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City of West Covina
Its Deteriorating Financial Situation Threatens Its Fiscal Stability and Its Ability to Provide City Services

Report Number: 2020-806

December 1, 2020

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 directed by the Joint Legislative Audit Committee, my office presents this audit report regarding the city of West Covina (West Covina), which we conducted as part of our high‑risk local government agency audit program.

This report concludes that West Covina is a high risk city because of the significant risks it faces related to its financial and operational management. West Covina reduced its year‑end general fund reserve balance by $10.6 million—more than half—during the past several fiscal years, primarily due to its inability to address substantial increases in citywide expenditures and its significant pension liability. The city has also likely underestimated the financial impact of the COVID‑19 pandemic during this current fiscal year.

West Covina made certain financial decisions that appear questionable or were based on insufficient analyses. Moreover, the city has not developed a formal financial recovery plan with specific timelines, monitoring, and reporting to improve its long‑term financial health. We also identified instances of inadequate management that limit West Covina’s ability to ensure that public funds are used appropriately and that its procurement efforts provide the best value.

To address these concerns, we present several recommendations, such as pursuing opportunities to better manage or reduce spending, preparing multiyear financial forecasts to quantify the impact of its decisions, and establishing and following procurement policies. We also recommend that West Covina develop a formal financial recovery plan to prioritize resources and assign responsibility for monitoring progress in implementing the plan.

Respectfully submitted,

California State Auditor

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