(CN) - California officials will monitor six troubled cities after a report by the state auditor tabbed them as being at high risk of financial failure due to fraud and mismanagement.
The cities have been placed on the state's new "Local Government High Risk Program" and were identified as being "at high risk for the potential of waste, fraud, abuse or mismanagement."
Richmond, a Bay Area city of 107,000, topped the list as the largest and most troubled city - rating poor in all five financial assessment categories including capacity to respond to financial emergencies, ability to pay retiree obligations and projected fiscal outlook.
Days before the auditor's report was released, the Richmond City Council approved a four-year contract extension for city manager Bill Lindsay. Lindsay has been city manager since 2005 and will make more than $385,000 annually with compensation, over seven times the city's median household income.
State Auditor Elaine Howle recommends high-risk audits of Richmond, the Los Angeles suburb of Maywood and the city of Hemet in Riverside County.
While Howle also lists Chico, Monrovia and Ridgecrest as potential candidates for financial failures, she says those cities are already addressing the challenges and don't need an audit.
"As a result, we concluded that we would not seek approval to perform an audit at that time, but will continue to monitor the city's progress and may subsequently consider performing additional work," the report states.
The auditor's office reviewed financial reports and previous audits for more than 450 cities before placing the six cities on the watch list. The office visited the cities over the last year to conduct meetings with local governments and assess the cities' operations.
Mark Orme, Chico city manager, said he was given a two-week notice last summer before members from the auditor's office examined the Northern California city's finances. Orme told Courthouse News the assessment helped confirm that Chico had major financial issues and that the meeting helped spur changes in the city's fiscal policies.
"We saw the benefits of their efforts," Orme said. "They were right on."
Orme, who was appointed as Chico's city manager July 2014, said the city has addressed the auditor's findings and that Chico is "continuing to implement sound and prudent fiscal strategies."
Last year the California Policy Center listed Chico and Ridgecrest in its top 10 local governments most at risk. The center's report ranked 490 California cities and counties with respect to their proposed bankruptcy risk.
Since 2012, three California cities have filed for municipal bankruptcy, including Stockton, San Bernardino and Mammoth Lakes.
The proposed audits for Richmond, Monrovia and Ridgecrest must be approved by the Joint Legislative Audit Committee, which oversees the auditor's office.
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