BELL — An audit released Wednesday by state Controller John Chiang found that the city’s internal controls were “virtually non-existent,” resulting in illegally raised taxes, mismanaged bond funds and questionable contracts and land purchases.

The first of three audits focusing on the city’s mismanaged finances also said the city’s finances were “tied to only one individual, resulting in a perfect breeding ground for fraudulent, wasteful spending.”

That individual was identified as former Chief Administrative Officer Robert Rizzo, who was one of eight current and former city officials arrested Tuesday on charges of misappropriating public funds.

“Our audit found the city had almost no accounting controls — no checks or balances — and the general fund was run like a petty cash drawer,” Chiang said. “

Rizzo had total control and discretion over how city funds were spent, according to the audit, which also suggested the former official used public funds for personal gain.

During his 17-year tenure with the city, Rizzo’s final compensation of $787,000 was 11 times higher than his starting salary. The city used more than $93,000 of public funds to repay two personal loans taken out by Rizzo, and approved $1.5 million in loans to other Bell employees without any authorizing ordinance or policy on the city’s books.

The audit has determined all of these loans to be gifts of public funds, as they provided no public benefit.

The employment agreements for Rizzo and other top officials required performance evaluations, but none could be found during the course of the audit. Nevertheless, Rizzo’s salary continued to grow, and he was allowed to authorize disproportionate salary and benefit packages for other Bell employees. The city spent more than $5.8 million on compensation for just the six top administrators, the City Council and the mayor in the last year alone, Chiang said.

The audit also found the city mismanaged its 2003 voter-approved Measure A bond funds. The city has issued $50 million of the possible $70 million in these bonds without any documented plan and time frame to utilize the proceeds.

Rizzo acted as the fiscal agent and issuer for the last $35 million of the bonds, and the majority of those funds were deposited in a non-interest bearing account, the audit said.

More than $23.5 million sat unused in that account on Aug. 31, and the city’s taxpayers have already lost out on approximately $1.7 million in interest.

It also was unclear whether any progress was made on Measure A’s major project, the Bell Sports Complex. After six years, the city has a dirt lot with a masonry wall. An existing water pumping station covers a major portion of the lot. No plans for completing or developing the complex were found during the course of the audit.

Auditors did find that the property taxes approved by voters to pay back those bonds were inappropriately deposited in the city’s general fund, rather than a debt service fund. Because Rizzo’s annual salary raises were contingent upon a positive cash balance in the general fund, Rizzo benefited directly from this accounting maneuver, the audit found.

Other questionable expenses found by the audit include:

• A $300,000 loan to a local business, which is now in default. The business is reportedly Sopp Chevrolet.

• $10.4 million paid to two development firms owned by a contractor who also was the city’s Director of Planning Services. Payments to the firms continued even after the contract ended in June 1997.

• A $4.8 million land purchase from the city’s former mayor, who purchased it for $480,000 in 1981. The city purchased the land without documentation showing how the property would be used, or why it was selected, and with only one appraisal report. The property contains a vacant store and there has been no activity on the site.

The audit also confirms the controller’s earlier findings that three separate taxes were raised inappropriately on Bell residents and business owners.

Those include:

• $2.9 million in property tax assessments for pension obligations.

• $621,000 in sewer standby charges.

• $2.1 million in business license taxes.

Chiang announced he will release audits on the city’s handling of state and federal funds by the end of October and an audit of the financial reports prepared by the outside accounting firm retained by the city in early November.