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Bankrupt Stockton: State Audit Draft Shows City Missed Signs Leading Up To Filing

STOCKTON (CBS13) — A scathing state audit shows the city of Stockton was struggling years before its bankruptcy filing.

The 50-page draft states there's no one wrong move that landed the city in its financial crisis.

A draft of the state controller's audit shows significant weaknesses with the city's accounting and administrative control system, creating an extremely high potential for waste, fraud and abuse of public resources.

Those are just a few of the highlights mentioned in the report examining the struggling city's finances from 2010 to 2011.

The document says leaders should have seen the warning signs, especially when the housing boom slowed down, and when it came to retiree health benefits.

Housing permits fell from a high of 2,954 in 2005 to 1,604 the next year before falling to 680 in 2007.

During that time, the city took out a trio of large loans, relying on tax revenue to make payments.

The city says it has issued a response to the controller's office, and remain tight-lipped, because the draft is confidential.

In a statement, the assistant city manager says, "The City Manager has been consistent with his direction to improve accounting controls. The Council approved the City Manager's recommendation of hiring Moss Adams to conduct an in-depth internal control review. "

The statement goes on to say the results of that review are expected this month.

The report was delayed by the city not submitting documents on time and asking for extensions.

The state controller's office won't say when the official audit will be released to the public.

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