Compton’s struggles with finances, and the city’s perceived reluctance to provide long term solutions to their problems, have driven then city millions of dollars into debt. Then the mayor made accusations of fraud and requested the Controller launch a forensic audit of the city.
Against that backdrop, the auditing firm Mayer Hoffman McCann was performing the city’s annual audit. But having recently been fined by the state for failing to detect problems in Bell, they apparently felt that they didn’t have sufficient access to render an opinion on the state of city finances. In other words, had there been fraud, they felt they didn’t have access to enough information to detect it. The lack of a formal opinion resulting from the audit is called a disclaimer.
Members of the city council and future city manager have expressed their displeasure at the audit firm issuing a disclaimer. It makes the city appear guilty when there has been no formal investigation into the fraud claims.
The disclaimer will also likely deter further lending to a city that has a $40 million deficit after several years of internal borrowing.
From the Los Angeles Times:
Compton’s already fragile finances became even more so when its independent audit firm quit and refused to sign off on the city’s financial statements.
The move late last month by Mayer Hoffman McCann may further undermine Compton’s hopes of getting a line of credit to help pay its bills and could endanger the city’s ability to receive federal grants.
Compton has accrued a more than $40-million deficit over the last several years, largely by borrowing money from other city accounts to pay its general fund expenses. The city has struggled to pay its bills on time and last year slashed its workforce by 15%.
Read the full article here.