The results of the first phase of an independent review of Fullerton’s budgeting process is making recommendations for better reporting, but did not reveal signs of fraud or intentional financial misconduct, according to Grant Thornton, a Newport Beach-based audit, tax and advisory firm contracted by the city.
Those findings were presented during the City Council’s meeting Tuesday night, June 16, after the firm checked for potential errors and miscommunication at the request of city officials, including looking at issues in reporting for the previous fiscal year ending June 30, 2025. The work included analyzing a $2.9 million audit adjustment documented in 2025 and the reporting of roughly $10 million in unassigned fund balance the same year.
The review concluded that limited transparency over “financial governance and oversight, accounting treatment, financial reporting and budget presentation issues” led to miscommunication and ultimately a misunderstanding over the city’s financial position.
City leaders have delayed releasing a proposed budget for the upcoming fiscal year by about a month, pending results from the forensic audit. Fullerton City Manager Eddie Manfro previously told the council that despite the city’s municipal code requiring him to present a budget prior to June 5, he did not want to move forward with the discussions until all the relevant information was available.
Among key audit findings, the $2.9 million adjustment stemmed from bookkeeping errors in how a transaction was logged, not from any underlying problem with the deal itself or its intent, the report’s authors said. And, a roughly $10 million decrease in unassigned fund balance was largely driven by a deliberate deficit budget, along with transfers, accounting corrections and shifts in how fund balances were classified.
“Through the audit, we have identified several internal operational challenges that must be addressed to build a stronger, more sustainable future for the Fullerton we all love,” Manfro said in a statement, adding that he was committed to working with the City Council and Fullerton staff to “implement stronger financial controls, protect taxpayer funds and give the city council clarity to make decisions for the future.”