Single audit report outlines violations and challenges at City Hall
COMPTON—The City Council received its 2011-2012 preliminary annual report on Wednesday, June 27, which detailed recommendations correcting outdated policies and practices, improper billing to city departments, antiquated Internet technology, cost overruns and misguided revenue projections.
The report, performed by Mayer Hoffman McCann PC, included a disclaimer of opinion. On Dec. 1, 2011, Mayor Eric J. Perrodin sent a letter to State Controller John Chiang, alleging waste, fraud and abuse of public funds. The firm said Perrodin did not respond to inquiries, and it could not release a final single audit report with the information he provided.
The document disclosed 21 material weaknesses in internal controls over financial reporting, 12 noncompliance issues material to the city’s financial statements, and five material weaknesses in the city’s internal control over the major programs.
Major programs offered by the city include the U.S. Department of Housing and Urban Development, Community Development Block and Entitlement Grants, the American Recovery and Reinvestment Act Community Development Block Grant, the Neighborhood Stabilization Program Cluster, the HOME Investment Partnership Program, Section 8 housing choice vouchers, Homelessness Prevention and Rapid Re-Housing Programs, Temporary Assistance for Needy Families, and the U.S. Department of Transportation, Highway Planning and Construction program.
During the year ending June 30, 2011, the city’s general fund had a $26.2 million reduction, 53 percent of its 2011 final budgeted revenues. The general fund deficit as of June 30, 2011, was $40.8 million.
The general fund’s actual expenditures exceeded appropriations by $17.6 million and revenues were $4.8 million less than budgeted revenues.
In addition to the general fund, the Self Insurance Internal Service had a $1.3 million net asset deficit as of June 30, 2011.
“We recommend that management make the necessary efforts to control expenditures,” the report said. “Procedures comparing actual to budgeted estimates on a monthly basis should be implemented, so management can react to anticipated revenue shortfalls or expenditure overages.”
In its response, the city has taken various steps to control expenditures for the fiscal year 2011- 2012.
The city laid off employees, negotiated with its unions regarding shared costs, reduced payroll through furlough days, and cancelled or renegotiated contracts with vendors. The City Council also approved fee increases for some city-provided services.
“City management continues looking for expense reductions and revenue enhancements,” the report said.
The audit also revealed an outdated cost allocation plan.
Cost allocations plans document, identify, accumulate and develop billing rates based on the allowable costs of services provided by a city to its departments and agencies.
“The city based costs charged to other departments on budgeted amounts rather than the cost allocation plan,” the report said. “These budgeted costs, in many cases, were less than the actual costs incurred.”
The city contracted an independent company to update the existing plan, the report said, which produced a draft report for review and discussions.
The audit also questioned the vacation accrual policy, which has been highly scrutinized by Mayor Eric J. Perrodin. The city’s current personnel rules and regulations limit vacation hours earned to 400 hours for employees and 350 for management, but memorandums of understanding for specific labor groups do not address the limitations.
City employees exceed the maximum established amounts set by its personnel rules and regulations policy, the report said, and it pays out all of the earned vacation time regardless of the limitations.
Interim City Manager Bryan Batiste is currently addressing this matter with the unions, and will review and revise the vacation accrual policy, in accordance with the terms agreed upon by all parties.
The report also suggests enhanced security controls over information technology systems.
“Certain procedures could be enhanced to be more in line with industry standards,” the report said. “Password complexity requirements are not enabled on the Windows Active Directory, and IFAS (Integrated Fund Accounting System) users receive an identification and password at setup, but never require updates, and account lockouts after a specific number of unsuccessful log-on attempts.”
Mayer Hoffman McCann PC will present its findings at the July 24 Council meeting.