Just a couple of months into his term as the first mayor elected after the change in New London's government, Mayor Daryl Justin Finizio delivered alarming news. Budgets approved in the dying years of the former city manager-council system had proved unrealistic. Revenues had been estimated too high, expenditures too low. And while prior councils had kept taxes steady for years, in reality the city was living well beyond its means.

Mayor Finizio approximated the fiscal hole at $12 million, a shocking number in a city with an $81.9 million budget. Many current and prior council members were incredulous. Critics dismissed the mayor as an alarmist.

But, on balance, he was right. A big reason this newspaper advocated for the change to a mayoral-led government, and voters approved it, was a desire for greater accountability. The city is getting it, warts and all.

Finance Director Jeffrey Smith on Tuesday gave the council's Finance Committee the final accounting (pending an audit) for the 2011-2012 fiscal year ending June 30, showing the city ran a $4.7 million deficit. Revenues, based on unrealistic tax collection, investment income and other rosy numbers, fell $3 million short. Spending exceeded the budget by $1.67 million.

This will be a second consecutive year of deficit spending for the city. The final audit for the 2010-2011 fiscal year found a $1.3 million deficit. To address those consecutive deficit budgets, the city has exhausted all but $312,000 of its fund balance, a financial cushion good-governance calls for and which once stood at $6 million. Take the $6 million in deficit spending of the past two years, add in the need to rebuild the $6 million fund balance, and you get the $12 million hole Mayor Finizio projected soon after taking office.

Who is to blame? Most everyone. Prior councils, eager to announce they had avoided tax increases, did not sufficiently challenge unrealistic revenue and spending numbers. In the difficult transition year between adoption of the charter change and the election of a mayor, adequate oversight by interim City Manager Denise Rose was lacking, with too much spending allowed on overtime and for compensation pay, and too little attention paid to runaway expenditures.

As for Mayor Finizio, having recognized early in 2012 that expenditures were well ahead of budgeted resources, he needed to do a better job reining in costs during the last six months. Some of the blame for $1.67 million in overspending must rest with the administration.

More importantly is assuring the city learns from past mistakes and places New London on firmer financial footing moving forward. The finance director has recommended an "operational audit" that would look at several major departments and provide answers as to why expenditures so exceeded estimates and why revenues were also far off. If evidence of possible fraud is detected, a more comprehensive, and expensive, forensic audit could be undertaken for a specific department.

Mr. Smith said auditing firm would also provide recommendations on how to provide more accurate and timely monthly budget updates to the council and mayor in a more understandable fashion, a step that will prevent fiscal problems from getting out of hand. He estimates the cost for the special audit help at $9,000. The council should adopt the recommendation.