LEMON GROVE — 

It was less than two years ago that Lemon Grove’s finance department shared some sobering information with the City Council — the city’s General Fund was operating at a deficit of more than $340,000 and the shortfall was projected to reach $1.5 million in the current fiscal year.

But the once-dire financial outlook now appears to be moving in a more positive direction, an independent auditor told the City Council last week. But while the city is regaining its fiscal health in the short term, Lemon Grove will need to continue to be conservative in managing its spending.

Interim administrative services director Rodney Greek and Greg Fankhanel of the city’s contracted auditors Van Lant & Fankhanel, LLP, shared the annual comprehensive financial report for the 2020-21 fiscal year that ended June 30. The two gave assurances to the City Council that its financial position appears to be on solid ground.

The audit report showed that the city’s assets — including property, infrastructure, equipment and cash in the bank — exceeded its liabilities, including $9.1 million in net pension liability — were $92.3 million.

It said the city’s overall revenue of $29.2 million showed an increase of $3.5 million from the previous year. The city’s expenses of $23.5 million decreased by more than $750,000 from the previous year.

The General Fund revenue of $18.9 million exceeded expenditures of $15.5 million, resulting in a $3.4 million surplus, the audit team reported.

“Avoiding a General Fund deficit and having a sizable surplus at the end of fiscal year 2020-2021 may seem surprising after (a previous) discussion on the city’s structural deficit issue and the economic impact of the COVID-19 pandemic,” Greek said before sharing detailed breakdowns of the reasons for the surplus:

• $1 million of the revenue surplus is from a one-time payment from a court settlement;
• Another $1.1 million of the revenue surplus is due to higher than anticipated sales tax revenues, mostly from an increase in online sales;
• Most of the budget savings of $591,000 can be attributed to overall city savings, largely from the city’s Public Works department managing expenditures during COVID and delaying some project work.

With Mayor Racquel Vasquez absent, the City Council unanimously accepted the report, though Councilmember Liana LeBaron said she was not fully satisfied with the audit.

LeBaron asked other members of the City Council to authorize a forensic audit of the city’s financials, and during public comments, former mayoral candidate and local business owner Christopher Williams also asked the City Council to consider a forensic audit.

Forensic audits are typically used to uncover criminal behavior, including fraud or embezzlement and there is typically a very specific thing to look into, Greek said.

The rest of the council declined LeBaron’s request.

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