AGENDA
A REGULAR MEETING
OF THE CUDAHY CITY COUNCIL
and JOINT MEETING of the
CITY OF CUDAHY AS SUCCESSOR AGENCY and HOUSING SUCCESSOR AGENCY
TO THE CUDAHY DEVELOPMENT COMMISSION
August 18, 2026 – 6:30 P.M.
Written materials distributed to the City Council within 72 hours of the City Council meeting shall be available for public inspection at www.cityofcudahyca.gov In compliance with the Americans with Disabilities Act (ADA) if you need special assistance to participate in this meeting, you should contact the City Clerk’s Office at (323) 773-5143 at least 72 hours in advance of the meeting.
Rules of Decorum
Under the Government Code, the City Council may regulate disruptive behavior that impedes the City Council Meeting.
Disruptive conduct may include, but is not limited to:
• Screaming or yelling during another audience member’s public comments period; • Profane language directed at individuals in the meeting room; • Throwing objects at other individuals in the meeting room; • Verbal altercations with other individuals in the meeting room; and • Going beyond the allotted three-minute public comment period granted.
When a person’s or group’s conduct disrupts the meeting, the Mayor or presiding officer will request that the person or group stop the disruptive behavior and WARN the person or group that they will be asked to leave the meeting room if the behavior continues.
If the person or group refuses to stop the disruptive behavior, the Mayor or presiding officer may order the person or group to leave the meeting room and may request that those persons be escorted from the meeting room. Any person who, without authority of law, willfully disturbs or breaks up a City Council meeting is guilty of a misdemeanor. (Pen. Code, § 403.)
Cynthia Gonzalez, Mayor
Daisy Lomelí, Vice Mayor
Elizabeth Alcantar Loza, Council Member
Martin U. Fuentes, Council Member
Amanda Gomez, Council Member
This meeting will be conducted in person,
telephonically, and electronically.
Council Chambers/Bedwell Hall
5240 Santa Ana Street
Cudahy, CA 90201
Teleconference Phone Number:
1 (669) 900-6833
Meeting ID: 893 0929 7839
https://us06web.zoom.us/j/89309297839
City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
August 18, 2026, at 6:30 P.M.
1. CALL TO ORDER
2. ROLL CALL
Council / Agency Member Alcantar Loza
Council / Agency Member Fuentes
Council / Agency Member Gomez
Vice Mayor / Vice Chair Lomelí
Mayor / Chair Gonzalez
3. APPROVAL OF AGENDA
4. PLEDGE OF ALLEGIANCE
5. LAND ACKNOWLEDGMENT
We would like to acknowledge that the land we inhabit today was once known as Tovangaar, the home of the Gabrieleño-Tongva people. We show our respects to the Gabrieleño-Tongva people, as well as all Indigenous people, past, present, and future, and honor their labor as original caretakers of this land. We commit to uplifting the Gabrieleño-Tongva people, invite you to acknowledge the history, and join us in caring for this land.
6. PRESENTATIONS
A. Certificate of Recognition to Carlos “CJ” Conde & Jaime Velasco – Power in Unity Mural
7. PUBLIC COMMENTS
(Each member of the public may provide a public comment in person, telephonically or electronically.
In person participants must submit one comment card if they wish to address the City Council. Only speakers that submit a comment card within the first 20 minutes of the meeting will be permitted to speak. Remote participants may provide public comment by clicking the hand icon on Zoom or pressing star (*) nine (9) on the telephone, if they wish to address the City Council. Members of the public are permitted to speak for three (3) minutes concerning items under the City Council’s jurisdiction, including items on the council agenda.)
(Any person who, without authority of law, willfully disturbs or breaks up a City Council meeting is guilty of a misdemeanor. (Pen. Code, § 403).)
8. CITY COUNCIL COMMENTS / REQUESTS FOR AGENDA ITEMS (Each Council Member is limited to three minutes.)
(This is the time for the City Council / Agency to comment on any topics related to “City Business,” including announcements, reflections on city / regional events, response to public comments,
City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
August 18, 2026, at 6:30 P.M.
suggested discussion topics for future council meetings, general concerns about particular city matters, questions to the staff, and directives to the staff (subject to approval / consent of the City Council majority members present, regarding staff directives). Each Council / Agency Member will be allowed to speak for a period not to exceed three (3) minutes. Notwithstanding the foregoing, the City Council Members shall not use this comment period for serial discussions or debate between members on City business matters not properly agendized. The City Attorney shall be responsible for regulating this aspect of the proceeding.)
9. CITY MANAGER REPORT (information only)
10. REPORTS REGARDING AD HOC, ADVISORY, STANDING, OR OTHER COMMITTEE
MEETINGS
11. WAIVER OF FULL READING OF RESOLUTIONS AND ORDINANCES (Consideration to waive full text reading of all Resolutions and Ordinances by single motion made at the start of each meeting, subject to the ability of the City Council / Agency to read the full text of selected resolutions and ordinances when the item is addressed by subsequent motion.) (COUNCIL / AGENCY)
Recommendation: Approve the Waiver of Full Reading of Resolutions and Ordinances.
12. CONSENT CALENDAR
(Items under the Consent Calendar are considered routine and will be enacted by one motion, prior to the vote to approve the Consent Calendar, each Council Member shall have a maximum of three (3) minutes to comment on the Consent Calendar as a whole. There will be no separate discussion of these items unless a Council / Agency Member so requests specific item(s) be removed from the Consent Calendar for separate action. Items may only be considered as a separate action if either (1) a Council Member must recuse themselves due to a conflict of interest or (2) a Council Member has specific questions for City Staff. Items called for separate discussion will be heard as the next order of business.) A. Adoption of Proposed Ordinance No. 771 by Second Reading, Approving Zoning Ordinance Text Amendment No. 2026-01 Amending Section(s) 20.88.050, 20.16.020, 20.20.020, 20.24.020, and
20.28.020 of Title 20 (Zoning) of the Cudahy Municipal Code, to Add a New Use Classification for Data Centers and Prohibiting the Use Citywide, in All Zones (page 7) Presented by City Attorney
Recommendation: The City Council is requested to take the following action:
1. Waive full reading and adopt Ordinance No. 771 approving Zoning Ordinance Text Amendment No. 2026-01, amending section(s)
20.88.050, 20.16.020, 20.20.020, 20.24.020, and 20.28.020 of Title 20
City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
August 18, 2026, at 6:30 P.M.
(Zoning) of the Cudahy Municipal Code, to add a new use classification for Data Centers and prohibiting the use city-wide, in all zones.
B. Adopt Resolution 26-36 Authorizing the City Manager to Execute A Memorandum of Understanding with Scholar Match (page 31)
Presented by the Community Services Director
Recommendation: The City Council is requested to adopt Resolution 26-36 authorizing the City Manager to execute a Memorandum of Understanding with ScholarMatch.
C. Approval of a Budget Amendment of the Fiscal Year 2026-27 City Budget to Appropriate Funds for the Community Development Block Grant Revenues and Expenditures (page 43) Presented by the Senior Planner
Recommendation: The City Council is requested to adopt Resolution No. 26-37 approving a Budget Amendment of the Fiscal Year (“FY”) 2026-27 City Budget to Appropriate Funds for the Community Development Block Grant (“CDBG”) Revenues and Expenditures for the ADA Door Installation Project.
D. 90-Day Synopsis of City of Cudahy’s Financial Conditions (page 49) Presented by the Finance Director
Recommendation: The City Council is requested to:
1. Receive and file this synopsis; and
2. Affirm, as a matter of City policy, that expenditures shall not exceed approved contract authority, purchase authority, or adopted appropriations without prior authorization through the appropriate amendment, change order, budget action, or other legally required approval process; and
3. Direct the City Manager, City Attorney, and Director of Finance to return with any contract amendments, ratifications, claims approvals, budget amendments, or other Council actions required to address the specific items identified in this report, and to provide progress updates through the regular budget cycle.
13. PUBLIC HEARING - NONE
City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
August 18, 2026, at 6:30 P.M.
14. BUSINESS SESSION
A. Receive Presentation on Cudahy Night Market and Select Name, Flyer, and Logo (page 99) Presented by the Assistant to the City Manager
Recommendation: The City Council is requested to take the following action(s):
1. Receive and file the presentation regarding the proposed Cudahy Night Market; and
2. Select the proposed Night Market name, flyer, and logo as presented by staff.
B. Discussion and Direction Regarding Rainbow Liquor (page 111) Presented by the City Manager
Recommendation: The City Council is recommended to discuss and provide direction to staff.
15. COUNCIL DISCUSSION - NONE
RECESS TO CLOSED SESSION
16. CLOSED SESSION
A. Closed Session Pursuant to Government Code Section 54956.9(d)(4) - Conference with Legal Counsel - Anticipated Litigation – Initiation of Litigation - One Matter B. Closed Session Pursuant to Government Code Section 54956.9(e)(1) – Conference with Legal Counsel to Discuss Matter Involving Potential Litigation – One Matter
RECONVENE TO OPEN SESSION
17. CLOSED SESSION ANNOUNCEMENT
18. ADJOURNMENT
City of Cudahy
City Council and Successor Agency
Regular Meeting Agenda
August 18, 2026, at 6:30 P.M.
I, Richard Iglesias, hereby certify under penalty of perjury under the laws of the State of California that the foregoing agenda was posted on the City’s Website, City Hall, Clara Park, and Lugo Park not less than 72 hours prior to the meeting. A copy of said Agenda is on file in the City Clerk’sOffice.
Dated this 14
th day of August 2026
Richard Iglesias, CMC
City Clerk
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STAFF REPORT
Date: August 18, 2026
To: Honorable Mayor and City Council Members
From: Christopher R. Lopez, City Manager
By: Shelley Preisler, City Attorney
Subject: Adoption of Proposed Ordinance No. 771 by Second Reading, Approving Zoning Ordinance Text Amendment No. 2026-01 Amending Section(s) 20.88.050,
20.16.020, 20.20.020, 20.24.020, and 20.28.020 of Title 20 (Zoning) of the Cudahy Municipal Code, to Add a New Use Classification for Data Centers and Prohibiting the Use Citywide, in All Zones
RECOMMENDATION
The City Council is requested to take the following action:
1. Waive full reading and adopt Ordinance No. 771 approving Zoning Ordinance Text Amendment No. 2026-01, amending section(s) 20.88.050, 20.16.020, 20.20.020, 20.24.020, and 20.28.020 of Title 20 (Zoning) of the Cudahy Municipal Code, to add a new use classification for Data Centers and prohibiting the use city-wide, in all zones.
BACKGROUND
At the May 5, 2026, Cudahy City Council Regular Meeting, Vice Mayor Lomelí requested the City Attorney’s Office assistance in coordinating with Council Member Alcantar Loza to discuss policy considerations regarding a potential data center moratorium and emphasized the importance of remaining proactive on issues impacting the community.
The Cudahy Municipal Code (“CMC”) does not, at present, provide a definition for, nor adequately regulate data center land uses, including their location, size and scope, or other applicable development standards. In order to protect the public safety, health, and welfare while the City studies and explores appropriate regulations concerning data center uses, at the June 16, 2026 regular City Council Meeting, the City Council approved Urgency Ordinance No. 768, instituting a temporary 45-day moratorium on applications and approvals of new data center uses. The moratorium expired on Friday, July 31, 2026.
Item Number
12A
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During the moratorium period, the City Attorney’s Office reviewed the impacts of data centers throughout other jurisdictions, the applicability of the City’s current zoning regulations to data centers, potential impacts of data centers in the City, and regulatory approaches by other jurisdictions pertaining to these uses. Based on the environmental, safety, and health impacts that data center uses impose, the City Attorney’s Office developed recommended zoning regulations that establish a new use classification for Data Center uses and prohibit establishment in all zones of the City for the review and consideration of the Planning Commission.
On July 20, 2026, the Planning Commission held a duly noticed public hearing to consider Zoning Ordinance Text Amendment No. 2026-01 (“ZOTA No. 2026-01”) to amend section(s)
20.88.050, 20.16.020, 20.20.020, 20.24.020, and 20.28.020 of Title 20 (Zoning) of the Cudahy Municipal Code (“CMC”), to add a new use classification for Data Centers and prohibiting the use city-wide, in all zones. The Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, and all other pertinent documents. After closing the public hearing, the Planning Commission adopted Resolution No. 2026-01 (Attachment B), initiating and recommending that the City Council approve ZOTA No. 2026-01.
On August 4, 2026, the City Council held a duly noticed public hearing affirming the Planning Commission’s recommendation to approve ZOTA No. 2026-01 and considered all public comments during the public hearing. At this hearing, the City Council, after considering all verbal and written testimony and evidence, voted 5-0 to introduce by first reading Ordinance No. 771 approving ZOTA No. 2026-01. The second reading of Ordinance No. 771 was scheduled for the August 18, 2026, City Council meeting.
DISCUSSION
Data Center Overview
Data Centers can create land use impacts distinct from those associated with other commercial and industrial uses because they house large volumes of high-performance computing equipment used for cloud computing, artificial intelligence, cryptocurrency processing, and other data-intensive activities. These facilities can impose substantial energy and water demands, noise, air quality concerns, aesthetic impacts, and the need for significant utility infrastructure. A modern artificial intelligence data center can use as much electricity as approximately 100,000 homes, and some projections estimate that data centers could account for up to 12 percent of United States electricity consumption by 2028, potentially requiring substantial investments in electrical generation, transmission, and substations. Moreover, artificial intelligence-related data centers are projected to require up to 32 billion gallons of water annually in the United States by 2028. These demands are expected to intensify as artificial intelligence applications grow because increasingly sophisticated models require
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larger datasets and greater computational resources, which, in turn, increase the need for larger data centers and greater energy consumption.
These concerns are not merely theoretical. California already has more than 270 data centers, and other jurisdictions have begun studying or restricting these uses in response to concerns regarding energy demand, water consumption, utility infrastructure, noise, air quality, public health, and land use compatibility.
Actions by the State of California and Other Local Jurisdictions State of California Legislation. In 2025, SB 57 (Padilla), was signed into law which requires the CPUC to report on ratepayer cost-shifting impacts of data center electricity loads by January 1, 2027, however Governor Newsom vetoed other proposed legislation that would have regulated data center water and electricity usage.
Monterey Park (Los Angeles County). On January 21, 2026, the Monterey Park City Council adopted an urgency ordinance establishing a 45-day moratorium on all data center development. The moratorium was subsequently extended through January 21, 2027. On April 20, 2026, the Council adopted ordinances designating data centers as a public nuisance and permanently prohibiting all data centers within city limits — making Monterey Park one of the first cities in California to enact such a permanent ban.
Montebello (Los Angeles County). On February 11, 2026, the Montebello City Council adopted an urgency ordinance imposing a 45‑day moratorium on data centers, including artificial‑intelligence (AI) facilities, while city staff studies their impacts and develops permanent zoning standards. The citywide moratorium was enacted due to concerns over infrastructure, power, and water consumption.
Oakley (Contra Costa County). On April 14, 2026, the City of Oakley became one of the first Bay Area cities to adopt a temporary moratorium on data centers by adopting a 45-day urgency ordinance that blocks acceptance, processing, or approval of data center land use applications while the City studies regulatory standards, expressing intent to develop permanent zoning standards by the end of 2026. In May 2026, the moratorium was subsequently extended by the City Council for an additional period of 10 months and 15 days.
Calipatria (Imperial County). On May 12, 2026, the Calipatria City Council voted to move forward with a public hearing on an interim urgency ordinance that would establish a moratorium on the approval, permitting, construction, or expansion of large-scale data center facilities. The proposed ordinance defines “large-scale data center” as any facility exceeding 10,000 square feet of dedicated server space, 5 megawatts of projected electrical demand, or one acre of land dedicated primarily to such use.
El Monte (Los Angeles County). On March 18, 2026, the El Monte City Council adopted an
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urgency ordinance establishing a 45-day moratorium prohibiting processing, approval, and acceptance of new data center land use applications. The urgency ordinance was passed in order to allow staff time to evaluate impacts, gather public input, and draft zoning regulations for consideration.
Baldwin Park (Los Angeles County). On March 4, 2026, the City Council of Baldwin Park adopted an urgency ordinance establishing a 45-day moratorium on the approval, establishment, or operation of data centers in the City in order to allow City staff time to analyze and recommend regulatory options for establishing new or updated regulations for data centers. On April 15, 2026, the City Council held a public hearing to extend the urgency ordinance establishing a moratorium for an additional 10 months and 15 days.
Imperial (Imperial County). On June 3, 2026, the City of Imperial unanimously approved a 45- day temporary moratorium on the approval of certain emergency high-energy industrial and technology uses, including data centers, battery energy storage systems, and similar utilityintensive industrial or technological uses.
Los Angeles County. On April 14, 2026, the LA County Board of Supervisors adopted a motion directing the Department of Regional Planning, Department of Public Health, and other departments to study the health, environmental, and safety impacts of data centers on neighboring communities, including impacts on electrical and water resources, and a review of how other jurisdictions are regulating data centers. The original motion included a potential moratorium; however, that provision was removed before final adoption. The resulting study is expected to be completed within 120 days.
Current and Proposed Regulation of Data Centers in the Zoning Code Data Centers are currently undefined in the CMC and are not subject to specific location, size, operational, or development standards. City’s existing zoning regulations do not adequately address potential impacts of Data Centers’ energy and water demands, among other operational characteristics.
Under Title 20 (Zoning Code) of the CMC (“Zoning Code”), use regulations in each respective zone dictate permitted and conditionally permitted uses, and any use that is not specifically identified as an allowed use is considered prohibited. Although data centers are not identified as a permitted or conditionally permitted use in the Zoning Code, absent a definition for these uses, there could be uncertainty whether data centers qualify as other defined uses in the Zoning Code. As such, the ZOTA would amend the use regulations tables for all zones to add “Data Center” as a new land use indicated as prohibited by a dash (--), and add a new definition for “Data Center” that reads as follows: “Data Center” means a facility or structure whose sole or primary function is to house servers, systems, equipment, appliances, and other related components for digital data storage, processing, and related operations (whether with connections to the public internet or closed enterprise networks for large scale software
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systems), including but not limited to generative artificial intelligence, cryptocurrency mining, cloud computing, server hosting, and/or other high-intensity computing uses. A Data Center may also include backup power generators, water cooling and storage facilities, air handlers, utility substations, fire suppression systems, physical security systems and other infrastructure to support operations. The term “Data Center” shall not include:
(a) City action;
(b) Data processing facilities whose use is secondary or ancillary to another expressly permitted use, located on less than one acre of land; and
(c) Utilities structures and service facilities.
The addition of a comprehensive definition of Data Center uses and express prohibition on their establishment in all zones of the City will ensure the City is protected from their potential impacts.
ANALYSIS
To amend the City’s zoning regulations, the Zoning Ordinance Text Amendment (“ZOTA”) process established by Chapter 20.84 of the CMC requires the ZOTA be:
• Initiated by resolution of Planning Commission or City Council, or by application of property owner.
• Reviewed by Planning Commission at a noticed public hearing for consistency with the objectives of the City’s zoning regulations, General Plan, and development policies. • By resolution, recommended by the Planning Commission for approval, approval with modifications, or denial based on the findings set forth in CMC Section 20.84.520 (discussed in greater detail below).
• Approved based on the findings set forth in CMC Section 20.84.520 by the City Council at a duly noticed public hearing at a regular or adjourned meeting, at which City Council must review the Planning Commission recommendation and the ZOTA for consistency with the objectives of the City’s zoning regulations, General Plan, and development policies.
CMC Section 20.84.520 Analysis
Any recommendation to approve a ZOTA must be supported by the findings set forth in CMC Section 20.84.520. Specifically, the City Council must find that the amendment: (1) is consistent with the goals, policies, and objectives of the general plan; (2) will not adversely affect surrounding properties; (3) promotes the public health, safety, and general welfare; (4) serves the goals and purposes of the Zoning Code; and (5) is consistent with the applicable portions of the County of Los Angeles Hazardous Waste Management Plan relating to the siting, and siting criteria, for hazardous waste facilities.
(1) The ZOTA is consistent with the goals, policies, and objectives of the General Plan; The proposed ZOTA is consistent with the Cudahy General Plan 2040 because it supports the
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City's land use and economic development goals and policies by ensuring that limited commercial and industrial land resources are preserved for uses that more directly advance the goals of the General Plan. The ZOTA supports Policy LUE 9.1, which calls for accommodating land uses that meet the economic, environmental, and social needs of Cudahy's residents and businesses. The ZOTA also advances Goal ED-5, including Policies ED 5.5 and ED 5.7, which promotes a balanced and sustainable local economy and encourages businesses that contribute to the City's long-term economic vitality. While Data Centers represent an emerging land use shift due to advances in artificial intelligence, the City finds that other commercial and industrial uses provide greater opportunities for economic activity. A prohibition on Data Centers supports the City's economic land use objectives by preserving already limited land areas for uses that more effectively implement the General Plan's vision and mitigates negative impacts on public health and strains on local electrical and water infrastructure. Accordingly, the proposed ZOTA is consistent with the goals, policies, and objectives of the Cudahy General Plan 2040. (2) The ZOTA will not adversely affect surrounding properties; The ZOTA will not adversely affect surrounding properties because it will prevent the establishment of a land use with the potential to adversely affect surrounding properties, as Data Centers may generate impacts distinct from those associated with other commercial and industrial uses permitted in the City. Data centers typically require substantial electrical and water resources, largescale cooling and mechanical equipment, backup power systems, and supporting utility infrastructure, and may generate continuous noise, air quality, and visual impacts.
Prohibiting data centers will avoid introducing these impacts into areas where they could affect nearby residential and other sensitive uses and will reduce the potential for unusually high or fluctuating demands on utility infrastructure serving surrounding properties. The ZOTA does not disturb existing lawful uses and instead preserves the existing pattern of development by preventing a new and potentially incompatible land use from becoming established within the City.
(3) The ZOTA promotes the public health, safety, and general welfare; The ZOTA promotes the public health, safety, and general welfare by protecting the community from the potential environmental and infrastructure impacts associated with data center development. Data centers can consume substantial amounts of electricity and water, produce continuous mechanical noise, require emergency backup generators that may affect local air quality, and place significant demands on electrical, water, and other utility systems. Water use may also fluctuate sharply during hot and dry conditions when facilities rely more heavily on evaporative cooling, creating peak demands that water distribution infrastructure must be capable of accommodating. Prohibiting data centers reduces the potential for these impacts to burden residents, surrounding properties, and public infrastructure and preserves limited land and utility capacity for uses more compatible with the community. (4) The ZOTA serves the goals and purposes of the Zoning Code; The ZOTA serves the goals and
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purposes of the Zoning Code. CMC Section 20.04.020 expressly states that the Zoning Code is intended, among other things, to protect all areas of the community from intrusion by incompatible or harmful land uses; ensure the provisions of adequate open space for light, air circulation, and visual relief; reduce the risk of injury or exposure to hazards for persons and property; ensure that new development does not overtax the capacity of existing utilities or community facilities and services; and maintain and enhance property values in the community. Although the Zoning Code does not expressly contemplate data centers as a distinct land use, its purposes support excluding uses whose scale, resource demands, utility infrastructure requirements, and potential noise, air quality, and visual impacts are inconsistent with the City’s existing development pattern. In particular, prohibiting data centers advances the Zoning Code’s objectives of preventing incompatible land uses and avoiding development that could overtax utility capacity, while preserving limited land within the City for uses more consistent with the community’s existing character and land use needs.
(5) The ZOTA is consistent with the applicable portions of the County of Los Angeles Hazardous Waste Management Plan relating to the siting, and siting criteria, for hazardous waste facilities; As the ZOTA does not relate to hazardous waste facilities, and therefore shall be consistent with the applicable portions of the county of Los Angeles hazardous waste management plan, relating to siting of and siting criteria for hazardous waste facilities.
PUBLIC NOTICE AND COMMENTS
The ZOTA was noticed in accordance with the City’s public notice requirements, which involved publication in the local newspaper (Attachment C) and the City’s social media accounts.
ENVIRONMENTAL IMPACT
The request was reviewed in accordance with the California Environmental Quality Act guidelines and determined that the proposed ZOTA is exempt from the California Environmental Quality Act (Pub. Res. Code § 21000, et seq.) (“CEQA”) and the state CEQA Guidelines (California Code of Regulations, Title 14, § 15000, et seq.) pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption). The exemption applies only to projects where it can be seen with certainty that there is no possibility that the activity in question may have a significant impact on the environment. Because the ZOTA does not approve any development or construction and otherwise maintains the status quo, it can be seen with certainty that the Ordinance would not result in any direct or indirect environmental impacts. A draft Notice of Exemption has been drafted and included as Attachment D.
FINANCIAL IMPACT
The expenses related to adopting this Ordinance would be paid from the General Fund, which
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includes staff time, publication costs, and legal review by the City Attorney’s Office.
CONCLUSION
As stated above, the City Council is recommended to conduct the required public hearing and waive full reading of and introduce Ordinance No. 771 approving ZOTA No. 2026-01 amending the CMC.
ATTACHMENTS
A. Ordinance No. 771
B. Planning Commission Resolution No. 2026-01
C. Public Hearing Notice
D. Draft Notice of Exemption
ORDINANCE NO. 771
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CUDAHY, CALIFORNIA, ADOPTING ZONING ORDINANCE
TEXT AMENDMENT NO. 2026-01 AMENDING SECTION(S)
20.88.050, 20.16.020, 20.20.020, 20.24.020 AND 20.28.020 OF TITLE 20 (ZONING) OF THE CUDAHY MUNICIPAL
CODE, TO ADD A NEW USE CLASSIFICATION FOR DATA
CENTERS AND PROHIBITING THE USE CITY-WIDE, IN
ALL ZONES
WHEREAS, the City of Cudahy (“City”) is a general law city, incorporated under the laws of the State of California (“State”); and
WHEREAS, the California Constitution Article XI, Section 7, enables cities to make and enforce local land use regulations; and
WHEREAS, California Government Code Section 65858 authorizes the City of Cudahy (“City”) to adopt an interim urgency ordinance for the immediate preservation of the public health, safety, or welfare, and to prohibit a land use that is in conflict with a contemplated general plan, specific plan, or zoning proposal that the City is considering or studying, or intends to study within a reasonable time; and WHEREAS, on June 16, 2026, the City Council of the City of Cudahy (“City Council”) adopted Urgency Ordinance No. 768, imposing a temporary forty-five (45) day moratorium on the acceptance, processing, and approval of data center land use applications pursuant to Government Code Section 65858; and
WHEREAS, the procedures and requirements for which a zoning code may be amended are contained within Title 20, Chapter 20.84, Part 8 of the Cudahy Municipal Code (“CMC”); and
WHEREAS, pursuant to CMC Section 20.84.500, a Zoning Ordinance Text Amendment (“ZOTA”) may be initiated by a motion of the Planning Commission; and WHEREAS, pursuant to CMC Section 20.84.510, Planning Commission must hold at least one public hearing on all ZOTAs with notice of such public hearing made in accordance with CMC Section 20.84.100; and
WHEREAS, pursuant to CMC Section 20.84.510, Planning Commission may, by majority vote, recommend by resolution to the City Council approval, approval with modifications, or denial of ZOTA; and
WHEREAS, recommendations for approval of a ZOTA must be based on the findings enumerated in CMC Section 20.84.520; and
WHEREAS, pursuant to CMC Section 20.84.510, City Council must hold at least one public hearing at a regular or adjourned meeting on each Planning Commission recommendation to approve or deny a ZOTA and may, based on the findings enumerated Attachment A Page 15 of 113
Ordinance No. 771
in CMC Section 20.84.520, approve, deny, or refer the matter back to Planning Commission for consideration of substantial modifications thereto; and WHEREAS, at the July 20, 2026 regular meeting, the Planning Commission of the City of Cudahy initiated ZOTA No. 2026-01, which proposes to amend section(s)
20.88.050, 20.16.020, 20.20.020, 20.24.020 and 20.28.020 of Title 20 (Zoning) of the CMC to clarify zoning provisions related to Data Center; and WHEREAS, the ZOTA would establish a separate land use classification for “Data Center” by adopting a clear and distinct definition so that such use is not interpreted as the same as, or substantially similar to, any other permitted or conditionally permitted use in the Zoning Code. The amendment further revises the use tables applicable to all zoning districts to include “Data Center” as a separate use classification and expressly designates such use as prohibited in all zoning districts; and
WHEREAS, on July 20, 2026, the Cudahy Planning Commission (“Planning Commission”) conducted a properly noticed public hearing to consider action on ZOTA No. 2026-01 and to receive evidence as to how or why the proposed general plan or zoning code amendment is consistent with the objectives of the City’s zoning code, general plan, and development policies. All evidence, both written and oral, presented during said public hearing was considered by the Planning Commission in making its determination; and WHEREAS, at this hearing, the Planning Commission, after hearing and considering verbal and written testimony and evidence, adopted Resolution No. 2026-01 to initiate and recommend that the City Council approve ZOTA No. 2026-01, based on the written findings and conclusions in the resolution; and
WHEREAS, on August 4, 2026, the City Council conducted a properly noticed public hearing to consider action on the Planning Commission’s recommendation on ZOTA No. 2026-01 and to consider all public comments during the public hearing, the presentation by City staff, the relevant staff report and other pertinent documents; and WHEREAS, at this hearing, the City Council, after hearing and considering verbal and written testimony and evidence, introduced by first reading Ordinance No. 771 approving ZOTA No. 2026-01; and
WHEREAS, on August 18, 2026, the City Council approved for a second reading and adopted Ordinance No. 771 approving ZOTA No. 2026-01; and WHEREAS, the proposed Ordinance would not result in the approval of any construction or development and it can be seen with certainty that the Ordinance would not result in any direct or indirect environmental impacts.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CUDAHY, CALIFORNIA DOES HEREBY ORDAIN AS FOLLOWS:
SECTION 1. Recitals. The above recitals are true and correct and incorporated herein by reference.
Ordinance No. 771
SECTION 2. Based on the record of the hearing, including all information presented and public testimony received at the hearing, including the Planning Commission Staff Report dated July 20, 2026, the Planning Commission Resolution No. 2026-01, City Council Staff Report dated August 4, 2026, which are hereby incorporated into this Ordinance by reference, the City Council hereby makes the following findings concerning ZOTA 2026-01:
A. The ZOTA is consistent with the goals, policies and objectives of the general plan;
B. The ZOTA will not adversely affect surrounding properties; C. The ZOTA promotes public health, safety, and general welfare; D. The ZOTA serves the goals and purposes of the zoning code; and E. The ZOTA is consistent with the portions of the County of Los Angeles Hazardous Waste Management Plan relating to siting, and siting criteria, for hazardous waste facilities.
SECTION 3. Based on the findings enumerated in Section 2, the City Council approves ZOTA No. 2026-01, attached hereto as Exhibit “A” amending the CMC as follows:
A. Amend Section 20.88.050 to add a new use classification for Data Centers.
B. Amend Sections 20.16.020, 20.20.020, 20.24.020, and Section 20.28.020 to prohibit Data Centers Citywide, in all zones.
For the purposes of Exhibit A, strikethroughs represent deletions and double underline represents additions.
SECTION 5. CEQA. The City Council determines that the proposed ZOTA is exempt from the California Environmental Quality Act (Pub. Res. Code § 21000, et seq.) (“CEQA”) and the state CEQA Guidelines (California Code of Regulations, Title 14, § 15000, et seq.) pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption), and a Notice of Exemption will be filed and prepared upon final action. The exemption applies only to projects where it can be seen with certainty that there is no possibility that the activity in question may have a significant impact on the environment. Because the ZOTA does not approve any development or construction and otherwise maintains the status quo, it can be seen with certainty that the ZOTA would not result in any direct or indirect environmental impacts.
SECTION 6. Severability. If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this Ordinance, or any part thereof is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance or any part thereof. The City Council hereby declares that it would have passed each section,
Ordinance No. 771
subsection, subdivision, paragraph, sentence, clause or phrase thereof, irrespective of the fact that any one or more section, subsection, subdivision, paragraph, sentence, clause or phrase would be subsequently declared invalid or unconstitutional.
SECTION 7. Construction. This Ordinance is intended to supplement, not to duplicate or contradict, applicable state and federal law and this Ordinance shall be construed considering that intent. Any provision of the CMC that is inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to affect the provisions of this Ordinance.
SECTION 8. Publication and Effective Date. The Mayor shall sign, and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within fifteen (15) days after its adoption.
This Ordinance shall become effective in full force and effect thirty (30) days after adoption.
Ordinance No. 771
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Cudahy at its regular meeting on this 4th day of August 2026.
Cynthia Gonzalez
Mayor
ATTEST:
Richard Iglesias
City Clerk
Ordinance No. 771
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS.
CITY OF CUDAHY )
I, Richard Iglesias, City Clerk of the City of Cudahy, County of Los Angeles, State of California, do hereby certify that the above and foregoing is a full, true, and correct copy of Ordinance No. 771 and was introduced for a first reading on the August 4, 2026, and approved for a second reading and adopted by the City Council of the City of Cudahy, at a regular meeting by said Council held on August 18, 2026, by the following votes to wit:
AYES:
NOES:
ABSTAIN:
ABSENT:
Richard Iglesias
City Clerk
Ordinance No. 771
EXHIBIT “A”
20.88.050 D definitions.
“Data Center” means a facility or structure whose sole or primary function is to house servers, systems, equipment, appliances, and other related components for digital data storage, processing, and related operations (whether with connections to the public internet or closed enterprise networks for large scale software systems), including but not limited to generative artificial intelligence, cryptocurrency mining, cloud computing, server hosting, and/or other high-intensity computing uses. A Data Center may also include backup power generators, water cooling and storage facilities, air handlers, utility substations, fire suppression systems, physical security systems and other infrastructure to support operations. The term “Data Center” shall not include:
a. City action;
b. Data processing facilities whose use is secondary or ancillary to another expressly permitted use, located on less than one acre of land; and c. Utilities structures and service facilities.
20.16.020 Use Regulations.
The following row is added to Table 20.16-1 Permitted and Conditionally Permitted Uses within Residential Zones:
Data Centers -- -- --
20.20.020 Use Regulations.
The following row is added to Table 20.20-1 Permitted and Conditionally Permitted Uses in Commercial and Industrial Zones:
Data Centers -- -- -- --
20.24.020 Use Regulations.
D. Prohibited Uses in City Parks/Parklets Zone, Schools Zone, and Los Angeles River Zone. The following uses are prohibited within the City Parks/Parklets Zone, Schools Zone, and Los Angeles River Zone:
1. Data Centers.
20.28.020 Use Regulations.
The following row is added to Table 20.28-1. Permitted and Conditionally Permitted Uses in Mixed-Use Zones:
Data Centers -- --
Attachment B
Long Beach Press-Telegram
5150 E. Pacific Coast Highway Suite 200
Long Beach, California 90804
(310) 540-5511
City of Cudahy
5220 Santa Ana Street
Cudahy, California 90201
FILE NO. 0011804273
PROOF OF PUBLICATION
(2015.5 C.C.P.)
STATE OF CALIFORNIA
County of Los Angeles
I am a citizen of the United States and
a resident of the County aforesaid; I
am over the age of eighteen years,
and not party to or interested in the
above-entitled matter. I am the
principal clerk of the printer of Long
Beach Press-Telegram, a newspaper
of general circulation, printed and
published in the City of Long Beach*,
County of Los Angeles, and which
newspaper has been adjudged a
newspaper of general circulation by
the Superior Court of the County of
Los Angeles, State of California, under
the date of March 21, 1934, Case
Number 370512. The notice, of which
the annexed is a printed copy, has
been published in each regular and
entire issue of said newspaper and not
in any supplement thereof on the
following dates, to wit:
07/24/2026
I certify (or declare) under the penalty
of perjury that the foregoing is true and
correct.
Executed at Long Beach, California,
this 24th day of July, 2026.
______________________________
Signature
*Long Beach Press-Telegram, a newspaper of general
circulation, is delivered to and available in but not limited to the following cities: Long Beach, Lakewood, Bellflower, Cerritos, Downey, Norwalk, Artesia, Paramount, Wilmington, Compton, South Gate, Los Alamitos, Seal Beach, Cypress, La Palma, Lynwood, San Pedro, Hawaiian Gardens, and Signal Hill.
Zoning text amendment No. 2026-01 - Page 1 of 1
Attachment C Page 27 of 113
CITY OF CUDAHY CITY COUNCIL
NOTICE OF PUBLIC HEARING
NOTICE IS HEREBY GIVEN that on Tuesday, August 4, 2026, at 6:30 p.m., or soon thereafter as the matter may be heard, in the City Council Chambers, 5240 Santa Ana Street, Cudahy, CA 90201, the Cudahy City Council will hold a public hearing to determine whether the matter below shall be approved under the provisions of State Law and the Cudahy Municipal Code as follows:
REQUEST: The City of Cudahy Council is requested to consider zoning text amendment (“ZOTA”) No. 2026-01 to approve Ordinance No. 771, amending section(s) 20.88.050,
20.16.020, 20.20.020, 20.24.020 and 20.28.020 of Title 20 (Zoning) of the Cudahy Municipal Code, to add a new use classification for Data Centers and prohibiting the use city-wide, in all zones.
ENVIRONMENTAL DETERMINATION: The proposed ZOTA is exempt from the California Environmental Quality Act (Public Resource Code Section 21000, et seq. (“CEQA”) and the state CEQA Guidelines (California Code of Regulations, Title 14, § 15000, et seq.) pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) because the ZOTA does not approve any development or construction and otherwise maintains the status quo, therefore it is reasonably foreseeable that the Ordinance would not result in any direct or indirect environmental impacts.
Any person interested in expressing an opinion on this matter shall appear in person at the public hearing to testify in support of, or in opposition to, this matter. Written testimony must be submitted to the City Clerk Office, at 5220 Santa Ana Street, Cudahy, CA 90201, or by email to [email protected] by noon on the date of the hearing.
In compliance with the Americans with Disabilities Act, if you require special assistance to participate in person, please contact the City Clerk’s Office at (323)-773-5143. Notifications at least 72 hours before the meeting will assist in assuring reasonable accommodation.
CITY CLERK
Richard Iglesias
Long Beach Press-Telegram
Published: 7/24/2026
CONCILIO MUNICIPAL DE LA CIUDAD DE CUDAHY
AVISO DE AUDIENCIA PÚBLICA
POR LA PRESENTE SE NOTIFICA que el martes 4 de agosto de 2026, a las 6:30 p.m. o poco después, en cuanto se pueda tratar el asunto, en la Cámara del Ayuntamiento, 5240 Santa Ana Street, Cudahy, CA 90201, el Concilio Municipal de Cudahy llevará a cabo una audiencia pública para determinar si el asunto que se indica a continuación debe aprobarse de conformidad con las disposiciones de la legislación estatal y del Código Municipal de Cudahy, tal y como se detalla a continuación:
SOLICITUD: Se solicita a el Concilio Municipal de la ciudad de Cudahy que considere la revisión del texto de zonificación (ZOTA) n.º 2026-01, para aprobar Ordenanza no. 771 por la que se modifica artículos 20.88.050, 20.16.020, 20.20.020, 20.24.020 y 20.28.020 del Título 20 (Zonificación) del Código Municipal de Cudahy, con el fin de añadir una nueva clasificación de uso para los Centros de Datos y prohibir su uso en todo el término de la ciudad, en todas las zonas.
DETERMINACIÓN MEDIOAMBIENTAL: La ZOTA propuesta está exenta de la Ley de Calidad Ambiental de California (Sección 21000 y siguientes del Código de Recursos Públicos, «CEQA») y de las Directrices estatales de la CEQA (Código de Reglamentos de California, Título 14, § 15000 y siguientes), de conformidad con la Sección 15061(b) de las Directrices de la CEQA (3) (Exención por sentido común), ya que la ZOTA no aprueba ningún proyecto urbanístico ni de construcción y, por lo demás, mantiene el statu quo; por lo tanto, es razonablemente previsible que la Ordenanza no tenga ningún impacto medioambiental directo o indirecto.
Cualquier persona interesada en expresar su opinión sobre este asunto deberá comparecer en persona en la audiencia pública para testificar a favor o en contra del mismo. Los testimonios por escrito deberán enviarse a la Oficina del Secretario Municipal, en la dirección 5220 Santa Ana Street, Cudahy, CA 90201, o por correo electrónico a [email protected] antes del mediodía del día de la audiencia.
De conformidad con la Ley de Estadounidenses con Discapacidades, si necesita asistencia especial para participar en persona, póngase en contacto con la Oficina del Secretario Municipal en el (323)-773-5143. Si nos avisa con al menos 72 horas de antelación a la reunión, nos ayudará a garantizar que se le proporcionen las adaptaciones razonables.
SECRETARIO MUNICIPAL
Richard Iglesias
Long Beach Press-Telegram
Publicado: 24/7/2026
NOTICE OF EXEMPTION
To: ☒Office of Planning and Research
P.O. Box 3044, Room 113
Sacramento, CA 95812-3044
☒County Clerk - County of Los Angeles
12400 E. Imperial Hwy. Room 101
Norwalk, CA 90650
From: City of Cudahy
Department of: Community Development
5220 Santa Ana Street
Cudahy, CA 90201
Project Title/Case No(s): Zoning Ordinance Text Amendment No. 2026-01 Project Applicant: City of Cudahy
Project Location – Specific: Citywide
Project Location – City: Cudahy Project Location – County: Los Angeles Project Description:
The project is ZOTA No. 2026-01, which would establish a separate land use classification for “Data Center” by adopting a clear and distinct definition so that such use is not interpreted as the same as, or substantially similar to, any other permitted or conditionally permitted use in the Zoning Code. The amendment further revises the use tables applicable to all zoning districts to include “Data Center” as a separate use classification and expressly designates such use as prohibited in all zoning districts.
Name of Public Agency Approving Project: City of Cudahy Exempt Status: 15061(b)(3) – Common Sense Exemption
Reason why project is exempt:
The project qualifies for the exemption, which applies only to projects where it can be seen with certainty that there is no possibility that the activity in question may have a significant impact on the environment. Because the ZOTA does not approve any development or construction and otherwise maintains the status quo, it can be seen with certainty that the ZOTA would not result in any direct or indirect environmental impacts.
Lead Agency Contact Person: Cecilia Madrigal-Gonzalez,
Senior Planner
Email: [email protected]
Signature:
Cecilia Madrigal-Gonzalez
Senior Planner
Date: ________________
Attachment D Page 30 of 113
“Serving The People” "Sirviendo A La Comunidad"
Staff Report
08/18/2026 Page 1 of 2
STAFF REPORT
Date: August 18 , 2026
To: Honorable Mayor/Chair and City Council/Agency Members From: Christopher R. Lopez, City Manager/Executive Director Brenda Rodriguez, Community Services Director
Subject: Adopt Resolution 26-36 Authorizing the City Manager to Execute A Memorandum of Understanding with Scholar Match
RECOMMENDATION
The City Council is requested to adopt Resolution 26-36 authorizing the City Manager to execute a Memorandum of Understanding with ScholarMatch.
BACKGROUND
ScholarMatch's mission is to support underserved first-generation college students from lowincome backgrounds in earning a bachelor's degree within five years. ScholarMatch provides virtual individualized advising, targeted financial support, and career mentoring to students throughout their college journey until graduation.
Beginning in high school, ScholarMatch delivers college access and persistence services through its Destined for College and Scholars Program. These services are provided at no cost to eligible first-generation students from low-income backgrounds and are made available through partnerships with community-based organizations, school districts, cities, and foundations.
ScholarMatch's Destined for College and Scholars Program has received funding from local foundations, including MoveUp LA and the Eisner Foundation, to support first-generation graduating high school seniors living in Southeast Los Angeles who enroll in two-year or fouryear colleges. The program began serving the graduating classes of 2025 and 2026.
The City previously entered into a Memorandum of Understanding with ScholarMatch to expand access to college advising, financial support, and related resources for Cudahy students.
Through the partnership, ScholarMatch has worked with students from Elizabeth Learning Center and the surrounding Southeast Los Angeles community to provide college access and persistence support at no cost to participating students. The continuation of the partnership provides an opportunity for the City to build upon these efforts and continue connecting local Item Number
12B
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Staff Report
08/18/2026 Page 2 of 2
students with resources that support college enrollment, persistence, and degree completion.
ANALYSIS
The proposed MOU establishes a partnership between the City and ScholarMatch to promote college access and persistence resources to eligible Cudahy students at no cost to the City or participating students. The MOU will be effective from August 18, 2026 through July 1, 2027.
Under the proposed MOU, ScholarMatch will promote available subsidized services to high school seniors residing in the City of Cudahy and students attending Elizabeth Learning Center.
ScholarMatch will also provide marketing materials and presentations regarding its Destined for College and Scholars Program to eligible graduating high school seniors.
The City will support the partnership by promoting ScholarMatch's programs through available City communication channels, including the City's website, email newsletter, and other marketing platforms. The City will also provide a letter of support to assist ScholarMatch with fundraising efforts to secure Basic Needs scholarships for Elizabeth Learning Center students participating in the ScholarMatch LA Scholars Program.
CONCLUSION
Staff recommends the council approve Resolution 26-36 authorizing the city manager to execute a Memorandum Of Understanding with Scholar Match.
STRATEGIC PLAN CORRELEATION
Goal A: Community Services
Goal B: Social Services
FINANCIAL IMPACT
The MOU does not require the City to provide funding to ScholarMatch and does not create a fiscal obligation for the City.
ATTACHMENTS
A. Memorandum of Understanding between City of Cudahy and Scholar Match B. Resolution No. 26-36
1 MEMORANDUM OF UNDERSTANDING
Between
ScholarMatch Inc.
and
City of Cudahy, California
This Memorandum of Understanding (“MOU”) is made and entered into on this 18th day of August, 2026 (hereinafter, the “Effective Date”) by and between the City of Cudahy, a municipal corporation, organized under the laws of the State of California, with its principal place of business at 5220 Santa Ana St., Cudahy, CA 90201 ("City") and ScholarMatch Inc., a 501(c)3 nonprofit with its principal place of business at 849 Valencia St, San Francisco, CA 94110 (“Consultant”). City and ScholarMatch are sometimes referred to herein collectively as "Parties."
I. PURPOSE & SCOPE
The purpose of this MOU is to provide the mutual and preliminary understandings of the parties as they relate to the provision of providing college access and college persistence support to first-generation high school students from low-income backgrounds within the City.
This MOU is intended to establish a partnership between ScholarMatch Inc. and the City for the purpose of supporting and offering college access and college persistence services for its college-bound high school students in the City.
II. BACKGROUND
ScholarMatch’s mission is to support underserved first-generation college students from low-income backgrounds to earn a bachelor’s degree within five years. We provide virtual individualized advising, targeted financial support, and career mentoring all the way to college graduation.
Beginning in high school, we deliver college access and persistence support to students who are the first in their family to attend college through our Destined for College and Scholars program. Our services are free for first-generation students from low-income backgrounds and available for contract by communitybased organizations, school districts, cities, and foundations.
Attachment A Page 33 of 113
2 Our college programs, Destined for College and Scholars Program, have received funding from local foundations like MoveUp LA and Eisner Foundation that will be used to support first-generation graduating high school seniors who live in Southeast LA and are enrolled in a two-year and four-year college. The program began with the graduating high school senior classes of 2025 and 2026.
III. RESPONSIBILITIES UNDER THIS MOU
● ScholarMatch Inc. shall:
o Promote opportunities for the current subsidized services to high school seniors in the city of Cudahy and Elizabeth Learning Center. ScholarMatch will also provide marketing materials and presentation(s) to graduating high school seniors attending a two-year and four-year university and applying to our Destined for College and Scholars Program.
● The City shall:
o Promote the Destined for College and LA Scholars Program opportunity through City channels such as websites, email newsletter, and other available marketing channels.
o Provide ScholarMatch with a letter of support to assist with ScholarMatch’s fundraising efforts for the purposes of securing Basic Needs scholarships on behalf of the Elizabeth Learning Center’s high school students participating in the ScholarMatch LA Scholars Program.
IV. TERM
The term of this agreement shall commence on August 18th , 2026, and will remain in effect until July 1, 2027
V. IT IS MUTUALLY UNDERSTOOD AND AGREED BETWEEN THE PARTIES THAT:
• All staff and volunteers that work directly with underage high school students shall complete a criminal background check at ScholarMatch’s expense.
3 • The Parties will meet on an annual basis to assess the partnership and address any concerns.
.
IX. EFFECTIVE DATE AND SIGNATURE
This MOU shall have a Term as set forth in Section IV above. By signing below, the City confirms that this MOU has been approved by the Cudahy City Council. [Remainder of page intentionally left blank; signature page follows]
4 IN WITNESS WHEREOF, the parties hereto have caused the MOU to be executed on the day and year first appearing in this Agreement, above.
CITY OF CUDAHY ScholarMatch, Inc
By____________________ By:________________________
Christopher R. Lopez, City Manager Karla V. Salazar, Executive Director ScholarMatch, Inc.
Date:________________________ Date:________________________
5 Attachment A:
6 Date:
Recipient Information
Re: Scholar Match Partnership
TO WHOM IT MAY CONCERN,
The city of Cudahy is proud to partner with Scholar match to promote college opportunities for high school students in our community. The city recognizes scholar match’s meaningful contributions to expand post-secondary education opportunities for underserved students, from high school through completion.
Scholar match has a proven track record of uplifting underserved first-generation college students through personalized counseling mentorship, financial support and career guidance.
Services the city recognizes as beneficial to members of our youth community.
The city remains committed to partnering with scholar match in its mission to help underserved students in our community reach their full potential, this letter aims to facilitate communication between the city and scholar match as a part of our shared efforts to expand educational access opportunity.
Thank you,
RESOLUTION NO. 26-36
A RESOLUTION OF THE CITY OF CUDAHY CALIFORNIA,
AUTHORIZING THE EXECUTION OF A MEMORANDUM OF
UNDERSTANDING BETWEEN THE CITY OF CUDAHY AND
SCHOLARMATCH INC.
WHEREAS, the City wishes to enter into a Memorandum of Understanding with ScholarMatch ("ScholarMatch") to establish the roles and responsibilities of each party in providing college access and success services; and
WHEREAS, the City of Cudahy desires to partner with ScholarMatch to expand college access, college advising, financial aid assistance, and scholarship resources for students residing in the City of Cudahy; and
WHEREAS, City staff has determined that ScholarMatch is qualified and experienced in providing college advising, financial aid support, scholarship assistance, and related educational services; and
WHEREAS, the City Council finds that entering into this Memorandum of Understanding serves a public purpose by increasing educational opportunities and resources for Cudahy students and their families.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Cudahy, California, as follows:
SECTION 1. The City Council hereby approves and authorizes the City Manager to execute a Memorandum of Understanding between the City of Cudahy and ScholarMatch, in a form approved by the City Attorney, for a term beginning August 18, 2026, and ending July 1, 2027.
SECTION 2. The Approval of this Memorandum of Understanding does not create a direct fiscal obligation for the City.
SECTION 3. This Resolution shall take effect immediately upon its adoption by the City Council and the City Clerk shall certify to the passage and adoption of this Resolution and enter it into the book of original Resolutions.
PASSED, APPROVED AND ADOPTED by the City Council of the City of Cudahy at its regular meeting on this 18th day of August 2026.
Cynthia Gonzalez
Mayor
ATTEST:
Richard Iglesias
City Clerk
Attachment B Page 39 of 113
Resolution No. 26-36
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS:
CITY OF CUDAHY )
I, Richard Iglesias, City Clerk of the City of Cudahy, hereby certify that the foregoing Resolution No. 26-36 was passed and adopted by the City Council of the City of Cudahy at a regular meeting held on the 18th day of August 2026 and that said Resolution was adopted by the following vote, to-wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
____________________________________
Richard Iglesias
City Clerk
Resolution No. 26-36
Exhibit A
Memorandum of Understanding
ScholarMatch
Blank Page
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Staff Report
08/18/2026 Page 1 of 2
STAFF REPORT
Date: August 18, 2026
To: Honorable Mayor/Chair and City Council/Agency Members From: Christopher R. Lopez, City Manager/Executive Director By: Cecilia Madrigal-Gonzalez, Senior Planner
Subject: Approval of a Budget Amendment of the Fiscal Year 2026-27 City Budget to Appropriate Funds for the Community Development Block Grant Revenues and Expenditures
RECOMMENDATION
The City Council is requested to adopt Resolution No. 26-37 approving a Budget Amendment of the Fiscal Year (“FY”) 2026-27 City Budget to Appropriate Funds for the Community Development Block Grant (“CDBG”) Revenues and Expenditures for the ADA Door Installation Project.
BACKGROUND
On July 18, 2023, the City Council adopted Resolution No. 23-26 Approving Substantial Amendment No. 1 to the FY 2023-24 CDBG Program to cancel and reallocate funds from the Clara Street Expansion Restroom Improvement project to a new project, the ADA Door Installation Project (“Project”) (CDBG Project No. 602661-23, CIP Project No. CIP-007). The Project budget allocation was approved for $244,800 with a funding start date of January 23, 2024.
On December 3, 2024, the City Council awarded a Contract Services Agreement to American Pride Builders Co. (“Contractor”) for the Project in the amount of $137,500, plus a 10% construction contingency and 5% construction management oversight.
The Contractor began construction in October 2025, and both the construction and project closeout were to be completed by June 30, 2026. The Contractor and the City required additional time to complete the labor compliance reporting and close out the Project, which Item Number
12C
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resulted in the Los Angeles County Development Authority (“LACDA”) approving a time extension in late May 2026 to complete the Project closeout by December 31, 2026.
On June 16, 2026, the City Council adopted the FY 2026-27 Budget.
ANALYSIS
The Project’s time extension was processed and executed concurrently with budget development. Due to this, the CDBG FY 2026-27 adopted revenues and expenditures reflect no estimates. The proposed Budget Amendment is for $75,000 and is required to authorize pending payments and retention to the Contractor and eligible labor compliance and project management costs. The proposed budget amendment will modify the CDBG FY 2026-27 allocation, add revenue to be received from CDBG funding, and update the projected expenditures related to these funds.
CONCLUSION
City staff recommends the City Council approve the budget amendment appropriating $75,000 of CDBG funds into the Project line items, and related budget adjustments.
FINANCIAL IMPACT
There is no fiscal impact on the General Fund, as the City is only spending the amount of CDBG funds allocated based on the approved Project Budget allocation as approved by Resolution No. 23-26. A total of $118,333 has been spent so far, leaving $126,467 available CDBG funds. The recommended budget amendment would appropriate $75,000 of the available CDBG funds for the Project into the corresponding revenue (510-0000-4527-000) and expenditure accounts (510-4685-6725-000). Any remaining unused funds will be made available to the City for future CDBG programming.
ATTACHMENTS
A. Resolution No. 26-37
RESOLUTION NO. 26-37
A RESOLUTION OF THE CITY OF CUDAHY, CALIFORNIA,
APPROVING A BUDGET AMENDMENT OF THE FISCAL
YEAR 2026-27 BUDGET TO APPROPRIATE FUNDS TO THE
COMMUNITY DEVELOPMENT BLOCK GRANT REVENUES
AND EXPENDITURES.
WHEREAS, on July 18, 2023, the City Council of the City of Cudahy (City) adopted Resolution No. 23-26 authorizing an amendment to the FY 2023-24 CDBG Program to allocate funds to a new project, the ADA Door Installation Project (CDBG Project No. 602661-23) (Project) in the amount of $244,800; and
WHEREAS, the City was granted extensions to the time of performance due to delays in the construction schedule and the completion of the mandatory labor compliance monitoring until December 31, 2026; and
WHEREAS, on June 16, 2026, the City of Cudahy City Council approved Resolution No. 26-25 adopting the City’s Annual Budget for Fiscal Year (FY) 2026-27; and WHEREAS, modifications are now required as a result of the Project time of performance, resulting in changes to the allocations of CDBG expenses and revenue during FY 2026-27.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Cudahy, California, as follows:
SECTION 1. The Budget for Fiscal Year 2026-27 is amended as follows:
Fund (510) Community Development Block Grant
510-0000-4527-000 (Revenue) INCREASE - $75,000
510-4685-6725-000 (Expenditure) INCREASE - $75,000
SECTION 2. The City Council hereby authorizes the City Manager to effectuate any further accounting and budget adjustments as long as the goal, total dollars, or intent of this Amendment are not altered.
SECTION 3. The Finance Director is authorized to make any and all actions to implement this Amendment.
SECTION 4. This Resolution shall take effect immediately upon its adoption by the City Council and the City Clerk shall certify to the passage and adoption of this Resolution and enter it into the book of original Resolutions.
Attachment A Page 45 of 113
Resolution No. 26-37
PASSED, APPROVED AND ADOPTED by the City Council of the City of Cudahy at its regular meeting on this 18st day of August 2026.
Cynthia Gonzalez
Mayor
ATTEST:
Richard Iglesias
City Clerk
Resolution No. 26-37
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS:
CITY OF CUDAHY )
I, Richard Iglesias, City Clerk of the City of Cudahy, hereby certify that the foregoing Resolution No. 26-37 was passed and adopted by the City Council of the City of Cudahy at a regular meeting held on the 18th day of August 2026 and that said Resolution was adopted by the following vote, to-wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
_________________________________
Richard Iglesias
City Clerk
Blank Page
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STAFF REPORT
Date: August 18, 2026
To: Honorable Mayor/Chair and City Council/Agency Members From: Christopher R. Lopez, City Manager/Executive Director By: John Xie, Finance Director/City Treasurer
Subject: 90-Day Synopsis of City of Cudahy’s Financial Conditions
RECOMMENDATION
The City Council is requested to:
1. Receive and file this synopsis; and
2. Affirm, as a matter of City policy, that expenditures shall not exceed approved contract authority, purchase authority, or adopted appropriations without prior authorization through the appropriate amendment, change order, budget action, or other legally required approval process; and
3. Direct the City Manager, City Attorney, and Director of Finance to return with any contract amendments, ratifications, claims approvals, budget amendments, or other Council actions required to address the specific items identified in this report, and to provide progress updates through the regular budget cycle.
Administrative procedures and financial system controls are being implemented under the City Manager's authority as purchasing officer and the Director of Finance's authority over accounting and financial controls. Any amendment or corrective action requiring Council approval under the Municipal Code, an existing contract or applicable law will be returned to the Council.
BACKGROUND
Upon assuming office in January 2026, the City Manager identified the need for a comprehensive review of the City's financial controls, including procurement practices, contract administration, budgetary controls, and related financial systems. Given the importance and complexity of this review, the City Manager determined that the assessment Item Number
12D
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should be conducted in coordination with dedicated financial leadership.
Following the appointment of the Finance Director in May 2026, the Finance Department initiated a structured review of the City's financial control environment. This report presents the initial findings from that review and identifies corrective actions underway to strengthen accountability, transparency, and compliance with the City's procurement and budget requirements.
This review is intended to provide the City Council with an accurate assessment of existing conditions and establish a path toward implementing sustainable internal controls. The purpose of this report is not to assign responsibility for past practices, but to identify areas where systems, procedures, and oversight mechanisms require improvement.
This report responds to the City Manager’s request for a synopsis of the financial conditions identified during the Finance Director’s first ninety days in office. It is informational.
These conditions are not new. In April 2014 the State Controller’s Office (SCO) reviewed the City’s administrative and internal accounting controls under Government Code section 12464 (Report S14-SPA-001) attached, after concluding the City’s ability to produce reliable financial reports was questionable. The SCO found only six of seventy-nine internal-control elements (8%) adequate. The City acknowledged the findings and committed in writing to remediate them — in several instances “upon appointment of a City Treasurer.” The City previously assigned Finance Department leadership responsibility for Treasurer functions; however, the City had not maintained a sustained internal control review or a comprehensive remediation effort addressing the procurement, contract administration, and budget-control weaknesses identified by the State Controller’s Office in 2014. The current review represents the first systematic examination of these controls in many years and provides an opportunity to implement the corrective measures previously identified.
This report is limited to procurement and budget-control matters. It does not address any matter that is the subject of a separate, ongoing review.
ANALYSIS
The review identified a set of related weaknesses in how the City authorizes, budgets for, and pays for goods and services. Each is described below, followed by the common control gap underlying most of them and the remediation in progress.
A. Payments exceeding contracted or authorized amounts
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Cumulative payments to several vendors have exceeded the amounts authorized under their contracts or purchase authority:
• Transtech Engineering (contract city-engineering services) - $1,189,420 paid to date and with $721,757 remaining payable as of June 30, 2026, over half of it 121+ days past due.
A total of $1,911,177 expenditure incurred against $750,000 authorized; excess of $1,161,177 above council approved limits.
• WCA (contracted tree trimming service) - $114,386 paid to date and with $7,921 remaining payable as of June 30, 2026. A total of $122,307 expenditure incurred against $60,000 authorized; overage of $62,307.
• Yunex (contracted traffic-signal maintenance) - $166,958 paid to date and with $29,397 remaining payable as of June 30, 2026. A total of $196,355 expenditure incurred with no active agreement authorizing expenditure.
• Nationwide (contracted street sweeping service): $144,647 paid to date against $130,000 authorized; overage of $14,647.
• Willdan (contracted professional consulting services): $20,637.50 paid to date and with $8,565 remaining in payable as of June 30, 2026. A total of $29,202.50 expenditure incurred against $10,000 per year authorized; overage of $19,202.50.
The same pattern appears in construction. On the Atlantic Avenue Complete Streets project (STR-003), billings reached $5,287,768.38 against an authorized contract amount of $5,239,746.73 — $48,021.65 over the ceiling — driven by unit-price quantity overruns billed without change orders and by pending change orders (approximately $192,000) billed as complete before execution. These items are being handled through the contract’s dispute process.
B. Services rendered under no executed contract
The review found payments for services for which no executed written agreement could be located — the same condition the SCO identified in 2014, when it recommended the City use vendor 1099 reports to identify vendors paid without a contract. Without an executed agreement in the City’s records, the City lacks documented terms for scope, price, insurance, and indemnification, and compliance with Municipal Code contracting and Council-approval requirements cannot be established.
C. Weak controls over construction change orders and project costs Beyond the payment overages described in (A), the review found recurring weaknesses in how the City authorizes, pays, and closes out construction change orders:
• Change orders billed before execution. On the Atlantic Avenue Complete Streets project (STR-003), pending change orders (approximately $192,000) were billed as complete before they were signed, and unit-price items were billed beyond their bid quantities
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without a change order authorizing the overrun.
• Contracts grown substantially through cumulative change orders. On the LA River Area Improvements project (ABP-001), the contract grew from $3,793,293 to $4,804,894 — a 27% increase — through nine change orders.
• Change orders paid outside the progress-billing process, without a reconciling review.
On that same project, change orders were paid 100% on separate check requests rather than through the progress pay applications, and the applications did not display the offsetting deduction until a later application. Nothing reconciled the separately paid change orders against the progress billing at the time of payment. A full reconciliation confirmed the contract ultimately tied out with no net overpayment; the finding is the absence of the reconciling control — which created double-payment risk and caused the payments to present as an overpayment until reconciled — not a loss. • Scope added by change order rather than competitively procured. A single change order added approximately $897,518 of work — about 24% of the base contract — as additional maintenance scope rather than through separate procurement, raising a competitive-bidding question under the Public Contract Code and the City's Purchasing Policy.
The common thread is that the contracts exist and the work was largely performed, but the authorization, change-order, and closeout controls around them were not enforced at the time of payment. These are being addressed through change-order authorization tiers, a three-way match, mandatory retention tracking, and a requirement that change orders route through the same encumbrance and review as base contracts — all within the Financial Policies Manual and the City's financial system.
D. Capital-improvement expenditures without appropriation Capital-improvement expenditure has been incurred without corresponding appropriation in the adopted budget. Because the adopted budget is the Council’s legal grant of spending authority, capital spending outside it proceeds without the appropriation the law requires and outside the Council’s capital-planning decisions.
E. Appropriations exceeded without a budget amendment
In one or more funds, expenditures exceeded adopted appropriations without a Councilapproved budget amendment. This represents budgetary noncompliance and mirrors the 2014 finding in which the General Fund overspent by roughly $1.3 million with no amendment adopted.
F. The underlying cause: purchase-order encumbrance requirements were not consistently used or enforced
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Most of the conditions above share one root cause. Payments to these vendors are processed through direct check requests rather than through purchase orders that encumber the contract amount. Because nothing in the financial system reserves funds against a contract ceiling or blocks a payment that would exceed it, an overage becomes visible only after the money is spent — which is also why several items were brought to the Council for authorization after the fact rather than before. Related weaknesses include change orders approved or billed without the authorization level the Municipal Code and contract require, and vendor records missing W-9s and 1099 designations, which is the very data needed to detect vendors paid without a contract.
G. Credit Card administration and compliance
The City has an adopted purchasing-card policy, authorized by Resolution No. 12-10 (2012) and amended by Resolution No. 21-44 (2021), with a written Credit Card User Policy and signed user agreements on file. The condition identified is not the absence of a policy but its administration. The policy assigns the Finance Director responsibility for the timely reconciliation of card accounts, the monitoring of card usage, and record retention, and it sets specific requirements — receipts submitted to the expense portal within three business days, a $5,000 per-purchase limit consistent with the Purchasing Policy, no splitting of purchases to evade that limit, and, under Resolution No. 21-44, no more than five authorized users. The reconciliation and monitoring that the policy assigns to Finance had not been performed on a regular basis. Finance is now performing reconciliation and monitoring, and is strengthening the policy — codifying transaction limits, automating receipt capture and review, and adding periodic audit — as part of the Financial Policies Manual. The same resolution authorizes the City's lines of credit and sets parallel controls, including at least two signatures on any drawdown and a five-user limit; compliance with those controls is being confirmed as part of this review.
H. Risk Issues Associated with Identified Concern Areas The conditions described above are correctable, but left unaddressed, they carry real exposure for the City. The risks if no actions are taken are as follows:
• Fiscal exposure- Paying above authorized amounts and outside the adopted budget creates liabilities the City did not plan for. Past-due balances -such as the vendor payables outstanding more than 120 days at June 30, 2026 - also expose the City to promptpayment interest, an avoidable cost caused by process rather than by the underlying obligation.
• Legal and contractual exposure- Paying for services under no executed agreement leaves the City without agreed scope, price, insurance, or indemnification, so it bears risks it would ordinarily transfer to the vendor. Adding scope by change order rather than through competitive procurement raises exposure under the Public Contract Code, and
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exceeding an appropriation without a budget amendment is inconsistent with California budget law.
• Audit and external-review exposure- Because these are previously identified control weaknesses, their recurrence increases the likelihood of audit findings and of a repeat of the heightened external scrutiny the City experienced in 2014. Where the affected spending is grant-funded, inadequate documentation or non-competitive procurement can place the associated grant revenue at risk of disallowance and repayment. • Continuing internal-control exposure- Until purchase-order encumbrance, a three-way match, and routine reconciliation are fully in place, overages, duplicate payments, and errors will continue to be detectable only after payment rather than prevented before it.
The exposure is ongoing, not historical.
• Governance and public-confidence exposure- A pattern of seeking authorization after funds are committed erodes the Council's budgetary authority and the public's confidence that spending is controlled. Bringing these conditions forward, and correcting them, is what restores both.
Relationship Between Prior SCO Findings and Current Review The conditions map to the 2014 record as follows:
Control area 2014 SCO review (S14-SPA-001) Condition in the 90-day review Contract
authorization
(FINDING 2)
SCO recommended executed
written contracts and use of
1099 reports to find vendors paid
without one; Municipal Code
amended to require Council
approval of contracts over
$5,000.
Payments for services rendered
under no executed contract.
Contract
administration
(FINDING 2)
Weak authorization and
disbursement controls let
spending outrun authority.
Payments to multiple vendors
exceed their contracted /
authorized amounts.
Appropriation
control
(FINDING 10)
FY2011–12 General Fund
overspent by ~$1.3M with no
budget amendment adopted.
Appropriations exceeded without
a Council-adopted budget
amendment.
Capital
budgeting and
appropriation
control
Budgets and budget
amendments were not adopted
timely, and expenditures
exceeded appropriations.
CIP expenditures incurred with no
budgeted appropriation.
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Control area 2014 SCO review (S14-SPA-001) Condition in the 90-day review (FINDING 10)
The point is not that today’s figures equal 2014’s. It is that these are previously identified, previously acknowledged control weaknesses that were not durably remediated — and are now being corrected.
Remediation in progress
The Finance Department is not waiting on this report to act. A comprehensive Financial Policies Manual — eight modules covering roughly three dozen policies — is currently being reviewed, updated, and implemented as the City’s internal-control framework; the first module (accounts payable, accounts receivable, and payroll) is drafted, and the policies most relevant to the conditions above are prioritized. These include a purchasing and contract-administration policy that requires an executed contract before payment, mandatory purchase-order encumbrance to each contract’s not-to-exceed amount, a three-way match (purchase order, receiving, invoice), and defined change-order authorization tiers; an updated travel and purchasing-card policy; and an appropriation-control and budget-amendment policy covering CIP.
In parallel, the City’s Tyler financial system is being configured to require purchase orders for designated vendors and to stop invoices that exceed the remaining encumbrance, and vendor master records are being brought current. These administrative procedures and system controls are being implemented under the City Manager’s authority as purchasing officer and the Director of Finance’s authority over accounting and financial controls. Any action requiring Council approval will be brought forward through the appropriate contract, claims, or budget process.
Next Steps
1. Confirm executed agreements and not-to-exceed amounts. Verify that each vendor and engagement identified in this report is covered by a current, fully executed agreement with a defined scope and not-to-exceed amount, and route any future change orders through the same encumbrance and review as the base contract. This closes the gap that allowed payments to run past authorized amounts and, in at least one case, without any active agreement in place.
2. Complete citywide contracts inventory. Assemble a complete inventory of active City contracts and centralize those authorized by the Council within the City Clerk's Office as the
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single system of record. A current, central repository lets staff confirm — before payment — that an executed agreement exists, what it authorizes, and how much authority remains.
3. Complete FY 24/25 Audit, and begin FY 25/26 audit. Finalize the outstanding FY 24/25 audit and begin the FY 25/26 audit to identify actual expenditures. Completing both brings the City’s financial reporting current and provides the verified figures against which the conditions in this report are measured.
4. Present required contract amendments, ratifications, or budget actions. Bring forward the contract amendments, ratifications, and budget actions needed to reconcile prior overcontract and over-appropriation amounts, incorporated into the regular budget cycle rather than as separate items.
5. Further implement budget controls in Tyler financial systems. Continue configuring the City's Tyler system to require purchase-order encumbrance for designated vendors, to reject invoices that exceed the remaining encumbrance, and to enforce budget-to-actual controls at the appropriation level. Building these controls into the system makes prevention automatic rather than dependent on manual review.
6. Complete and adopt the Financial Policies Manual. Complete and adopt, administratively, the Financial Policies Manual now being reviewed, updated, and implemented as the City's internal-control framework, prioritizing the purchasing and contract-administration, purchasing-card, and appropriation-control policies that address the conditions in this report.
7. Provide quarterly budget updates. Provide the City Council with quarterly informational updates on the City's budget position and on the progress of the corrective measures described in this report, giving the Council a regular, documented view of both spending against appropriation and the status of remediation.
CONCLUSION
The conditions described here are serious but correctable. Finance is leading the accounting and system-control work in coordination with the City Manager, City Attorney, and operating departments. Presenting the conditions now — with the 2014 record attached rather than omitted — is itself part of the correction: it places the City on a documented path back to the procurement and budget discipline it committed to a decade ago. Administrative remediation is already underway, and matters requiring Council approval will return through the appropriate contract, claims, or budget process.
FINANCIAL IMPACT
This is an informational report and requests no appropriation. The amounts identified in this
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report represent known conditions identified through the initial 90-day review. Finance will continue reconciliation of contracts, appropriations, encumbrances, and outstanding obligations and will return with any additional corrective actions requiring Council approval.
The corrective controls run on existing staff and the City's current financial system at no material added cost, and their effect is to prevent future unauthorized or over-ceiling expenditures.
ATTACHMENTS
A. 2014 State Controller’s Office – Administrative and Internal Accounting Controls Report
CITY OF CUDAHY
Review Report
ADMINISTRATIVE AND INTERNAL
ACCOUNTING CONTROLS
July 1, 2010, through June 30, 2012
JOHN CHIANG
California State Controller
April 2014
Attachment A Page 58 of 113
MAILING ADDRESS P.O. Box 942850, Sacramento, CA 94250-5874 SACRAMENTO 3301 C Street, Suite 700, Sacramento, CA 95816 (916) 324-8907 LOS ANGELES 901 Corporate Center Drive, Suite 200, Monterey Park, CA 91754-7619 (323) 981-6802
JOHN CHIANG
California State Controller
April 15, 2014
Honorable Chris Garcia
Mayor of the City of Cudahy
5220 Santa Ana Street
Cudahy, CA 90201
Dear Mayor Garcia:
Enclosed is the report of the State Controller’s Office (SCO) review of the City of Cudahy’s (City) administrative and internal accounting controls. The review was conducted to assess the adequacy of the City’s controls to safeguard public assets and to ensure proper use of public funds.
Our review found significant weaknesses with the City’s accounting and administrative controls system. We found that the potential for waste, fraud, and abuse of public resources is extremely high due to numerous deficiencies noted in the Findings and Recommendations section of our report.
As a part of the review, we assessed various aspects of the City’s internal control components and elements based on guidelines established by the General Accounting Office. Of the 79 control elements evaluated pertaining to internal control components, we found only six, or 8%, in which controls were considered to be adequate.
The results of our review and evaluation of the elements of internal control are included in this report as an Appendix. Our assessments of the elements were based on the conditions that existed during our review period of fiscal year (FY) 2010-11 and FY 2011-12. To the extent feasible, we made inquiries to assess whether the control deficiencies have been addressed since the conclusion of FY 2011-12.
It should be noted that the City generally agreed with the findings noted in the report and is in the process of developing corrective actions and implementing our recommendations. Therefore, the City should be commended for taking these matters seriously and being proactive in resolving the noted deficiencies.
Chris Garcia, Mayor -2- April 15, 2014
As always, my staff and I are available to address your questions. You may contact Steven Mar, Chief, Local Government Audits Bureau, by telephone at (916) 324-7226 or by email at [email protected].
Sincerely,
Original signed by
JEFFREY V. BROWNFIELD
Chief, Division of Audits
JVB/kw
cc: Henry Garcia, Interim City Manager
City of Cudahy
Steven Dobrenen, Finance Director
City of Cudahy
Angela Bustamante, Deputy City Clerk
City of Cudahy
Cristian Markovich, Vice Mayor
City of Cudahy
Diane Oliva, Council Member
City of Cudahy
Baru Sanchez, Council Member
City of Cudahy
Jack Guerrero, Council Member
City of Cudahy
City of Cudahy Administrative and Internal Accounting Controls Contents
Review Report
Introduction ....................................................................................................................... 1 Background ........................................................................................................................ 2 Objective, Scope, and Methodology ................................................................................. 2 Conclusion .......................................................................................................................... 3 Views of Responsible Official ........................................................................................... 3 Restricted Use .................................................................................................................... 3 Findings and Recommendations........................................................................................... 4 Appendix—Evaluation of Elements of Internal Control.................................................... 28
City of Cudahy Administrative and Internal Accounting Controls -1-
Review Report
The State Controller’s Office (SCO) reviewed the City of Cudahy’s (City) system of administrative and internal accounting controls for the period of July 1, 2010, through June 30, 2012 (fiscal year [FY] 2010-11 and FY 2011-12). As necessary, we expanded our testing to include prior and current transactions to follow-up on issues identified through interviews of City officials and through our review of the work of the independent auditors and other audit reports.
On September 3, 2013, the SCO responded to the letters from Mayor Jack Guerrero dated November 2, 2012, May 23, 2013, and June 16, 2013, in which the Mayor requested the SCO to conduct a forensic audit of the City’s internal financial controls.
In those letters, Mayor Guerrero cites concerns that support the need for such an audit, including:
Corruption charges filed against previous City Council members. Possible illegal raises authorized by the previous City Manager who was terminated in March 2011. Additional key City employees were either terminated or resigned during 2011 and 2012.
The 2010-11 independent financial audit was not issued until November 27, 2012, nearly one year after such an audit should have been completed. In addition, the audit firm declined to express an opinion.
The 2011-12 independent financial audit was performed by a different audit firm that issued its final report on January 3, 2013.
While this report is timely, the audit firm noted a number of qualifications based on the lack of necessary information which did not allow the audit firm to calculate extraordinary gain or loss in various funds.
The last formal evaluation of the City's internal control was performed as a part of a single audit required for 2009-10. However, the firm conducting the 2011-12 independent financial audit issued a SAS 115 letter to the City which identified several material deficiencies in internal controls.
The SCO also reviewed the independent financial audits for the last three years and noted the following information, which raises questions about the City's financial status:
General Fund expenditures have exceeded revenues in each year as follows:
FY 2009-10 $332,500
FY 2010-11 $582,500
FY 2011-12 $823,000
Introduction
City of Cudahy Administrative and Internal Accounting Controls -2-
The SCO also reviewed the City’s compliance with financial reporting requirements and found that the City generally has submitted such reports timely. However, based on the factors supporting the Mayor’s request for a forensic audit of internal controls, the additional information from the independent financial audits and the internal control letter from the independent audit firm, the SCO concluded that there is reason to believe that the City's ability to provide reliable and accurate information relating to required financial reports submitted by the City is questionable. Therefore, under Government Code section 12464(a), the SCO Division of Audits conducted an investigation to validate the financial transaction reports submitted by the City during FY 2009-10, FY 2010-11 and FY 2011-12. Under Government Code section 12464 (b), the costs of this review, including preparing a report of the results and transmitting copies to the City Council, will be borne by the City.
This report presents the results of findings and conclusions reached in our review of the City’s administrative and internal accounting controls system.
The City of Cudahy is located in southeastern Los Angeles County, California. The City covers a total area of 1.23 square miles and is bordered by the cities of Bell on the north, Bell Gardens on the east, South Gate on the south and southwest, and Huntington Park on the west.
Cudahy is the second smallest City in Los Angeles County but with one of the highest population densities of any incorporated City in the United States. It is part of the Gateway Cities region. Cudahy is populated predominantly by Latino immigrants and has a population of 23,805 as of the 2010 U.S. Census
The objective of this review was to evaluate the City’s system of administrative and internal accounting controls to ensure:
Effectiveness and efficiency of operations;
Reliability of financial reporting;
Compliance with applicable laws and regulations; and
Adequate safeguard of public resources.
To accomplish our objective, we performed the following procedures:
Evaluated the City’s formal written internal policies and procedures; Conducted interviews with City employees and observed the City’s business operations for the purpose of evaluating City-wide administrative and internal accounting controls;
Reviewed the City’s documentation and supporting financial records; On a limited basis, performed tests of transactions to ensure adherence with prescribed policies and procedures and to validate and test the effectiveness of controls; and
Objective, Scope,
and Methodology
Background
City of Cudahy Administrative and Internal Accounting Controls -3-
Assessed various aspects of the City’s internal control components and elements in accordance with guidelines established by the General Accounting Office.
We found the City of Cudahy’s administrative and internal accounting control deficiencies to be serious and pervasive. As a result, the potential for fraud, waste, and abuse is very high.
As part of our review, we made an assessment of various aspects of the City’s internal control components and elements based on guidelines established by the General Accounting Office’s Internal Control Management and Evaluation tool.
Of the 79 control elements evaluated pertaining to internal control components, we found only six, or 8%, of elements in which controls were considered to be adequate. The results of our review and evaluation of elements of internal control are included in this report as an Appendix.
In the Control Environment components “Integrity and Ethical Values,” and “Commitment to Competence,” we found none of the eight control elements to be adequate. We found the City’s administrative and internal accounting control deficiencies to be serious and pervasive during our review period. Under such a weak control environment, the potential for waste, fraud, and abuse is extremely high.
The City should develop a comprehensive remedial plan to address these deficiencies. The plan should identify the tasks to be performed, and milestones and timelines for completion. Additionally, the City Council should require periodic public updates on the progress in implementing the remedial plan.
We issued a draft report on February 6, 2014. Steven Dobrenen, Finance Director, on behalf of Interim City Manager Henry Garcia, responded by email dated March 5, 2014. The city did not dispute the findings and is in the process of implementing our recommendations.
This report is solely for the information and use of the City of Cudahy and the SCO; it is not intended to be and should not be used by anyone other than these parties. This restriction is not intended to limit distribution of this report, which is a matter of public record.
Original signed by
JEFFREY V. BROWNFIELD
Chief, Division of Audits
April 15, 2014
Conclusion
Views of
Responsible
Official
Restricted Use
City of Cudahy Administrative and Internal Accounting Controls -4-
Findings and Recommendations
Noncompliance with Government Code section 12464
Pursuant to Government Code section 12464, our review determined the following reporting issues:
Financial Transactions Report (FTR) for Fiscal Year 2011-12 Unexplained prior period adjustments to Governmental Funds – The City reported prior period adjustments totaling $321,583 as an increase to the fund balance. However, the City’s Comprehensive Annual Financial Report (CAFR) disclosed 10 prior period adjustments totaling $124,521 as a net decrease to the fund balance; a difference of $446,104 between the FTR and the CAFR. No explanations for prior period adjustments were noted in the FTR. Overstated Traffic Congestion Relief Fund (TCRF) Revenues – The City reported $67,001 in TCRF revenues. However, no TCRF revenues were allocated to the City during this fiscal year. Unrecorded Fixed Assets – The City did not report $125,943 of fixed assets purchased, which understates the Fixed Assets Group of Accounts. See Finding 6 for details.
Financial Transactions Report (FTR) for Fiscal Year 2010-11 Understated Highway Users Tax Apportionments (HUTA) – The HUTA apportionments were understated by $254,940. The total apportionments allocated were $647,317, and the City reported $392,377.
Grant refund not reported – The City returned $240,114 to the State Department of Parks and Recreation for ineligible expenditures.
However, this transaction was not reported. See Finding 5 for details.
Recommendation:
The above findings should be taken into consideration when preparing future Financial Transaction Reports. Amounts reported should be reconciled to the City’s CAFR. Also, the City should ensure that internal control findings and recommendations noted in this report are reviewed and evaluated for impact on future reporting.
City’s Response
The City agrees with the finding and recommendation and would like to add that the Financial Transactions Report (FTR) is prepared prior to the audited Financial Statement. Due to the timing differences, transactions requiring adjustments made after the submittal of the FTR are reflected in the audited Financial Statements but will not be reconciled to the FTR until the following year. Accordingly, any prior period adjustment to the opening fund balance in the FTR’s current fiscal year 2013-14 will include items which reconcile to the ending
City of Cudahy Administrative and Internal Accounting Controls -5-
fund balance of the preceding fiscal year’s audited Financial Statements.
SCO’s Comments
The City agrees with the SCO’s recommendation and will make the necessary prior period adjustments to the opening fund balance in the fiscal year 2014-15 FTR.
Results of Analysis of City’s Administrative and Internal Accounting Controls Our review of the City’s Administrative and Internal Accounting Controls focused on fiscal year (FY) 2010-11 and FY 2011-12. However, we expanded our tests of selected transactions into prior and future periods as necessary to follow-up on related issues.
As a part of our internal control review, we assessed various aspects of the City’s internal controls components and elements based on guidelines established by the General Accounting Office’s Internal Control Management and Evaluation tool. Of the 79 control elements evaluated pertaining to internal control components, we found only six (8%) that were considered adequate. (See Appendix for the results of our evaluation of internal control elements.)
In the Control Environment components “Integrity and Ethical Values,” and “Commitment to Competence,” we found none of the eight control elements to be adequate. We found the City’s administrative and internal accounting control deficiencies to be serious and pervasive during our review period. Under such a weak control environment, the potential for waste, fraud, and abuse is extremely high.
Using the results of our internal control matrix, we performed reviews of selected transactions to document examples of weak and non-existent controls. The specific findings described below all resulted, at least in part, from these deficiencies.
Recommendation
While there are specific recommendations to address the findings described below, from a broader perspective, we recommend that the City develop a comprehensive remedial plan to address the deficiencies noted in the Appendix. The plan should identify the tasks to be performed, and milestones and timelines for completion. In addition, we recommend that the Cudahy City Council require periodic public updates on the progress in implementing the remedial plan.
City’s Response
In accordance with AB 1248, Assemblyman Ken Cooley’s (D-Rancho Cordova) transparency bill, the City of Cudahy will work with the State Controller’s office indirectly through the California League of Cities in providing input to the State Controller on or before January 1, 2015, to develop internal control guidelines applicable to a local agency. An
City of Cudahy Administrative and Internal Accounting Controls -6-
important element that the City will work to communicate is that a onesize fits all approach will not work. The economies of scale difference between a City with a budget of $10 million and $500 million is so significant that the timeframe to implement recommendations should be adjusted and State funding should be provided to the five smallest cities in each county to defray the cost of establishing a compliance program that lines up with the State’s guidelines. The City looks forward to indirectly work with the State Controller’s office for the goal articulated in the words of State Controller John Chiang “… to develop stronger fiscal management practices aimed at protecting communities against selfdealing, misuse of taxpayer monies and other abuses of public trust”.
Upon the appointment of a City Treasurer and/or hiring of a City Auditor a remedial plan will be developed to address the matters raised in the Administrative and Internal Accounting Controls review report.
SCO’s Comments
The City agrees with SCO and is in the process of taking appropriate corrective action to remedy the noted deficiencies.
Our review noted that the gross pay of several City officials showed material increases from year to year for FY 2004-05 through FY 2011-
12. The gross pay paid to these City officials included regular salary, Leave Pay, and Other Pay.
We have identified the total payments that City officials received during the FY 2004-05 through FY 2011-12 from the Earnings History Report as follows:
Positions/
Fiscal Year
Total
Regular
Pay
Monthly
Salary
Monthly
%
Change
Leave
Pay
Leave
Hours
Other
Pay
Gross
Pay
Yearly
%
Change Notes
City Clerk
2005 67,608 5,634 — — (252) 67,356
2006 77,346 6,446 14% — — 39 77,385 14.89%
2007 88,950 7,412 15% 38,210 — — 127,160 6.32%
2008 100,906 8,409 13% 5,925 120 13,734 120,565 -5.19%
2009 106,018 8,835 5% 10,303 40 7,922 124,244 3.05%
2010 106,294 8,858 0% 13,243 259 7,825 127,363 2.51%
2011 91,321 7,610 29,628 295 15,250 136,199 6.94% 1
2012 — — — — — —
638,443 97,309 714 44,518 780,273
HR Director
2005 37,644 3,137 2,901 145 900 41,445
2006 42,659 3,555 13% 6,086 280 1,291 50,036 20.73%
2007 50,036 4,170 17% 5,374 230 2,268 57,678 15.27%
2008 64,347 5,362 29% 5,644 183 7,629 77,619 34.57%
2009 79,451 6,621 23% 6,827 188 8,239 94,517 21.77%
2010 90,083 7,507 13% 11,823 273 5,700 107,606 13.85%
2011 91,988 7,666 2% 10,871 251 5,700 108,559 0.89%
2012 43,465 3,622 -53% 13,246 — 238 56,948 -47.54% 1
499,673 62,772 1,550 31,965 594,408
FINDING 1—
Questionable leave and
other pay for some City
officials
City of Cudahy Administrative and Internal Accounting Controls -7-
Positions/
Fiscal Year
Total
Regular
Pay
Monthly
Salary
Monthly
%
Change
Leave
Pay
Leave
Hours
Other
Pay
Gross
Pay
Yearly
%
Change Notes
Director of Community Services
2005 45,435 3,786 8,903 347 1,238 55,577
2006 79,826 6,652 76% 5,717 149 1,059 86,602 55.82%
2007 83,387 6,949 4% 8,875 224 900 93,162 7.57%
2008 94,562 7,880 13% 10,471 236 2,740 107,773 15.68%
2009 108,231 9,019 14% 13,306 196 3,352 124,889 15.88%
2010 112,283 9,357 4% 16,070 298 900 129,253 3.49%
2011 116,601 9,717 4% 24,707 458 900 142,208 10.02%
2012 111,311 9,276 -5% 99,867 1,850 3,059 214,237 50.65% 1 751,635 187,916 3,758 14,148 953,701
City Manager
2005 114,001 9,500 15,424 168 1,091 130,515
2006 123,976 10,331 9% 17,025 284 46,382 187,384 43.57% 2007 134,838 11,237 9% 26,949 407 4,640 166,428 -11.18% 2008 155,753 12,979 16% 36,703 504 28,616 221,072 32.83% 2009 173,558 14,463 11% 43,931 512 8,412 225,900 2.18%
2010 186,347 15,529 7% 47,572 531 21,867 255,787 13.23% 2011 160,814 13,401 -14% — — 32,689 193,503 -24.35% 1
1,049,287 187,604 2,406 143,697 1,380,589
Note 1 – Salary stated is not for the entire fiscal year It is not clear how the amounts for salary increases, Leave Pay, and Other Pay are authorized and approved. For instance, it appears that these actions may be approved by the City Manager or the City Council.
In addition, Leave Pay and Other Pay may each be used to compensate for unused sick leave, vacation, or compensation time. As a result, it is difficult to determine whether such payments are properly calculated and approved.
We identified the following questionable salary payments for the four positions listed above:
The City Clerk received $38,210 of Leave Pay during FY 2006-07.
The Earnings History Report did not show any hours used. The HR Director received material salary increases totaling 111% from $42,659 in FY 2005-06 to $90,083 in FY 2009-10. There were no documents in the employee’s personal record to support these salary increases.
The Community Services Director received Leave Pay based on a total of 3,758 hours for FY 2004-05 through FY 2011-12. This indicates that he accumulated approximately 470 hours each year. It appears unreasonable for an employee to be earning that much leave time each year.
City of Cudahy Administrative and Internal Accounting Controls -8-
The City Manager received $187,604 and $143,697 in Leave Pay and Other Pay, respectively, over a seven-year period in addition to his regular salary without documentation to support these charges.
Recommendation
The City Council should review the calculations and approve appointed positions’ salaries, Leave Pay, and Other Pay, including payout of unused sick leave and vacation time. The City Manager, or his or her designee, should be responsible for calculating and approving payouts for non-appointed management group members.
The City should review the Leave Pay and Other Pay to officials to determine if the City overpaid, and seek refunds where necessary.
City’s Response
In Resolution 07-25 the salaries for appointed officials have been memorialized and in the case of the City Manager, the contract is negotiated directly between the parties. Going forward the City Council will document approval of any salary increases given to appointed officials. Additionally, support for Leave Pay and Other Pay to be made appointed officials will be presented to the appropriate subcommittee of the City Council to document their approval that the calculation was supported and in accordance with any contracts and/or memorandum of understandings that exist at the time. With respect to Leave Pay and Other Pay to management individuals, the approval of the City Manager or their designee will be affixed to the supporting documentation. In December 2013, there was one management member who was eligible for and “cashed out” Leave Pay. The calculation for that individual’s Leave Pay and the non-management individual leave pay was reviewed by a responsible individual prior to the payment being processed. It is the City’s intention that upon appointment of a City Treasurer or hiring of a City Auditor the individual will review the items noted above and seek refunds where necessary.
SCO’s Comments
The City did not dispute this finding. The City has started to implement our recommendations and is taking steps to improve oversight of its financial and operational activities pertaining to salary increases and Leave Pay and Other Pay. Although the City is moving forward, it must review the salary increases and leave payments cited in the finding to ensure that these payments were appropriate.
The finding remains as stated.
City of Cudahy Administrative and Internal Accounting Controls -9-
During our review of the City’s contracting process from January 1, 2005, through June 30, 2012, we noted that the City officials as well as the City Council did not comply with and therefore violated the City’s municipal code. This code requires a written contract for purchases of supplies and services greater than $10,000. City officials made numerous questionable decisions by not following the contract process, including obtaining City Council approval when required.
In addition, when contracts were actually submitted to City Council, the meeting minutes revealed a lack of analysis, discussion, or deliberation by the City Council. As a result of these significant deficiencies, noncompliance, and violations of City’s municipal code, we expanded our review to all City Council minutes made available for our review. (See Finding 9.)
We also noted that payments for goods and services were readily approved by City officials and City Council without detailed review or analysis of the reasonableness of these costs. We identified numerous contracts and transactions that raised questions regarding reasonableness and proper use of public funds. Examples are:
Payments to contractors without negotiated contract agreements:
ITL, Inc.
For the period of January 1, 2005 through June 30, 2012, ITL, Inc. billed $424,276 to the City for fuel used by City vehicles. However, the City could not provide contract documents relating to these purchases.
Special Projects/Community Outreach Consulting Services During the period of June 1, 2010, through July 30, 2011, the City was billed for consulting services amounting to $52,849. The City confirmed that there was no written contract agreement relating to these services. Billing documents indicated that the services provided were for various activities such as preparing for project meetings, attending various meetings, calling businesses for fundraising, attending town hall and community dinners, etc. The City could not provide a reasonable justification for how these activities relate to City operations and how the City benefitted from these services.
Steelworkers Oldtimers Foundation
The Steelworkers Oldtimers Foundation (Oldtimers) had a contract with the City for providing Dial-A-ride, Fixed Route, and Charter Transportation services that expired on June 30, 2011. However, Oldtimers continued to bill the City on an expired contract for services provided during the period of July 1, 2011 through May 31, 2012. The total amount billed during this period was $259,201.
We also noted that the Oldtimers billed the City in excess of the contract amount resulting in unallowable payments. For two fiscal years ended June 30, 2006, the contract amount was $210,000 per FINDING 2 —
City officials failed to
comply with and violated
City’s municipal code
over contracts
City of Cudahy Administrative and Internal Accounting Controls -10-
fiscal year. However, the City was billed for and made payments of $227,900 and $233,657, respectively. Accordingly, the City exceeded the contract authority by $17,900 for FY 2004-05 and $23,657 for FY 2005-06.
Code Enforcement Prosecuting Services
The City was unable to provide copies of contracts and contract amendments for the period of January 1, 2005, through June 30, 2012 for services performed by the Code Enforcement Prosecuting Service. Though the City was able to provide City Council minutes that noted the approvals or motions to award or extend the contract, we could not confirm if any contract and/or amendments were ever properly executed. As a result, the City made unauthorized payments of $409,798 for these services.
The situation is further complicated because City Council minutes use different names for the Code Enforcement Prosecution Services between the City and the Law Offices of Edgar Coronado, (i.e., Code Enforcement Prosecuting Services, Prosecuting Attorney Services, contractor, Code Enforcement – Prosecution Services between the City of Cudahy and the Law Offices of Edgar Coronado, Community Development Block Grant Contract between the City of Cudahy and the contractor). It appears that the City Council was approving contracts and amendments for the same service, however without the actual contract we could not determine if this was actually the case.
Our review of the billing documents also noted that this contractor was paid $8,323 for services provided to council on May 20, 2011, and $13,025 on March 31, 2012, and April 23, 2012, for reviewing the Shuttle Services agreement during FY 2011-12. These services appear to be outside the scope of the work as approved by the City Council.
Payments to contractors in excess of the amount approved by the City Council or the contract amount:
Code Enforcement Prosecuting Services
We noted that the City made payments to the Law Offices of Edgar Coronado that exceeded the amount approved by the City Council.
Our review of City Council minutes reflected a $22,000 maximum approved amount for FY 2010-11 and FY 2011-12. However, the City was billed and paid $42,967 (FY 2010-11) and $42,877 (FY 2011-12) which exceeded the amounts approved by the City Council by $20,967 and $20,877, respectively.
D & J Engineering Services
For the period of July 1, 2004, through July 1, 2012, the City paid D & J Engineering Services a total of $2,533,416 for various engineering services.
City of Cudahy Administrative and Internal Accounting Controls -11-
These services were for general plan update, land survey and appraisal services, code enforcement services to the Community Development Block Grant (CDBG) Program, preparation of plans and specifications, and other various engineering, design, and inspection services. From our review of the document provided by the City, the billed engineering services are as follows:
As part of our review, we requested from the City all existing contract agreements and amendments to support the allowability of these services.
The City provided us the following contracts only:
Consultant for General Plan Update,
dated 12/22/03 $79,500
Design and Construction for Clara
Street Park, dated 6/26/03 $200,000
Consultant to CDBG Code Enforcement
Program, dated 12/03/03 $50,000
Total $329,500
Code Enforcement $ 61,641
Building, Planning and Engineering Services 1,716,050
Street Light Assessment 131,254
Clara Street Park Extension 40,935
General Planning Services 63,801
Environmental Site Assessment 124,486
Basketball Court Renovation 85,095
City Hall Renovation Project 46,437
ARRA Federal Projects 90,318
Public Works Inspection 82,481
Land Survey and Appraisal Services 62,215
Other Project Services 28,703
Total $ 2,533,416
City of Cudahy Administrative and Internal Accounting Controls -12-
In addition, we considered information noted during our review of the City Council minutes wherein the City Council approved several requests to execute additional contracts with D & J Engineering Services.
We determined from the minutes that an additional $493,000 for the following consulting services could be allowable if proper contracts were executed between the City and D & J Engineering Services:
Date Purpose Amount
10/03/2006 Engineering services for implementation of the Atlantic bus pad project $ 60,000
10/03/2006 Engineering services for implementation of the Olive Street overlay project No. 230-7033-6725 80,000
10/03/2006 Engineering services for implementation of the speed hump installation project No. 230-7037-6745, Live Oak and
Elizabeth Street 32,000
10/17/2006 Engineering services for City-wide curb ramp improvement project No. 255-7029-6725 35,000
10/17/2006 Engineering services for traffic signal improvement project No. 251-7010-6725 (Wilcox Avenue and Live Oak Street) 60,000 01/08/2008 Engineering and inspection services for AC overlay at Live Oak and Elizabeth project No. 251-7022-6725 11,000
03/17/2009 Engineering services for Elizabeth Street asphalt overlay, Atlantic to Wilcox project No. 240-7047-6725 20,000
04/07/2009 Engineering design services for Live Oak street rehabilitation project 65,000
07/07/2009 Engineering and inspection services for Clara Street bridge street light installation project No. 240-7048-6725 10,000 08/11/2009 Prepared plans, specifications, and estimates for concrete pavement project at the intersection of Florence and Atlantic 100,000 11/03/2009 Engineering and inspection services for Clara Street traffic signal upgrade improvement project No. 251-7091-6725 8,000 11/03/2009 Engineering and inspection for Atlantic Avenue traffic signal upgrade 12,000
Total $ 493,000
Therefore, only $822,500 ($329,500 contract and $493,000 in City Council approvals) was actually approved by the City Council. As a result, the City overpaid D & J Engineering Services by $1,710,916 ($2,533,416 less $822,500).
Recommendation
The City Council should direct City officials to comply with the City’s municipal code pertaining to contracting. In addition, the City should ensure that:
Contracts are properly executed and approved, including the use of competitive bidding and City Council approval when required; Payments do not exceed contract amounts; and
Payments are for contracted services.
City of Cudahy Administrative and Internal Accounting Controls -13-
City’s Response
The City agrees with the spirit of the finding in that contracts were not provided for all the amounts that were paid. The Cudahy Municipal Code has recently been modified to require all new contracts above $5,000 to be presented to the City Council to approve or require additional bids to be received. The City agrees with the use of competitive bidding and City Council approval when required. The City will implement changes to ensure that payments made do not exceed the contracted (with amended) amounts, and are for the services contracted. Since the City has recently filed their annual 1099 with the IRS they will use the reports generated for that purpose to determine if there are any outside entities for which negotiated contracts do not exist and will take the appropriate action to ensure that the City complies with the Cudahy Municipal Code.
SCO’s Comments
The City agrees with the spirit of the finding. The City has modified the Municipal Code requiring City Council approval of all new contracts in excess of $5,000. The City has also started to implement our recommendations to ensure that payments are for contracted services and that the City pays only up to the contract amount. The City is taking steps to improve oversight of its financial and operational activities.
Although the City is moving forward, it must review the contracts cited in the finding and ensure that these services were appropriately provided.
The finding remains as stated.
The City entered into a contract dated March 17, 2000, with the Legislative Advocacy Group (LAG) consulting firm, providing lobbying services for the City. However, the City was not able to provide our auditors with a copy of the original contract for review.
An amendment to the above contract (Amendment No. 1) was entered on August 5, 2003 increasing the monthly retainer fee to $2,000.
The description of services per the amendment is:
“LAG shall represent the interest of the CITY before the various governmental agencies . . .”
“All correspondence, legislative updates, documents related to this agreement, and any other documentation prepared by LAG shall be provided to the City Council with a copy to staff. . .” Exhibit “A”, Scope of Services states:
LAG shall provide lobbying and advocacy support services before the California Legislature and related governmental services regarding all issues impacting local municipal governments including, but not limited to redevelopment and housing policy, gaming policy, labor and employment issues, municipal finance, land use issues, funding for parks and recreational facilities, and transportation and infrastructure issues and any other projects or FINDING 3 -
Questionable payments
for lobbying services
City of Cudahy Administrative and Internal Accounting Controls -14-
issues directed by the City Council.
The City has been paying a $2,000 monthly retainer fee to LAG’s contract totaling $192,000 from July 1, 2004 through June 30, 2012. It is unclear as to what specific services, if any, LAG provided to the City.
Therefore, all payments to LAG are questionable because each of the invoices we reviewed stated “For professional services rendered.” We also reviewed City Council minutes and could not find any documentation relating to any of LAG’s services or any issues directed to LAG by the City Council. Additionally, the City Council nor City management ever reviewed or evaluated this contract as to the necessity and benefits to the City.
Recommendation:
The City should review and evaluate all contract terms, especially the description and scope of services to be provided. The invoices should include a full description of services and should be reviewed and approved prior to payment.
City’s Response
The amounts paid are currently from amounts budgeted in the City Council department. On March 4, 2014 the City Council began discussions to put a moratorium on all non-essential professional services, until such time that the City Council approves a balanced budget which affirmatively re-incorporates these services.
SCO’s Comments
The City did not dispute this finding. The City is in the process of implementing the SCO’s recommendation.
The finding remains as stated.
During our review period, the City did not have a policy governing Cityissued credit cards. From July 1, 2007, through June 30, 2012, City employees charged a total of $144,901 in expenses on City-issued credit cards. Out of the total expenses incurred during this time period we found that $64,152, or 44%, to be questionable.
Our review found that many of the charges, particularly those incurred by the former City Managers, the Director of Community Services, the Director of Community Development, the Code Enforcement Director, the Human Resources Director and other City employees, are questionable.
FINDING 4 —
The City failed to exercise
adequate control over
expenses charged to Cityissued credit cards
City of Cudahy Administrative and Internal Accounting Controls -15-
Current City officials or employees could not provide an explanation or rationale for charges that included meals, hotel stays, personal cellphones and accessories purchases, late charges, and miscellaneous expenditures as follows:
Meals
The City did not have an established policy relating to meals and incidental expenses related to out-of-pocket reimbursements.
Expenditures for meals totaled $20,535, or 14%, of total City-issued credit card expenditures. These charges were for various restaurants.
Some of these charges were for the City Manager’s meetings with City Council Member(s), dinners, staff meetings, and business lunches.
However, not all of these charges had an explanation or reason for the charges. For example:
The former Code Enforcement Director charged meal expenses of $260 on September 05, 2008; $133 on September 12, 2008, and $286 on September 13, 2008.
The former City Manager charged meal expenses of $174 on January 2, 2012, and $317 on January 4, 2012.
The above charges supposedly were for periodic meetings with the City Council. These types of charges were incurred monthly between 2008 and 2012. However, the City could not provide us with a valid reason or documentation to support these charges. The fact that City officials and upper management routinely incur charges without adequate supporting documentation, justification, and/or description shows a lack of fiscal control, accountability, and integrity.
Also, while the City has no specific limit on meals, the amounts incurred seem excessive.
Hotel Charges
During our review period, the City did not have a policy governing City hotel charges. Expenditures for hotel stays totaled $7,519, or 5%. We also noted that, in many instances, the purpose for some of the expenses were not clear and properly documented. For example:
On June 3, 2009, the former Code Enforcement Director charged $859 for a stay at the Marriott Renaissance Resort in Indian Wells, CA.
On February 2, 2012, a City Council member charged $560 for a two-night weekend stay at the Marriott Marquis in San Diego, CA. On January 13, 2012, the former City Manager charged the Cityissued credit card $275 for a one-night stay at the Hyatt Regency in Sacramento, CA.
During June 2008, the City Manager and the Community
Development Director charged the City-issued credit cards $649 and $744 for a weekend stay at the Marriott Renaissance Hotel.
City of Cudahy Administrative and Internal Accounting Controls -16-
As noted in other examples cited above, there was a lack of a description, justification, or any type of documentation as to the purpose and necessity of these trips.
In addition, while the City had no limit on hotel charges, the amounts incurred seem excessive. For example, the lodging expense allowance for State employees only ranges from $90-$150 depending on the location.
In each of above instances, as well as other instances concerning lodging expenses, there was no discernible indication that the former City Manager, Community Development Director, Community Services Director or other City employees ever inquired or considered staying at hotels that offered government rates. Some of the hotels identified above offer government rates even on weekends if it is a legitimate business trip.
Cellphones and Accessories
Expenditures for personal cell phones and accessories totaled 11% or $15,324. We found that City-issued credit cards used to purchase cellphones/accessories did not have any support or description for the purpose. For example:
On September 17, 2007, the Human Resources Director spent $1,382 for unlocked cellphones.
On October 3, 2007, the Community Development Director spent $1,147, on unlocked cellphones.
On July 30, 2008, and September 3, 2008, the Human Resources Director spent $1,159 and $1,148 for cellphones and accessories. On September 5, 2008, the City Manager spent $2,020 for unlocked cellphones.
Miscellaneous Expenditures
Expenditures for miscellaneous expenditures totaled $16,501, or 11%, and were not supported with receipts and/or detail. For example:
On December 16, 2011, the City Manager paid $493 to a Halloween Club. The City did not provide any support that these costs were business-related.
On June 17, 2010, the Human Resource Director’s City-issued credit card was paid-off $922 for amounts accumulated on the card during various months. However, the City did not provide receipts for these charges.
On June 5, 2009, the Community Development Director charged $2,554 of various expenditures to the City-issued credit card. The City did not provide any receipts to support that these costs were business related.
On June 2, 2008, the City paid the $3,010 balance accumulated over time on the City Manager’s City-issued credit card, again without providing any receipts to support the necessity of these charges.
City of Cudahy Administrative and Internal Accounting Controls -17-
Late Payment Charges
Late payment fees and over-the-limit charges totaled $4,273, or 3%, including:
In FY 2007-08, the Human Resources Director and Code
Enforcement Director accumulated $718 and $495 in late monthly payment fees or over-the-limit charges on the City-issued credit card. In FY 2009, the Community Development Director and Code Enforcement Director accumulated $380 and $406 in late monthly payment fees or over-the-limit charges on the City-issued credit card. In FY 2012, the City Manager accumulated $382 in late monthly payment fees or over-the-limit charges on the City-issued credit card.
Recommendation
The City should implement appropriate control measures to ensure proper review and approval of all charges relating to meals, lodging, and incidental expenses including City-issued credit card charges. This should include:
A comprehensive travel policy which establishes clear guidance for travel, including the purpose of the trip and documentation requirements, and sets limits on lodging rates, meals, and other travel expenses;
A policy governing circumstances for which business meals are authorized, including documentation requirements, and limits on the maximum amount allowable for business meals; and
An expedited payment process to avoid late charges.
We also recommend that the City review the questionable charges noted above and determine whether the City officials and employees should be required to refund the City for all or part of them. The City should also consider performing a review of travel and meal expenses for the period of our review to determine whether additional refunds should be sought.
City’s Response
The City agrees with the finding. Since the period under review the City reduced the credit cards that were being held by City employees. The City will implement procedures to ensure that a business expense is documented for the purchase of meals and travel related items. The City currently has a travel policy that could be updated to address the concerns raised by the findings noted. On the most recent proposed travel to a conference in California it has been documented that an inquiry was made for rooms available at the government rate. In recent travel completed by members of the City Council to participate in the California League of California City conference, members of the City Council who attended waived their right to receive per diem. It is the City’s intention that upon appointment of a City Treasurer or hiring of a City Auditor a review of the items noted in the finding be performed and where applicable refunds will be sought. As time permits, those individuals will be directed to review the expenses during the periods referenced to
City of Cudahy Administrative and Internal Accounting Controls -18-
determine if additional refunds should be sought.
SCO’s Comments
The City agrees with the finding. The City is in the process of implementing the SCO’s recommendation.
The finding remains as stated.
On May 5, 2011, the City refunded $240,114 to the California Department of Parks and Recreation (Department) for disallowed amounts and unexpended balances plus interest from grant funds advanced to the City for the Clara Park Sports Complex.
Our review of available documents confirmed that in 2004 the City received a $2.5 million grant award from the Department’s Office of Grants and Local Services for the acquisition and development of the Clara Park Sports Complex. In February 2005, the City received an advance of $250,000 for the project.
The City contracted with Verde Vistas, LLC to provide consulting services to acquire property, manage grant services, and for project management. However, the consultant failed to properly manage and oversee this project. While some responsibility for this can be attributed to the consultant, it was the City’s responsibility to supervise the consultant closely to avoid the problems that occurred.
On October 6, 2008, the City submitted to the Department a Project Costs Summary identifying $173,500 in costs incurred. On February 4, 2009, the City submitted a revised Project Costs Summary for $159,750.
The Department conducted an interim grant review of the Project Costs Summary submitted by the City and determined the following:
Description
Amount
Claimed
Amount
Allowed
Amount
Disallowed
Appraisal fees $ 9,500 $ — $ 9,500
Acquisition/grant services/
consulting fees 147,500 35,000 112,500
Landscape design 2,750 2,750 —
Subtotals 159,750 37,750 122,000
Unexpended funds deposited in a
bank account 90,250 — 90,250
Totals $ 250,000 $ 37,750 $ 212,250
FINDING 5 —
Mismanagement of
state grant funds
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As shown above, the Department disallowed:
$112,500 for consulting services in excess of the contract amount; $9,500 for appraisal fees for which the City could not provide a completed appraisal report; and
$90,250 represents unexpended funds deposited in an interest bearing bank account could not be accounted for by the City.
The City was requested to refund the Department a total amount of $240,114 (the disallowed claim of $212,250 plus $27,864 in interest). In addition to the loss of advanced funds, the project was delayed past the grant expiration date and requires legislative action. While some responsibility for this can be attributed to the consultant, it was the City’s responsibility to supervise the consultant closely to avoid the problems that occurred.
Recommendation:
The City should establish and implement grant management policies and procedures to ensure that the City properly manages and accounts for grants awarded to the City whether they are administered by City staff or by consultants.
City’s Response
The City agrees with the recommendation. The Los Angeles Community Development Commission (LACDC) has requested this same document and the City has committed to provide this as part of the Manual. The timeline has been provided to LACDC.
SCO’s Comments
The City agrees with the finding and is in the process of implementing the SCO’s recommendation.
The finding remains as stated.
City of Cudahy Administrative and Internal Accounting Controls -20-
The City failed to include $125,943 out of $59,605,670 in fixed assets in its financial records for FY 2011-12. The City did not comply with Generally Accepted Accounting Principles by not properly and accurately accounting for its fixed assets.
The City provided a copy of an electronic file containing six worksheets of transactions relating to fixed assets, including a List of Fixed Assets as of June 30, 2012. However, we noted some assets purchased during FY 2011-12 were not included in the List of Fixed Assets, as follows:
Date Purchased Check Number Description Amount
08/26/2011 33488 Vehicle for municipal officer $ 4,800
10/20/2011 33721 Two treadmills, LUGO fitness 8,381
10/31/2011 33748 2001 and 2006 Ford Crown Victoria (US Auction) 6,666 01/12/2012 34100 Multi-hip machine 6,956
01/26/2012 34129 2002 Crown Victoria 2,500
08/17/2011 33453 Hardware and software 32,668
04/05/2012 34100 Inner/outer thigh machines 5,209
04/23/2012 34488 Machines for fitness center 5,209
04/23/2012 34462 City Hall network server 8,475
04/30/2012 34525 Two new machines, LUGO fitness 5,209
05/21/2012 34601 Windows 7 iPad 3 (16GB) 5,642
05/31/2012 34647 Ford Fusion vehicles (lease) 5,903
05/31/2012 34664 TOSHIBA laptops, emergency operations center 6,061 06/07/2012 34684 2012 Ford Fusion Hybird (including monthly payments) 22,264 Total $ 125,943
All fixed assets purchased by the City should be properly recorded and accounted for in its listing of fixed assets, and included in its annual financial reports reported on by its independent auditor and in its annual financial transactions report submitted to the SCO.
An accurate and complete listing of fixed assets is important to the City governance and management because it provides information for:
Safeguarding fixed assets, because assets that are properly recorded can be easily located and maintained;
Financial and managerial reporting, for determining capitalized cost and depreciation;
Insurance coverage, for recording replacement and insurance values; Facilities and administration rate proposals, for recording use, location, funding source, and depreciation; and
Compliance with annual audit and financial transaction reporting requirements.
Recommendation:
We recommend that the City ensure consistent City-wide procedures for fixed asset accounting, management, control, and accountability including:
Proper financial accounting and reporting in accordance with Generally Accepted Accounting Principles (GAAP), the
FINDING 6 —
The City’s fixed assets
were not properly and
accurately accounted for
City of Cudahy Administrative and Internal Accounting Controls -21-
Governmental Accounting Standards Board (GASB), and other applicable government accounting standards;
A complete and accurate listing of fixed assets of significant value; A description of the responsibilities of stewardship involved in safeguarding such an important and valuable public investment; and Maintenance of fixed asset records for the life of each asset which should be retained in accordance with the City’s retention program.
City’s Response
The City acknowledges that out of $59 million in Capital assets $125,943 or .21% was not shown as City property in the audited fiscal year 11/12 financial statements. While the City strives to have timely financial information, the State recognizes and allows the FTR to be submitted unaudited. Accordingly, the FTR may not always agree include fixed assets which are recorded after the submission of the FTR. The City intends to fine tune the controls over recording machinery and equipment to ensure that all movable items purchased over the capitalization policy are recorded.
SCO’s Comments
The City agrees with the finding and is in the process of implementing the SCO’s recommendation.
The finding remains as stated.
A well-designed and properly maintained system of accounting policies and procedures enhances both accountability and consistency. The resulting documentation can also serve as a useful training tool for staff.
The documentation of accounting policies and procedures should be evaluated and updated periodically, according to a predetermined schedule. Changes in policies and procedures that occur between these periodic reviews should be updated and documented promptly.
Documentation provides guidance for implementing controls and serves as a basis for training new personnel in implementing them, and provides evidence that the controls are operating effectively.
Undocumented and outdated policies and related internal controls result in unclear roles and responsibilities and lead to improper handling of transactions. An essential element of internal control is monitoring, which includes verification by management that policies and procedures are updated to adequately address new challenges identified by ongoing risk assessments.
The City updated its Accounting Policy and Procedures Manual (Manual) in September 2003. There have not been any updates through June 30, 2012, to reflect current processes and procedures over payroll and accounts receivables and payables.
FINDING 7 —
The City’s Accounting
Policy and Procedures
Manual has not been
updated
City of Cudahy Administrative and Internal Accounting Controls -22-
The City does not have a process in place to routinely review and update its Manual. Therefore, documentation for completeness, accuracy, and consistency with existing processes is lacking.
In addition, most employees are not aware of the existence of the Manual and had no written procedures for their particular assignments.
Therefore, most staff members do not have a comprehensive understanding of the City’s accounting system.
Specific deficiencies related to the City’s Manual are:
Computerized payroll system changes have not been reflected in the Manual.
The accounts receivables and payables processes are not included in the Manual.
Travel policy and procedures are not included in the Manual; accordingly, guidance and cost limitations relating to travel expenses were not properly established. See Finding 4.
Budget and planning are not included in the Manual; accordingly, budget estimates and expenditures are not monitored throughout the appropriation cycle. See Finding 10.
A computerized accounting system section is not included in the manual.
It should be noted that the City’s current management team is taking an active role by working with the department staff to review, develop, and update its Manual to minimize internal control weaknesses.
Recommendation
The City should review and update its Manual to ensure consistency with current processes and organizational structure, and perform periodic and ongoing reviews to ensure proper documentation, accuracy, and completeness in its financial transactions and records.
The updated Manual should be readily available to all responsible employees. It should clearly state the authority and responsibility of all employees, especially the authority to authorize transactions and the responsibility for the safekeeping of assets and records.
The Manual should also indicate which employees are to perform which procedures. Procedures should be described as they are actually intended to be performed. Also, the documentation of accounting policies and procedures should explain the design and purpose of procedures related to controls to increase employee understanding of and support for controls.
City of Cudahy Administrative and Internal Accounting Controls -23-
City’s Response
As acknowledged by the State, the City is in process of updating the Manual and is committed to a timeline that is being monitored by the Los Angeles Community Development Commission (LACDC). Once the City has updated the Manual in accordance with the scope committed to the LACDC, the City will set a timeline to address other items noted by the State Controller’s Office. Prior to addressing in a formal policy items noted by the State, the City will informally implement items to ensure that employees know and understand what duties they are expected to perform.
SCO’s Comments
The City agrees with the finding and is in the process of updating its Administrative Policy Manual. The City will also continue to implement and update its policies on a regular basis and ensure that City staff are fully aware and understand the duties required of them.
The finding remains as stated.
Cash can be the most vulnerable asset of an entity. Timely bank reconciliation provides the necessary control mechanism to help protect this valuable resource by uncovering irregularities such as unauthorized bank withdrawals. Timely monthly preparation of bank reconciliations also assists in the regular monitoring of the City’s cash flows.
Bank reconciliation is an important monthly task for the City’s accounting department because:
It compares the City’s general ledger against its bank statement to check for any irregularities or overcharges,
It provides City management a good financial oversight from month to month; and
It provides information regarding misclassified and/or missing funds.
It is also essential that the duties of issuing payments and reconciliation are separated, and that bank reconciliation statements be reviewed and approved by upper management, performed at least once a month, and reviewed by an external auditor at least once a year.
In our review of the City’s bank reconciliation process and procedures for the period of July 1, 2010, through July 31, 2012, we could not ascertain that bank reconciliations were performed monthly. The City’s bank reconciliation consisted only of a print-out summary of adjusted cash balances for FY 2011-12.
FINDING 8 —
Bank reconciliations not
performed, reviewed,
and approved
City of Cudahy Administrative and Internal Accounting Controls -24-
Recommendation:
The City should establish and implement procedures to properly document monthly bank reconciliation process and ensure that bank reconciliations are completed, reviewed, and approved timely.
City’s Response
The City agrees with the finding that during the period under review, bank reconciliations were not performed monthly. Currently, the City performs the bank reconciliation within 30 days of the end of each month.
SCO’s Comments
The City agrees with the finding and has implemented the SCO’s recommendation.
The finding remains as stated.
State law establishes the duties of a general law City Clerk in Government Code section 40801, et seq. A summary of some of the City Clerk’s duties include the following:
Keep an accurate record of the proceedings of the legislative body. Maintain records readily reflecting the financial condition of the City. Keep a book marked “ordinances” and record in it all City ordinances with his or her certificate annexed to each, stating:
a. It is a true and correct copy of a City ordinance.
b. The ordinance number.
c. It has been published or posted pursuant to law.
The City’s Municipal Code section 2.20.010 (1) states “The City clerk shall perform such duties as are set forth in the Government Code and in this code and as the City Council from time to time shall direct or authorize.” The Office of the City Clerk is responsible for legislative proceedings, elections, records management, and public records including agenda and minutes. City Council minutes and resolutions are a record of official City activities and authorization for various City expenditures.
We found that not all of the minutes and resolutions were properly maintained and recorded by the City. During the period of January 1, 2005, through December 31, 2012, the City Council held 140 meetings and approved 297 resolutions, however, the City was unable to locate sufficient records of what transpired at all of these meetings. We noted the following:
City Council meeting minutes for the period of January 1, 2005, through June 30, 2008 were incomplete and lacked the required signatures. The City Council meeting minutes were transcribed from audio into a draft copy which was not finalized, therefore, the City did not have an official final copy;
FINDING 9 —
Insufficient records of
City Council meeting
minutes and resolutions
City of Cudahy Administrative and Internal Accounting Controls -25-
The City was unable to locate any information for 24 City Council meetings;
Audio recorded tapes for meetings held during the period of July 1, 2008, through December 31, 2008, could not be found and there were no written minutes for these City Council meetings; and, The City was unable to locate documentation for 53 resolutions adopted at City Council meetings.
Recommendation
We recommend that the City Clerk establish policies and procedures to ensure that City Council activities are properly recorded, retained, and available to the public as required by state law.
City’s Response
The City acknowledges the recommendation and is currently developing a list of policies and procedures that will be implemented in the City Clerk’s Office. It is estimated that by June 2014 all minutes, resolutions, and ordinances will be completed and recorded in the City Books.
SCO’s Comments
The City agrees with the finding and is in the process of implementing the SCO’s recommendation.
The finding remains as stated.
Late submission to and approval of the budget by the City Council will limit the legislative scrutiny of fiscal and budgetary policies, which undermines transparency and accountability in resource allocation and utilization. Late approval of the budget also prevents the City from initiating procurement processes at the start of the financial year based on the approved budget.
During our review we found:
For FY 2010-11 and FY 2011-12, the proposed annual budgets were not presented to the City Council for approval until August 5, 2010, and August 18, 2011, respectively. Consequently, these budget proposals were not approved by the City Council until September 2, 2010, for FY 2010-11 and November 1, 2011, for FY 2011-12. Both are well after the start of the fiscal year.
A budgetary amendment for an increase in additional expenditures for the FY 2010-11 budget was not approved until September 6, 2011, nearly three months after the end of the fiscal year. There was no budget amendment approved for FY 2011-12, even though general fund expenditures for this fiscal year exceeded the appropriation by $1,310,907.
FINDING 10 —
Delayed submission and
adoption of annual
budgets and
amendments
City of Cudahy Administrative and Internal Accounting Controls -26-
Adoption of a timely budget and amendments allows local officials and others to use budget numbers as a reference against which to compare expenditures and revenues throughout the year. As such, the budget provides an ongoing financial management tool to ensure that the City spends within its means and balances expenditures against revenues.
Without the assurance that budget amendments are recorded timely to the financial accounting system, expenditures may exceed budgeted amounts without City Council and management’s knowledge. It may also result in misstatement of the accounting records and financial reports. From a control standpoint, this is a significant deficiency in the City’s administrative and internal accounting control system.
Recommendation:
The City should develop a policy and procedures to ensure that proposed budgets and amendments are submitted to the City Council with adequate time to discuss the City’s proposal, make changes where appropriate, and approve the annual budget before the start of the new fiscal year and amendments prior to the end of the fiscal year.
City’s Response
The City agrees with the finding and adopted Resolution 13-53 which requires the City to approve a structurally balanced budget no later than 60 days after the beginning of the fiscal year. The City will set a timeline to formalize their budget process and add that to the Manual.
SCO’s Comments
The City agrees with the finding and is in the process of implementing the SCO’s recommendation.
The finding remains as stated.
Based on our review of the FY 2009-10, FY 2010-11, and FY 2011-12, year-end general fund balance, we noted a decline of approximately $2.5 million, or 26%. The City’s ending fund balance amounts were as follows:
Fiscal Year
Beginning
Balance
Ending
Balance
Ending Balance
Increase (Decrease)
2009-10 $ 9,300,964 $ 8,968,448 $ (332,516)
2010-11 8,968,448 7,567,550 (1,400,898)
2011-12 7,567,550 6,838,969 (728,581)
Observation—
Continued decline in
general fund balance
City of Cudahy Administrative and Internal Accounting Controls -27-
Conclusion
The above table indicates that for FY 2009-10, FY 2010-11, and FY 2011-12, the City did not receive sufficient revenues to fund the level of services provided. The City should monitor the changes to its fund balance to ensure that revenues received are equal to or more than expenditures incurred. This will ensure that the City will be able to continue to provide current services and to avert fiscal emergencies.
City’s Response
The City acknowledges that expenditures exceeded revenues for the three fiscal years ended June 30, 2012. As noted in the City’s response to the Los Angeles Grand Jury report, the City will use available resources when there are anticipated revenue short falls. The City Council has been reformed and with the exception of two members have all served less than 6 months. Accordingly, the City Council in March 2014 will be meeting to establish a strategic plan for the City. At that time the City Council will decide what programs to offer its residence and what revenue sources will be needed to sustain the level of service desired.
SCO’s Comments
The City agrees with the observation and is in the process of implementing the SCO’s recommendation.
The finding remains as stated.
City of Cudahy Administrative and Internal Accounting Controls -28-
Appendix—
City of Cudahy
Evaluation of Elements of Internal Control
Management Oversight and Control (Control Environment)
A1. Integrity and Ethical Values On July 2012, based on information available to the general public, certain officials of the City of Cudahy’s management and governing body entered into plea agreements stipulating to criminal acts including bribery, kickbacks, and misuse of public funds.
a. Are code of conduct and other policies regarding acceptable business practice, conflicts of interest, or expected standards to ethical and moral behavior established and communicated to all City management and employees?
X City staff interviewed were not aware of the City’s code of conduct and other policies regarding integrity and ethical values.
b. Is the reasonable management attitude of "Tone at the Top" established and communicated to City management and staff?
X See A1.
c. Is everyday interaction with vendors, clients, auditors and other parties based on honesty and fairness?
X See A1 and Finding 7.
d. Is appropriate remedial action taken in response to non-compliance? X Based upon our inquiry with City staff, they are not aware of any remedial action taken in response to employee non-compliance with the established policy. e. Is management appropriately addressing intervention or overriding established controls?
X See A1.
A2. Commitment to Competence
a. Is management identifying and defining the tasks required to accomplish particular jobs and fill - various positions? X Excessive turn-over of City management is affecting decisions and the evaluation of critical City jobs. Temporary employees and consultants are performing critical functions to continue City operations. See Finding 7.
b. Does the City conduct appropriate analysis of the knowledge, skills, and abilities needed to perform job assignments?
X For the period of July 1, 2010, through June 30, 2012, there was no evaluation and analysis performed to evaluate the knowledge and skills of City employees in their performance of assigned tasks.
City of Cudahy Administrative and Internal Accounting Controls -29-
Management Oversight and Control (Control Environment)
c. Is the City providing training and counseling in order to help employees maintain and improve their job competence?
X Training in general safety and practices have not been provided to employees since October 31, 2005. In addition, based upon our inquiry there was no training provided to City employees to improve job performance.
A3. Audit Committee
a. Does the City have an audit committee that is appropriate for the size and nature of the entity?
X The City has no audit committee.
b. Are members of the audit committee independent from the City management?
X See A3-a.
c. Do audit committee members have sufficient knowledge, experience, and time to serve effectively?
X See A3-a.
d. Does the audit committee meet regularly to set policies and objectives, review the City’s performance, and take appropriate actions; and are minutes of such meetings prepared and signed on timely basis? X See A3-a.
e. Do the members of the audit committee regularly receive the information they need to monitor management’s objectives and strategies?
X See A3-a.
f. Does the audit committee review the scope and activities of the internal and external auditors?
X See A3-a.
g. Does the audit committee meet privately with the Chief Financial Officer/and or accounting officers, internal auditors, and external auditors to discuss the reasonableness of the financial reporting process, the system of internal control, significant comments or recommendations, and management performance?
X See A3-a.
h. Does the audit committee take actions as a result of its audit findings? X See A3-a.
City of Cudahy Administrative and Internal Accounting Controls -30-
A4. Management Philosophy and Operating Style
a. Is management conservative in accepting risks, and does management move carefully, and proceed only after careful evaluation? X The Joint Power Insurance Agency (JPIA) performed two risk management and evaluation reviews (October 31, 2005 and February 16, 2010) in which the “Loss Control Action Plan” was identified. As of June 30, 2012, the City had not initiated any action to address the noted issues. As a result, the City was placed in a “Performance Improvement Plan” (PIP) status. Members of the JPIA that do not complete the PIP will be denied membership and will not benefit from the lower operating costs (i.e., insurance costs) afforded to JPIA members. b. Are procedures or activities in place to regularly educate and communicate to management and employees the importance of internal controls and to raise the level of understanding control? X Prior to June 30, 2012, except for the built-in control in the computerized accounting system (Fund Balance) there were no procedures or activities in place to educate management and employees of the importance of internal controls.
Most of the City staff was not aware of the existence of the Accounting and Administrative Policy Manual. See Finding 7.
c. Is personnel turnover in key functions at an acceptable level? X Turnover at key City management positions was excessive. For example, from July 1, 2010 through December 11, 2013, (last day of fieldwork) there were five different Interim City Managers and three different City Finance Directors who assumed these key City positions.
d. Does management have a positive and supportive attitude towards internal control and audit functions?
X The City did not provide a management representation letter to the independent auditor relating to the financial audit for FY 2010-11. Also see A4-a. e. Are valuable assets and information safeguarded from unauthorized access or use?
X There were several City Council minutes and resolutions missing. In addition, several computer equipment and vehicles were not included in the City’s “List of Fixed Assets.” See Findings 9 and 6.
f. Are there frequent interactions of senior management and operation management?
X
g. Is management attitude appropriate towards financial, budgetary and other operational reporting?
X Annual budgets for FY 2010-11 and FY 2011-12 were adopted after the beginning of the fiscal year. There was no approved budget amendment for FY 2011-12. The City failed to provide a management representation letter for the financial audit for FY 2010-11. See Finding 10.
A5. Organizational Structure
a. Is the City’s organizational structure appropriate for its size and the nature of its operation?
X Part-time employees are performing critical functions. The City Treasurer position must be evaluated. This position is mandated by the Cudahy Municipal Code; however, it has been vacant since 2005.
City of Cudahy Administrative and Internal Accounting Controls -31-
b. Are key areas of authority and responsibility defined and communicated throughout the organization?
X The Accounting Policy and Procedures Manual is outdated and most of the employees were not even aware its existence. These employees do not have a copy of specific procedures applicable to their assigned tasks. See Finding 7. c. Have appropriate and clear reporting relationships been established? X d. Does management periodically evaluate the organization’s structure and make changes as necessary in fluctuating conditions? X There were no evaluations made of the City’s organizational structure. There were several changes made to fill vacated key positions but were not based on an evaluation or analysis to meet the City’s goals and objectives. e. Does the City employ an appropriate number of employees, particularly in managerial positions?
X At the beginning of our review period, approximately 60 employees were employed by the City, of which only 12 are on permanent full-time status. The City relies on consultants to perform some of the critical accounting functions.
A6. Assignment of authority and responsibility
a. Is the City appropriately assigning authority and delegating responsibility to the proper personnel to deal with organizational goals and objectives?
X As of June 30, 2012, there were 64 employees employed by the City, of which 14 were permanent full-time and 50 were permanent part-time. In addition, some operation-critical functions were performed by consultants. b. Does each employee know how his or her work interrelates to others in the way in which authority and responsibility are assigned, and how duties are related concerning internal control?
X Based upon our interview of several City staff, they are not aware how the work and duties interrelate with internal controls.
c. Is delegation of authority appropriate in relation to the assignment of responsibility?
X See A6-a.
A7. Human Resources policies and practices
a. Are policies and procedures established for hiring, training, and promoting employees and management?
X Prior to June 30, 2012, per our inquiry with City staff, there were no policy and procedures established for hiring and promoting employees. The City Manager promotes and assigns staff to management positions. Additionally, there was no training provided to City staff during the period of July 1, 2010, through June 30, 2012.
b. Are background checks conducted on candidates for employment? X There were no policy and procedures requiring candidates to have background checks when applying for City employment. See Finding 7. c. Are employees provided the proper amount of supervision? X Most of the City staff we interviewed learned their specific assignment through on-the-job training. Employees in the accounting department were not properly supervised.
City of Cudahy Administrative and Internal Accounting Controls -32-
Risk Assessment
B1. Establishment of Entity-wide Objectives
a. Are there entity-wide objectives that were established by management? X b. Are City-wide objectives clearly communicated to all employees, and does management obtain feedback signifying that communication has been effective?
X City-wide objectives were not communicated to some of the employees and feedback from employees was not obtained and evaluated by management. c. Is there a relationship and consistency between the department’s operational strategies and the City-wide objectives?
X
d. Is there an integrated management strategy and risk assessment plan that considers the City-wide objectives and the relevant sources of risk from internal management factors and external sources, and that establishes a control structure to address those risks? X See A4-a.
B2. Risk Identification See A4-a.
a. Is management appropriately and comprehensively identifying risk using various methodologies?
X See A4-a.
b. Are there mechanisms in place to anticipate, identify, and react to routine events or acts that affect achievement of objectives? X See A4-a.
c. Do adequate mechanisms exist to identify risks to the City arising from external factors?
X See A4-a.
d. Is management assessing other factors that may contribute to or increase the risk to which the City is exposed?
X See A4-a.
e. Is management identifying risks City-wide and for each significant activity level of the City?
X See A4-a.
B3. Risk Analysis
a. After risks to the City have been identified, does management undertake a thorough and complete analysis of the possible effect? X See A4-a.
City of Cudahy Administrative and Internal Accounting Controls -33-
b. Has management developed an approach for risk management and control based on how much risk can be prudently accepted? X See A4-a.
Control Activities
C1. Policies and Procedures (General Applications)
a. Do appropriate procedures, techniques, and mechanisms exist with respect to each City’s activities?
X The Accounting Policy and Procedures Manual has not been updated since September 2003.
b. Are the control activities identified as necessary in place and being applied?
X Most of the City staff we interviewed was not aware of the existence of an Accounting Policy and Procedures Manual.
c. Are control activities regularly evaluated to ensure that they are still appropriate and working as intended?
X For the period of July 2010 through June 30, 2012, there was no evidence that evaluations were performed.
C2. Common Categories of Control Activities
a. Are top level reviews made of actual performance relative to budgets, forecasts, and prior periods?
X City management is relying on the audited financial statements to identify variances between budgeted and actuals.
b. Do managers review performance reports? X There were no performance reports completed for City staff and, therefore, were not reviewed.
c. For information processing, are varieties of controls in place for performing check accuracy, completeness, and authorization of transactions?
X
d. Are controlled items periodically counted and compared to amounts shown on control records?
X There was no count or comparison of controlled items. e. For performance indicators, does management compare different sets of data and investigate differences?
X There were no reviews performed by City management.
f. Are duties properly segregated among different people to reduce the risk or error or inappropriate actions?
X See A4-a.
g. Are administrative and operation policies in writing, current, and do they set clear procedures for compliance?
X The Accounting Policy and Procedures Manual is outdated.
City of Cudahy Administrative and Internal Accounting Controls -34-
Information and Communication
D1. Information
a. Are mechanisms in place to obtain relevant information on legislative or regulatory developments and program, budget, or economic changes?
X The City contracted with Legislative Advocacy Services (LAG) to provide lobbying services including legislative tracking, analysis of legislation or regulations, and advocacy support. LAG is to provide quarterly oral reports to the City Council regarding these services; however, based upon our review of the City Council minutes there was no quarterly oral report provided to the City Council. See Finding 3.
b. Is information provided to the right people in sufficient detail and on time to enable them to carry out their responsibilities efficiently and effectively?
X Not all operation-critical functions were communicated to the City staff. The excessive turnover of City management personnel and the problem with the City Council affected the flow of information within the City. c. Is development or revision of information systems based on the strategic plan linked to the entity’s overall strategy, and is it responsive to achieving City-wide objectives?
X Based upon our inquiry with the City staff, there were minimal changes to the automated accounting system, but these were updates and not changes related to the City’s overall strategy.
d. Does management support the development of necessary information systems and show its support by committing appropriate resources.
X There is an insufficient number of permanent full-time employees that were assigned to perform operation critical functions.
D2. Communications
a. Does management ensure that effective internal communications occur? X There is lack of communication between management and staff resulting from excessive turnover at key positions (see A4-c) and problems noted in A1 relative to some of the City Council members.
b. Does management ensure that effective external communication occurs regarding issues with serious impact on programs, projects and other activities?
X See D2-a.
c. Does the City employ various forms and means of communicating important information with employee and others?
X See D2-a.
d. Does the City manage, develop, and revise its information systems in an effort to continually improve usefulness and reliability? X There was no efforts noted for the period ending June 30, 2012.
City of Cudahy Administrative and Internal Accounting Controls -35-
Monitoring
E1. On-going monitoring
a. Does management have a strategy to ensure that ongoing monitoring is effective and will trigger separate evaluations?
X For the period of July, 1, 2010, through June 30, 2012, monitoring information relating to accounting and administrative controls was not obtained; accordingly, there were no outputs to be evaluated, no monitoring discussions among City management, no summation of monitoring data, and no general monitoring information developed.
b. Do City personnel, in the process of performing their regular duties, obtain information about whether internal control is functioning properly?
X Among the City staff we interviewed, most of them were not aware about the City’s internal controls.
c. Are communications from external parties corroborated with internally generated data and able to indicate problems with internal control? X Based on our inquiry, there were no internally generated data available. d. Is there appropriate organizational structure and supervision to help provide oversight of internal control functions?
X There was no supervision to provide oversight of internal control functions except for built-in controls in the computerized accounting system. e. Are data recorded by information and financial systems periodically compared with physical assets and discrepancies?
X We noted that several fixed assets were purchased during FY 2011-12 that were not included in the City’s lists of fixed assets. See Finding 6. f. Are the City Auditor’s Office and other auditors regularly providing recommendations for improvements in internal control, and is management taking appropriate follow-up action?
X Recommendations were noted in independent as well as other audit/review reports; however, these recommendations were not always implemented. See B2. g. Are meetings with employees used to provide management with feedback on whether internal control is effective?
X Per our inquiry with City staff, there were no meetings between management and City staff relating to the City’s internal control policies and procedures. h. Are employees’ regularly asked to state explicitly whether they comply with the City’s code of conduct?
X Some of the City staff we interviewed do not appear to be well-informed regarding the City’s code of conduct.
E2. Separate evaluation
a. Are the scope and frequency of separate internal control evaluations appropriate for the City?
X There was no separate evaluation of internal control performed on the City except for the consideration of internal control over financial reporting for FY 2009-10. b. Are the methodologies for evaluating the City’s internal control logical and appropriate?
X See E3-a.
City of Cudahy Administrative and Internal Accounting Controls -36-
c. If the evaluations are conducted by the City Auditor’s Office, does the office have sufficient resources, ability, and independence? X See A3-a.
d. Are deficiencies found during separate evaluations promptly resolved? X The Comprehensive Audited Financial Reports for fiscal year 2010-11, issued by the external auditor, noted that the Management Representation Letter was not provided in connection with this audit. As of December 12, 2013, the end of our fieldwork, this has not yet been resolved.
E3. Reporting deficiencies
a. Are there means of obtaining reports of deficiencies from both internal and external sources?
X
b. Is there ongoing monitoring of internal controls? X The City does not have on-going monitoring for internal controls. The City addresses internal control issues when presented in a report, but not all the time.
For example, the Risk Management Evaluation Report, dated August 12, 2010, identified 44 operational deficiencies that included internal controls. As of June 30, 2012, none of these issues was evaluated or corrected as recommended. c. Are deficiencies reported to the person directly responsible and to a person at least one level higher?
X Noted deficiencies in reports were directly communicated to the City manager.
Neither the documents we reviewed nor our interview of several City staff denotes that deficiencies were ever reported to the person directly responsible for the deficiency.
d. Are the identified transactions or events investigated to determine causes and correct problems?
X There was no procedure in place to perform or investigate noted causes of problems. Likewise, problems noted were never corrected.
State Controller’s Office
Division of Audits
Post Office Box 942850
Sacramento, CA 94250-5874
http://www.sco.ca.gov
S14-SPA-001
“Serving The People” "Sirviendo A La Comunidad"
Staff Report
08/18/2026
STAFF REPORT
Date: August 18, 2026
To: Honorable Mayor/Chair and City Council/Agency Members From: Christopher R. Lopez, City Manager
Estefania Zamora, Assistant to the City Manager
Kailie Renteria, Communication Aide
Subject: Receive Presentation on Cudahy Night Market and Select Name, Flyer, and Logo
RECOMMENDATION
The City Council is requested to take the following action(s):
1. Receive and file the presentation regarding the proposed Cudahy Night Market; and
2. Select the proposed Night Market name, flyer, and logo as presented by staff.
BACKGROUND
In December 2024, the City of Cudahy conducted a community survey regarding sidewalk street vending and the potential establishment of a Night Market. The survey was conducted from December 6 through December 9, 2024, and received a total of 41 responses.
The survey provided staff with valuable information regarding the experiences, challenges, and interests of local street vendors. Among the respondents:
• 75% indicated that they did not have a valid Los Angeles County Health Permit; • 73% indicated that they did not have a valid Seller's Permit; • 47% identified limited knowledge or guidance regarding the licensing process as a factor preventing them from obtaining the required permits;
• 61% expressed interest in participating in a Night Market; and • 53% indicated that they would need additional information regarding the fee structure before determining whether they would be willing to pay a participation fee.
The survey results demonstrated both an interest in a Night Market and the need for additional information regarding vendor requirements, operating hours, participation fees, permitting, and the overall structure of the program.
Item Number
14A
“Serving The People” "Sirviendo A La Comunidad"
Staff Report
08/18/2026
On June 16, 2026, the City Council formally directed staff to develop a concept and preliminary plan for the creation of a Night Market in the City of Cudahy.
On August 3, 2026, the Communications Team conducted a survey on social media to learn more about the community’s interest in a Night Market and what residents would like to see at the event. The survey results were as follows:
• Would you attend a Night Market?
o Yes: 365
o No: 26
• What would you be most excited to see?
o Food/Local Vendors: 262
o Art & Activities: 53
o Entertainment: 52
• What time would you prefer?
o 4:00 p.m. – 8:00 p.m.: 69
o 5:00 p.m. – 9:00 p.m.: 326
• How would you like to participate?
o Become a vendor: 60
o Attend only: 234
o Volunteer: 44
• Are you a local business interested in becoming a vendor? o Yes: 58
o No: 174
The August 2026 survey demonstrated strong community interest in a Night Market, with the majority of respondents indicating that they would attend. The survey also showed a preference for a 5:00 p.m. to 9:00 p.m. operating schedule and identified food and local vendors as the most anticipated component of the event.
ANALYSIS
The proposed Cudahy Night Market would be a new community event focused on food, art, culture, and local businesses. The event would provide residents with an opportunity to gather, support local businesses, and experience entertainment in a family-friendly setting.
The Night Market would also create opportunities for Cudahy businesses, artists, vendors, and performers. Staff proposes giving priority to local Cudahy participants, followed by businesses and participants from the Southeast Los Angeles area.
Unlike some existing Night Markets in the surrounding area, the proposed Cudahy Night Market would place a particular emphasis on local art. Art-related careers and creative activities can
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be underrepresented in traditional community events; therefore, incorporating visual artists, live demonstrations, performers, and other creative professionals would provide an opportunity to showcase local talent and encourage community participation.
EVENT THEME
The proposed theme for the Cudahy Night Market is: “Cudahy: Every Culture Tells a Story. Every Story Builds Our Community.”
The theme reflects the goal of bringing the community together through food, culture, art, music, and entertainment. The event would include local artists, cultural activities, food vendors, performers, and other community activities.
LOCATION
Clara Park is being considered as the preferred location because it is centrally located, already serves as a community gathering space, and may require fewer improvements than other potential locations. The site also has existing pedestrian activity and is familiar to the community.
Clara Park also has an existing kitchen facility located on-site. This is beneficial for the Night Market because the kitchen can support the event’s food-related activities and help meet applicable Public Health requirements regarding food preparation facilities.
Clara Park has also historically been used for community activities, including as a swap meet.
Its previous use as a marketplace demonstrates the potential for the site to accommodate a Night Market-style event.
NIGHT MARKET BRANDING
As part of establishing a recognizable identity for the event, staff have developed proposed options for the Night Market's name (Attachment A), flyer (Attachment B), and logo (Attachment C). The selected branding would be used for flyers, social media, vendor information, and other promotional materials. Staff is requesting that the City Council select the preferred name, flyer, and logo presented as part of this item.
CONCLUSION
The proposed Cudahy Night Market would create a new opportunity for residents to come together while supporting local businesses, artists, vendors, and performers.
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Staff is requesting that the City Council receive the presentation and select the preferred Night Market name, flyer, and logo. Following Council direction, staff will continue developing the event plan.
STRATEGIC PLAN CORRELATION
None
FINANCIAL IMPACT
There is no immediate financial impact associated with this item. Future costs related to the Night Market, including permits, public safety, sanitation, entertainment, insurance, marketing, equipment, and other event needs, will be determined as the event plan is further developed.
ATTACHMENTS
A. Night Market Names
B. Flyers
C. Logo
ATTACHMENT A
NIGHT MARKET NAMES
Option A:
Name: Cudahy Mercado de la Luna
Slogan: Nuestra Noche, Nuestra Cultura
Option B:
Name: Cudahy Mercadito
Slogan: Luna, Cultura, y Comunidad
Option C:
Name: Cudahy Night Market
Slogan: Bajo Las Estrellas
OCTOBER
16 THNuestra noche, nuestra cultura. Cudahy’
s
Night Market
5:00 P.M.-
9:00 P.M CLARA
PARK
Join us for a night of art, food, crafts and more!
Attachment B Page 104 of 113
night market BAJO LAS ESTRELLAS
STREET FOOD · ARTISINAL VENDORS
· LIVE PERFORMANCES · ART WALK
STREET FOOD · ARTISINAL VENDORS
· LIVE PERFORMANCES · ART WALK
ocotber 16 | 4835 clara st
Art, Community &Culture at CUDAHY MERCADITO CUDAHY October 16th October 16th Clara Park
5-9p.m.
C U D A H Y NIGHT
MARKET
NUESTRA NOCHE, NUESTRA CULTURA.
Attachment C Page 107 of 113
night market BAJO LAS ESTRELLAS
Art, Community &Culture at CUDAHY MERCADITO CUDAHY
Blank Page
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STAFF REPORT
Date: August 18, 2026
To: Honorable Mayor/Chair and City Council/Agency Members From: Christopher R. Lopez, City Manager/Executive Director Subject: Discussion and Direction Regarding Rainbow Liquor
RECOMMENDATION
The City Council is recommended to discuss and provide direction to staff.
BACKGROUND
The Rainbow Liquor business is being displaced because its current lease is not being renewed.
The business owner has expressed a desire to remain in Cudahy and has inquired about relocating elsewhere within the City.
Under the current Cudahy Municipal Code, staff has identified two primary obstacles to relocation:
1. Liquor Store Prohibition: The Municipal Code no longer permits new liquor stores anywhere within the City. A liquor store is defined as a retail establishment where annual alcohol sales exceed 25 percent of total gross sales.
The business owner has indicated that Rainbow Liquor provides additional neighborhood services and has asserted that the business may not meet this definition. However, the Planning Division has not received financial documentation demonstrating that alcohol sales account for less than 25 percent of the business's annual gross sales. Staff has yet to receive financial information from the business owner.
If the documentation demonstrates that alcohol sales exceed the 25 percent threshold, the business would remain classified as a liquor store and relocation would not be permitted under the current Municipal Code.
2. Distance Separation Requirements: If the business is able to demonstrate that it is not Item Number
14B
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classified as a liquor store, any proposed convenience store selling alcohol must still comply with the City's alcohol outlet separation requirements.
The business owner previously expressed interest in relocating to 8204 Atlantic Avenue. Staff determined that this location conflicts with the required separation distance from the existing Type 20 (Beer and Wine) license operating at the ARCO station located at 8111 Atlantic Avenue.
No alternative sites have been identified by the applicant.
The City's alcohol regulations were comprehensively updated in 2024. Those amendments maintained restrictions on liquor stores, convenience stores selling alcohol, and other alcoholrelated land uses based upon public safety, land use compatibility, and operational considerations.
Under the current Municipal Code, staff has no administrative authority to approve an exception to these regulations.
Discussion and Direction
Should the Council wish to retain the business within the City, the Council could provide policy direction to staff to evaluate one or more of the following:
1. Evaluate the City's General Plan policies and goals to determine the feasibility of amending the Municipal Code to allow the relocation of legally existing liquor stores that are displaced due to circumstances beyond the business owner's control, subject to appropriate operational and development standards.
2. Evaluate the City's existing land use definitions, minimum separation distance, and operational requirements for alcohol-related businesses that provide neighborhoodserving services.
3. Consider options to allow a narrowly tailored, one-time relocation provision for qualifying legally existing businesses that are displaced due to circumstances beyond the business owner's control, subject to defined eligibility criteria.
4. Maintain the existing Municipal Code with no changes and take no action.
Staff recommends first determining whether Rainbow Liquor meets the Municipal Code definition of a liquor store by obtaining documentation regarding the percentage of annual gross sales derived from alcohol sales. If the business does not meet the definition, staff can continue evaluating potential relocation opportunities that comply with the existing Municipal Code. Staff has previously asked for this information but has yet to receive any information.
It is highly recommended that the business owner provide this information so that staff can make this determination.
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If the business does meet the definition, relocation would require a policy change by the City Council, as staff has no authority to approve such a use under the current Code.