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California State Auditor Report Number : 2015-803

City of Maywood
Its Flawed Governance and Financial Mismanagement Could Compromise the Basic Services It Provides to Residents




HIGH RISK ISSUES

City of Maywood, Los Angeles County Risk Designation: High Risk



Issue
MAYWOOD’S WEAK GOVERNANCE INHIBITS RECOVERY FROM ITS PRECARIOUS FINANCIAL AND OPERATIONAL CONDITION

City Council’s Inadequate Oversight of City Operations

  • Failed to manage the city’s financial and administrative functions properly and to monitor the performance of a former city manager adequately.
  • Approved contracts without requiring competitive bidding authorized flawed budgets, and spent city money for inappropriate purposes.

City Council’s Lack of Transparency

  • Deprived the public of information concerning the city council’s decisions by repeatedly violating the State’s transparency law—the Brown Act.
  • Made hiring decisions without using a competitive or structured selection process.
INEFFECTIVE FINANCIAL MANAGEMENT HINDERS MAYWOOD’S ECONOMIC RECOVERY

Ongoing Deficits

  • Reported a general fund deficit for each of the last six fiscal years.
  • Failed to develop a long‑range plan for paying off significant overdue debts totaling more than $15 million as of June 30, 2015.

Deficient Budgeting Process

  • Released poor‑quality budget documents that omitted information critical to users’ understanding of the city’s financial condition.
  • Failed to monitor effectively its revenue and expenditures and to use its budget to guide its financial decisions.

Failure to Maximize Revenue

  • Lost significant revenue from uncollected parking citation and business license fees.
  • Allowed tenants to remain delinquent in paying the city more than $60,000 in rent and related late fees.
WEAK INTERNAL CONTROLS AND NONCOMPLIANCE WITH ITS MUNICIPAL CODE COMPROMISE MAYWOOD’S PROVISION OF BASIC SERVICES TO RESIDENTS

Poor Contract Administration

  • Violated competitive bidding requirements when approving contracts worth millions of dollars.
  • Did not ensure its contractors’ compliance with requirements for adequate insurance coverage.
  • Failed to comply with the State’s prevailing wage laws.

Inadequate Accounting Controls

  • Increased the risk of fraud because it failed to segregate incompatible duties by allowing staff both to handle cash and to record related transactions.
  • Made little effort to correct significant deficiencies in its internal controls—its methods for ensuring the accuracy and integrity of its financial information—that continue to cause late financial reporting.
APPENDICES
Appendix A–Scope and Methodology
Appendix B—The California State Auditor's High-Risk Local Government Agency Audit Program
AGENCY RESPONSE
City of Maywood
California State Auditor’s Comment on the Response from the City of Maywood


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