CHICO: The city has been forced to recognize $13.1 million in debts as immediate obligations of the general fund in order to receive a favorable audit, plunging the general fund almost $8 million in the red because of years of deficit spending.
The City Finance Department's comprehensive annual financial report and the results of a third-party audit completed earlier this week confirm concerns city officials have stated for months. In prior years, other auditors have accepted the city's methodology of accumulating deficits in funds where the debts were not being paid back, but the new auditors would not accept that approach.
To prevent the issuance of a qualified or negative opinion on the city's financial status, $10.1 million had to be taken out of the general fund to cover a deficit in the private development fund, and $3 million had to be covered for the capital improvement projects fund. Such action depletes the city's emergency reserves and plunges the general fund into a nearly $7.7 million deficit.