An accounting firm hired to audit Central Basin Municipal Water District’s fiscal records threw in the towel last week, claiming it could not finish the job because missing records and “ongoing mismanagement” had undermined the review’s integrity.
Central Basin hired the firm, Harshwal & Co., in November 2022 to complete a routine end-of-the-year audit of the district’s finances for fiscal year 2021-22. Yet, a year-and-a-half later, the review is still incomplete and now may need to be started over, records showed.
In a June 3 resignation letter, Managing Partner Sanwar Harshwal stated auditors “encountered significant internal control deficiencies that demand immediate attention.”
“We have dedicated our efforts to rectify these deficiencies, but their persistence raises significant concerns regarding the reliability and accuracy of the financial information provided to us,” Harshwal wrote. “Additionally, the challenges associated with incomplete and insufficient information have obstructed our ability to conduct a thorough and comprehensive audit.”
Central Basin is a water wholesaler that serves 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 on the annual audits supposed to be completed within six months of a fiscal year’s end.
Lack of ‘internal controls’
Harshwal’s audit for 2021-22 found “significant variances” between the agency’s internal closing balances and supporting documents, according to a draft provided to Central Basin in late May.
“There was a lack of established internal controls and processes over the financial reporting process to ensure timely and accurate financial reporting,” auditors wrote. Such a weakness generally increases the chance that “fraud or material errors will occur,” according to the draft.
The auditors initially issued a “qualified…
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