Report 2020-806
January 21, 2021

Corrective Action Plan and Assessment—City of West Covina

West Covina's Ineffective Fiscal Management Threatens Its Ability to Meet Its Financial Obligations and to Provide City Services
Subject January 2021 January 2022
Continual diminishing of reserves Pending Pending
Questionable use of city resources Pending Pending
Financial decisions based on insufficient analyses Pending Pending
Lack of formal financial recovery plan Pending Fully Addressed

West Covina's Weak Enforcement of Its Procurement Policy Increases the Risk of Waste and Fraud
Subject January 2021 January 2022
Inadequate management of purchase cards Pending Pending
Lack of oversight to ensure that contracts provide best value Pending Pending



Corrective Action Plan and Assessment—City of West Covina

January 21, 2021

View West Covina's Corrective Action Plan from January 21, 2021

The city of West Covina (West Covina) submitted its corrective action plan on January 21, 2021, in response to the audit report titled City of West Covina: Its Deteriorating Financial Situation Threatens Its Fiscal Stability and Its Ability to Provide City Services (2020-806) issued by the California State Auditor as part of its high-risk local government agency audit program. The corrective action plan states that the city will submit by July 1, 2021, a financial recovery plan that accounts for the city's rising costs and the actions that it will take to improve its financial condition. The financial recovery plan will also provide a long-term financial projection, prioritize the resources that the city will use to improve its financial condition, identify individuals responsible for monitoring the city's progress in implementing each action, and outline when the city anticipates completing key milestones related to each action. We will review the city's progress in its next update and will evaluate at that time the extent to which the city has made progress in addressing any of the risk areas.

 

West Covina's Ineffective Fiscal Management Threatens Its Ability to Meet Its Financial Obligations and to Provide City Services
Continual Diminishing of Reserves
California State Auditor's Assessment Status:
Pending		 West Covina plans to perform the following actions to address its diminished financial reserves:
  • Set aside land sale revenue to compensate for any shortfalls in revenue that the city experiences as a result of the effects of the pandemic on the fiscal year 2020-21 budget. The city also plans to use any remaining revenue from the land sale not already committed to repay bond debt to replenish the city's general fund reserves.
  • Proactively mitigate risk and exposure to litigation through training and implementation of best risk management practices.
  • Address the excessive costs currently incurred providing fire and emergency medical services. The city also plans to review the current service delivery model of the fire department and consider other options for service delivery.
  • Implement a formal process for development of reasonable budget projections that adequately accounts for the impact that significant events may have on revenue.
Questionable Use of City Resources
California State Auditor's Assessment Status:
Pending		 West Covina plans to perform the following actions to address its questionable use of resources:
  • Ensure that the fees and assessments charged for services align with costs and increase fees to reflect costs reasonably borne in the provision of city services.
  • Meet and confer regarding negotiation of employee union agreements once the effects of the pandemic subside.
Financial Decisions Based on Insufficient Analyses
California State Auditor's Assessment Status:
Pending		 West Covina plans to prepare financial analyses that evaluate both the short-term and long-term financial implications of significant spending decisions.
Lack of Formal Financial Recovery Plan
California State Auditor's Assessment Status:
Pending		 West Covina states that its financial recovery plan will be submitted by July 1, 2021. That plan will describe the intended corrective actions, timing, prioritization of resources, and the identification of resources responsible for monitoring progress toward implementing each action.

West Covina's Weak Enforcement of Its Procurement Policy Increases the Risk of Waste and Fraud
Inadequate Management of Purchase Cards
California State Auditor's Assessment Status:
Pending		 West Covina plans to improve its internal purchasing processes and enforcement of those processes by effectively documenting management approval.
Lack of Oversight to Ensure That Contracts Provide Best Value
California State Auditor's Assessment Status:
Pending		 West Covina plans to review, evaluate, and monitor all city contracts and seek opportunities for collaboration, reorganization, grants, and cost sharing to eliminate the city's reliance on general fund reserves to support operations. The city also plans to follow its competitive bidding policy to ensure that purchases and contracts secure the best value.



Corrective Action Plan and Assessment—City of West Covina

January 3, 2022

View West Covina's Corrective Action Plan from January 3, 2022

The city of West Covina (West Covina) submitted its corrective action plan update on January 3, 2022, in response to the audit report titled City of West Covina: Its Deteriorating Financial Situation Threatens Its Fiscal Stability and Its Ability to Provide City Services (2020-806) issued by the California State Auditor as part of its high-risk local government agency audit program. The update consists of West Covina's financial recovery plan as of December 2021, which summarizes the city's intended corrective actions along with their expected completion dates, individuals responsible for overseeing the actions, and the current status of those actions. In its corrective action plan from January 2021, the city states that the financial recovery plan will also include a long-term financial projection. Although this update does not contain any projections, the city's development of a financial recovery plan sufficiently addresses our recommendation for that risk area. We will continue to review the city's progress in its next corrective action plan update and will evaluate whether it has fully addressed any of the other risk areas.

 

West Covina's Ineffective Fiscal Management Threatens Its Ability to Meet Its Financial Obligations and to Provide City Services
Continual Diminishing of Reserves
California State Auditor's Assessment Status:
Pending		 West Covina has taken the following action to address its diminished financial reserves:
  • Set aside land sale revenue to compensate for any shortfalls in revenue that the city experiences as a result of the effect of the pandemic on the fiscal year 2020-21 budget.
  • Performed an initial risk management evaluation and is in the process of addressing corrective actions.
  • Evaluated the current fire department model through a consultant's review. The city intends to meet and confer with stakeholders to discuss alternatives.
  • Implemented a formal process for developing reasonable budget projections that compares current year to prior year revenue and expenditures.

Our local high risk dashboard continues to report West Covina's general fund reserves as high risk. We will monitor West Covina's ongoing corrective actions to assess whether they result in changes to its financial reserves.
Questionable Use of City Resources
California State Auditor's Assessment Status:
Pending		 West Covina has taken the following action to address its questionable use of resources:
  • Sought assistance from an external consultant to conduct a municipal fee study to ensure that fees and assessments charged for services align with costs and to increase fees to reflect costs reasonably borne in the provision of city services.
  • Approved employee union agreements with some labor groups and is currently undertaking collective bargaining with other groups.

West Covina indicates that its efforts are still pending in these areas.
Financial Decisions Based on Insufficient Analyses
California State Auditor's Assessment Status:
Pending		 West Covina is in the process of developing a draft financial evaluation template for use in preparing financial analyses that evaluate both the short-term and long-term financial implications of significant spending decisions.
Lack of Formal Financial Recovery Plan
California State Auditor's Assessment Status:
Fully Addressed		 West Covina developed its financial recovery plan that it provided as its corrective action plan update. The financial recovery plan describes the intended corrective actions, expected completion dates, and the identification of staff resources responsible for monitoring progress toward implementing each action.

West Covina's Weak Enforcement of Its Procurement Policy Increases the Risk of Waste and Fraud
Inadequate Management of Purchase Cards
California State Auditor's Assessment Status:
Pending		 West Covina is currently evaluating its purchasing policies to incorporate state law and best practices.
Lack of Oversight to Ensure That Contracts Provide Best Value
California State Auditor's Assessment Status:
Pending		 West Covina has reviewed its existing service contracts and is in the process of evaluating its purchasing policies to incorporate best practices, including those for contracting and bidding.

Corrective Action Plan and Assessment
City of West Covina