$4.6M spent at Rio Nuevo site questioned

Total at issue arises in garage-funds audit
2012-03-14T00:00:00Z 2014-07-02T14:40:06Z $4.6M spent at Rio Nuevo site questionedRob O'Dell Arizona Daily Star Arizona Daily Star
March 14, 2012 12:00 am  • 

The Rio Nuevo board released an audit Tuesday questioning $4.6 million worth of spending on the Depot Plaza Garage, which was built underneath the new Martin Luther King Jr. housing project near East Congress Street.

The forensic audit, done by Regier Carr & Monroe, said $2.2 million spent on the garage was never approved by the board. At the time the money was spent, the city was in control of Rio Nuevo and not the new board appointed in 2010 by the Legislature.

Additionally, the audit questioned nearly $2 million worth of payments that had no supporting documentation or minimal supporting documents to back them up.

The remaining $400,000 in questioned spending included:

• $48,000 in city salaries.

• $102,500 in finance charges made to Rio Nuevo from the city finance department.

• $91,500 that was incorrectly billed to the garage instead of the Martin Luther King Jr. housing project.

It's unclear exactly what the ramifications of the audit are. The Rio Nuevo board asked several questions about the audit but didn't discuss any action it might take.

Board Chairwoman Jodi Bain asked the district's lawyers if the audit would have an effect on the more than $1.5 million the city contends Rio Nuevo owes it for the garage. District lawyer Sean Brearcliffe said lawyers would have to review the audit before making any decisions.

Other board members asked questions of the auditors to try to understand the audit better.

The district spent $40,000 to $45,000 on the audit. Auditors said they combed through 4,000 documents, including paper documents, spreadsheets, pay applications, communications and memos.

The auditors specifically pointed out that the city was in control of Rio Nuevo when the spending occurred.

More than $13.8 million was analyzed by the auditors, although the full cost of the project is about $16 million. The auditors said they only examined the money actually spent by Rio Nuevo on the garage; the rest of the money was likely spent by the city after Rio Nuevo refused to pay the rest of the bills.

Assistant City Manager and Finance Director Kelly Gottschalk said the difference between the $13.8 million examined and the $16 million total cost could be the bills the city covered after Rio Nuevo stopped payment, but she was unsure.

"I don't know what they looked at," she said.

Gottschalk said she was unsure how the city would respond to the audit, which she said was not an independent audit because the firm that conducted the audit also represents the district in its litigation against the city. She characterized the firm as "hired guns."

The audit is one of several audits authorized by the district.

The first audit, a financial audit, released last week said the district had $13 million cash on June 30, 2011. The next audit of the Rio Nuevo projects on the west side could be released sometime in April.

Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com.

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