More proof: Compton government spending reckless, undisciplined
The city’s spending policy has been like a 'tornado of unchecked bad fiscal policy'
Corbis|Volker Möhrke via Getty Images embed
Compton audit uncovers questionable credit card, petty cash, travel transactions; dubious professional services contracts
The Compton Herald continues with the third installment in our review of the California State Controller’s office City of Compton audit.
While the mayor has spun various rationale in the official city newsletter for the city’s mismanagement around its fiscal blunders, the facts of the controller’s findings remain solid as concrete. They cannot be dismissed as inaccurate or untrue.
The state controller’s City of Compton audit revealed that the expenditure of city taxpayer money often happened without due diligence or oversight, too often spent by the City Council and city officials without detailed review or analysis of the reasonableness of these costs.
The state controller’s office determined in its audit how readily city spending can spin wildly out of control. The city’s spending policy has been like a “tornado of unchecked bad fiscal policy.” During several council meetings, for instance, payments of warrants were approved without review or evaluation of payment.
Dubious professional services payments
Unallowable payments were made for professional services due to lack of approved contracts. The state controller found that the city failed to provide approved contract agreements between itself and several service providers. In addition, there was no evidence from the council minutes that the council had approved a resolution for these professional services. As a result, the city made unauthorized payments of $291,537.
Some professional services were warranted and made sense, others did not.
For instance, the city paid the Compton Chamber of Commerce for Fiscal Years 2013-14, 2014-15, and 2015-16 — $11,074, $25,000, and $50,000, respectively, for a total of $86,074. The payments increased three years straight under questionable circumstances since little is known about what the Chamber of Commerce does or how it benefits the city.
The city also made payments for auditing services without ensuring that the work was satisfactorily completed. On Nov. 20, 2015, the city and Macias Gini & O’Connell, LLC entered into a contract for professional auditing services for Fiscal Year 2013-14 and 2014-15.
The total approved contract was $648,879, prorated at $324,439 for each fiscal year to complete the Comprehensive Annual Financial Reports (CAFR) and Single Audit Reports for FY 2013-14 and 2014-15.
The city was billed for single audit work for FY 2013-14 in the amount of $70,483 of which the city paid $56,822. The city did not provide a completed Single Audit Report for 2013-14.
Additionally, the state controller has no record of receiving a completed Single Audit Report for FY 2013-14. Furthermore, the city was billed and paid for work related to the completion of the CAFR for FY 2013-14.
We obtained a copy of a Macias Gini & O’Connell-completed FY 2013-14 CAFR dated Nov.17, 2016. However, the city informed the state controller that this report had been recalled by the firm, and should not be relied upon.
Payment was made for professional services without detailed review of invoices. The city paid Macias Gini & O’Connell $46,145 for services related to the FY 2014-15 Single Audit Report. However, on Nov. 6, 2017, the City Controller’s Office informed the state controller that it was still in the process of preparing its Schedule of Expenses for Federal Award — the basis for preparation of Single Audit Report.
The city did not perform a detailed review of the invoices for work completed before paying this amount.
City-issued credit card policy deviation
The city failed to exercise adequate control over expenditures charged to city-issued credit cards. According to the state controller, city management did not enforce a strict policy for governing city-issued credit cards. From July 1, 2013, through June 30, 2016, city management charged a total of $51,695 in expenditures on city-issued credit cards.
On examination of the $51,695 in charges, the state controller found them questionable. The city did not provide any policies and procedures governing city-issued credit cards and business-related travel, again, a wholesale disregard to follow city policy for making purchases and maintaining proper supporting documentation.
The state audit found that charges were incurred before purchase orders and purchase requisitions had been fully approved. Chapter 4, Section 11, of the city’s Municipal Code states, in part:
(1) All purchases made on behalf of the City shall be by purchase order only issued by the City Manager. (2) No purchase order shall be issued by the City Manager except upon a requisition upon which the City Controller shall endorse that there exists an unencumbered appropriation in the fund account against which such purchase is to be charged.
The controller found that most of the charges were not supported by original receipts, nor was any justification or reason for the expenditure included to support most of the charges. The questionable expenditures included travel charges, late fees, and miscellaneous charges.
Excess travel charges
The state controller dug up questionable expenditures for travel that totaled $24,404, or approximately 47 percent of total charges to city-issued credit cards. The controller underscored that the purpose of the travel expenses was “missing, unclear, excessive, or not properly documented.”
Some of the questionable charges are as follows:
- On Feb. 10, 2015, $1,193 was charged for airfare to Washington, D.C. The purpose of the charge was missing and unsupported.
- On May 22, 2015, $1,028 was charged for lodging in Hartford, Conn. The controller noted it was unclear whether the charge was for city business and no supporting documentation was provided.
- On June 24, 2015, a total of $1,494 was charged for round-trip airfare to Miami, Fla., and an unknown period of lodging there; there was no record to justify the trip and no supporting documentation.
- On Dec. 12, 2015, $1,492 was charged for one night of lodging in New York, NY; the charge was unsupported and excessive.
- On June 11, 2016, $708 was charged for one night of lodging in Las Vegas, Nev.; the charge was unsupported and excessive.
The trips may have been warranted, but the unsubstantiation and lack of supporting documentation created reasonable suspicion as to the plausibility of the travel.
Late payment charges
Other wanton disregard for how taxpayer money was spent involved payment of city-issued credit card billings. For the period of Oct. 29, 2014, through June 30, 2016, the state audit revealed that several late payment and delinquency fees were charged to city-issued credit cards due to late payments and delinquency fees after the due date.
The controller noted other miscellaneous expenses totaled $16,334, or 32 percent of city-issued credit cards. These expenses lacked documentation — either unsupported by expense reports or there was no documentation of the reasons for the charges. Receipts were also missing. For example:
- On April 29, 2015, charges of $1,990 to an online office supply warehouse for certificate holders for the City Council; the charges were unsupported.
- On May 30, 2015, charges of $1,975 for supplies; we could not determine the purpose or type of supplies.
- On Dec. 3, 2015, charges of $1,274 to an electronics store for a camera; there was no record to justify that this purchase was for city business.
The City’s credit card policy was not a vacuum. There were controls in place according to the state audit. Compton officials were lackadaisical and irresponsible and failed to monitor compliance with Expense and Reimbursement Policy, dated April 19, 2016, which clearly states, “Officials shall submit expense reports accompanied by the receipts documenting each expense.”
Further, the policy specifies that “expenses should be clearly documented on the Expense Reimbursement Report form.” All charges to city-issued credit cards were missing expense reports and were unclear, excessive, and undocumented.
Petty cash discrepancy
During the state controller’s audit, it was noted that cash advances granted to city departments totaling $15,950, had been recorded in the city’s accounting record as Petty Cash Fund.
The amount recorded as advanced to city departments exceeded the actual amount available in the Petty Cash Fund. On July 27, 2017, the controller conducted a cash count and confirmed that the total petty cash amount was only $2,497. There was no explanation by the city for the difference of $13,453.
The state controller also found several instances of financial flimflammery where city employees circumvented the petty cash reimbursement policy. The reimbursement claim form clearly states that petty cash may only be used for items up to $100. The audit found evidence of purchases greater than $100 that had been split into amounts less than $100, so that employees could be reimbursed from the Petty Cash Fund.
That clearly was deception.
The litany of failure after failure by the mayor, council, and other city officials and employees to abide by city and state protocol and laws to such excess defies understanding, except, perhaps a general willingness to get away with as much as possible — which in the final analysis could be grounds for criminal negligence punishable under the law.