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State Controller's audit finds Cudahy spending was out of control

California state controller John Chiang audited the city of Cudahy and found widespread financial irregularities.
California state controller John Chiang audited the city of Cudahy and found widespread financial irregularities.
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There were virtually no controls over spending of taxpayer dollars by city officials in Cudahy, state Controller John Chiang said in an audit released Tuesday.

The audit found city leaders misspent millions of dollars in state and federal grants and misallocated some $22 million dollars in redevelopment funds. Cudahy is a small city— just barely more than one square mile —  with 24,000 residents in Southeast L.A. County. 

Well-run cities in California have 79 standard rules in place to safeguard taxpayers money, Cudahy was observing only eight, the audit said. Chiang also said Cudahy city council meetings were not property recorded and city budgets were adopted months later than required.  

Cudahy officials did not respond to questions about the audits Tuesday afternoon in advance of an evening news conference scheduled by the city. 

Cudahy city leaders requested the audit after two council members and a former city manager pleaded guilty in 2012 to extortion and bribery.

The audit renews  focus on financially troubled cities of Southeast L.A. County as former Bell City Manager Robert Rizzo hears his final sentencing Wednesday on corruption charges. A federal judge recently sentenced him to nearly three years on tax fraud charges.

Chiang said a city's financial controls are not that different from how you might run your own household finances.

" You have to balance your checkbook," Chiang said. "You have to understand how much cash you have in place. You have to have contracts that are signed and followed. You have to keep track of your credit card bills."

In the four years since the Bell corruption scandal surfaced, the state legislature has passed several laws to increase the accountability and transparency of local governments.

"They are called Bell bills," Chiang said.

The state Auditor was given increased authority to audit spending in cities that appear to be at higher risk, for example. And the public can now find the salaries of city officials online on the controller's website.

The public integrity units of county district attorney and federal prosecutors' offices, and county grand juries have long been empowered to investigate local governments where there is evidence of corruption.

Chiang said the most effective check on local officials is for the public to get more involved in their city and local governments, to ask questions and insist on answers.

" They need to certainly mobilize," Chiang said. "We've tried to make getting information about cities easier."

Corrupt city governments have several elements in common, said Patrick Whitnell, general counsel for the League of California Cities. 

"It's a combination of officials who are willing to take advantage of a  lack of oversight, and a failure of oversight among the various parties that should be providing oversight to cities," Whitnell said.

Residents have several powerful tools, including the state open meeting laws and public records act, but when local governments refuse to obey them, the only legal remedy is to sue, he said.

The Los Angeles County Grand Jury last year undertook a wide-ranging study ranking the existence of internal controls of all 88 cities from best to worst. Cudahy tied with the City of Industry for last place.

Los Angeles County Grand Jury ranks cities by their internal controls