Southern California -- this just in

« Previous Post | L.A. NOW Home | Next Post »

Compton's bond rating suspended amid questions

September 5, 2012 |  2:42 pm

Rating agency Standard & Poor's announced Wednesday that it has suspended its ratings on the city of 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, the city'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 allegations of fraud, and that the agency may reinstate Compton's ratings once the city has a new audit completed.

Compton City Manager Harold Duffey said the city has engaged Los Angeles County to complete a forensic audit that will address the fraud allegations and is scheduled to meet next week with a new audit firm, Macias Gini & O'Connell, about revisiting the city's annual 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 that have made it late on paying its bills, and earlier this summer, City Treasurer Douglas Sanders told the council that they might need to look at bankruptcy as an option.

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

— Abby Sewell