Another of the 1% Eating, and Drinking, Well

Rick Daniels (photo by Bruce Montgomery)

Desert Hot Springs, CA – As another part of the unfolding story about city expenses another public information request has been supplied to us – finally – by the City of Desert Hot Springs. This one took just six months of asking. It reveals spending by City Manager Rick Daniels that an accountant we contacted said “does not pass the smell test.”

“It is generally accepted in the accounting profession that receipts that do not record the nature of business discussed are invalid,” said Michael E. McGinnis, a Rancho Mirage based CPA. “Governmental accounting standards require this same level of information as the IRS.”

McGinnis said the Internal Revenue Service considers receipts without all four critical pieces of information included in an expense submission to be invalid. McGinnis said expenses submitted for meals must include the name and location of the restaurant, the time of either the meeting or the conclusion of the meeting, who was at the meeting and the nature of the business conducted, the last of which McGinnis said is a “key piece of information.”

“This is to ensure that there is no abuse of the city,” said McGinnis.

A review of 458 pages, only obtained at press time, show Daniels spending tens of thousands of city dollars on lavish meals and alcohol over the course of four years, all reimbursed to Daniels by the city and without the kind of documentation McGinnis said is considered a customary accounting practice for expense reimbursement.

At a 2009 San Jose conference, Daniels shows expenses for two Bombay Gin martinis purchased by Daniels using city money. Documents supplied by the city show Daniels was reimbursed for that expense. For that same event Daniels was reimbursed by the city $54.00 for “parking” although he supplied no receipt.

Daniels also flew to a Aug. 4-7, 2010 Bay Area conference on the Saturday in advance of the event starting Wednesday. The city paid for Daniels’ car to be parked at the Palm Springs airport for the entire time while he was gone and also reimbursed Daniels for some of his meals for days prior to and after the event. Surprisingly Daniels was also reimbursed a toll charge for the Bay Bridge, even though his car was still in Palm Springs.

Other documents show alcohol flowed frequently at city dinner functions that Daniels hosted and submitted for reimbursement. However, most all lacked the standard list of names of people attending and the type of business function or discussion that took place during the meeting.

City records do not show if others were in attendance of if the amounts reimbursed by the city were for Daniels’ personal expenditures. From the documents supplied, there is no way to know. That itself is a problem according to McGinnis.

Daniels and company also ate very well the documents show. Daniels frequently dined on the city dime, turning in reimbursement of a lavish dinner on March 2, 2009 at the exclusive Two Bunch Palms Resort Casino Dining Room for a total of $518.00 that included “Natural Black Filet Mignon.”

It is not clear who Daniels picked up the dining tabs for although this particular receipt indicates there were 12 guests but only five beverages were served. The names were only scribble on the receipt listing Darrel, Thomas, Jaime, and Scott. There was no reference whatsoever to what official city business was discussed, if any.

Daniels generously gave the server a $87.00 tip – also reimbursed to Daniels.

Other receipts obtained in the document request have illegible scribblings and show as many as five or six individuals at the meal. Other receipts list meals for two, but there is no indication or notation of anyone accompanying Daniels.

One person repeatedly listed on the receipts and the beneficiary of apparent meal largesse is Councilman Karl Baker who met with Daniels frequently for breakfast to discuss the Music Festival, according to Daniels’ documents.

McGinnis said for reimbursement of meals and entertainment expenses incurred by governmental officials to be valid, the submitted receipt and expense report and include the four tests for IRS documentation. McGinnis went further. “If the City of Desert Hot Springs is reimbursing meals and entertainment expenses incurred by city officials without proper documentation, it is in violation of those rules. As to who would be culpable should this be taking place, it would be the City Controller’s office.”

If abuse of these types of expenses is prevalent and has been going on for multiple years without notice, the outside CPA firm that audits the city is also to blame, said McGinnis.

“When an outside CPA firm audits a city, it is standard procedure to audit the travel and meal and entertainment expenditures of city officials. If invalid expenses have been occurring for multiple years and the CPA Firm signing off on the city financial statements is not bringing this problem to the attention of the top financial official in the city and the city manager, then that CPA firm is partly responsible for the undetected fraud. Think Enron. Think Z-Best.

Civic minded citizens familiar with these issues don’t think of Enron and Z-Best, they think cities of Bell, Vernon, and Montebello.