San Diego City Council Audit Committee Meeting – June 14, 2017

The Audit Committee of the San Diego City Council met on June 14, 2017, at 5:00 PM UTC (approximate start in the morning local time). The meeting covered approval of prior minutes, public comments, a monthly activity report from the City Auditor, a presentation on the Fiscal Year 2016 Single Audit Report, and a performance audit of the city's management of its advisory boards. Key outcomes included unanimous adoption of the single audit report and the advisory board audit, both to be forwarded to the City Council.

Consent Calendar

• The record of action for the May 2017 meeting minutes was approved without objection.

Public Comments & Testimony

• Martha Welch (public comment): Expressed concern about deferred maintenance (citing $3–5 million) and alleged that funds (e.g., Mission Bay fund, J and PROP C) are being hidden or not used for their intended purposes. Called for an audit of the Mission Bay fund and other funds without employees.
• Robert McNamara (District 3): Complained about the lack of printed backup materials for agenda items, which were previously available. Requested restoration of at least a handful of copies for public use. Chair Gomez acknowledged the comment, noting the city's effort to reduce paper.
• J. Powell (member of the Sustainable Energy Advisory Board): Strongly supported the advisory board audit recommendations. Highlighted specific issues: high number of vacancies and expired seats on boards, the need for better training on the Brown Act and conflict of interest, the need for clear guidance on statutory duties, and the value of public participation.

Discussion Items

1. Monthly Activity Report (Item 1) – Presented by Kyle Elser (Assistant City Auditor) and Danielle Knighton. Reported that since the last meeting, one audit product was issued (advisory boards audit). Three audits are in the report-writing phase (Capital Improvement Program Quality Assurance, Capital Improvement Lifeguard Tower Project, and Economic Development Business and Industry Incentive Program). Six audits in progress, including IT audits and the annual Mission Bay Fund audit. No committee questions or action required (information only).

2. Fiscal Year 2016 Single Audit Report (Item 2) – Presented by Kevin Starkey (MGO). Key points:

   • The city expended about $52 million in federal awards and is subject to single audit requirements.
   • The city qualified as a low-risk auditee for the first time in at least six years, allowing only 20% coverage of total federal awards ($11.5 million, or 20.5% of $56.2 million) through four programs: Lead-Based Paint Hazard Control, Airport Improvement Program, Capitalization Grants for Drinking Water, and National Urban Search and Rescue.
   • No material weaknesses or major compliance findings were identified. Two internal control deficiencies were reported: one carry-forward for the National Urban Search and Rescue program (lack of documented controls) and one new for the Lead-Based Paint program (timing of reports). Both are being remediated; the city expects no impact on low-risk status.
   • Committee members (Sherman, Hebrank, Valdivia) asked clarifying questions about the findings. The city attorney’s office confirmed that expenditures were proper and that corrective actions (process narratives) have been implemented or are underway.

3. Performance Audit of City's Management of Advisory Boards (Item 3) – Presented by Andy Hannah (Office of the City Auditor) and Danielle Novokolski. Findings:

   • Finding 1: Over half of the 334 member positions on active boards were either vacant or filled by members with expired terms (by March 2017). Many positions have been expired/vacant for over two years. Contributing factors: the City Council rarely uses its charter authority to appoint after 45 days, the vetting process lacks formal timelines, and there is no recourse if council members do not submit nominees. Recommendations: improve notifications to council, formalize vetting, and develop a strategy for publicizing vacancies.
   • Finding 2: Advisory boards must comply with the Brown Act, but the city does not require all members to receive training, and not all boards have websites to post agendas and minutes. Recommendations: require Brown Act training (e.g., via video) and provide websites for all boards.
   • Finding 3: There may be unnecessary overlap, outlived boards, and lack of periodic review. The mayor’s office is conducting a one-time review. Recommendations: standard analysis for new boards, annual reports from all boards, and a biennial review process by the mayor and council.
   • The audit made 14 recommendations, all accepted by the mayor’s office, city attorney’s office, city clerk’s office, and city administration.
   • Public comment from J. Powell (Sustainable Energy Advisory Board) supported the recommendations and raised additional concerns about conflict-of-interest guidance and outdated municipal code defining board duties.
   • Committee members (Sherman, Valdivia, Hebrank) discussed challenges in filling positions, the need for ongoing Brown Act training, and the importance of transparency. The city attorney’s office noted that a training video already exists and they are available for live sessions if needed. The mayor’s office (Francis Barraza) reported progress on consolidating about 12 boards, to be presented at the rules committee in July. The city clerk’s office (Deanna Fuentes) noted the need for policy clarification on calculating the 45-day appointment rule. The communications department (Katie Keats) is developing a broader outreach strategy using social media. Staff liaisons will develop standard operating procedures for boards.

Key Outcomes

• Motion and vote: The committee unanimously (by voice vote) adopted the single audit report (Item 2) and directed it to be forwarded to the City Council.
• Motion and vote: The committee unanimously adopted the performance audit of advisory boards (Item 3) and directed it to be forwarded to the City Council.
• Next meeting: Scheduled for July 26, 2017.