DEPOE BAY — A pair of businessmen who spent the last six months investigating the city’s books revealed their findings Wednesday, claiming the city of Depoe Bay has gone seven years without valid financial statements.

The upshot is no less than Depoe Bay’s “financial collapse,” according to John O’Connell, a main street retailer who studied nearly 300 transcripts obtained from a public records search. Aside from missing documents, the papers included two failed audits, evidence of illegal spending and the “collapse” of internal controls.

“The City of Depoe Bay has operated a financial shell game for seven years,” concluded O’Connell in a summary report available at www.DepoeBayReport.com. “While extracting millions in increased rates and fees from citizens, it has systematically denied the transparency to verify where their money goes.”

His collaborator, former IRS tax auditor John Woodmark, likened the neglect to “not filing income taxes for seven years.” Oregon law requires government entities to file audited annual financial statements with the secretary of state. O’Connell said Depoe Bay was named in a group of “chronic” non-filers recently published by the Oregon secretary of state.

“There are simply no records at the city we can rely on,” stated Woodmark, who uncovered an embezzling scheme at city hall nearly 40 years ago. “Nothing is transparent. How can you make a budget if you don’t know how much money you have?

Citing a range of undesirable impacts such as the costly withdrawal of the city’s A2 Moody’s rating, the duo led a sometimes combative meeting of about 20 residents who met at the Horn Public House & Brewery. Among the audience were interested citizens, former city officials and two current city councilors, Fran Recht and Debra Poland, who defended the city.

“We’ve made it our No. 1 priority,” responded Poland, asserting the city council declared its intention to fix the problem a couple of months ago.

Recht criticized the effort “by concerned citizens,” saying the two Johns failed to name themselves on their website. She defended City Hall, saying it was difficult to find municipal auditors or get them to work on a timely basis. “It’s not like we’re not trying,” she said.

Her statement invited a terse response from former city councilor Jerome Grant, who claimed city officials impeded the efforts of several auditors who quit in frustration. Grant called on the city council to take “a war room” line of attack to solve the fiscal fiasco.

“I’m a businessman, and I tell you it can be done,” said Grant, on the council for eight years. “Nobody’s accusing anybody of malfeasance. But if I was a suspicious person, I’d raise my eyebrows at all the things the city’s done to not produce the audits.”

It remains to be seen what impact the report will have. Woodmark hopes the city will bring a CPA aboard to oversee the $23.5 million budget and restore accountability. He claimed a variety of troubling issues — high turnover, harbor losses, improper spending, rate increases and other crises named in his report — are linked to the audit failures.

O’Connell said the point is to spark a discussion among residents, who have a “citizen’s right” to trustworthy bookkeeping at city hall.