San Diego City Audit Committee Meeting – November 28, 2018
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San Diego City Audit Committee Meeting – November 28, 2018
The City of San Diego Audit Committee met on November 28, 2018, to review several audit reports, the City Auditor’s FY2020 budget, and a recommendation follow-up report. The committee heard public comments, discussed findings on the Development Services Department’s Exela system implementation, employee compensation reporting, and the Auditor’s Office budget, and took unanimous votes on each item.
Public Comments & Testimony
- Martha Welch (non‑agenda speaker) expressed frustration with the city’s financial management, stating that performance audits are insufficient and that she wants to see audits of monies spent. She complained about roads and sidewalks not being fixed, Mission Bay rents being too high (citing a 3% or 5% of gross profit provision), and the lack of a budget for library books. She also noted that Mission Bay funds go to the general fund instead of parks, contrary to a 1964 vote.
- Clive Richard (non‑agenda speaker, resident of Council District 9) thanked the committee for its service, expressed hope for hiring a new city auditor, and welcomed the new interim auditor, Kyle Elser. He also greeted Kyle, noting he had been away for two years.
Monthly Activity Report (Item 5)
Interim City Auditor Kyle Elser presented the monthly activity report, noting that three audit products had been issued since the last meeting: IT audit of the Exela Implementation, Department of Finance External Financial Reporting, and a recommendation follow‑up report. Three audits are in the report‑writing stage (community planning groups, IT security of City Hub, transportation stormwater curb painting), three in field work (park joint‑use agreements, tree trimming, AMI implementation), and two in planning (public utilities call center, neighborhood services homelessness). Two memos on the FY2020 proposed budget were also issued.
Discussion Item 1: Performance Audit of Development Services Department (DSD) Exela Permitting System Implementation
- Principal IT Auditor Steven Gomez presented the audit, finding that DSD skipped steps to document and analyze processes before replacing the aging Project Tracking System (PTS). The original $10.9 million, 18‑month implementation (planned go‑live May 2017) is now expected to cost $17.7 million and be completed in 2020 – a 60% cost overrun. The system architect retired suddenly, and DSD terminated its relationship with Exela’s professional services (though retaining the Exela platform). The audit made four recommendations to improve IT governance and prevent future cost overruns; management agreed fully.
- DSD Director Elise Lowe and Deputy Director Karen Dennison responded, acknowledging the issues and noting that the code enforcement module went live in January 2018, achieving paperless operations within a month and improving efficiency. They are now using CGI contractors with Exela certification.
- Committee members (Mr. Hebrank, Mr. Sherman, Mr. Spencer) praised the audit’s quality. Mr. Sherman noted that the committee has seen more transparency and progress since new leadership came in. The committee voted unanimously to accept the report and forward it to the City Council.
Discussion Item 2: Performance Audit of the City’s Annual Employee Compensation Reports
- Principal Performance Auditor Andy Hannah and Senior Auditor Nathan Otto presented the audit. The city’s compensation reports omitted employer contributions to defined benefit pension plans, listing them as $0 for every employee. The missing amount averages about $7,900 per affected employee (2017), totaling $52 million citywide. This understates compensation and makes the city appear less attractive for recruitment. The State Controller’s guidelines require reporting these contributions, and most other California cities include them.
- Recommendations: (1) begin calculating and reporting the missing component going forward; (2) correct the 2017 report. The Department of Finance agreed to implement both, with the 2017 correction expected by April 2019 (revised from June 2019).
- Committee members asked about the feasibility of the methodology and the effect on recruitment (especially for police). The committee voted unanimously to accept the report and forward it to council.
Discussion Item 3: City Auditor’s FY2020 Proposed Budget
- Interim City Auditor Kyle Elser explained that the proposed budget is the same as FY19 adopted, with no new positions or additions. However, the Chief Operating Officer requested a 3% reduction ($123,000) from all general fund departments. The Auditor’s Office determined that a full reduction would require terminating a staff member, discontinuing the electronic work paper system, or cutting training. They proposed a $10,000 reduction from the contracts budget (for specialized consultants), representing an 8% reduction in discretionary non‑personnel spending.
- Committee members (Mr. Sherman, Mr. Hebrank, IBA Lisa Byrne) argued that the office runs a tight ship and that the requested cut is “budget dust” – pennywise and pound foolish given the savings generated by audits. They recommended keeping the budget as is, with no increase or decrease. The motion passed unanimously.
Discussion Item 4: City Auditor’s Recommendation Follow‑Up Report (Period Ending June 30, 2018)
- Deputy City Auditor Danielle Knighton presented the report. Of 143 outstanding recommendations, 48 were implemented or no longer applicable, leaving 95 carried forward. 27 are one‑to‑two years old, 35 are under a year old. One recommendation from Environmental Services was deemed not applicable (they incorporated key elements into franchise agreements).
- Committee members (led by Mr. Hebrank) reviewed each department’s outstanding recommendations, noting progress and delays. Significant discussion focused on:
- Purchasing & Contracting: Long‑standing debarment recommendations (2014, 2016, 2017) concerning vendors who colluded with city employees. Several committee members expressed frustration that the city has not permanently debarred individuals who defrauded the city. The committee requested a memo from the City Attorney’s office on the debarment process.
- Advisory Board Recommendations: Eight recommendations from a performance audit of advisory boards were not yet implemented. The committee requested a special report within 60 days on their status.
- Purchasing & Contracting – Ariba System: A disconnect remained between the department and the auditor on whether controls for contracts not yet in Ariba are sufficient. The committee requested an update on the status of these recommendations.
- Motion: Accept the report, drop recommendation 1503‑4 (as outlined in Attachment A), and request (1) a special report on advisory board recommendations within 60 days, (2) a City Attorney memo on debarment issues, and (3) an update on purchasing and contracting recommendations. The motion passed unanimously.
Committee Comments & Farewell
- Councilmember Lori Zapf (Chair) was not present at the start; after the agenda items, she returned and received farewell remarks from committee members. Councilmember Scott Sherman and Mr. Hebrank expressed gratitude for her leadership and common‑sense approach. Ms. Zapf thanked the committee, noting her eight years of service and her commitment to “doing more with less” for taxpayers. She shared personal reflections on her background and concluded the meeting.
Key Outcomes
- Unanimous votes to accept and forward the performance audit of the Exela implementation and the compensation reports to the City Council.
- Unanimous vote to recommend the City Council adopt the City Auditor’s FY2020 budget with no cuts from the FY19 approved level.
- Unanimous vote to accept the recommendation follow‑up report, drop one recommendation, and request three follow‑up items (advisory board special report, City Attorney debarment memo, purchasing and contracting update).
- No consent calendar items were presented.
- Next steps: The reports will be forwarded to the City Council; the City Auditor will provide the requested updates within 60 days or as directed.
Meeting Transcript
We have one. Martha Welch. Good morning, Martha Welch. Voted for financial and uh um uh we voted of that. We don't have that right now. All we have is performed, all they have that right now. Because if you don't do that, we only have a half uh um pitcher, we only have one that own that we don't how much me how much we have right now. Um if I was a good loan or something like that, I'd like to see that because I don't think performance wouldn't help me at all because if I was gonna uh give me money, I wouldn't do I wouldn't like that. Right now we need some uh audits. Now the roads and sidewalks. We have all these things to fix it. I I D and Sanction Um. But they're not fixed. We know that it's not fixed because we didn't uh all this money, where's it go? We don't know. Um and also now downtown, um the PIB when they had it last time a budget, it was very bad. They only spent th three point five eight of uh money, that's all they did. It's it's not right. Oh, where's the money go? It's where's the money go? It's it's it's it's it's it's it's it's it's it's it's is they're stealing money or something because it's not right. Uh all these things. Now Mission Bay, you got on the list, but it's um I noticed it goes to the general fund and it's supposed to be for the parks. It was voted in 16 6914 64. We voted um um that's what we built it. And it's supposed to be the parks, but it goes to the general fund. Now I don't like what you do with with uh mission bay at all. You're your you you should look all the uh your rents and all that stuff. You want to go into their the gross uh uh uh their their profit all the time. You know, people have to have a profit, but you go in if they if they have more money, you won't 30 percent 3% or 5% of their gross. Now that's a lot of money for these people that's their profit. So you all the you do thing is is wrong. Your rules are wrong, what do you do your rents and everything should be looked in into here, but it's not right what you do here. These rents you do in Mission Bay is wrong. Um the roads are in bad condition because you don't you don't audit all this stuff in financial, and that's what we want. We want financial uh things because like I say, if I was giving you money, I would like now I looked at the budget, and there's no but there's no budget for the library, for example, for books. You should look in that also. Where's the book money? You it finally actually has to sell the books. If you want uh uh a cookbook, it's wrong. They're down, they're selling them downstairs. Thank you, Ms. Welch, and we do have one other non-agenda, Mr. Clive Richard. Is he here? There he is. Mr. Richard, welcome. Welcome, sir. Good to see you.
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