The Camarillo city treasurer has been fired and the city finance director has resigned amid claims that the city has lost $2.5 million in bad investments over the last year and cannot account for another $2.5 million in city funds.
At a press conference Tuesday, officials said City Treasurer Donald Tarnow, an 18-year city employee, was fired for failing to keep the City Council informed of $2.5 million in investment losses sustained during last spring and summer.
Officials also said accounting errors have left the city unable to account for another $2.5 million.
City Manager Thomas W. Oglesby also said Tarnow, 46, of Camarillo, violated several city policies. However, he refused to elaborate other than to suggest the policies were related to the reporting of investment losses.
Tarnow, who as treasurer had wide latitude in investing city funds, said Tuesday he had done nothing wrong and made no errors in accounting.
Finance Director Larry Weaver, Tarnow's boss, resigned, saying his departure would be "in the best interest of the city." Officials said he was not asked to resign.
Although there is no evidence of criminal wrongdoing, a full-scale audit of all city investments over the past several years will be conducted by Arthur Andersen & Co., a nationally known accounting firm, City Atty. Colin Lennard said. In addition, Lennard said he met Tuesday with investigators of the Ventura County district attorney's office. Representatives of the district attorney's office could not be reached for comment.
City Check Bounced
Financial troubles surfaced in Camarillo last November when a city check was returned for insufficient funds, Camarillo officials said. At the time, the city was in the midst of a $5.3-million road-and-bridge project that was being paid for in cash, officials said.
When a second check bounced in December, officials called for a preliminary audit of city investments.
Midway through the audit, officials said they discovered that Camarillo had lost $2.5 million in bond investments last year. Oglesby said it is those losses that were not properly reported.
On Monday, the city hired Arthur Andersen to begin an extensive audit of city investments to determine if they were proper. The amount of unused city funds available for investment, which include money being held for future projects and deferred compensation to employees, generally ranges from $14 million to $20 million a year, Oglesby said. The city budget for the last fiscal year was about $26 million.
Bad Bond Market
In a telephone interview Tuesday, Tarnow attributed the losses to a deteriorating market last spring in government bonds. He said he filed the proper report with the council after the investments went bad. "For a layman to have read the report, the losses would not have been readily apparent," he said.
Tarnow also said the city's total losses from investments will be higher than $2.5 million because the city was forced to sell other investments early to meet cash-flow problems he did not create.
Tarnow said he notified Weaver last summer that the city faced a potential cash-flow problem because of a decision to move a road project ahead by two months. "The project was to have begun in October but, instead, the first payment was due in August and they didn't tell me that until the end of July," Tarnow said.
Camarillo keeps its unused cash in investment accounts until needed for such capital improvements, Tarnow said. Monthly cash payments of more than $1 million for the road project forced the sale of investments, mostly government securities, and also caused the cash-flow problems later in the year, Tarnow said.
Tarnow said he did not know the total loss in investments sustained by the city. The losses were the first in the 18 years that he has handled city investments, he said.
Tarnow said he did not know whether he would appeal the firing from his $50,000-a-year job, in which he has served by City Council appointment for the last eight years. He was also the city's investments officer.
Camarillo has since changed its method of financing the road project, selling $6.5 million in bonds last month to pay for the improvement.
Weaver's resignation takes effect when the city hires a replacement, said Larry Davis, assistant city manager.
"In light of the ongoing audit and investigation into the past investment transactions of the city, I think it is in the best interest of the city for me to resign my present position in order that the everyday functions of the finance department may continue without interference," Weaver's resignation letter said.
Weaver could not be reached for comment.
Lennard said that the full impact of Camarillo's financial troubles will not be known until a full audit is completed.
The City Council last week created a committee to oversee city investment policies.