Shelter — August 21, 2014 august 21, 2014 john moorlach for a sampling.

However, it is nice to receive a shout out for my current efforts in carrying SB 1273 (see MOORLACH UPDATE — SB 1142 and SB 1273 — April 16, 2016 april 16, 2016 john moorlach). This bill passed on the Senate Floor on April 21st with 38 votes.

The second piece comes from the Banning-Beaumont Patch, which provided the Press Enterprise article yesterday. It is the front-page, top-of-the-fold story in today’s Press Enterprise. Just like the city of Bell, the city of Beaumont will be talked about for the next few months. My first quote deals with an audit firm giving a "going concern" opinion to a municipality that is near insolvency. It is rarely done. And, when it is done, it is with fear and trepidation by the audit firm.

The closing comments deal with how to address this matter in the future. Short of hiring a very competent CPA firm, and paying for the better level of service (instead of low bid, mill house firms that have sprung up again), this matter is best resolved by the Government Accounting Standards Board, through its promulgations.

Part Three of the voter’s guide is provided at the bottom, for those who need assistance with ballot measures and Republican Party Central Committee candidates.

Tackling homelessness in O.C.

By ANDREW DO / Contributing Writer

After years of neglect, Orange County is finally taking action and achieving significant progress on homelessness.

This month, a unanimous Orange County Board of Supervisors voted to open the competitive bidding process for managing the first permanent, year-round shelter in Orange County. In addition to achieving the best value for taxpayers, this bidding process will prioritize innovative thinking to address the ongoing challenges of solving homelessness.

By the end of next year, the Anaheim-based multiservice center will be open and connecting people with housing, employment and social services, as well as providing a warm bed to 200 people with nowhere else to go.

Although a critical component of Orange County’s response to homelessness, it’s far from the only action the county’s taking to help the 2,000 people who lack shelter on any given night in Orange County.

1. Emergency El Niño assistance

In advance of the El Niño storms, Orange County fast-tracked the transformation of an abandoned Santa Ana bus terminal into an emergency storm center. Under the standard 90-day escrow, the facility would have remained offline until mid-April – well past the brunt of the winter storms.

By working collaboratively with the Federal Transit Administration and Orange County Transportation Authority, we were able to activate the storm shelter on January 30. El Niño may have pulled its worst punches this winter, but our advance preparation helped provide food and emergency shelter to more than 3,900 people.

2. Homeless czar to cut through red tape

There’s no shortage of government assistance programs that are charged with providing vital services to those in need. However, departments are so focused on their singular mission that they often lose sight of the overall objective: to help people achieve self-sufficiency.

That’s why I proposed the creation of a social care coordinator, or homeless czar, to cut through red tape and better coordinate existing public health, social services and housing programs. Rather than add to the bureaucracy, Orange County’s homeless czar will incorporate every department and program to deliver wraparound service to those in need. By the end of the month, this homeless czar will be on the job directing our comprehensive response.

3. Maximizing state mental health dollars

Chronic homelessness can’t be solved without addressing the underlying root cause of homelessness. For many, that’s substance abuse or mental illness. “One in five people experiencing homelessness had a serious mental illness,” the federal Substance Abuse and Mental Health Services Administration estimates, “and a similar percentage had a chronic substance use disorder.”

Again, the problem isn’t a lack of government programs or tax dollars dedicated to mental health services or substance abuse programs. Orange County oversees approximately $323 million for 200 mental health programs and behavioral services, ranging from case management to crisis intervention. Unfortunately, much of this funding is tied up in bureaucratic restrictions and cannot be used for our most pressing needs.

Thankfully, state Sen. John Moorlach has introduced legislation to provide greater flexibility and make better use of mental health funds provided by the state. Senate Bill 1273 grants local governments the authority to use mental health services funding for crisis stabilization services for individuals who are experiencing a mental health emergency.

Orange County’s efforts are also being supplemented by outstanding nonprofit organizations that have been on the ground serving the homeless while many were ignoring the issue. In conjunction with the county and the Veterans Housing and Homelessness Prevention Program, more than $1.7 million has been awarded to American Family Housing’s Potter’s Lane project, which will provide housing for Orange County’s veterans.

Orange County is committed to getting people off the streets and onto a productive path to self-sufficiency.

Andrew Do, a former prosecutor, is First District Orange County supervisor.

Should someone have raised red flag on city’s finances?

Written by Alicia Robinson, Reprinted from the Riverside Press Enterprise


A question lingers in the case of Beaumont’s alleged financial malfeasance – just as it does after problems in Bell, or Vernon, or the City of Industry.

Why is it that, for years, either no one saw red flags or, if they did, never reported them. And agencies that could have acted didn’t.

Answers may be complex and hard to come by, but experts and observers are now pointing to a number of breakdowns that can lead to shackled city officials standing before a judge and taxpayers asking where their money went.

In Beaumont, seven former top city officials stand accused of 94 felony charges of misappropriating $43 million in public funds over two decades. Six of the men were arrested Tuesday, May 17, and the seventh turned himself in Wednesday. No one has yet entered a plea.

Former City Manager Alan Kapanicas and former Finance Director William Aylward are charged with embezzlement, misappropriation of funds and conspiracy. Former Economic Development Director David Dillon, former Public Works Director Deepak Moorjani and former Planning Director Ernest Egger are charged with conflict of interest and embezzlement.

Former City Attorney Joseph Aklufi faces embezzlement charges, and former police Chief Francis Dennis “Frank” Coe was charged with misappropriation of funds and conspiracy.

Most of the charges stem from an alleged scheme in which prosecutors say city officials used bond money for public works projects such as building streets and sidewalks while personally enriching themselves and paying back the debt through tax assessments on homeowners.


The first potential pitfall is that most people think government finance is either too complicated or too boring to spend time on. As a result, few citizens look closely at what local officials are doing with their money.

In Beaumont, several residents repeatedly raised questions about city finances for years but have only now been vindicated by the former officials’ arrests.

Smaller cities, especially those like Bell with significant numbers of immigrant and working class residents, may be less engaged with city government, said Max Neiman, a former UC Riverside professor and senior fellow at UC Berkeley’s Institute of Government Studies.

Most elected officials don’t have a financial background, so they may depend on city officials for information and trust them to make sure the city is following the law.

Riverside City Councilman Mike Soubirous said that, when he took office in 2014, he was faced with an inches-thick annual audit full of complex information. City officials said the finances were in good order, though some in the community told him there were problems.

“There are a lot of people that come into this and they don’t want to look dumb,” so they’re reluctant to ask questions, Soubirous said.

“The success of your city relies on how honest and good (staff is).”

Some past Beaumont council members have publicly supported city staff and approved bond issuances they proposed. Former Councilman Roger Berg has said the benefits of the bond spending are clear from the growth the city has experienced.

So who reviews local government finances?

The short answer is the state controller’s office, which requires cities to submit annual reports of their revenues, expenditures and bond debt, said Jennifer Hanson, spokeswoman for state Controller Betty Yee.

But with 58 counties, more than 400 cities and nearly 5,000 special districts across the state,those reports are not reviewed in depth, she said.

The state controller can do a detailed audit – Yee’s office released a scathing review of Beaumont’s past practices in November. Data provided by Hanson shows 259 reports were flagged in 2013-14 for a closer look, up from about 80 that were flagged each of the previous two years.


State law does not mandate outside audits by an independent firm, but many cities do them as a best practice, in order to receive a bond rating, or because federal funding rules require it, Hanson said.

In keeping their books, the vast majority of government agencies follow rules set by the Governmental Accounting Standards Board, an independent, private sector organization that is considered the authority on accurate and transparent accounting.

The standards don’t include anti-fraud measures, but it’s unlikely any specific rule could stop criminal conduct, board spokesman Kip Betz said.

“We want our standards to result in a fair and accurate representation of the financial picture,” he said. “If people are willfully distorting that, I don’t think that’s something we can address.”

Beaumont was audited by an outside firm, Culver City-based Moss, Levy & Hartzheim, between fiscal 2007-08 and 2012-13, according to audits posted on the city website. Officials at the firm could not be reached for comment Thursday or Friday.

Several experts said auditors should look for the kind of problems alleged in Beaumont. And they were surprised the issues apparently went undiscovered or unaddressed for so long.

For example, Yee’s review of the city’s accounting controls concluded that checks and balances were practically nonexistent, and the Riverside County District Attorney’s investigation found that city officials were signing checks to their own consulting companies that were paid with city-issued bonds.

Auditors are supposed to look at internal controls as a cue for how deep the audit should go, said Richard Savich, a UC Riverside accounting professor. They’re not required to give an opinion of the controls, but the weaker they are, the more financial transactions the auditor should check.

“Professional skepticism is the thing that all auditors are supposed to use,” Savich said. “I would definitely look askance at the external auditors and say, ‘What did you guys do?’”

A required statement included in a 2003 bond issuance noted that Kapanicas, then the city manager, was also serving as a special tax consultant and Public Works Director Deepak Moorjani was the engineer for the projects for which the bonds would pay. That could be seen as a conflict of interest, but it’s not clear whether anyone ever questioned it.

And when an audit uncovers a problem, it’s typically reported to city management or the city council.

But auditors can be discouraged from giving too negative of an opinion “because they’ll lose the client,” said State Sen. John Moorlach, a CPA who was Orange County’s treasurer from 1995 to 2006.

Once auditors deliver their report, they may consider their work done.

Macias Gini & O’Connell, a Bay area firm Beaumont hired for two special audits in 2015, made findings including that the city’s general fund had been running deficits for several years, and there was no clear payback plan for loans made between city funds, said Scott Johnson, a partner at the firm.

He said the firm doesn’t comment publicly on whether anything it finds in audits is illegal, improper or reportable to some other authority.

“We had a contract with the city, we provided reports to the City Council, we made our recommendations to them, and it’s up to the City Councilas a governing body to pursue those recommendations,” Johnson said.


Figuring out how to address the pitfalls in government financial oversight may be as complex as how they happen in the first place.

Soubirous, the Riverside councilman, said elected officials need to take responsibility.

“I think it’s incumbent on council (members) to really ask a lot of questions and dig down,” raise the alarm if they meet resistance or can’t get answers, he said.

Accounting professor Savich said ethics training and a whistleblower program to protect employees who report concerns could help, but no solution is foolproof. “You can’t think of all the ways people are going to cheat you,” he said.

The state could require local governments to make financial data available to the public in a common format, so it would be easier for citizens to compare and crunch numbers themselves, said Neiman, the Berkeley fellow.

Moorlach, who warned officials before Orange County’s 1994 bankruptcy, said trying to solve the problem with legislation would be seen as the state meddling in local affairs. He suggested the Governmental Accounting Standards Board should look at the issue.

“It’s got to be done nationally,” he said. “If it’s a problem in California, it’s a problem everywhere else.”


Rule 1: I can only endorse Republicans. Such is the joy of being in a partisan office and a member of both the Orange County Republican Party and the California Republican Party.

Rule 2: If I have endorsed, or if I plan to endorse, a candidate, that individual is provided inbold.

Rule 3: If there are two or more good candidates in the race, and I have decided not to endorse because I have a relationship with them, I will lay off and list them in italics.

Rule 4: If I am unsure and have not endorsed, but believe there is a good choice or good second choice, I will also list these candidates in italics.

Rule 5: Sometimes there are Republican candidates and I have no position, knowledge of their qualifications, or am not particularly comfortable with, I will list them in normal font.

Orange County Republican Central Committee – 55th Assembly District
IRENE YEZBAK Small Business Owner
CRAIG YOUNG Councilman/Investor/Attorney
DESARE FERRARO Small Business Owner
TIM SHAW Mayor Pro Tem
NADIA WHITE Registered Nurse
DENNIS R. WHITE Senior Principal Engineer
TARA CAMPBELL Legislative Aide
SUSI KHAN Registered Nurse
EUGENE J. "GENE" HERNANDEZ Appointed Incumbent
PEGGY HUANG Councilwoman/State Prosecutor
JAMES G. GERBUS Yorba Linda Businessman
ED GUNDERSON Infrastructure Projects Manager
Orange County Republican Central Committee – 65th Assembly District
JOHN (JACK) BEDELL Member, OC Board of Education, Trustee Area 4
JERRY JACKSON Retired Aerospace Engineer
SHAWN NELSON Orange County Supervisor, 4th District
CHRIS NORBY Retired Orange County Teacher
DAVID JOHN SHAWVER Councilmember/Teacher/Coach
STEVE SARKIS Retired Design Engineer
CHARLES KIM Nonprofit Executive
PETER KIM City Councilmember/Manager
ZONYA MARCENARO-TOWNSEND Registered Nurse/Educator
LEROY MILLS Retired USAF Officer
BEVERLY GUNTER Community Volunteer
CHRIS GAARDER Non-Profit Executive Director
SEAN PADEN Construction Attorney
Orange County Republican Central Committee – 68th Assembly District
DENIS BILODEAU Director, Orange County Water District
TREVOR O’NEIL Small Business Owner
KAREN LEE SCHATZLE Deputy District Attorney
DAVID SAREGA Police Officer/Businessman
TODD SPITZER Orange County Supervisor, 3rd District
PATRICIA A. WELCH Businesswoman
FRED M. WHITAKER City of Orange Councilman/Businessman
KEN L. WILLIAMS, JR. Member, Orange County Board of Education
NICK WILSON Property Manager
ZACHARY COLLINS Nonprofit Executive
STEVEN S. CHOI Mayor/Orange County Businessowner
DOMINICA KRISTEDJA Nonprofit Boardmember/Parent
RAYMOND "RAY" GRANGOFF Sheriff’s Department Manager
MICHAEL PARHAM Governing Board Member, Irvine Unified School Dist
Orange County Republican Central Committee – 69th Assembly District
STEVEN A. NGUYEN Public Safety Recruiter
ALBERTA CHRISTY Retired Bank Officer
ANGIE R. CANO Santa Ana Businesswoman/Economist
ROBERT M. HAMMOND Member, OC Board of Education, Trustee Area 1
MARIBEL MARROQUIN Appointed Incumbent
CECILIA "CECI" IGLESIAS Governing Board Member, Santa Ana USD
Orange County Republican Central Committee – 72nd Assembly District
PHAT BUI Councilman/Business Owner
JOHN W. BRISCOE Certified Public Accountant
ANDREW DO Orange County Supervisor, 1st District
TYLER DIEP City Councilman/Businessman
MICHAEL E. GATES City Attorney of Huntington Beach
P.J. GARCIA Small Business Owner
PAT GARCIA Small Business Owner
DEAN GROSE Los Alamitos City Councilmember
Orange County Republican Central Committee – 73rd Assembly District
MARY YOUNG Incumbent
JAMES V. LACY Author/Television Commentator
JENNIFER BEALL Appointed Incumbent
TONY BEALL Incumbent
LISA A. BARTLETT Orange County Supervisor, 5th District
ROBERTA TURBOW Small Business Owner
ERIC STOLASKI Small Business Owner
CATHY SCHLICHT Councilmember/Businesswoman
ED SACHS Mission Viejo Councilmember/Businessowner
LAURIE DAVIES Mayor, City of Laguna Niguel
Orange County Republican Central Committee – 74th Assembly District
DAVID L. BOYD Trustee, Orange County Board of Education
SCOTT BAUGH Businessman
PETER VAN VOORHIS Irvine Business Owner
THOMAS A. "T.J." FUENTES Businessowner/Parks Commissioner
CARI SWAN Businesswoman
ERIK K. WEIGAND Newport Beach Commissioner/Businessman
CAROL WOODWORTH Retired Accounting Manager
DAVID S. WHITLEY Small Business Owner
JOHN WARNER Orange County Businessman
KATHERINE DAIGLE Small Business Owner
ANTHONY C. KUO City Commissioner/Businessman
MICHAEL B. MCCLELLAN Orange County Business Owner
SCOTT PEOTTER City Councilman/Architect
TOM POLLITT Certified Tax Consultant
California State Proposition 50 – Suspension of State Legislators NO
Overreaction to bad apples. But, a "YES" vote is easy and safe.
Orange County Measure A – Establishment of Campaign Finance and Ethics Commission NO
Expensive Price to Pay for a Job the FPPC or OC District Attorney should do.
But, a "YES" vote is easy and safe.
Orange County Measure B – Fiscal Impact Statement Requirement YES
This Charter Amendment reeks of "I need attention, so I did a ballot


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