Corrective Action Plan and Assessment—City of Calexico
| Subject | December 2022 |
|---|---|
| Lack of safeguards to prevent overspending | Pending |
| Lack of certain best practices for reducing financial risk | Pending |
| Failure to regularly update service fees | Pending |
| Subject | December 2022 |
|---|---|
| Shortsighted budget practices | Pending |
| Budgets presented in a format that limits residents’ engagement | Pending |
| Subject | December 2022 |
|---|---|
| Mismanagement of grants | Pending |
| Lack of staff prepared to fill key roles | Pending |
Corrective Action Plan and Assessment—City of Calexico
December 19, 2022
View Calexico's Corrective Action Plan from December 19, 2022
The city of Calexico (Calexico) submitted a corrective action plan in December 2022, in response to the audit report titled City of Calexico: Past Overspending and Ongoing Administrative Deficiencies Limit Its Ability to Serve the Public (2021-805). The California State Auditor’s Office issued that report as part of our high-risk local government agency audit program. After reviewing the corrective action plan, we prepared the following assessment of Calexico’s action items to address the high-risk areas referenced on page v of our October 2022 report. Many of the activities Calexico discusses in its plan are ongoing, and presently it expects to complete most of them in fiscal year 2022-23. We will review the city’s progress in its next update, due in April 2023, and reevaluate whether to remove the city’s high-risk designation at that time.
| Lack of safeguards to prevent overspending | |
|---|---|
| California State Auditor's Assessment Status: Pending |
Calexico plans to establish a policy to formalize its provision of quarterly budget reports to its city council. However, it offers this action as an alternative to our recommendation that it implement a policy allowing the city council to approve an annual budget only if it has audited financial statements for the most recently completed fiscal year, along with other financial information. Consequently, we assess its risk of adopting budgets that could result in deficits—as it did in the past—to be high. Calexico could reduce its risk in this area by requiring the city council to act prudently if there are indicators that the city does not have reliable financial information. |
| Lack of certain best practices for reducing financial risk | |
| California State Auditor's Assessment Status: Pending |
The city describes how it plans to propose revisions to its reserve policy and present its city council with options to address its OPEB liability. We will assess these efforts as the city provides us with evidence that they have been completed, and we will continue to assess the city’s other efforts to address its liquidity risk. To address the liquidity risk, Calexico states that it prepared a monthly cash flow projection and determined its general fund reserves are sufficient to address cash flow fluctuations. However, it has not yet provided us with evidence of this projection and determination, and the nature of Calexico’s reserve balance also poses a concern. As we noted in our report, at the end of fiscal year 2020-21 Calexico’s general fund reserves consisted almost entirely of amounts that the city was owed but had not yet collected, and its general fund had to borrow more than $1 million from special revenue funds to maintain its operations. |
| Failure to regularly update service fees | |
| California State Auditor's Assessment Status: Pending |
The city plans to undertake several efforts to address this risk area. These efforts include drafting a fee policy for the city council’s consideration, updating fee studies, and training staff in its planning and building department on the calculation and assessment of fees. The city estimates it will complete these efforts during 2023. We will assess its progress toward implementing these efforts as it provides updates to its corrective action plan. |
| Shortsighted budget practices | |
|---|---|
| California State Auditor's Assessment Status: Pending |
The city plans to revise its budget-change process to use a form that will require expanded information about the risks and benefits of proposed adjustments to budgets. It also plans to prepare revenue and expenditure projections for the city’s next annual budget that will include the costs of operating new city facilities. In addition, the city is exploring revenue development options with its city council. Although each action represents a positive step, Calexico needs to coordinate these efforts to ensure that it can sustain its existing operations. To that end, we reiterate our recommendation that the city develop a detailed plan for generating the revenue it needs to serve the public. For example, such a plan could identify the amount of revenue Calexico needs to staff its technology center, sources and strategies for obtaining that revenue, and a timeline for opening the technology center so the public is able to access its computer and internet resources. We will review the city’s efforts to develop such a plan in our assessments of future updates to its corrective action plan. |
| Budgets presented in a format that limits residents’ engagement | |
| California State Auditor's Assessment Status: Pending |
Calexico states that it verbally presented a recent budget report to its city council in both English and Spanish, and it intends to propose a policy that provides for multilingual presentation of key elements in its proposed and adopted budgets. |
| Mismanagement of grants | |
|---|---|
| California State Auditor's Assessment Status: Pending |
The city states it is on schedule to submit a corrective action plan and resolve various deficiencies in its management of grants administered by the California Department of Housing and Community Development. It also stated that it is on schedule to update its grant management policy to provide more information to its city council about findings related to grants and their resolution. We will assess Calexico’s progress when it provides us with updates to its corrective plan. |
| Lack of staff prepared to fill key roles | |
| California State Auditor's Assessment Status: Pending |
Calexico stated that by April 2023 it will complete overdue performance evaluations and schedule an annual review of compliance with performance evaluation requirements by its city manager. The city also described how it will annually identify one or two essential services and cross-train staff or identify backup resources to ensure continuity in case of vacancies or absences. However, this approach could leave the city vulnerable to disruptions of certain essential services for many years. Calexico should consider whether developing a comprehensive succession plan would be a more efficient use of departments’ time and better ensure that it has provided any critical training on a more expedited schedule. |