As legal settlements skyrocket and strain the city of Los Angeles, City Controller Kenneth Mejia announced Thursday his office will begin a performance audit of risk-management practices to reduce harm and liability payouts.
Total liability costs rose consecutively in the last five fiscal years. In a previous report on risk management, the Controller’s Office reported the city paid $35 million in liability claims in 2006, or about $54 million in 2024 dollars.
In the 2023-24 fiscal year, liability payouts reached $254 million. In the 2024-25 fiscal year payouts are estimated to be more than $286 million, an increase of more than 500% in 20 years, according to Mejia’s office.
“Liability payouts are a major reason that the city is in a fiscal emergency. Behind each payout is an example of city government failing to serve and meet the expectations of its constituents,” Mejia said in a statement.
“Our office is launching this audit because the city must do everything in its power before the risks lead to injuries and death — and the claims, litigation and payouts that follow. We must do better,” he added.
The audit will focus on evaluating at the citywide and departmental levels the following:
— How effectively risk management processes identify, evaluate, respond to and monitor risks to reduce potential liability payouts; and
— Issues that hamper effective risk management.
The audit will be conducted by the Controller’s Audit Services Division.
Elected officials closed a roughly $1 billion deficit via measures in the 2025-26 budget, which called for hundreds of layoffs, increasing fees and fines related to city services, among other initiatives.
Economic downturn, overspending, wildfire recovery, labor agreements, lower than anticipated revenue from taxes and increasing liability costs contributed to the deficit.