State controller blasts Compton city government mismanagement
State Controller Betty Yee’s audit team identified more than $3.9 billion in misuse, waste, and fraud involving public funds, since January 2015
State audit of Compton finds reckless overspending, scant accounting controls
COMPTON (MNS) — The City has a General Fund deficit caused in large part by reckless overspending, pervasive internal control deficiencies, and a lack of city council oversight, according to a review published Thursday by the California State Controller’s office.
Of the 79 measures of internal accounting and administrative controls reviewed by State Controller Betty Yee’s audit team, Compton was found deficient in 71 — almost 90 percent.
Responding to the harsh assessment to soften the blow, Mayor Aja Brown released the following statement:
“Compton was on the brink of bankruptcy as publicly reported in 2012, and is now solvent, as currently reported,” she said.
“Compton is on a firm and definitive path to recovery, which includes a new solid source of annual tax revenue, new economic development, new fiscal policies, stable senior management and full city council support — which all occurred under my administration.”
But the controller’s in-depth audit totally contradicts Brown.
$42.7 million in the hole
At the start of Fiscal Year 2007-08, Compton had a General Fund surplus of $22.4 million. Three years later, the surplus had become a $42.7 million deficit due to overspending at an average of $16.3 million a year above budgeted expenditures. In June 2014, the Compton City Council adopted a repayment plan, but over the next year, the General Fund deficit enlarged by another $6.4 million.
Brown is not alone in the city’s fiscal management. The city manager, city controller, and entire council are culpable through a consistent pattern of disturbing mismanagement.
The Council expenditures are three times those of comparable charter cities in Los Angeles County. Where other small cities have one full-time assistant for an entire city council, Compton has one for each of its five council members. Total compensation for the mayor and city council members themselves exceeded limits in Compton’s city charter by nearly $1.3 million from January 2010 through July 2017, the state audit reflected. The review also found that all charges to city-issued credit cards were questionable because city management did not enforce its policies and procedures.
“While violating the city’s charter and continually overpaying themselves, the council’s brazen overspending contributed to the city’s financial hardship,” said Yee, the state’s chief fiscal officer. “Clearly, the city council needs to right the ship and make deficit spending a part of its past by exercising meaningful oversight of the city’s duties.”
Weak internal controls, staff turnover play a role
Material weakness in internal controls — such as a lack of segregation of cash-handling duties — allowed incarcerated former deputy treasurer Salvador Galvan to embezzle more than $3.7 million from May 2010 through December 2016, for which he received a federal prison sentence of six and a half years.
Auditors also found that staff turnover and a lack of consistent leadership prevent employees from performing some critical functions. The city has had nine different city managers in seven years and has been without a human resources director for three years.
The city controller’s office has seven vacancies, leading to delays in financial records and reporting. Compton’s failure to file a financial transaction report (FTR) with the State Controller in Fiscal Year 2015-16 raised red flags that triggered this review. The city’s FTRs were submitted after the state deadline in FY 2012-13 and 2013-14, and its Government Compensation Report was filed late in calendar years 2013 through 2015. The city’s single audit report was never filed in FY 2013-14 through 2015-16.
Since January 2015, Controller Yee and her audit team have identified more than $3.9 billion in misuse, waste, and fraud involving public funds.
The State Controller’s Audit of Compton may be the severest in city history. The Compton Herald has access to the report and will break down and analyze the audit in the coming weeks.