By James Nash – Jul 13, 2012 6:57 AM PT
Law enforcement officials are investigating possible crimes in San Bernardino’s city government, which almost drained special funds to prop up its budget.
The near-bankrupt state of the community of 209,000 east of Los Angeles came to light when a new finance director discovered that previous officials shifted money for workers-compensation and liability insurance to the general fund, said Andrea Travis- Miller, interim city manager.
“The city has relied on a whole variety of one-time measures to balance its budget,” Travis-Miller, who began her job in May, said yesterday. “There have been transfers to the general fund with the expectation that they would be repaid. That became difficult.”
A day after she and the finance director warned of a projected $45 million deficit, the City Council voted to seek bankruptcy protection, according to documents and City Attorney James Penman. San Bernardino became the third California municipality to opt for bankruptcy in a month.
The city has been under investigation for several months by the San Bernardino sheriff’s office, the city’s police department and the local district attorney following allegations of crime, according to a statement posted on the sheriff’s website. The release said the probe is continuing and provided no details.
Travis-Miller said she knew of no intentional wrongdoing.
At a council meeting this week, Penman said former municipal employees had understated the extent of the city’s fiscal woes in “falsified” reports during the past 16 years. He declined to name anyone. Mayor Patrick Morris, who took office in 2006, said that it was the first time he had heard Penman’s allegations.
Penman, who unsuccessfully ran against Morris for mayor, said in an interview that irregularities in city accounting became apparent to him in February, and he notified an “outside governmental agency” on Feb. 29. He declined to name the agency, or say whether it was a branch of law enforcement. He also wouldn’t detail the signs of irregularities he saw.
“All evidence of suspected wrongdoing has been turned over to the appropriate governmental agencies,” he said. The probe under way now was sought by city officials, according to the sheriff’s office.
Penman, first elected in 1987 as chief lawyer for the city, said the magnitude of San Bernardino’s financial crisis came to light only in June.
Travis-Miller and Jason Simpson, the new director of finance, discovered that cash reserves had fallen as low as $127,000, jeopardizing the city’s ability to meet its June 15 payroll costs of more than $4 million, Penman said.
Travis-Miller and Simpson weren’t available to comment on Penman’s account, their assistants said.
In a draft of a budget document dated June 26 and released by the city clerk, Travis-Miller and Simpson wrote that San Bernardino was facing insolvency as both its general fund and special funds were out of money.
More than half of the projected $45 million deficit resulted from the city shorting special accounts such as those for retiree health, and workers’ compensation and general- liability insurance funds, according to the budget document.
Evan Westrup, a spokesman for Governor Jerry Brown, a Democrat, and the state Finance Department, said he had no comment as to the legality of the fund transfers. His response came before the disclosure of the law-enforcement probe.
The dissolution of the city’s Economic Development Agency, one of about 400 such entities in California eliminated Feb. 1 by a new state law, compounded the crisis by taking away a source of revenue, according to the memo.
To read entire story, click here.