A draft of an independent audit of the city''s 1998 finances turned up 19 "significant deficiencies" in the way Seaside officials keep their books. The missteps range from the relatively minor such as voided checks that were not properly defaced to more serious oversights, such as failing to adequately monitor the amount of money some employees contributed to their retirement fund.

"We have not been prescribing to good accounting principles," acknowledges Seaside Mayor Jerry Smith. "We have deviated from accepted accounting practices and, unless we get it under control, it could create some problems down the road."

Indeed. Problems discovered by the auditor included a lack of documents pertaining to a loan to the city''s Redevelopment Agency and other bookkeeping oversights that, in one case, led the city to pay the same invoice twice.

Among other bookkeeping snafus:

An analysis of payroll and checking activity revealed "numerous" bank notices revealing insufficient funds as in, bounced checks. In those cases, however, the bank paid the overages without charging the city any additional fees.

City staffers did not make daily deposits to the bank, nor did they keep utility bill receipts.

The city did not meet a U.S. Housing and Urban Development Department rule that requires monthly expenditure reports to be filed. Instead, the city filed the reports once a year.

"Non-manual" checks are printed and authorized with signatures off of a laser printer. "This method could allow misappropriation of funds to go undetected," the draft audit says. "We recommend that all checks should have at least one ''live'' authorized signature."

Smith, almost a year into his new job as Seaside''s mayor, praised the auditors for highlighting the deficiencies. "This is the audit that should have been done over a year ago. The whole purpose of an audit is to see that you''re adhering to accepted accounting practices. Once these deficiencies have shown up, it''s time now to get staff back on the right track."

But Smith''s predecessor, Don Jordan, who was at the city''s helm during the 1998 fiscal year and whose administration has been the target of allegations of financial wrongdoing, says Smith is overstating the extent of the city''s problems.

"The things the audit is talking about are not huge violations. They''re not deviations from good accounting principles," Jordan says. "They''re simple human errors."

And, Jordan says, the audit exonerates all those in his administration who have been accused of everything from mismanagement to mishandling funds. "I looked at the numbers. This is a tremendous audit. This is an audit the city can be proud of. It not only shows there''s no money missing, but it shows that we kept [within our] budget of $10 million, and we even had revenue of $11 million."

Acting City Manager Rich Guillen says most of the auditor''s findings have already been fixed. Further, he says he didn''t know about many of the problems until the audit came out, and that some may have been due to a staff shortage.

Understaffing and sudden resignations, in fact, have plagued the city over the past year, and they explain why the audit was completed months after it was due. Cities are required to conduct an annual, independent audit of their finances; most cities analyze the audits in December, then use them to calculate the city''s budget, which is due by July 1.

But political upheaval in the city-including the election of a new mayor and the subsequent resignation of City Manager Tim Brown and a veteran city councilmember left the administration shorthanded. Then, finance director Linda Downing resigned in the middle of the audit to take the finance director post in Marina.

At the same time, a new accounting firm Citrus Heights-based Moss, Levy and Hartzheim was hired to handle the city''s audits. The new firm took some three weeks to go over the city''s past audits and budgets before it was ready to prepare the current review.

City officials got their first peek at the draft audit last week; the City Council is expected to review it next Thursday. The city will then turn its attention to drafting a budget for 1999-2000, another long-overdue document.

"We have to resolve the issues related to the draft audit," Smith says, "then the budget is our No. 1 priority."

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