City Treasurer Still Can’t Explain $21-Million Error : Finances: Overestimate of interest income shows ‘a major breakdown’ in his office, he tells council committee.

Los Angeles city Treasurer J. Paul Brownridge said Tuesday that a $21-million overestimate of city revenues by his office was a “major breakdown,” but he is still not sure what caused the miscalculation.

Brownridge told the City Council’s Budget and Finance Committee that a preliminary audit due later this week should help determine why his office projected $39.4 million in interest income when the city will net just $18 million.

The discrepancy has driven a projected budget shortfall of $71 million for this year to $92 million and raised concerns about how the city will maintain police, fire and other services.

“We missed our mark last year, and we missed our mark this year,” Brownridge said. “Combine those two and you have what appears to be a major breakdown in our office.”

Brownridge reiterated earlier explanations by his assistant that the problem in tracking interest on bank deposits and other investments resulted, in part, to a reduction in staffing because of a citywide hiring freeze.

But City Councilman Zev Yaroslavsky, who chairs the council committee, rejected that explanation. “That is not an excuse for not doing the important things,” Yaroslavsky said. “I cannot think of anything more important than properly estimating the income we are going to earn from our deposits.”

Yaroslavsky pointed out that a computer purchased several years ago was supposed to improve the tracking of interest income.

But Brownridge said the decrease in his staff from 57 to 44 made it difficult even to operate the computer and that analysis of income took months to compile.

“I still don’t have a satisfactory answer,” conceded Brownridge. “We are still trying to figure out what went wrong.”

Yaroslavsky ordered Brownridge to report to the committee again Friday, after the results of an independent audit are available.