Standard & Poor’s suspends ratings on city of Compton’s bonds

Standard & Poor’s announced Wednesday that it has suspended its ratings on Compton’s bonds, as the city has yet to get an audit firm to sign off on its financial statements from last year.

In June, Compton’s former audit firm, Mayer Hoffman McCann, refused to sign off on its financial statements and quit, citing allegations made by Mayor Eric Perrodin that waste, fraud and abuse of public funds may have contributed to the city’s financial distress.

Perrodin would not further elaborate on his concerns to auditors, leading the firm to conclude: “The scope of our work was not sufficient to enable us to express, and we do not express, an opinion on these financial statements.”

In July, Standard & Poor’s put the city on credit watch.

In a statement, Standard & Poor’s analyst Lisa Schroeer said the agency understands the city is working to get the audit reevaluated and to address the fraud allegations, and that the agency may reinstate Compton’s ratings once the city has a new audit completed.

City Manager Harold Duffey said Compton has engaged Los Angeles County to complete a forensic audit that will address the allegations and is scheduled to meet next week with a new audit firm, Macias Gini & O’Connell, about revisiting the city’s audit from last year. He could not say what the timeline would be to complete the new audits.

“We are disappointed that we were not able to resolve this issue before Standard & Poor’s took any action, but we are working on it and are confident that we will be able to resolve these issues,” he said.

The city has struggled with a massive general fund budget deficit and cash-flow problems, and has been late paying its bills. Earlier this summer, City Treasurer Douglas Sanders told the council that it might need to consider bankruptcy as an option.

Duffey and other city officials quickly reassured the public that the city is not insolvent and has no plans to file for bankruptcy.

abby.sewell@latimes.com