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Central Basin auditor resigns due to lack of records and ongoing ‘mismanagement’ – Whittier Daily News
Central Basin Municipal Water District office, as shown on Dec. 10, 2020. (Staff photo by Mike Sprague)
An accounting firm hired to audit the tax records of the Central Basin Municipal Water District threw in the towel last week, claiming it could not finish the work because a lack of records and “ongoing mismanagement” had undermined the integrity of the review.
Central Basin hired Harshwal & Co. in November 2022 to complete a routine year-end audit of the district’s finances for the 2021-22 fiscal year. However, a year and a half later, the review is still incomplete and may now have to be restarted, records showed.
In a June 3 resignation letter, managing partner Sanwar Harshwal said auditors “found significant internal control deficiencies that require immediate attention.”
“We have dedicated our efforts to correct these deficiencies, but their persistence raises significant concerns regarding the reliability and accuracy of the financial information provided to us,” Harshwal wrote. “Additionally, challenges associated with incomplete and insufficient information obstructed our ability to conduct a complete and comprehensive audit.”
Central Basin is a water wholesaler serving 1.6 million people from 24 cities and unincorporated areas in southeast Los Angeles County, including La Habra Heights, East Los Angeles, Signal Hill and parts of Compton and Carson. It is years behind annual audits that are supposed to be completed six months after the end of the fiscal year.
Lack of ‘internal controls’
Harshwal’s audit for 2021-22 found “significant variations” between the agency’s internal ending balances and supporting documents, according to a draft supplied to the Central Basin at the end of May.
“There was a lack of established internal controls and processes over the financial reporting process to ensure timely and accurate financial reporting,” the auditors wrote. Such a weakness generally increases the chance that “fraud or material errors will occur,” according to the draft.
Auditors initially issued a “qualified opinion,” which indicates that problems exist, but are not widespread, in their May 16 project. However, days later, a Harshwal employee told Kenneth Pun, the contractor who served as Central Basin’s chief financial officer, that the company intended to downgrade his opinion or resign.
Previously fired Central Basin most of its staff, including its internal CFO, in 2020 and contracted for these services in subsequent years.
Harshwal’s demotion would have landed the agency the second-worst possible audit opinion and put its financial credibility at risk. The lowest classification — called “disclaimer of opinion” — essentially states that an auditor was unable to form an opinion due to the amount of missing information. Harshwal reportedly tried to resign several times from February to May, but was repeatedly persuaded by staff to stay on.
The deficiencies described by Harshwal are not new discoveries. A previous accounting firm hired to complete a 2020-21 tax audit noted exactly the same problems during its review and Central Basin committed to reforms in response, records showed. That company, Maze & Associates, delivered its audit in September 2022 and terminated its contract with Central Basin a month later.
Both Maze & Associates and Harshwall & Co. – hired as Maze’s replacements – originally received three year contracts, but chose to resign early. Maze’s completed audit indicates it had to make “$2.1 million in adjustments” to the district’s balance sheets. This covers about 10% of the district’s overall budget.
‘Worrying’ dismissal
Central Basin’s newly hired interim general manager — Elaine Jeng, who took the helm at the end of May — said Harshwal’s resignation is “concerning as it signifies a lack of confidence in the district’s financial records.”
Although her knowledge of the district’s operations is currently limited, resolving the issues highlighted by Harshwal is a “priority,” she said.
“In the future, with the support of the Board, the District’s plan is to request the services of another financial audit firm to complete the audit for FY22, FY23 and FY24,” Jeng said via email. -mail. “The District will seek to improve the preparation of supporting data to support financial records. This may require temporary staff increases and dedication of internal resources to this focus.”
Jeng will present a list of possible replacement companies to the agency’s board of directors in the near future, she said.
“My priority as IGM is to ensure that the District produces a report from a reputable company that accurately reflects the organization’s financial situation,” she wrote.
Financial team resistance
Pun Group, the contractor that serves as its finance department, internally rejected Harshwal’s findings, according to an email obtained by Southern California News Group. Pun told then-acting general manager Victor Ponto that his team strongly disagrees with Harshwal’s statements about “inadequacies in accounting records.”
“We have invested considerable time and effort in correcting any misstatements and addressing all concerns raised by the audit team,” Pun wrote in his email. “This development is unprofessional and unacceptable, especially given the extensive efforts we have made to ensure the accuracy and integrity of our financial statements.”
Pun recommended scheduling an urgent meeting with the Board of Directors to discuss next steps, including the possibility of “pursuing legal action” against Harshwal. However, at this time, the board is not expected to meet again until its regularly scheduled meeting at the end of June.
“It is crucial that we address this issue promptly to maintain the integrity of our financial reporting and defend the District’s reputation,” Pun wrote.
‘Totally negligent’ management
Board director Leticia Vasquez condemned the idea of prosecuting Harshwal for “simply doing his job.” The issues identified in the audit and resignation letter are consistent with concerns she has expressed about the district’s finances over the past three years, she said.
“For the last three years, this is how this agency has operated,” she said. “The board has been grossly negligent in its responsibility to the agency and the public we serve.”
The reasons behind Maze & Associates’ resignation nearly two years ago were never discussed by the board, she said.
Past problems
Vasquez supported proposals to put general manager Alex Rojas in the role paid administrative leave and for meaunch investigations in his administration as a result of his concerns about the district’s finances. Rojas was charged by the Los Angeles County District Attorney’s Office in August 2022 for allegedly accepting $400,000 in bribes while serving as superintendent of the Bassett Unified School District. Despite the arrest, he continued to run the water district for nearly two years until the board placed him on leave following a change in political power in early 2024.
The board majority initially allowed Rojas, who is often credited with stabilizing the district after a particularly tumultuous period, to stay because the criminal case was – and is – still pending and was considered unrelated to his new role.
The turning point came after Vasquez, while suing the agency he represents over Rojas’ alleged treatment, discovered a link between Rojas’ co-defendant in the bribery case and a contractor hired by Central Basin.
The testimony revealed that Capstone Partner Groupa construction management company contracted by Central Basin, was owned by a longtime employee of Central Basin. Del Terracompany involved in the Rojas case.
Rojas has denied any involvement in Capstone’s selection and claims he was unaware of any ties between Capstone and Luis Rojas, his co-defendant, until after Capstone terminated his contract in August 2022.
Much of Capstone’s work with the district occurred during the fiscal year that was under review by Harshwal, according to board director Juan Garza.
“The critical nature of this particular audit is that it reflects a period in our agency when Capstone was providing services,” Garza said. “Going forward, we need to find out what exactly happened and we are committed to doing so under the new management team.”
A separation audit and forensic investigation regarding the district’s hiring of Capstone is still pending.
Garza said it is concerning that the district still does not have a complete accounting of “activities and transactions that occurred nearly two years ago.” He questioned why the district never implemented proposed reforms in response to Maze & Associate’s 2020-21 findings.
“We have two prestigious auditors who leave as soon as they finish their first year with us,” Garza said. “It is highly disturbing and is an independent message that our agency’s finances and controls are not accurate and that we must uncover the truth to restore our agency’s credibility and, more importantly, our agency’s control measures and operations. .”
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Latest news on July 11, 2024: Airtel says its new Xstream Fiber plans bundle over 350 live TV channels (Official Photo) (Reuters) Disclaimer: This is an AI-generated live blog and has not been edited by Hindustan Times staff.
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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