PVE Community Newsletter

Serving Lunada Bay, Malaga Cove, Montemalaga and Valmonte

This newsletter highlights important financial issues affecting our city, opportunities for savings, and answers to your questions.

PVE’s Key Financial Issues Continue

Our city’s financial health is important to all of us. Here are some critical issues that have been identified:

1. Troubling Audit Pattern Reveals Fraud Exposure

2. Conflicting Statements between Staff and Auditors

3. Financial Systems are Accessible to Unauthorized Outsiders

4. Auditors Alerted Council for 4 Consecutive Years

5. Concerns About City Staffing and Expertise

6. A Pattern of Unaddressed Issues, with no action taken

7. Missing Audits for City-Owned Concession Assets

8. A Major $1.3 Million Accounting Error Discovered

Before Raising Taxes: Shouldn't the City first ensure proper accounting and audits?

Troubling Audit Pattern Reveals Fraud Exposure

• 2021: Auditor reports City had unreconciled differences in bank statements LINK (151st page) - that had to be written-off. The transactions were untraceable.

• 2023: LINK

  • The Auditor discovered a $713,672 LOSS, staff was unaware of LINK (152nd page).

  • “The City is operating on expired lease contracts” LINK (158th page).

  • Five terminated employees are accessing the systems LINK (174th page)

  • City practices allow "undetected errors." LINK (157th page)

• 2024: City discovers a $1.3 million error because bank statements went unreconciled VIDEO - (excluded from auditor’s report)

• 2024/25: Instead of resolving the ongoing problems, the city justified concealing important auditor findings as "for our own good."

  • June 2024: In an unprecedented decision, the City denied ALL public access to audit info LINK citing legal risks: “the public interest in withholding those records outweighs the public interest in disclosure” and “attorney-client privilege”

  • July 2025: Auditor states IT (system access) issues are confidential and the vulnerabilities still exist VIDEO. Auditor states it will be reported separately. So, the auditor’s report made public is not the full report of serious problems.

  The City is NOT Transparent

Conflicting Statements between Staff and Auditor

City Manager states (June 2025):

"​City’s​ management has established a comprehensive internal control framework that is designed both to protect​ the City’s assets from loss, theft, or misuse and to compile sufficient reliable information for this report.​" LINK (9th page)

However, the Auditor wrote (July 2025):

“The City lacks formal written policies and procedures within key operations and financial processes.” LINK (6th page)

The City lacks: “critical internal control processes … including … proper recording of transactions” LINK (4th page)

These statements show a significant disagreement on the state of the city's financial controls

Financial Systems are Accessible to Unauthorized Outsiders

Imagine former temporary staff and ex-employees having access to your personal bank account with the authority to conduct transactions without your knowledge… then finding no one is looking at the bank statements to validate balances or cash transactions… That's is exactly what the auditors found in the city's financial systems

Mar 2023: Auditor’s confidential report on IT system access: LINK of material weaknesses

• Five ex-Police employees accessed confidential data after termination (181st page)

• Ex-employees and ex-temps have access to update financial systems (182nd page)

July 2025: Auditor states IT (system access) issues are confidential and the vulnerabilities still exist VIDEO. Auditor states it will be reported separately. So, the auditor’s report made public is not the full report of serious problems. Worse: According to the 2023 auditors' findings LINK (pages 181-182), a simple remedy would be to remove system access when employees upon termination. But the City chose not to.

Audit Results should NOT be Concealed from Residents

Auditors Alerted Council for 4 Consecutive Years

Historically, PVE had timely audited financial reports completed by January: 2013, 2014, 2015, 2016, 2017, 2018, 2019.

2020: the auditors began reporting serious audit discrepancies, that exposed the city to fraud:

• 2020: 2 months late (Mar 2021)

• 2021: 8 months late (Sept 2022)

• 2022: 2 months late (Mar 2023)

• 2023: 6 months late (July 2024)

• 2024: 6 months late (July 2025) this is still happening

Auditor’s Recommendations were Ignored

Concerns about Staffing and Expertise

Auditor states there is a significant skill gap leading to:

“limited ability to maintain accurate financial records, including timely updates, proper transaction recording, and account reconciliations.” LINK (4th page)

Finance Director position is still vacant after 2+ years LINK:

Qualified private sector candidates are not being considered.

A Pattern of Unaddressed Issues

• Sept 2022: Auditor reports 3 pages of “material weaknesses” in handling of finances LINK (3rd page)

• Mar 2023: Auditor reports: LINK

  • “Repeat of prior year [financial] deficiencies” (173rd-182nd pages).

  • “14 out of 16 terminated employees still had active user accounts” (174th page)

• May 2023: Elected Treasurer Greenberg (a CPA) notified Council in writing that essential internal controls, including reconciling bank accounts, are needed LINK (page 15). No action was taken.

• Feb 2024: City Manager reports LINK (page 2) “bank reconciliations have not been performed since March 2023 [a year] and “capital assets, cash and investments data were not tracked”

• 5/29/24: Elected City Treasurer Greenberg, a certified (CPA) Accountant, drafts financial controls PROPOSAL (15th page) to resolve some issues that have caused the city to fail audits for 4 years VIDEO (start time: 23:06). To date, the Council has not considered rudimentary financial controls, that would have eliminated fraud exposure.

• 2025: To Date our City remains exposed to fraud:

  1. Lacking Controls: no controls have been implemented to protect our funds

  2. Staffing: Auditors repeatedly identified skill gaps. Yet, the City focuses on training and retention, rather than hiring practices to address skill gaps LINK (8th page). The Finance Director position remains vacant for 2+ years. Competent private sector candidates are not considered.

  3. Hiding from residents: Auditor admits other critical audit issues are concealed from the public VIDEO. Ex-employees ARE accessing our systems and the Auditor keeps finding issues.

     What else don’t we know?

Missing Audits for City-Owned Concession Assets

City Concessions bring in $2.1 million  LINK (19th page), the 3rd highest source of revenue for the City. The Golf Club, Beach Club, Tennis Club and Stables concessionaires contract to operate on city-owned land and buildings. While Concessionaires are contractually required to submit annual audits, the City has no audits for the Stables or Tennis Club and audits are missing for the Beach Club after 2022  LINK.

Before demanding Tax Increases, shouldn’t the City properly conduct audits of the people’s assets?

A Major $1.3 Million Accounting Error Discovered

A LARGE ERROR went undetected, indicating no one was looking at the city’s main bank account or reconciling it, which is a basic accounting practice.

Nov 2024 VIDEO (For fiscal year 2024, just audited)

• CM McGowan (CPA): “The financial statements today are not accurate or reliable.” and “we are in serious trouble”

• Treasurer Greenberg (CPA): ‘$1.3 million in interest went unreported.’

What else is missing?

No. PreservePVE does not object to tax increases.

PreservePVE Advocates Good Governance:

• Informed Consent

• Residents choose if/what additional services they value over the $7 million baseline tax

• Full Transparency of the Resident’s assets (no secrets)

• Adequate Fiscal Management

A tax that reflects that reflects the Residents needs/wants that is balanced with cost/value, will receive broad-based support and will solve underlying problems that will bring the community together.