San Diego Audit Committee Meeting - December 7, 2016

This meeting of the Audit Committee covered three major items: a performance audit of streetlight repairs, a performance audit of the Affordable Housing and Sustainable Buildings Expedite Program, and the Fiscal Year 2018 budget for the Office of the City Auditor. The committee also heard non-agenda public comment. All audits were accepted and forwarded to the City Council.

Non-Agenda Public Comment

• Clive Richards spoke in strong support of the City Auditor's office, referencing the "Call report" from 2006 and emphasizing the need for openness and transparency. He criticized the mayor's office for investigating the Office of Internal Auditor, stating that should have been the committee's responsibility.

Monthly Activity Report from the City Auditor

• Eduardo Luna reported that since the last meeting, two audit reports had been issued (streetlight repair and expedite permitting) and a budget memorandum for FY 2018. Audits in field work include the Capital Improvement Program quality assurance and three IT audits. A 30-40 day delay was noted for the Lifeguard Tower audit due to consultant issues.

Performance Audit of the Street Light Repair

• The audit found that the Street Division is not meeting its goal of repairing streetlights in an average of 12 days or less. Data from FY16 showed 47 repairs listed as completed in a negative number of days, and 23% of repair vehicles were not operational during a three-month period in FY17. There are no documented policies for repair prioritization or data entry, and no active inventory logs for $550,000 in parts ordered in FY16. The asset inventory was not updated for over 3,000 LED lights. Five city departments share responsibility for streetlights, but there is no comprehensive management plan. The audit included seven recommendations, all agreed to by management. The committee voted unanimously to accept the report and forward to City Council.
  • Councilmember Sherman (requested the audit) expressed concern about the lack of inventory and reliance on institutional knowledge. He urged faster implementation of the Infrastructure Asset Management (IAM) system.
  • Deputy Director Christy Reeser (Street Division) stated that a mobile work manager prototype would be presented that afternoon and that the IAM system was expected to go live within 12 months.
  • Committee member Hebrank questioned why developing written policies would take until December 2017; management cited dependence on the IAM system.
  • Committee member Spencer recommended adding training as a component to ensure policies are effective.

Performance Audit of the Affordable Housing and Sustainable Buildings Expedite Program

• The audit found that expedited review cycles missed their deadlines 45% of the time between 2011 and 2015, with the environmental review discipline causing a waterfall effect. The program's eligibility criteria for sustainability have not been updated since 2003 and now incentivize projects that would occur anyway (e.g., 7,000 solar permits in 2015, less than 1% through the program). Since 2006, single-family homes and small projects (under four units) were allowed into the program despite City Council policy limiting it to four units or more. These ineligible projects accounted for more than half of program entries from 2011-2015, consuming capacity and slowing processing for larger affordable housing projects. 88% of single-family homes were in the coastal zone. The audit made eight recommendations; the department agreed to all.
  • Director Robert Vocke (Development Services Department) noted the program is a small part of DSD's workload (about 50 projects per year out of 50,000 permits). He disagreed with the 45% late metric, stating that 85% of overall projects (based on a sample of 20) met their final timeline.
  • Committee member Hebrank pressed for immediate cessation of accepting single-family projects. Deputy Director Elise Lowe said they would cease immediately, not in July 2017 as initially stated in the response.
  • Public speaker Matthew Adams (Building Industry Association) suggested improvements such as limiting new issues on subsequent reviews and expanding self-certification.
  • Public speaker Jim Schmidt (Chelsea Investments) praised the program but requested more customized timing for affordable projects to meet financing deadlines.
  • Public speaker David Gatsky (Community Housing Works) supported the audit's critical path approach and thanked DSD staff for collaboration.
• The committee voted unanimously to accept the report and forward to City Council with an updated management response clarifying immediate cessation of ineligible projects.

Fiscal Year 2018 Office of the City Auditor Budget Report

• City Auditor Eduardo Luna presented a budget request with no new significant additions. The office was asked to submit a 3.5% reduction (approximately $135,000) as part of a citywide directive. They proposed cuts from consultants ($40,000), low-value assets ($60,000), and books/materials ($1,500), totaling about $101,500, falling short by about $24,000. They agreed to look deeper to meet the full reduction. A planned fraud investigator position was not added.
• Public speaker Clive Richards urged the committee to move toward a full staffing level of around 25 positions, arguing the office saves money and should not be cut.
• Committee member Hebrank noted the difficulty because 85% of the budget is fixed (salaries and benefits). He asked for a future discussion on the benefits of the second fraud investigator position.
• The committee moved to accept the report and direct the auditor to submit a budget including the requested reduction. The motion passed unanimously.

Key Outcomes

• Street Light Repair Audit: Accepted and forwarded to City Council. Management agreed to all seven recommendations, with implementation timelines tied to the IAM system.
• Expedite Program Audit: Accepted and forwarded with an updated management response to immediately cease accepting single-family projects. Management agreed to all eight recommendations.
• FY18 Audit Office Budget: Accepted with direction to submit a budget reflecting the city's 3.5% reduction request. The office will revisit whether to propose adding a fraud investigator.