The audit obtained by The Arizona Republic shows the account dropped from about $8 million in July 2010 to less than $3 million in June largely because of the improper transfers. The trust fund is essentially a self-insurance policy to cover personal injury or property damage liabilities.
The audit found city staff used the money during tight budget years to pay other bills, including $3.2 million to the state retirement system, $2.65 million to the city workers compensation trust fund and $500,000 to pay for administrative expenses and salaries.
The drawdown of the insurance trust fund means the city may come up short of cash to cover liabilities.
The fund board apparently wasn’t told, but the City Council was told of some payments.
The revelations come as Glendale voters were to decide Tuesday whether to repeal a sales tax increase the city council approved to bolster the city budget. Proposition 457 seeks to undo a temporary, five-year city sales-tax hike and require all future sales-tax hikes to go before voters.
If the ballot measure is approved, the city estimates it would lose about $25 million annually and face dire budget cuts. But proponents say the extra tax hurts businesses and that the city should focus instead on controlling reckless spending.
The City Council received a copy of the internal audit last week after The Republic filed a request for the document. Mayor Elaine Scruggs has called for a special meeting Monday to discuss the matter.
City Attorney Craig Tindall, in a scathing memo in response to the audit, said the transfers violated the city charter and city code, which lays out limited uses for the fund.
The audit said staff did not follow rules and regulations, or keep the Board of Trustees, which oversees the fund, informed about the transfers. However, the audit noted the council was told about one transfer before it happened and others afterward.
The board, which is chaired by Councilwoman Joyce Clark, was presented with the audit in early October.
Clark said the board should have been better informed, according to a transcript its Oct. 4 meeting.
Clark at one point said the audit was nitpicky. But at other points, she scolded staff for the lack of information sharing. “Shame on you,” she said.
The councilwoman did not respond to The Republic’s requests for further comment.