Six California Cities At High Risk Of Financial Trouble Or Fraud

A review of California cities by the State Auditor has found six are at high risk of financial mismanagement or are under severe financial stress.

Margarita Fernandez is with the California State Auditor's office. She says the office will monitor the cities of Hemet, Maywood and Richmond at least through January 1, 2016 to assess how they are dealing with their  financial difficulties.

"Richmond -they have budget deficits. They were experiencing different changes in some of their primary revenue sources. We also noticed that they have high level of overtime usage and that they have unfunded pension and other post-employment benefit liabilities."

The auditor may ask the legislature for permission to audit the cities next year.

Maywood was found to have budget deficits and weak processes for accounting and reporting fraud.

The city was contracting for services with the city of Bell in 2010 when the L.A. Times revealed Bell city staff and council were making exorbitant salaries. Seven people from Bell were sentenced to jail or prison for corruption.

Chico, Monrovia and Ridgecrest are taking steps to address their deficits or unfunded pension liabilities and are not likely to be audited.

The State Auditor reviewed financial statements for 450 California cities as part of a new high-risk assessment program approved by the legislature this year.

The program was created to identify cities that are at risk of fraud or that are on unstable financial footing. In 2012-13 Stockton, Mammoth Lakes, and San Bernadino declared bankruptcy.

Fernandez says the auditor's office has not yet completed a report on the financial risk of the other cities it reviewed.