City auditors resign
COMPTON—The city’s ongoing financial controversy took another dramatic turn on Wednesday, June 27, as its independent auditor, Mayer Hoffman McCann PC, located in Irvine, turned in its resignation.
The audit firm expressed its communication struggles in its solid waste bond compliance report addressed to the City Council.
“On December 1, 2011, the Mayor of the city of Compton sent a letter to California State Controller John Chiang alleging waste, fraud and abuse of public monies. The mayor did not respond to audit inquiries, and we could not determine the financial impact on the city of Compton’s 2011 financial statements. The city did not evaluate the financial impact of the allegation made. We did not to satisfy ourselves about these matters by means of other audit procedures,” the report said.
Mayor Eric J. Perrodin asked Chiang to help identify the reasons why the city has a $39 million general fund deficit.
“We need your assistance in weeding out waste, fraud and abuse of public monies,” Perrodin said. “I am requesting your assistance to help us navigate this difficult economic time by conducting a complete forensic audit of all city records and departments.”
He asked City Controller Stephen Ajobiewe for a report of each department’s finances for the last five years, and every purchase order all the way down to one penny. To date, Ajobiewe has not submitted the report to the Council.
Mayer Hoffman McCann PC came under scrutiny in 2010 when Bell, one of its client cities, was the subject of a series of reports in the Los Angeles Times, leading to the arrest of City Manager Robert Rizzo, Assistant City Manager Angela Spaccia, Mayor Oscar Hernandez, Vice Mayor Teresa Jacobo, Councilmen Luis Artiga and George Mirabal and former Council Members George Cole and Victor Bello.
The group, who became known as the Bell Eight, was charged with misappropriation of public funds.
City Attorney Bryan Batiste said the group began working in Compton before the Bell controversy surfaced.
“The audit was already in progress when I started as city manager,” he said. “They stopped working after the state controller received the letter, but agreed to a call-itlike they-see-it audit."
The group sent its preliminary single audit report and basic financial statements to Ajobiewe, along with water, sewer and solid waste bond compliance reports, GANN letter, (independent accountants’ report on agreed-upon procedures applied to appropriations limit worksheets), air quality report, a statement of accounting standards (SAS 114) and Community Redevelopment Agency financial statements.
Chiang’s office released a report on the Bell issue on Dec. 21, 2010, and said the company did not comply, to varying degrees, with the majority of fieldwork auditing standards regarding audit documentation and evidence, the risk of fraud, litigation, claims and assessments, subsequent events, going concerns, and the Office of Management and Budget (OMB) Circular A-133 requirements for testing federal program internal control and compliance.
“In addition, the firm did not comply with the Redevelopment Agency (RDA) Audit Guide in testing for allowable expenditures, or section 5097 of the California Business and Professions Code,” the report said.
The firm disputed the findings, and offered documentation that Bell employees and administrators circumvented fraud prevention policies and deceived its auditors.
City Attorney Craig Cornwell, Batiste, and Ajobiewe hope they can resolve the auditor’s issues.
An email to Perrodin seeking comment on the action was not returned.
The termination date for Mayer Hoffman McCann P.C. is Friday, July 13.
The next City Council meeting is on Tuesday, July 10