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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


City of West Covina, Los Angeles County Risk Designation: High Risk

West Covina’s Ineffective Fiscal Management Threatens Its Ability to Meet Its Financial Obligations and to Provide City Services
Continual diminishing of reserves
  • Relied on its general fund reserves to support its operations for years, thereby significantly reducing its reserve balance.
  • Encountered substantial increases in citywide expenditures, including its unfunded pension liability and associated annual payments.
  • Allowed the fire department to routinely exceed its budget by more than $1 million each year, primarily because of excessive overtime costs.
  • Will be further threatened by revenue decreases resulting from the COVID‑19 pandemic.
Questionable use of city resources
  • Paid a greater proportion of its employees’ health benefits than the average proportion paid by state and local governments on the West Coast.
  • Used general fund revenue to subsidize city services rather than increasing the fees it charged to the users of those services.
Financial decisions based on insufficient analyses
  • Did not adequately quantify the financial consequences of budget adjustments for the city council.
  • Did not begin to develop projections of its long‑term outlook based on financial trends until after our initial assessment and has not included key assumptions in its forecast.
Lack of a formal financial recovery plan
  • Has not developed a comprehensive plan with clear timelines, monitoring, and reporting to improve its long‑term financial health.
West Covina’s Weak Enforcement of Its Procurement Policy Increases the Risk of Waste and Fraud
Inadequate management of purchase cards
  • Lacks documentation demonstrating that managers appropriately approved increases to the dollar limits for purchase cards.
  • Allowed requests for limit increases on purchase cards to be granted indefinitely despite its own policy restricting such increases to specific time frames.
Lack of oversight to ensure that contracts provide best value
  • Violated its own competitive bidding requirements when contracting for human resources and claims administration services.
  • Approved amendments to its contract for waste collection services that contain overly-restrictive terms, including lengthy time extensions and a nontermination clause.
Appendix AScope and Methodology
Appendix BThe State Auditor’s Local High‑Risk Program
Agency Response
City of West Covina

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