Fontana's Finances in a Mess, Audit Says

Times Staff Writer

Faulty financial management practices, overly generous raises and unchecked growth of housinbg developments have put this city in dire financial straights, according to an audit released Tuesday.

One result is that the costs of basic municipal services threaten to outstrip the city's revenue in the near future, the audit by Arthur Young & Co. concluded.

In fact, Fontana's financial affairs are so tangled that the city's assistant financial director, Betty Stark, said "we don't know if we are working in a deficit budget or not." A seperate audit will soon be launched to determine that, she said.

The 300-page audit report included more than 200 recommendations to correct the problems. Targeting unchecked residential development as a leading cause of the city's failing financial health, the report also recommended that city officials balance future growth in housing with additional industrial and commercial businesses to provide a healthier tax base.

"While the deterioration of the city's financial condition should be of significant concern," a summary of the report added, "it is noteworthy that these trends came as a surprise to the city's management."

City Council members hired the accounting firm to conduct the audit six months ago after Edwin Luekemeyer, the city's finance director, resigned in the wake of a police investigation into an alleged scheme to embezzle $140,000 in public funds and sell city-owned cars to friends and relatives. In July, Luekemeyer was charged with 55 counts, including embezzlement of $150,000 and theft of three city-owned vehicles. He has pleaded innocent.

Meanwhile, five Fontana city officials have stepped down in the last six months amid scandals and internal squabbles, and three city councilmen are facing a recall campaign.

The problems come at a time when Fontana, a community of 59,000 people, is at a "crossroad," the report said. It lies in the "geographic epicenter" of one the most rapidly developing areas in Southern California. In the last five years, Fontana's population has increased nearly 45% and is projected to triple by the year 2000.

"Unless there are immediate and major changes in both the city's financial management policies and practices and its current approach to development," the audit report warned, "the community will not evolve in a manner consistent with the City Council's desires and expectations."

Fontana Councilman William Kragness, who originally called for the audit, said the report and its recommendations came "just in the nick of time."

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