Published: Apr 30, 2010 1:49 AM EDT

CAPE CORAL, Fl - Councilman Bill Deile acknowledged concerns raised by the city's auditor, Purvis Gray & Company. In a memo to the Mayor and council, Deile details the auditors findings.

The audit finds that Cape Coral may not have the funds to pay for benefits the city owes to its retired employees.

The city was using a Pay as You Go system that many other cities use. Paying for expenditures like health and life insurance policies when premiums are due.

The city is not obligated to set up any form of trust to ensure payments are made.

When an audit discovers that a city may be in danger of defaulting on those payments there is a possibility that the State government may step in.

Florida statute 218.503, according to Purvis Gray, provides that local governments shall be subject to review and oversight by the Governor when there is a failure to transfer "at the appropriate time, due to lack of funds" retirement benefits owed to former employees.

Deile does not believe that will happen. The councilman is working with staff on a presentation regarding the issue, to deliver to the Mayor and fellow councilmembers at next Monday's meeting.