HIGH RISK ISSUES

City of El Cerrito Risk Designation: High Risk

ISSUE
El Cerrito's Failure to Manage Its Spending Resulted in the Depletion of Its General Fund Reserves
*Continual diminishing of financial reserves through overspending* Expenditures exceeded revenue in nearly every year from fiscal years 2009–10 through 2019–20. Exhausted its general fund reserves in fiscal year 2016–17. Relies extensively on short-term loans to provide services to its community and avoid insolvency. Faces rapidly increasing pension costs.
*Ineffective budget development and monitoring practices* Lacks sufficient policies and practices for developing departmental budgets. Does not enforce safeguards to prevent departments from overspending. Does not provide the city council with sufficient information to properly monitor the city's financial condition.

Without a More Coordinated Effort, El Cerrito's Financial Condition Will Continue to Deteriorate
*Lack of a formal financial recovery plan* Developed its budget to reduce spending, but most proposed reductions do not specify how the city will decrease its costs. Identified some cost savings, but most are short-term and do not address future budget challenges. Lacks a comprehensive approach to replenish its reserves and ensure accountability for reductions in spending.
*Insufficient reductions in ongoing costs* Pays above-average salaries for certain positions. Has not sufficiently addressed the costs of employee salaries and benefits in its police and fire departments. Established contracts with police staff that result in more overtime pay than required under the law.
*Missed opportunities to increase revenue* Fails to charge adequate fees to fully cover the costs of its swim center. Charges low or no fees for its senior services, which must be subsidized by the city's general fund.

Appendices
Appendix A—Scope and Methodology
Appendix B—The State Auditor’s Local High‑Risk Program

Agency Response
City of El Cerrito
California State Auditor's Comments on the Response From the City of El Cerrito