To identify local entities that may be high risk, we analyzed publicly available information, such as a city's financial reports and prior audit reports or analyses, for more than 450 California cities and used this analysis to identify various cities for which we performed a more detailed financial analysis. The more detailed analysis included using the financial data to calculate fiscal indicators that may be indicative that a city is in fiscal stress. We also reviewed publicly available information to assess the city's fiscal outlook over the next five years using financial and budgetary reports and other information that could impact the city's operations. We then analyzed the results to determine whether each city is at risk for the potential of waste, fraud, abuse, and mismanagement, or has major challenges associated with its economy, efficiency, or effectiveness.
Based on our initial analyses of cities, we identified six cities that caused us concern for being at high risk for major challenges. The table below presents some of the initial analyses.
To better understand the factors that caused us concern, we visited each of the six cities and conducted an initial assessment to determine the city's awareness and responses to those issues, and identify any other ongoing issues that could affect our determination of whether the city is high risk.
In August 2015, after conducting our initial assessment, we concluded that three cities—City of Chico, City of Monrovia, and City of Ridgecrest—were taking steps to address the risk factors that caused us concerns. As a result, we concluded that we would not seek approval to perform an audit at that time, but would continue to monitor the city's progress and may subsequently consider performing additional work.
However, we concluded that three cities—City of Hemet, City of Maywood, and City of Richmond—may warrant an audit. By December 2015, we concluded that the City of Richmond was taking some steps to address the risk factors that caused us concerns and would not at that time recommend an audit. In January 2016, the Joint Legislative Audit Committee considered and approved an audit of the City of Hemet and the City of Maywood.