Compton officials overpaid themselves, charged questionable trips on city-issued credit cards and failed to safeguard taxpayer money, resulting in a staffer stealing millions of dollars over years, according to a state audit.
The city of Compton’s weak financial 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.
The California state controller review, released Thursday, found that the city 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,” state Controller Betty Yee said.
“The City Council’s brazen overspending contributed to the city’s financial hardship,” Yee said. “Clearly, the City Council needs to right the ship.”
In a statement from the city manager’s office, Compton officials said they took measures to increase financial oversight and adhere to the debt elimination plan long before the state audit was released.
“It cannot be overstated that Compton is fiscally solvent and is at no risk of a financial breakdown or bankruptcy,” city officials said.
Fiscal mismanagement is not a new problem in Compton, where former Mayor Omar Bradley was convicted last year of misappropriating public funds. Current Mayor Aja Brown took office in 2013 on a good governance platform and vowed to bring financial stability to a municipality that had run through city managers.
Though the audit did not single out any officials by name, its publication — just days after Brown announced her ambition to run for Congress — suggests Compton’s problems are not entirely behind the city.
Brown said in a statement that fixing nearly three decades of problems “is a process that requires stable leadership, new policies, adequate organizational capacity and time.”
“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,” she said.
In a response to the audit, City Manager Cecil Rhambo offered a list of new safeguards implemented after a deputy city treasurer was arrested on suspicion of stealing money from the treasurer’s office last year. The employee, Salvador Galvan, was sentenced in November to six and a half years in federal prison for embezzling $3.72 million from 2010 to 2016.
Among the reforms was a move two years ago to ensure the salaries of council members and the mayor do not exceed $600 a month, as mandated by the city charter. For years, they had boosted their salaries by paying themselves for sitting on boards and commissions — a long-standing practice the district attorney's office said was illegal. That action brought total salaries of the four council members and the mayor from an annual average of $207,000 to about $26,500, according to the audit.
Still, officials upped their pay with monthly car and phone allowances, as well as other unspecified payments, which increased their total compensation to more than the amount allowed by the city charter, according to the audit.
The state review, which examined city finances from July 1, 2013, through June 30, 2016, found that Compton has a budget 300% higher than the average budget of cities of similar size and population. City officials overspent on events and failed to send public works projects out for bids. The report found that $51,695 in expenses charged to city-issued credit cards were questionable because officials did not provide required documentation and justification for the purchases. Some of those charges include unexplained trips to Connecticut, Miami, New York, Las Vegas, and Washington, D.C. The charges also include $1,975 in for unspecified supplies and $1,274 for a camera.
The city failed to conduct meaningful oversight, allowing, in one instance, a single employee to count cash, prepare daily deposit slips and perform end-of-day reconciliations — duties that should be conducted by different people to prevent theft, the report found. For three years, the city did not compare its bookkeeping records with those of its bank, “an effective tool to detect mistakes, errors and embezzlement.” And Compton officials frequently missed financial report deadlines, leaving one accounting document past due by 35 months, the audit found.
It was the tardiness of financial reports that triggered the state audit.
Jessica Levinson, an L.A. city ethics commissioner and Loyola Law School professor, said the level of financial mismanagement in Compton does not rise to the level of Bell, a small Southern California city that became a poster child for graft after city leaders were caught paying themselves outsized salaries. But she said she sees a lot of similarities: failure to adhere to common accounting practices, lack of oversight and excess pay.
“All of this is harming constituents and the people who live in Compton,” she said. “Bell is a really high threshold to hit and I don’t think we’re quite there, but if they don’t do anything the city is going to get closed.”
In 2012, Compton was on the brink of bankruptcy and the city’s general fund had a $40-million deficit because for years officials used the city's water, sewer and retirement funds when the general fund ran short on cash. Two years later, a think-tank study named Compton the most financially distressed city in the state. Compton officials disputed the claim, saying the firm that compiled information for the study used outdated reports and secondhand sources.
More recently, Compton has been on the upswing. Crime is down, property values are on the rise, and the city has been able to attract new development. Brown touted these accomplishments as proof that voters should support her congressional bid.
“Our city is making a strong comeback and I’m proud to have served as a catalyst for real change that my community can see and feel,” Brown said in a statement last week after she launched her campaign to run for the 44th Congressional District, which represents Carson, Compton, Lynwood and several other cities in south Los Angeles County.
But the report found that the city might find itself in real financial trouble if it does not rein in spending and follow the budget approved by the City Council.