COMPTON — Overspending of more than $16 million a year, pervasive internal deficiencies and a lack of City Council oversight have contributed to a multimillion-dollar budget deficit in Compton, according to a state controller’s audit released March 15.
According to the review published by state Controller Betty T. Yee, at the start of the 2007-08 fiscal year, 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, Yee said.
Compton Mayor Aja Brown said, “correcting nearly three decades of mismanagement and a resulting impaired governance structure, including nearly 50 percent of staff reductions, is a process that requires stable leadership, new policies, adequate organizational capacity and time,” in a statement issued by her spokesperson.
“Compton was on the brink of bankruptcy as publicly reported in 2012, and is now solvent, as currently reported,” Brown added.
“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.”
Brown was elected mayor in 2013 and re-elected to a second term in 2017.
Yee said Compton’s City 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 council, Compton has one for each of its five council members.
The Compton City Council adopted a repayment plan in June 2014, but over the next year the deficit increased by another $6.4 million, Yee said.
“While violating the city’s charter and continually overpaying themselves, the city council’s brazen overspending contributed to the city’s financial hardship,” Yee said. “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.
“We assessed various aspects of the city’s internal control components and elements based on the internal control management and evaluation tool guidelines established by the Government Accountability Office,” Yee added. “Of the 79 control elements evaluated, we found that 71, or 90 percent, were inadequate.”
The audit determined that 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 review also found that all charges to city-issued credit cards were questionable, because city management did not enforce its policies and procedures.
Material weakness in internal controls — such as a lack of segregation of cash-handling duties — allowed a former deputy treasurer 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, according to the controller.
Auditors also found that staff turnover and a lack of consistent leadership prevent employees from performing some critical functions. The city has had nine city managers in seven years and has been without a human resources director for three years, according to the report.
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 with the controller’s office for the 2015-16 fiscal year raised red flags that triggered the audit.
The city’s financial transaction reports were submitted after the state deadline in fiscal years 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 for the 2013-14, 2014-15 and 2015-16 fiscal years.