As any L.A. motorist could readily attest, local streets are in rough shape. In some parts of town, you can’t go two blocks without running over a pothole or bumping along on cracked pavement. And when you call to complain, you’re told it will take months or even years before your street is fixed there simply aren’t enough funds to fix everyone’s street immediately.

So how is it that the L.A. Bureau of Street Services returned $2.3 million in unspent funds to the city’s reserve fund this past year? And that’s on top of the $2 million to $5 million returned in each of the previous four years.

The Bureau of Street Services is far from alone or even the worst offender, according to a preliminary fiscal year-end financial report released last week by City Controller Laura Chick. (The city’s fiscal year ends June 30.)

All told, various city agencies sent back some $63 million in unspent funds to the city’s reserve fund, the highest amount in the last five years. Thirteen departments each gave back more than $1 million; the Information Technology Agency sent back $8.6 million, 10 percent of its entire 2000-01 budget allocation.

While Chick said some might look upon this as good news “at least we’re not overspending” she added that it also could signify deep financial management problems for the city.

“For some of these departments, this underspending means they did not fulfill their work plan,” Chick said. “You wouldn’t run your business that way. To me, it says there’s some mismanagement going on. There’s something not right.”

Chick said she would ask both Mayor James Hahn and the City Council to set up a committee to look into the multimillion-dollar givebacks. “We need to get to the bottom of this, to see if these departments really are being very efficient, or if there is indeed mismanagement of these funds,” she said.

City department officials offer a variety of explanations for the underspending. Bureau of Street Services spokesman Marshall Lowe said that a number of street projects came in below budget, primarily because of lower-than-expected material costs and fewer-than-expected rain delays.

“In our business, it’s a rule of thumb that you can’t be 100 percent exact on budget projections there are just too many variables,” Lowe said.

So how come the extra money wasn’t redirected towards speeding up the repaving schedule? Simply put, Lowe said, city directives prohibit this. All unspent money must go back to the city’s reserve fund.

To drive home the point, former Mayor Richard Riordan sent out a memo this past February imploring managers to scrounge up any unspent dollars they could find.

“He said that, with the deteriorating economy, it was really important to shore-up our reserve fund with any dollars that had been budgeted but not spent over the last four or five budget years,” said Joseph Mozingo, interim general manager of the city’s Information Technology Agency.

But Geoffrey Segal, policy analyst with the Reason Public Policy Institute, said “it shows that departments may not have a very good grasp of internal cash flows. In the city of L.A., unlike San Diego for example, you’ve got no performance guidelines and no requirements that tie funds to specific purchases.”

At the L.A. General Services Department which gave back $9.4 million, the highest total of any department assistant general manager Anthony De Clue called the return of funds an “accounting technicality.”

He said much of the money was related to construction projects that were approved midyear but took longer than the end of the fiscal year to complete. Because of the way the city keeps its books, these unspent funds must be returned to the city’s reserve fund and then re-allocated the following year.

Meanwhile, at the Information Technology Agency which saw its level of returned funds spike from the $2 million range in each of the last four years to $8.6 million this past fiscal year Mozingo said the agency reaped huge unanticipated savings from signing up with a cheaper state phone contract.

“A couple of years ago, you might remember the flap over the city not paying its phone bills,” Mozingo said. “So to make sure that didn’t happen again, we asked for a little more money in subsequent budgets. Then, last year, we found out we could sign up with this state contract, which saved us something like $10 million on our phone bills.”