Watsonville Performance Audit Press Release

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					                                                        MEDIA RELEASE

                                                 CITY OF WATSONVILLE
                                                             City Manager's Office
                                275 Main Street, Suite 400 • Watsonville, CA 95076
                                                        www.cityofwatsonville.org

1/10/2013

CONTACT:    Mayor Lowell Hurst, 831-768-3010
            Carlos Palacios, City Manager, 831-768-3010
            Ezequiel Vega, Administrative Services Director, 831-768-3470

                        (FOR IMMEDIATE RELEASE)

Today the Santa Cruz County Grand Jury released a performance
audit of the City of Watsonville conducted by the San Francisco
based Harvey M. Rose and Associates firm. City staff and City
Council are reviewing the report and an agenda item has been
scheduled for the January 22 nd City Council meeting to discuss
and approve the City’s response to the audit.

City Manager Carlos Palacios stated the following:

      “We agree with some of the recommendations of the auditors
       regarding the need to update selected administrative rules
       and procedures and in fact had already implemented some of
       the recommendations.       While the City has many good
       practices in place, we agree that some written policies could
       benefit from being updated.       We agree that the City’s
       financial management computer system needs to be updated
       and replaced in the coming years. We also acknowledge that
       the City's finance staff, like other City Departments, has
       been over-burdened and understaffed for several years. In
       an effort to increase our focus on the financial systems, we
       have transferred some functions, like Utility Billing, Risk




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    Management and Health Plan          Management     to   other
    departments in the past year.

   We agree that the City, like other cities in the State and
    Nation, has been in a challenging financial situation over
    the past three years due to the impact of the Great Recession
    on the City’s major revenue sources. We agree that the City
    has spent down reserve balances in the past three years.
    Budget decisions were made by the City Council after
    extensive public hearings, discussion and public debate and
    resulted in major cut backs to employee salaries and in
    layoffs. The City Council made the deliberate decision to
    prioritize public safety and prevent layoffs in Police and
    Fire personnel while making cutbacks in administrative
    staff and placing more stress on fund balances.

   We disagree strongly with the auditor’s characterization of
    the City’s financial strength because the auditor has
    discounted and ignored contextual background information
    and made poor choices in comparison cities. In fact, the
    City’s key financial indicators show that when the City is
    compared to truly comparable cities, the City is close to the
    median in financial strength.

   We disagree strongly with the auditor’s characterization of
    City budget management practices. The auditor made the
    error of comparing original budget to final budget amounts
    while ignoring City Council approved mid-year budget
    amendments. In fact, overall, the City General Fund has
    been under-budget for each of the last three years. The
    auditor also ignored City Manager approved intra-fund
    departmental budget adjustments as allowed by City Council
    Resolution.

   We disagree with the majority of the auditor’s evaluations of
    selected purchasing transactions. We look forward to a
    detailed discussion of each of the transactions and the
    demonstration that the transactions complied with approved
    purchasing procedures.




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     A true performance audit would acknowledge the City’s
      significant achievements during the time period under study
      including major projects such as the 1.3 billion gallon Water
      Recycling Plant, the LEED Platinum Water Operations
      Center, the 131,000 square-foot Civic Plaza Building
      including the new Main Library, new Superior Courts and
      460 car Parking Structure, over six miles of scenic nature
      trails, an 850,000 KWH Solar Panel installation, the Contigo
      Gang Prevention and Intervention Program, the Urban
      Greening Plan and the Watsonville Vista 2030 General Plan.
      The City actively pursued and was awarded millions of
      dollars in grant funding to support these projects which
      leveraged our limited local funding.”

Mayor Lowell Hurst stated, “After three years of intense scrutiny
and now an $88,000 study, the Santa Cruz County Grand Jury has
come up with the ‘earth-shattering’ news that we need to update
some rules and procedures and that the City is in a challenging
budget situation.

The City Council has had numerous public hearings and staff
presentations and debate over the past three years of the Great
Recession and has made informed and difficult budget decisions.
We especially appreciate the informed and willing cooperation
and sacrifice by our City employees in taking painful salary cuts
and other cutbacks to maintain critical public services. It is true
that there is risk involved in reducing City reserve fund balances.
It is equally true that there is risk to the community in Police and
Fire personnel layoffs. We acknowledge that difficult decisions
remain ahead. Rather than restating the obvious, the Grand Jury
may wish to reconsider mandating that the Santa Cruz County
General Fund sponsor their fishing expeditions and let the County
use the funds for what it was intended for: critical health and
human service provision to the most vulnerable in our
community.”



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