Standard & Poor's Ratings Services said it placed its BB long-term rating and underlying rating on Compton, Calif.'s lease revenue bonds on CreditWatch with negative implications.
"The CreditWatch placement reflects that the independent auditors of the city's recently released fiscal year 2011 audit declined to express an opinion on the financial statements," said Standard & Poor's credit analyst Matthew Reining. "The independent auditor wrote that due to allegations of waste, fraud, and abuse of public moneys, as well as a lack of city responses to the auditors' inquiries, that the scope of their work did not enable them to express an opinion," he continued.
Standard & Poor's expects to request independently audited financial statements with an opinion from the city related to its financial position.
If the city were to provide independently audited financial statements with an opinion on a timely basis, S&P could maintain the ratings. The agency's rating committee would review the city's lease revenue bonds based on that information and could take rating action, as appropriate and supported by financial statements.
However, should S&P fail to receive sufficient independently audited financial information from the city, it could withdraw or suspend the ratings.
