Fullerton city officials are hiring an outside accounting firm to take a hard look at the city’s rocky budget after revelations that $10 million originally thought as set aside in reserves was actually allocated to other areas. 

It comes as city council members grapple with an expected budget deficit they’re going to have to patch this upcoming fiscal year.

During a budget update last month, city staff publicly told council members the $10 million that was part of the $26 million in reserves was money actually allocated for other projects or in other funds – leaving the city with $16 million in savings while facing an expected $13.7 million deficit. 

[Read: How Cooked is Fullerton’s Budget?] 

Now, auditors with Grant Thornton are expected to take a hard look at Fullerton’s budget. 

“We understand there is a $10 million unassigned budget amount that’s caused some concern and some confusion,” said Grant Thornton partner Shawn Stewart to elected officials at Tuesday’s city council meeting.  

He said the aim is to figure out what happened. 

“Our purpose is to really understand what happened, why it happened and who’s responsible with the idea on how do we avoid this in the future and to restore trust,” Stewart said. 

Grant Thornton is the same firm that reviewed Orange’s municipal budget last year, warning in a public report the city could face bankruptcy in three years if officials didn’t make real changes to the budget. 

[Read: Orange On Track for Bankruptcy in Three Years Without ‘Radical’ Change]

In that report, auditors highlighted numerous spending issues – like floating too many vacancies on the books and hiring full-time employees after getting COVID bailout money without creating long-term funding for those new positions. 

During Tuesday’s Fullerton City Council meeting, Stewart said auditors will also look for any signs of fraud. 

“If we do find instances where we find problems of fraud, then we would let you know immediately,” Stewart said. 

Earlier this month, city staff told Voice of OC that City Manager Eddie Manfro raised the issue of the $10 million that was thought to be in reserves in February, but were surprised that council members didn’t publicly discuss the item. 

Meanwhile, city council members pointed fingers at each other and city staff for the city’s bleak budget. 

[Read: Fullerton Plays Hot Potato With Budget Crisis] 

But city staff said council members knew for years that the city’s been in an operating deficit – with expenditures routinely outpacing revenues. 

While cities are legally required to adopt a “balanced budget,” that’s often achieved through shifting money away from other funds – like capital improvements – to break even on spending. 

“We made decisions based on the fact it was presented to us in a certain way,” Councilman Ahmad Zahra said. “There were these misallocations.” 

Councilman Nick Dunlap said it’s a critical time to take a hard look at the budget. 

“We’ve really not seen a time more important in our city’s history than now to figure out what our options are,” Dunlap said. “I think what’s really important here is giving us all of the data and giving us actionable items that we can move on.” 

Spencer Custodio is the civic editor. You can reach him at scustodio@voiceofoc.org. Follow him on Twitter @SpencerCustodio.