San Diego Audit Committee Meeting: July 22, 2015

The San Diego Audit Committee met on July 22, 2015, to review multiple audit reports, approve the annual risk assessment and work plan, and receive a presentation on a new employee performance evaluation format. The committee unanimously approved the minutes from the previous meeting, accepted several reports, and forwarded one report to the City Council.

Consent Calendar

• The committee approved the minutes from the last meeting by unanimous consent.

Public Comments & Testimony

• No non-agenda public comments were made.

Discussion Items

• Monthly Audit Activity Report: City Auditor Eduardo Luna presented a summary of six recently issued audit-related products, including the citywide special funds audit, Mission Bay fund audit, recommendation follow-up, fraud hotline report, an investigative report on under-recorded leave time, and the annual risk assessment and work plan. Audits in progress include fiscal sustainability, business improvement districts, and central storage. Councilmember Zap asked about the scope of the code enforcement audit, which focuses on complaint handling and prioritization.
• Fraud Hotline Quarterly Report: Fraud Investigator Andy Horita reported that in the fourth quarter of fiscal year 2015, 11 complaints were assigned to the city auditor, 12 to departments, and 10 were outside the hotline's purview. Of 36 active complaints, 20 were closed, leaving 16 open. Six corrective actions resulted from substantiated cases, including excessive breaks, improper building permit process, and non-compliance with employee compensation posting requirements. Committee members discussed the limitations of describing corrective actions due to privacy laws.
• Annual Mission Bay Fund Audit: Assistant City Auditor Kyle Elser presented the audit of Mission Bay and Regional Parks Improvement Funds for fiscal year 2014. Adjusted Mission Bay lease revenue was $29.8 million, with $2.5 million allocated to Regional Parks and $4.3 million to Mission Bay. Ending balances were $12.3 million and $9.6 million, respectively. The audit found compliance with charter requirements but noted that the process for council approval of project priorities could be enhanced. Andy Field, Assistant Director of Park and Recreation, explained that the dredging project (estimated at $7-8 million) is proceeding with environmental review, and a five-year plan will be developed to address fund balance accumulation. Councilmember Zap expressed concern about the lengthy permitting process. The committee unanimously accepted the report.
• Recommendation Follow-Up Report: The auditor reviewed 20 recommendations from audits issued between fiscal years 2009 and 2011. Ten were implemented, nine are in process, and one is no longer applicable. Discussion focused on delays in implementing recommendations from the Treasurer's delinquent accounts audit and the take-home vehicle audit. Leslie Fitzgerald, Senior Chief Deputy City Attorney, confirmed that updates to the Housing Commission ordinance are on track. Committee members emphasized the need for timely follow-up and requested that high-priority overdue recommendations be brought to their attention. The report was unanimously accepted.
• Citywide Special Funds Audit: Auditor Chris Kime presented findings on four funds (Transnet, gas tax, capital outlay, public safety needs) totaling $70 million in fiscal year 2016. The audit found that funds have not been spent in a timely manner, resulting in a projected fund balance decrease from $114 million to $64 million. Three findings were identified: unspent balances due to encumbrance processes, misalignment of council policies with state law, and lack of formal procedures for reconciling easement sales. Management agreed to all four recommendations. The committee unanimously accepted the report and forwarded it to the City Council.
• Annual Risk Assessment and Audit Work Plan: Eduardo Luna presented the proposed work plan for fiscal year 2016, comprising 21 projects and 23,100 staff hours. Key audits include purchasing and contracting, police property and evidence, pedestrian safety, development services permitting, fleet services, capital improvement program, public libraries, street trenching, San Diego Housing Commission, and the convention center. The plan also includes an IT risk assessment. Committee members discussed the risk assessment methodology, with Mr. Hebrink questioning why the purchasing and contracting audit had a lower risk score despite prior issues. The committee unanimously approved the work plan.
• Unclassified Employee Performance Evaluation Format: Colin Brazil from Human Resources presented a new electronic and PDF-based performance evaluation program launched in September 2014. The program involves three stages: developing goals, monitoring progress, and assessing performance. Goals and key managerial behaviors are rated. Committee members noted the lack of previous standardized evaluations and expressed support. The report was unanimously accepted.

Key Outcomes

• Approved the minutes from the previous meeting by unanimous consent.
• Accepted the monthly audit activity report, fraud hotline quarterly report, and recommendation follow-up report (all unanimous).
• Accepted the annual Mission Bay fund audit and forwarded it to the City Council (unanimous).
• Accepted the citywide special funds audit and forwarded it to the City Council (unanimous).
• Approved the fiscal year 2016 risk assessment and audit work plan (unanimous).
• Accepted the unclassified employee performance evaluation format report (unanimous).
• The committee entered closed session to evaluate the performance of the city auditor under Government Code Section 54957(b). No reportable actions were taken upon reconvening.