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Costa Mesa budget audit claims $26 million available for services, jobs

Representative from independent firm hired by employees union suggests city is not on brink of insolvency.

June 21, 2011|By Lauren Williams and Imran Vittachi,,

When asked whether he agreed with OCEA's assertion in a news release that the audit identified "hidden pots of money," Foti took issue with the word "hidden," but did say that the audit revealed money held in other funds.

Jennifer Muir, spokeswoman for the OCEA, said although Foti had done an "independent audit" of Costa Mesa's finances, "We do believe that the (majority) City Council intentionally manipulated numbers."

The audit found a $4.2-million difference in the projection in expenditures for the general fund figure given by city officials for the start of the 2011-12 year, Foti said.


According to the audit, the city gave a fund balance of $39.9 million to start the fiscal year, but Foti's calculations found that to be $44.1 million.

OCEA is claiming the equipment replacement fund, which contains unnecessary reserves, is one of the places the city holds reserve money that could be spent on retaining jobs, according to an OCEA news release.

The audit examined the equipment replacement working capital dating back from 2005, and concluded that the reserve funds could be used in the general fund.

The audit also largely questioned the city's priorities in allocating money to different funds and noted a high degree of imprecision in calculating assets, according to Foti.

Areas the city could reallocate money to put the budget in the black included compensated absences, general funds for liabilities, and the unnecessary reserves in the equipment replacement fund, according to Rose Associates' report.

The report examined the equipment replacement working capital dating back to 2003-04, and concluded that the reserve funds could be used in the general fund.

Quoting Moody's, the report said, "The city also has noted that $3.5 million in the Capital Improvement Fund and $6.5 million in the Equipment Replacement Fund are available to the General Fund if necessary. This remains a credit positive and is reflected in the current rating."

"Therefore, the city has fully acknowledged the availability of these funds for general government and debt service purposes," the report said.

About $6.2 million of the equipment replacement fund can be moved to the general fund, Foti said.

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