Compton misused gas tax funds, state audit finds

Compton officials used state-issued funds earmarked for road repairs and other transportation-related expenses to balance the city’s budget and pay for unrelated projects, according to a state audit.

Over a nine-year period, the city of Compton’s loose accounting and weak financial oversight allowed officials to borrow $4.4 million from a special gas tax street improvement fund and nearly $800,000 from a traffic congestion relief fund in violation of state rules, the audit found.

In total, $5.2 million in taxpayer funds was misused from 2007 to 2016 and will have to paid back to the state.

“Our bad, we’ll fix it,” said Compton City Manager Cecil Rhambo Jr., who was not employed by the city during the time period the audit examined. “I don’t know why they did that. My guess is they had some funding shortages.”

The audit, released Wednesday, is the California state controller’s second recent review of Compton’s accounting practices.

Last month, a scathing report found the city’s weak oversight and rampant overspending turned a general fund surplus of $22.4 million a decade ago into a deficit of $42.7 million just three years later. Even after officials adopted a plan to repay the debt in 2014, the deficit increased by $6.4 million the next year.

Additionally, the city has received failing marks in 71 out of the 79 measures assessing internal accounting and administrative controls, a score that ranks Compton’s accountability as “nonexistent,” the March audit said.

“Considering the findings of our review issued last month along with this gas tax audit, clearly the city’s insufficient internal controls were widespread and included unallowable and excessive gas tax borrowing and spending,” state Controller Betty Yee said Wednesday. “This further underscores the need for Compton to seriously and diligently address the findings of both reports.”

The audit found the city borrowed money from the special gas tax street improvement fund that was supposed to be spent on expanding the Martin Luther King Jr. Transit Center, street traffic signal upgrades, sobriety checkpoints and other street-related purposes. The audit does not disclose how the money was used.

In cases in which the city charged expenses to the traffic congestion relief fund, officials did not provide supporting documentation to back up the expenses. The city also failed to spend all the money allocated by the state to ease congestion before a deadline and must now repay $130,805.

The audit did not single out any city officials for their role.

Former Compton Mayor Eric Perrodin, who served until 2013, sent a letter in 2011 to the state controller’s office alleging that fraud may have led to Compton’s financial troubles and requested a forensic audit. He did not immediately respond to a request for comment.

Mayor Aja Brown, who succeeded Perrodin, said in a statement that Compton is now on solid fiscal footing.

“Today, our city is solvent,” said Brown, who attributed the stability to new economic development and the approval of a local sales tax that has “consistently outperformed projections, allowing us to restore vital city services and repair critical infrastructure.”

Rhambo said the city will set up a payment plan with the state that will stretch over several fiscal years. Some money will come from the general fund, but he hopes additional revenue generated from leasing vacant city buildings and updating city facility fees, along with cuts in redundant programs and council staff, will help bring in extra money.

Jessica Levinson, an L.A. city ethics commissioner and Loyola Law School professor, said some cities, in the midst of the Great Recession, engaged in questionable accounting practices simply to maintain vital services.

“Compton wasn’t alone here,” Levinson said.

Still, she said the report follows a pattern of financial mismanagement in Compton.

“It looks like part of the same story of the city leaders not being able to get their act together and not running a clean fiscal house,” she said.

For more California breaking news, follow @AngelJennings. She can also be reached at angel.jennings@latimes.com.