COMPTON—The financial turmoil surrounding the Hub City took another drastic turn for the worse on Thursday, July 5, when the state controller’s office initiated actions that could eventually cost the city some or all of its federal grant money.

Compton is on the state auditor’s list of delinquent cities for its single audit report, which was due on Saturday, March 31.

“Compton can be subject to penalties if it does not comply,” State Controller Spokesman Jacob Roper said. “After receiving the list, state offices can reject financial statements and withhold money.”

Roper said the penalty is discretionary.

“This office does not decide which cities forfeit money,” he said.

The city’s auditing firm, Mayer Hoffman Mc- Cann PC, did not complete a final audit and gave two weeks’ notice on Wednesday, June 27. The company blamed Mayor Eric J. Perrodin for its action because he would not discuss his Dec. 1, 2011, letter to State Controller John Chiang, alleging waste, fraud, and abuse of public funds with the group.

Perrodin maintains that releasing information will trigger a cover-up.

The firm completed a preliminary audit report, along with a disclaimer of opinion (issued when the auditor will not present an opinion on financial statements because of missing information), which adds bond holders, trustees, underwriters and financial institutions to the list of people and organizations likely to reject its financial statements.

The issue remains deadlocked, with no help from Chiang in sight.

“There is no timeframe for any of the hundreds of allegations coming in from cities, counties, special, water and library districts right now,” Roper said. “Our audit staff is tied up with audits in Hercules, where an investigation revealed the worst accounting records Chiang had ever seen, according to published reports, and Stockton, which filed for bankruptcy protection in June.”

Roper confirmed Perrodin’s claim that he has met with the controller’s office.

“I know they have already begun looking at Compton, but no decisions about conducting an investigation have been made,” he said.

The audit will go through all proper procedures including an official announcement if the controller’s office takes action.

“Establishing the scope of the audit through an opening conference is the first step,” he said.

Investigations vary in length.

“It all depends on how much a city cooperates,” Roper said. “We completed the Bell investigation in about five months. The Hercules investigation took twice as long and getting documents has been an issue through the entire process.”

Perrodin said his meeting with the controller’s office did not discourage his efforts.

“They wanted the county auditor to hear my concerns,” he said. “When we finished they told me there is probably something there.”

The situation can be resolved, Perrodin said, and the door is open for compromise.

“I have no problems releasing my concerns to a neutral audit firm,” he said. “City Attorney Craig Cornwell has been the only person who approached me about my concerns.”

Perrodin has never publicly stated what allegations he made to the controller’s office, but he said that anyone who watches or attends Council meetings knows his concerns.

One of the larger debates in the last six months focused on accrued vacation time by city employees.

“They exceed the city charter limits all the time,” Perrodin said. “That is an unfunded liability.”

The city remains in a compromised credit position, he said, which makes a line of credit unattainable.

“We have no money and do not pay our bills on time,” Perrodin said. “Who is going to lend us money and create more debt? It is a common sense issue.”

In a statement, Councilwoman Janna Zurita said she has lost confidence in Perrodin.

“As a City Hall ‘outsider’ and candidate, I complained about the big events sponsored by the mayor and other Council members,” she said. “It was especially disheartening to find out that his own event, the Gospel Fest, cost the city nearly a million dollars a year.”

Zurita wrote her own letter to Chiang, and does not believe there is any fraud.

“The issue centers on mismanagement,” she said. “Perrodin is a former Compton Police officer and a current deputy district attorney. Making allegations without sharing his evidence with Cornwell, City Treasurer Douglas Sanders and the Council is highly unethical.”

The next City Council meeting is on Tuesday, July 24.