San Diego Audit Committee Meeting - February 19, 2020

The San Diego Audit Committee met on February 19, 2020, at 9:00 a.m. (note: given date is 2020-02-19 17:00:00+00:00, but meeting occurred in the morning). Chair Sherman presided, with Vice Chair Councilmember Vivian Moreno and members Spencer, Valdivia, and Halpern present. The committee approved minutes, received informational reports, and discussed several audits and proposals.

Consent Calendar

• Approval of Minutes (January 15, 2020): Motion by Councilmember Moreno, second by Mr. Halpern; passed unanimously.

Public Comments & Testimony

• Martha Welch (member of the public): Made disjointed statements accusing the city of hiding money, referencing Bill Horn and the FBI, and demanding financial audits.
• Kevin Swanson (public speaker): Expressed concern about the city's projected deficit of over $100 million and urged the committee to ensure integrity and oversight.
• Michael McConnell (public speaker, in favor of homelessness audit): Supported the audit, criticized the city's encampment abatement policy as ineffective ("whack-a-mole"), and urged a solutions-focused approach to save money and improve outcomes.
• Joyce Yanna (public speaker): Praised the audit team and the Community Action Plan on Homelessness, emphasizing the complexity of the issue and the need for continued effort.
• Kevin Swanson (second appearance): Asked for return-on-investment analysis for homelessness spending and suggested comparing funding percentage to homeless population share.
• Maria Rivera (public speaker): Called for a full audit of the 101 Ash Street purchase and subsequent spending, citing reports of mismanagement and escalating costs.

Discussion Items

• City Auditor's Monthly Activity Report (Kyle Elser): Since last meeting, four audit products were issued, including the homelessness audit. Two audits in report-writing stage, two in fieldwork, six in planning, and five not yet started. In FY2020: six audit reports, three hotline investigations, 57 recommendations.
• Annual Activities & Accomplishments Report for Calendar Year 2019 (Daniel Knighton): Highlighted 10 performance audits, 3 hotline investigations, 66 recommendations (all agreed to by administration). Since inception in 2008, 239 reports with 1,171 recommendations; 178 open as of December 2019. Staff received 800+ hours of CPE. Committee expressed appreciation. Mr. Halpern asked about carryover audits and open recommendations; staff clarified that disagreed recommendations are tracked and brought to committee.
• Performance Audit of City's Efforts to Address Homelessness (Andy Hannau, Danielle Novikolski, Luis Brezeno):
  • Findings: (1) City lacked strategic plan until October 2019; increased spending ($102M in FY2019) did not reduce homeless count (stayed ~5,000). Recommendations include communications plan, long-term funding, governance structure, staffing analysis, public reporting. (2) Outreach was insufficient; SDPD's HOT team filled gap but lacks non-law enforcement workers; recommended comprehensive outreach strategy, staffing analysis, and data collection on refusal reasons. (3) Encampment abatements (Clean SD) lacked comprehensive outreach; recommended protocol with non-law enforcement outreach, adequate time before abatements, and better data collection.
  • Management Response (Keely Halsey, Chief of Homelessness Strategies): Agreed with most findings; partially agreed on outreach and encampment protocol, stating city is pursuing broader reforms and cannot immediately reduce law enforcement outreach due to resource gaps. Clarified that city intends to lead locally on outreach.
  • Committee Discussion: Chair Sherman raised concerns about responsibility (city vs. county) and noted that HSD is understaffed (two people). Captain Scott Wall (SDPD) described current outreach efforts, including PER clinicians and a diversionary program (shelter bed for 30 days in lieu of citation). Committee questioned effectiveness and data tracking. Motion to accept report and forward to council after requesting revised management response; passed unanimously.
• Performance Audit of Development Services Department Administration of Deposit Accounts (Chris Kine, Megan Garth, Zoya Ahmed):
  • Findings: (1) DSD did not enforce minimum balances; 61% of accounts had zero minimum balance, leading to $14,000+ deficits and inequity. (2) Invoicing was manual and delayed; as of July 2019, 1,384 accounts had deficit balances totaling $4.6M, of which $1.4M was not yet invoiced. Lack of system controls (PTS) contributed.
  • Management Response: Agreed to all 11 recommendations; plans to implement by 2020 via new system (Exella).
  • Committee Discussion: Councilmember Moreno noted that $4.5M remains in deficit/invoiced/collections. Mr. Spencer asked about allowance for doubtful accounts; city controller promised formal response. Mr. Valdivia queried about latency in charges and interim controls. Motion to accept and forward to council; passed unanimously.
• Request for Audit of 101 Ash Street Building (Kyle Elser): Proposed adding audit of real estate acquisition process to FY2021 work plan, noting lawsuits preclude auditing construction improvements. Alternative: postpone current climate action plan audit. Committee also considered directing management to answer related questions.
• Public Comment (Kevin Swanson): Supported audit, citing additional $30M needed for asbestos abatement and questioning oversight.
• Discussion: Councilmember Moreno moved to include in FY2021 work plan (allowing climate audit to proceed). Mr. Spencer questioned whether questions could be answered without audit; management confirmed a forensic review is already underway. Motion passed unanimously.
• Request for Independent Legal Counsel for Office of the City Auditor (Kyle Elser): Proposed charter amendment to allow OCA to access independent legal counsel when perceived conflicts arise with City Attorney's dual role. Cited examples of differing legal opinions and mentioned similar models in Portland and CA State Auditor. Estimated costs similar to Ethics Commission.
• Public Comment (Kevin Swanson): Supported, noting City Attorney drafted contract that left city liable.
• City Attorney Response (Deputy City Attorney Ken So): Objected, stating current model works; only Portland has such a measure; argued audit committee should wait for permanent auditor input.
• Committee Discussion: Chair Sherman supported independence; Councilmember Moreno seconded motion to forward to Rules Committee for potential November 2020 ballot. Mr. Spencer questioned process for resolving disagreements; Deputy City Attorney Joan Dawson clarified city cannot sue itself. Motion passed unanimously.

Key Outcomes

• Homelessness Audit: Accepted and forwarded to City Council with request for revised management response from homelessness strategies division; vote unanimous.
• Deposit Accounts Audit: Accepted and forwarded to City Council; vote unanimous.
• 101 Ash Street Building Audit: Will be added to FY2021 annual audit work plan; vote unanimous.
• Independent Legal Counsel for City Auditor: Request forwarded to Rules Committee for potential ballot measure in November 2020; vote unanimous.
• General: Committee thanked outgoing member Alan Spencer for his service.