An independent auditor has given the city of San Mateo high marks for the way it handles its finances and has informed the city of new accounting standards it must soon put in place.

Caporicci and Larson, a certified public accounting firm, found neither material misstatements in the city’s financial statements nor any evidence of fraud, said C&L’s Ahmed Badawi.

Three auditors spent two weeks combing through city documents, although the firm did not look at every single transaction, Badawi said.

The firm presented its findings to the San Mateo City Council Audit Committee yesterday afternoon. Mayor Brandt Grotte and Vice Mayor John Lee sit on the committee.

In the audit, C&L was responsible for reviewing the city’s internal control policies and procedures, assessing risk of material misstatements in the financial statements and for the expression of an opinion on the city’s financial statements.

In a word, Badawi said the city was doing “fantastic.”

The firm obtained information directly from attorneys and banks and validated the city’s significant account balances to supporting documents in its audit of city finances. It also performed year-over-year comparisons of specific account balances.

The firm compared cost of services to tax revenues in the audit, finding a $2 million decrease in tax revenues from 2008 to 2009 while the city’s total net cost of services increased slightly over the same period by a little more than $100,000.

San Mateo’s tax revenues in 2008 were $82,908,716 and $80,792,836 in 2009, according to the audit.

The city’s available fund balance for 2009 is $11,211,424 or about 15 percent of available funds to annual expenditures. The number is enough to get the city through approximately two months in case of a dire emergency, as recommended by the Government Finance Officers Association.

The GFOA recommends cities have two to four months in available funds. On average, surveyed cities have about 31 percent in available funds, according to C&L.

Pension costs were assessed in the audit as well. In 2007, the city’s annual pension cost was $7.7 million. The number increased significantly to $8.7 million in 2008. In 2009, however, the pension costs increased slightly by $81,917 to $8.8 million.

Cities across the state will soon have to conform to new accounting practices dictated by the Government Accounting Standards Board meant to better define what a city’s reserves are.

Bill Silverfarb can be reached by e-mail: silverfarb@smdailyjournal.com or by phone: (650) 344-5200 ext. 106.