City Council Rehires Embattled Auditing Firm

As the saying goes, six degrees of separation will prove the reality of how interconnected we all are. In the city of Campbell’s case, it turns out to be closer than that.

A financial scandal in the Southern California city of Bell prompted Campbell City Council to take a second look at what would ordinarily be standard procedure.

At its last meeting, the council voted to extend its contract with the auditing firm Mayer Hoffman McCann, the same company involved in the Bell case.

The auditing firm that handles the city of Campbell, however, is not the same branch as the one handling the Bell case.

The current contract with the San Jose MHM was for an initial three-year term, with an option to extend by two additional years, said Director of Finance Jesse Takahashi. The council voted to extend the contract for the two years but wants to revisit after the fourth year, he said in an e-mail.

Takahashi had recommended that the council renew the contract with MHM.

He said the finance committee and the council will have the opportunity to examine the peer review due out later this year. If city officials find problems in the review, they have the option of terminating the contract with MHM as long as notice is given by December.

“Now that the spotlight is on MHM, you can be sure they’re going to dot their I’s and cross their T’s,” Takahashi said. “They have every reason to improve.”

Takahashi pointed out that at less than $40,000 a year for its services, MHM is reasonable, compared with other audit firms. Hiring a new firm would be much more costly, he said.

City officials agree that for the last three years, MHM has done a competent and professional job of overseeing the fiscal health of Campbell.

Mayor Jason Baker has a background as a security fraud lawyer and expressed his concern about assuming that the San Jose branch of MHM would make the same mistakes as the firm in Orange County.

“I’m not aware of any complaints about the MHM branch in San Jose," Baker said. "Having said that though, the state controller’s report found fault with sloppy paperwork and failure to follow standard policy and procedure in the Orange County branch, and that does concern me.”

MHM voluntarily offered to accelerate a peer review of its California city and municipal audit practices.

“The scope of the accelerated peer review is focused on the firm’s system of quality control and covers the review of multiple engagements, offices and shareholders, which differs from the state controller’s report, which was focused on one audit engagement,” said Bill Hancock, president of MHM.

MHM was founded in 1954 in Kansas City, MO, and has eight locations in California. The office at 84 S. First St., Third Floor, in San Jose is its only Bay Area branch.