Budget Deficit Spurs Call for 10-Year Audit

The administrator of this tiny city called for a 10-year audit of municipal finances last week, charging that years of overspending and sloppy accounting procedures have caused budget reserves to dip dangerously low.

A special audit conducted recently by the city Finance Department shows that officials have been overspending “for some years” and that reserves have been used to “shore up the budget,” City Administrator Darwin G. Pichetto said.

“We are at this time trying to find out why the city has been operating on a yearly shortfall,” Pichetto said.

The financial revelations come as the City Council struggles to develop an already overdue operating budget for fiscal 1988-89, which began July 1. Faced with a deficit of from $117,000 to $1.28 million, the council is debating cutbacks in a variety of programs. In the meantime, the city is being run without any spending plan.

General Fund Account Overdrawn

Pichetto said that much of the current problem stems from years past. The audit shows, for example, that spending over the past two years has outpaced revenue by $1.78 million.

Last year, according to the audit, the city tapped its general fund for $982,110 more than it received in revenue. And the year before, the general fund suffered an $806,297 deficit, even though the city’s formal budget report indicated a $240,000 surplus, Pichetto said.

The city made up for much of the deficit by reaching into its reserve fund. As a result, the reserve fell from $1.2 million two years ago to its current level of about $300,000, officials said.

At a budget session last week, officials haggled over ways to bring spending into line with the $3.1 million in revenue expected this fiscal year.

When the budget sessions began, officials were projecting a deficit of $623,000. Department heads had originally asked for spending approvals that were about $1.28 million above the city’s expected income.

Officials recently managed to trim the spending proposals to within $250,000 of a balanced budget. But the council, which must approve all expenditures, is still faced with slashing politically sensitive services that include some recently implemented police and recreational programs.

Agrees to Cut in Skyknight Service

So far, the council has tentatively eliminated participation in an anti-drug program run by the Los Angeles County Sheriff’s Department, which provides law enforcement services to the city. The council also has agreed to reduce the Skyknight helicopter service and trim a $180,000-a-year program that pays for a deputy to patrol neighborhoods around the clock.

“We’re going to have to cut into everything” in an effort to balance the proposed budget, Mayor Kathleen M. Navejas said.

She also said that the council is “probably going to have to look deep into the Recreation Department” by laying off some part-time employees and reducing operating hours.

Other proposals have included a wage freeze and a halt of all travel and entertainment expenses for council members and city staff. The preliminary budget had proposed a 10% wage hike and allowed $52,260 in travel and entertainment expenses.

Navejas added that she does not expect a final budget to be adopted until at least mid-September. The next budget session is scheduled for Monday, and officials say they expect a final draft of the preliminary budget to be ready before next week for the start of public hearings.

After a final draft is complete, the City Council must hold public hearings before it can approve the financial plan.

Navejas also suggested that a broader audit be made. She said that an audit would substantiate her belief that former City Administrator Charles E. Bryant is to blame for the financial problems.

Bryant was dismissed by the council last December and temporarily replaced by financial consultant Dudley Lang. Pichetto, director of redevelopment since last August, was given the additional duties of administrator in May.

Navejas, a longtime foe of Bryant, said that the former administrator routinely left council members out of financial decisions and often failed to tell them the condition of city finances.

“This has been going on for years,” said Navejas, who last year served on the council’s financial committee. “The former administration would never give copies of financial management reports.” She said that the council often approved expenditures, believing that there was money available to pay for them.

But Bryant, in a telephone interview last week, said that he left his former job after becoming frustrated with the “inexperience of various council members.”

Bryant said he always submitted balanced budgets that were scuttled by council members who would vote to spend money “like drunken sailors.”

For instance, he said, he warned in an internal memorandum to council members in May, 1987, that they had spent $110,227 for unbudgeted items during fiscal 1986-87.

Parade Expense Cited

Among other things, the city’s annual parade cost $10,000 more than expected, Bryant wrote. And a law enforcement study ordered in mid-year cost $14,000.

“They wouldn’t listen,” said Bryant, now a private financial consultant. “It got to where (Navejas) was interfering with my job.”

Bryant agreed that the city’s reserve fund of about $300,000 is now “getting into the danger zone.”

Councilman Donald E. Schultze defended Bryant’s administration and instead blamed Navejas for not properly managing the city’s affairs. He accused her of “trying to bankrupt the city with programs we can’t afford.”

“It all boils down to poor leadership,” said Schultze of Navejas, who has held the mayoral post since April.

Financial Impact Overlooked

Schultze contended that the majority of council members often vote hastily on programs, without realizing the financial impact, a charge Navejas and others deny.

He also said the city has suffered this year because the council had relied on the reserve to balance past budgets while expanding law enforcement and recreation programs. “We adopted a deficit budget. We all knew that,” he said.

But additional expenditures and unexpected revenue losses caused the city to cut deeper into reserve funds.

The city also has felt the impact of the loss of the lucrative Cooper Fellowship bingo parlor. The nonprofit operation, which was expected to pay the city $235,000 in license fees last fiscal year, provided only $135,000 before it closed in February.