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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

October 3, 2016 2015-803

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

As requested by the Joint Legislative Audit Committee, the California State Auditor presents the results of our audit of the city of Maywood, conducted as part of our high-risk local government agency audit program.

This report concludes that Maywood is a high-risk city because of substantial risk factors concerning the city’s financial and operational management. Specifically, the city council did not adequately oversee the city’s operations or monitor the performance of the former city manager over her five‑year tenure, allowing numerous problems to remain uncorrected. The city council also inhibited transparency by repeatedly violating the State’s open meeting law when making decisions that significantly affected city operations, including the hiring of individuals for the positions of the city manager and city attorney.

Maywood has reported a general fund deficit for the last six years, and it continues to face significant financial challenges that threaten its ability to provide services to its residents. Although the city projects a slight improvement in its financial condition, it still lacks the resources to fully repay substantial overdue debts, as of June 30, 2015, totaling over $15 million, which is more than twice its annual operating costs. Further, the city undermined its ability to recover from its financial difficulties by failing to maximize revenue in several possible ways. For example, it understaffed its parking and code enforcement functions, leading to a loss of substantial amounts of revenue from parking citations and business license fees. Finally, Maywood spent millions on contracts it did not subject to a competitive bidding process, thereby failing to ensure the cost-effectiveness of its expenditures.

To help Maywood address these risk factors, we developed recommendations for the city to implement, including employing better personnel management practices and adhering to state laws governing the transparency of local governments’ meetings. We also recommended preparing a repayment plan for the city’s overdue debts, strengthening controls over procurement, and maximizing available revenue sources.

Respectfully submitted,

State Auditor

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