At the City Council meeting on June 16, 2026, the results of an independent financial review were presented to clear up public confusion about the city’s finances. Conducted by Grant Thornton Risk Advisory Services, the review found accounting errors and budget decisions responsible for the confusion, but confirmed that there was no fraud or intentional misconduct. It apparently boiled down to poor accounting practices, weak financial oversight, inadequate financial reporting, and a lack of clarity in budget reports.

The review focused on two main issues that had raised concerns among residents: a $2.9 million adjustment to the city’s Fiscal Year 2024-25 budget and a depletion of about $10 million from the General Fund.

The Grant Thornton audit revealed that the $2.9 million error was due to accounting errors related to property transfers between the city’s General Fund and the Successor Agency to the former Redevelopment Agency.
Emails reviewed by Grant Thornton show City staff researched the property’s ownership between December 9 and December 15, 2020, and determined that the property should be transferred from the Successor Agency to the City’s General Fund. The journal entries were recorded in December 2020. The report states that City staff later determined the transfer was incorrect and reversed it in 2022. However, the reversal entries were also recorded improperly and failed to correct all of the original accounting errors.
Ultimately, the transaction itself was valid and served the city’s purposes, but mistakes in how it was recorded led to overstated cash balances in the General Fund. These issues weren’t caught until the annual external audit, leading to a correction in Fiscal Year 2024-25.

The depletion of approximately $10 million from the unassigned General Fund balance was primarily due to planned budget decisions, rather than to missing funds. The Fiscal Year 2024-25 budget, which included a planned deficit of more than $9 million and anticipated the use of accumulated reserves, was developed and presented to the City Council during Eric Levitt’s tenure as City Manager.

The planned deficit means the city’s expenditures were intentionally set higher than its income for that period. While it might sound risky, using reserves can help maintain services during tough financial times. Factors such as transfers between funds, the $2.9 million accounting error, and changes in how funds were categorized contributed to the decrease in the unassigned fund balance.

Although the auditors found no signs of fraud, they raised serious concerns about how the city’s finances were communicated to the public and City Council. The budget documents didn’t always line up with the audited financial statements, making it hard to see the true financial picture.

Additionally, the budget presentations mixed different financial activities in ways that could confuse both City Council members and the citizens. The report pointed out that it was challenging to track how the city’s financial situation changed over the fiscal year.

In light of these findings, Grant Thornton made several recommendations for the City of Fullerton, including:

– Improving financial governance and oversight
– Creating more structured review processes for budgeting and financial reporting
– Standardizing accounting procedures for financial transactions
– Enhancing how the budget is presented

To support informed decision-making, the City will host two community conversations designed to provide residents with clear, factual information about the City’s fiscal outlook and gather meaningful input regarding community priorities.

Budget Community Meeting #1
Tuesday, July 7, 2026, at 5:30 pm in the main conference center of the Fullerton Public Library at 353 West Commonwealth Avenue, Fullerton, CA 92832

Budget Community Meeting #2
Thursday, July 9, 2026, at 5:30 pm at the Hunt Branch Library at 201 South Basque Avenue, Fullerton, CA 92833

Learn more about Fullerton’s finances here.

About the City of Fullerton

The City of Fullerton is a public entity located in Orange County, serving a population of approximately 140,000 residents and is celebrated for its historic downtown, vibrant arts scene, top-ranked educational institutions, and thriving small-business community.