The Arizona Republic (Phoenix)
BYLINE: By, Dustin Gardiner, The Arizona Republic
Surprise Mayor Sharon Wolcott gave her first State of the City speech Monday morning, revealing that the city’s financial problems are far worse than had been known.
The city already knew it would have to repay $73million that had been misallocated over the course of a decade. But Wolcott said another audit, still being finalized, has uncovered further problems.
City officials wouldn’t give details of the newfound errors on Monday, but said the impact is a $16million shortfall in the city’s general fund for the current fiscal year.
Wolcott said the problems were revealed during an independent audit of the city’s end-of-year books from the last fiscal year.
“The picture is at last coming into focus, and we are committed to getting to the bottom of our financial affairs,” Wolcott said. “The bad news is that our current situation is more challenging than anticipated.”
The city will cover the shortfall with money from its general fund, draining a $13million reserve and leaving a $3million deficit heading into the next fiscal year. State law requires that the City Council approve a balanced budget, so the city will have to make cuts in the coming fiscal year.
Wolcott said the full scope of the errors is still unknown, and further budget cuts could be needed as the city’s finances are investigated more thoroughly. It’s unclear what the city will cut to cover its deficit.
As part of a plan to address the city’s financial problems, Wolcott said the city will hire two accounting firms to audit its development agreements and impact-fee projects going back to 2000. One audit will look at how fees were collected. Another will examine how they were spent.
The city’s use of impact fees has been problematic. An audit last year had uncovered the $73million that was misallocated over a decade to build a new City Hall, police and fire headquarters, a Recreation Campus, and other projects.
The money had been improperly transferred or was used to pay for projects for which it was not designated.
But the scope of the mistakes brought to light in the latest audit of its books, which is being conducted by the firm CliftonLarsonAllen, appears to go beyond the $73million issue.
Surprise officials would not immediately release further details about the latest audit’s findings, such as how the funds had been misallocated.
Chief Financial Officer Scott McCarty said he would outline the problem further this evening in a presentation to the council.
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