The Grid

"There's no reason to have overdrafts," Leal says. "If you put the proper mechanism in place, there's no reason for it."

On top of crazily huge balances and absurdly large overdrafts, San Francisco has paid significant fees to the Bank of America for servicing the city's 78 "known" accounts. Without undertaking an extensive survey of the banking industry, it is difficult to know how appropriate the fees are for the dozens of services the city requested for its various accounts.

But we can tell you that the city paid BofA nearly $1.7 million in 1997 to service its 78 or so "known" accounts. That's a nice little contract to have handed to you, year after year, without the nasty necessity of competitive bidding. It's especially nice, given that the city generally bids any contract involving more than $10,000 of goods or services.

Besides the 78 or so "known" accounts, early this year city departments were keeping roughly 150 other accounts at the Bank of America. No one at the Treasurer's Office, apparently, had been told these accounts were open. Leal says her staff discovered the accounts this year in a way that might be described as unusual.

Or should we say surreal?
To find out what accounts various city departments had at the Bank of America, the Treasurer's Office had to engage in a process that most purported fiscal watchdogs would consider humiliating. The city's financial officials -- the people who are supposed to be ever-vigilant and all-knowing in their protection of the city purse -- had to call the Bank of America and ask what accounts the city maintained there.

Because the Treasurer's Office didn't know.
Of the 150 or so mystery accounts this embarrassing search turned up, some, Leal says, contained no money -- but the city was paying fees to keep them open anyway. Some of the accounts held relatively large amounts of money -- enough money that it should have been invested at interest. Some departments had accounts and money they were not legally allowed to possess. (Leal says the Police Department, for example, had a towing account from the days before the Department of Traffic and Parking took over the business of enraging illegal parkers.)

Some accounts, Leal says, were being used to purchase items that departments didn't think it necessary to run before the city's Board of Supervisors. You know, minor items. Like automobiles.

And as of last week, Leal says, there were still 40 or 50 accounts for which the Treasurer's Office did not have full documentation.

Susan Leal deserves real commendation. She says the Treasurer's Office is closing illegal accounts and returning money to the city's General Fund, where it belonged all along. And we believe her. She talks convincingly of reforming the city's financial system to bring an end to massive overdrafts and ridiculously high account balances and Iran-Contra-style mystery banking practices. And we're convinced.

But when dozens of government bank accounts are created and used beyond the realm of fiscal oversight; when million-dollar city contracts are handed out for decades without competitive bidding; when multimillion-dollar overdrafts are run for months and years, for no sane reason; when, in fact, financial stupidity (or worse) rules a large city's banking relationships for a long time, something more than an energetic new city treasurer is called for.

As much as we like Susan Leal, as much as we agree with her intent to reform the city's financial control system, we are equally certain that the city's banking situation begs for thorough outside investigation. Changing screwed-up systems to make them work properly is important. It's just as important for a city's citizens to know exactly what happened when their money was taken off the books and hidden, under layer after layer of obfuscation, in the financial equivalent of 150 different onions, any one of which might be rotten at the core.


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