HIGH RISK ISSUES

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

Issue

INADEQUATE FINANCIAL MANAGEMENT HINDERS LYNWOOD’S FISCAL STABILITY
Ongoing budget deficits and uncertain financial future Operated with a structural deficit for many years. Developed inaccurate fund-balance projections for its general fund, distorting its financial outlook.
Inadequate budgeting practices Does not perform multiyear revenue and expenditure projections. Falls short of recommended general fund reserve.
Questionable salary increases Increased salaries of 40 position classifications by an average of 27 percent. Unable to justify the methodology for determining the amounts of the increases.

VIOLATIONS OF STATE LAW, WEAK OVERSIGHT, AND POLICY BREACHES MAKE LYNWOOD SUSCEPTIBLE TO FRAUD AND WASTE
Violation of state law in the use of water and sewer funds Unable to justify its use of water and sewer revenue to fund some staff salaries. Water and sewer funds may be illegally subsidizing other city departments’ overhead costs. May have inappropriately used the water fund to help pay for a capital project.
Poor contract administration Approved a contract amendment that significantly changed the contract’s scope of services and increased city expenditures. Intentionally bypassed competitive bidding requirements for nearly 50 contracts through a provision in its municipal ordinance that provides city council with such discretion.
Inadequate controls over its financial operations Has not implemented nearly half of the recommendations made by its external auditor more than a year ago. Has not developed a timetable for implementing the remaining fiscal year 2015–16 recommendations.

INEFFECTIVE ORGANIZATIONAL MANAGEMENT DIMINISHES LYNWOOD’S ABILITY TO PROVIDE PUBLIC SERVICES
Lack of strategic plan Does not have a formal citywide plan for guiding its departments and personnel on its vision and mission. Allows reporting on goals, objectives, and measures through its annual budget without a uniform approach.
Inability to effectively measure staffing needs Experienced reductions in its workforce during the past decade despite increases in city services. Has not measured and quantified its workload need for some departments.
Significant turnover in key positions and no plan for identifying future leadership Experienced frequent turnover in the city manager position and among leaders of four key departments. Has not developed a formal plan for ensuring continuity of operations and maintaining institutional knowledge.

APPENDICES
Appendix A—Scope and Methodology
Appendix B—Lynwood’s Implementation Efforts to Address Financial Audit Recommendations
Appendix C—The State Auditor’s Local High-Risk Program

AGENCY RESPONSE
City of Lynwood
California State Auditor’s Comments on the Response From the City of Lynwood