Missing Audit Complicates Decision on City Budget

The South Pasadena City Council remains divided on whether to move decisively on a proposed budget or take a more cautious approach as the deadline looms, and expects to consider direction from the Finance Commission after this week.
Though Karen Aceves, the city’s finance director, has prepared and presented a budget to both the commission and council already — a plan that includes $3.5 million in cuts in anticipation of economic fallout from the COVID-19 pandemic — a variety of factors have given some council members pause.
Chief among those factors is the long-delayed audit of prior budgets that has forced planners to rely on estimates rather than final figures. Councilmen Richard Schneider and Michael Cacciotti both support approving a continuing appropriations budget in the meantime, which would essentially continue the current year’s operating budget and delay adoption of the new budget beyond its June 30 due date.
Schneider initially moved to place the continuing appropriations budget on a later meeting’s agenda.
“So we don’t have to be rushed into putting this thing forward in two weeks,” he said last week, referring to the tentative June 24 adoption date of the budget.
“I would say, in the future, we do not let the audit go this long,” he added. “As I remember, we used to get the audit completed by December or January. There’s no reason to let it go to July. I don’t know why it’s going to July, but it does mess things up.”
Mayor Pro Tem Diana Mahmud cautioned against jumping the gun on a continuing appropriations vote, partly because the council’s discussion of the budget last week was not slated to result in action; legally, public bodies are required to make note of action items versus discussion items when agendas are published.
Mahmud also opined that the city’s plan to review the budget on a quarterly basis — because of changing circumstances resulting from the pandemic — would effectively achieve what a continuing appropriations budget would do. Councilwoman Marina Khubesrian agreed with Mahmud.
Schneider and Cacciotti advanced their recommendations based on a petition that demanded a continuing appropriations vote and that began circulating after Josh Betta, a former finance director for South Pasadena and several neighboring cities, published a detailed, highly critical analysis of Aceves’ proposed budget.
The unsolicited review claimed, among other things, that several pools of funds remained unaccounted for from prior budgets and pointed out that the numbers had changed between the Finance Commission review on May 26 and publication of the current version for the council’s discussion.
A number of public comments submitted for the meeting also called for a delayed budget adoption.
City Manager Stephanie DeWolfe said that shortly after joining the city in 2017 she discovered a variety of “inappropriate accounting and control practices” that had for years obscured the city’s true financial standing, and said she and the Finance Department have since been ironing out the flaws.
“Among other things, these actions inflated the size of the unrestricted general fund,” DeWolfe noted.
The city manager also emphasized that no dollars were missing from the city’s records or financial portfolio, and committed to transparency and open discussion with those who should want it. Aceves also explained in her presentation that the changes made to her proposals’ numbers were made in observance of policy updates from the county regarding pandemic restrictions.
Mayor Bob Joe signaled support for city staffers working on the audits and budgets.
“Over the past few years, we have made significant changes in our procedures so that our financial record-keeping and forecasting is far more stringent than in the past,” he said. “We strongly believe that the community must trust us to manage our public resources wisely, and we have taken significant steps to try to earn that trust.”