San Diego Audit Committee Meeting - April 11, 2018

The Audit Committee met on April 11, 2018, with all members present (Councilmember Scott Sherman, Thomas Hebrink, Alan Spencer, and Ricardo Valdivia), along with city auditor Eduardo Luna, deputy city attorney Priscilla Dugard, interim city comptroller Scott Clark, and others. The committee reviewed audit recommendation follow-ups, designated a member for the upcoming audit services RFP, and discussed a performance audit of the Business and Industry Incentives (BII) program, leading to a motion to recommend suspension of the program.

Consent Calendar

• Approval of minutes from the February meeting by unanimous consent.
• Item #6 (annual report on internal financial control) was continued to the next meeting due to docketing issues.

Public Comments & Testimony

• Martha Welch expressed frustration that the committee does not conduct financial audits, stating: "The people want to know what you're doing with money. You're supposed to audit these things, financial, not performance." She urged the committee to conduct both financial and performance audits. The Chair noted that many financial audits and reports are conducted, and perhaps she missed those meetings.

Discussion Items

• Audit Recommendation Follow-Up Report (as of December 31, 2017): Presented by Danielle Knight. As of Dec 31, 2017, there were 160 open recommendations across 46 audit reports. Since the last reporting period (June 30, 2017), 45 new recommendations were added, and 42 were implemented or no longer applicable, leaving 118 carrying forward. The committee reviewed departmental statuses:

  • Public Utilities Department: One recommendation on valve maintenance was deemed not applicable because a risk-based approach was found not cost-effective. Tom Howard (Deputy Director) explained the linear maintenance approach is more efficient. The committee voted to drop this recommendation.
  • Chief Operating Officer: Recommendations on pedestrian safety and Vision Zero task force. The task force had not met in nearly a year. Lee Friedman (Office of the Mayor) noted a new position to oversee Vision Zero and a planned meeting in May 2018, but lacked specific target dates for implementation.
  • Code Enforcement (Development Services): Improvements from the Acela system implementation; most recommendations are expected to be completed shortly.
  • Communications Department: Brown Act training video pending feedback; time tracking for enterprise fund departments nearly complete.
  • Development Services: Multiple audits from 2012-2016 reliant on Acela system rollout. Phased implementation ongoing; target completion by 2020.
  • Economic Development: Two audits (community parking districts and business improvement districts) on track for June 2018.
  • Environmental Services: Recommendations on waste hauling system; consultant study delayed; expected to go to committee in May.
  • IBA and Library: Recommendations on equity of resources and matching funds; library reported progress on a new policy and staffing model.
  • Fleet Services: Inventory management recommendation still open; working on handheld devices for efficiency; target end of fiscal year.
  • Office of Homeland Security: Recommendations to update municipal code and administrative regulation; on track for May 2018.
  • Office of the Comptroller: Fraud hotline investigation on IT contract; risk-based sample approach being implemented.
  • Office of the Mayor: Advisory board audit; on track with reallocation of resources.
  • Parks and Recreation: Fraud hotline on permit calculations; training completed; more complex automation recommendation may require extension.
  • Public Works: Citywide contract oversight; implementing virtual project manager software; target December 2018.
  • Purchasing and Contracting: Multiple audits from 2014-2016; long implementation timeline up to 2022 due to Acela contract module rollout. Committee agreed to hold a more detailed discussion on this topic at a future meeting.
  • Real Estate Assets: Policy on rent subsidies on track for June 2018.
  • San Diego Police Department: Pedestrian safety enforcement recommendations; captain reported 10% increase in details and education efforts.
  • Transportation/Stormwater: Reward program for graffiti reporting (Sprand Payne) nearing implementation; undergrounding program on track.

• Designation of Audit Committee Member for RFP: Kyle Elser presented a timeline to secure an audit firm for FY19-23. The committee needed to designate one member to work with staff on the RFP development. After discussion, a coin flip selected Thomas Hebrink to serve; motion passed unanimously.

• Performance Audit of Economic Development's Business and Industry Incentives Program: Andy Hannau and Kevin Christensen presented findings revealing significant deficiencies: no tracking system, inadequate documentation, lack of internal controls, and outdated council policy (last updated 2001). Examples included a Vons in Mission Hills receiving incentives without clear justification. The department director, Eric Caldwell, acknowledged the policy needs updating and noted that 80% of staff time is on customer service, not financial incentives. The committee expressed strong concerns about potential abuse and lack of accountability.

• City Auditor's Annual Activities Report: Eduardo Luna reported that in 2017, the office issued 16 performance audits, 7 hotline investigation reports, 102 recommendations with 100% agreement, and received an award for the street audit. Updates on ongoing audits were provided.

Key Outcomes

• Motion to drop one recommendation (Public Utilities valve maintenance) as not applicable and to accept the recommendation follow-up report. Approved unanimously.
• Motion to designate Thomas Hebrink as the audit committee member to participate in the RFP for audit services. Approved unanimously.
• Motion to accept the BII audit report and forward it to the city council with a recommendation that the mayor temporarily suspend the Business and Industry Incentives program until all recommendations are implemented. Approved unanimously.
• The committee agreed to schedule a separate, more detailed discussion on Purchasing and Contracting audit recommendations in a future meeting.
• The committee expressed appreciation for the city auditor's office work and noted the importance of follow-up procedures.