San Diego City Audit Committee Meeting - 2019-10-30

The San Diego City Audit Committee met on Oct. 30, 2019, to consider routine approvals, hear public comment, receive the interim city auditor's monthly activity report, review the first-quarter FY20 fraud hotline report, and conduct the semi-annual follow-up on outstanding audit recommendations. Chair Sherman presided; Vice Chair Councilmember Campbell and members Spencer, Valdivia, and Halpern were present, joined by Interim City Auditor Kyle Elser, Deputy City Auditor Danielle Knighton, and city staff.

Consent Calendar

• The committee approved the minutes of the Oct. 2, 2019 meeting on a motion by Councilmember Campbell, seconded by Spencer. The chair announced unanimous passage while noting one abstention by Mr. Valdivia.

Public Comments & Testimony

• Martha Welch, a non-agenda speaker, used her two-minute public comment period to allege corruption and improper payments, claiming city actions are illegal and that federal and state authorities are investigating. She criticized the use of performance audits, said Mission Bay funds are diverted from parks, and expressed anger over city financial management.

Discussion: Monthly Activity Report

• Interim City Auditor Kyle Elser reported two audit products issued since the previous meeting: the FY20 first-quarter fraud hotline report and the recommendation follow-up report for the period ending June 30, 2019.
• Two audits are in report-writing stage with November release targets: IT audit of network perimeter controls and audit of neighborhood services' homelessness efforts.
• Four audits are in fieldwork and slated for December completion: risk management/city attorney liability payouts, development services charges for deposit accounts, strategic human capital management, and fiscal sustainability/financial condition.
• Two audits are in planning: IT audit of citywide sensitive data encryption standards and audit of the San Diego Police Department's crime analysis unit. Eleven audits on the annual plan have not yet started.
• In FY20 to date, the office has issued two audit reports and two hotline investigation reports containing 23 recommendations.

Discussion: Quarterly Fraud Hotline Activity Report

• Fraud investigator Andy Harita reported 53 reports received in the first quarter of FY20: 37 were within the fraud hotline's purview (6 assigned to the City Auditor's office and 31 to departments) and 16 were outside purview.
• There were 58 city-related open cases on July 1, 2019; adding 37 brought the inventory to 95. Forty-two cases were closed, leaving 53 open at quarter end.
• Two city auditor investigations were substantiated and resulted in public reports on improper free trash collection and unfair award of a multimillion-dollar contract. Seven department investigations were substantiated, including allegations of theft of time, a possible Brown Act violation, an unpermitted construction project, unfair parking privileges, an employee bringing a BB gun to city property, and abuse of discretion regarding a customer fee. Seven department investigations led to corrective actions.
• Members discussed case-management tracking and analytics. Harita explained that the process uses a third-party call database plus Excel tracking, with 30-day department response deadlines and follow-up. Spencer suggested exploring more robust software. Harita said volume remains on track for about 200 reports per year.
• Councilmember Campbell asked about a Brown Act violation case; Harita said the department fixed it by rehearing the item with a more specific agenda description.
• The committee accepted the report on a motion by Valdivia, seconded by Halpern, passed unanimously.

Discussion: Recommendation Follow-Up Report

• Deputy City Auditor Danielle Knighton presented the follow-up for the period ending June 30, 2019. There were 141 open recommendations across 42 audit reports. Since the Dec. 31, 2018 follow-up (117 open), five new performance audits added 24 recommendations.
• In this cycle, 25 recommendations were implemented, one was reported as will not implement, and two were determined not applicable, leaving 113 carried forward. Of the 141 recommendations, 46 in process are over two years old, 17 are one to two years old, and 50 are under a year old.
• Auditor staff highlighted three recently implemented recommendations: (1) Parks and Recreation corrected permit fees for city employees conducting business at parks, invoicing an employee about $4,000 and improving training and software; (2) Public Utilities added photo capabilities to water meter cover work orders, reducing wasted trips; and (3) the Stormwater Division and Communications Department created a public outreach plan, including a Think Blue website and public service announcements, after the audit identified a five-year funding gap of about $460 million that has since grown to more than $700 million.
• Auditor staff also asked the committee to drop three recommendations: two debarment referrals involving vendors no longer in business, and one permanent-debarment recommendation where Purchasing and Contracting instead pursued a non-responsible hearing that resulted in a five-year bar. Deputy City Attorney Joan Dawson advised that debarment is governed by ordinance and is a mayoral quasi-judicial decision, making further action by the committee unlikely. Auditor staff maintained that permanent debarment was warranted.

Department-by-Department Follow-Up Review

• Assistant Chief Operating Officer: Jury duty service rod recommendation has no update; working with the City Attorney's office, with an expected completion in early 2020.
• Chief Operating Officer/Convention Center: Recommendation tied to pending ballot measure discussions; no change.
• Communications/Office of Boards and Commissions: Brown Act training video was created, but documentation of delivery was missing; the item will transfer to the Office of Boards and Commissions. The office later said all recommendations were implemented, with over 300 commissioners trained and an administrative regulation circulating for approval.
• Department of Finance: One recommendation was reported close to completion, ahead of the December 2020 target.
• Department of Information Technology: CIO Jonathan Bakey said the IT contract hotline recommendation is on track for June 2020; an IT governance administrative regulation for the Exella permitting system was drafted and in review.
• Development Services: Director Elise Lowe and Interim Deputy Director John Twilliger said Exella permitting system implementation continues, with user testing under way, discretionary processing rollout targeted for February 2020, and ministerial permits later in the year. Some controls will not be implemented until the new system is live.
• Economic Development: Director Christina Bibler reported all four recommendations were implemented, including council approval of the business cooperation program and rollout of the revamped Council Policy 900-12 in March.
• Sustainability and Environmental Services: Cody Hooven said the energy billing system was overhauled and departmental trainings will finish in December, keeping the item on track.
• Fleet Operations: Casey Smith said most recommendations are implemented; documentation will be uploaded, and a program coordinator was hired June 22.
• Human Resources: Julie Rasco said the waste-in-transportation-alternatives recommendation is on track for July 2020, with contract negotiations under way with REOs.
• Parks and Recreation: Andy Field said the recreation permit calculation recommendation is in pilot and full implementation is expected by January, rather than the earlier October 2019 end date.
• Planning: Mike Hansen said community planning group email boilerplate was received; implementation will be evidenced once changes are active.
• Public Utilities: Matthew Vespey said seven industrial wastewater recommendations are on track for January 2020; water billing recommendation two remains on track for April 2020. Several recommendations were extended to July 2021, including skip/trouble code analysis and crew size evaluation. Tom Howard described work to streamline 129 codes, reorganize teams, and evaluate data. The department also discussed using the AMI contract to address the box-and-lid backlog.
• Purchasing and Contracting: Christina Pratt said about 70% of SAP contracts are in Ariba and the December 2020 target may be pulled up. Documentation for one selected-contracts recommendation is being gathered; a handheld-device recommendation is unfunded and may slip depending on budget, with costs estimated from about $20,000 upward.
• Real Estate Assets: Christy Geitz said Council Policy 700-10 updates should be docketed in December; another item is pushed to January.
• Risk Management: Chris Olson reported that the transportation alternatives program recommendation was fully implemented in October through an in-house SAP portal for benefit and transit passes, with pre-tax payroll deductions.
• Transportation and Stormwater: Nathan Patterson said street light auto repair is on track for November and the undergrounding item was approved by council Oct. 15 and is implemented. Everett Houser said Vision Zero subcommittee work is on track for December 2020 and related items are on target for December 2019. Drew Kleist said a stormwater pipe repair crew recommendation was not funded in FY20; the full 24-position, $7 million crew request will go in the FY21 budget.
• During the discussion, Councilmember Campbell noted the city is $700 million behind on stormwater maintenance, and residents pay about 95 cents per month vs. $11.35 in Sacramento, supporting a stormwater fee increase.

Key Outcomes

• The committee approved the Oct. 2, 2019 meeting minutes.
• The committee accepted the FY20 first-quarter fraud hotline activity report.
• The committee voted unanimously to accept the recommendation follow-up report and to drop the three recommendations identified by auditor staff as no longer applicable or will not be implemented.
• The next Audit Committee meeting was scheduled for Dec. 11, 2019, at 9 a.m.