Audit Committee Meeting – February 16, 2022

This meeting of the San Diego City Audit Committee, chaired by Councilmember Stephen Whitburn, was held via Zoom due to public health concerns. The committee reviewed a performance audit of the city's lease management and renewal processes, received the City Auditor's annual accomplishments report for 2021, and heard public testimony on prior audits and homelessness. The meeting took place on Wednesday, February 16, 2022, from 9:00 a.m. (local time).

Consent Calendar

• Approval of Committee Actions (January 26, 2021): Motion by Vice Chair Vivian Moreno, seconded by Committee Member Stuart Halpern, passed unanimously (5-0).

Public Comments & Testimony

• Non‑Agenda Public Comment:

  • Lori Soldania (former Assembly Housing Chair) congratulated the committee on the new select committee for Housing Commission oversight and reform. She urged the committee to examine the city's return on investment for public safety spending on homeless encampments (e.g., the Midway encampment) and questioned whether Project Homekey purchases have resulted in suitable permanent housing.
  • Martha Sullivan (San Diego Housing Emergency Alliance) criticized that $110 million of the $250 million in CARES Act funding went to the police, far exceeding spending on homeless strategies ($39 million). She called on the audit committee to explore this disproportionate police spending.

• Public Comment on Lease Management Audit:

  • Lori Soldania asked whether the audit considered equal opportunity, climate action plan compliance, and diversity of leaseholders. She advocated for energy audits of leased buildings and broader equity considerations.
  • Martha Sullivan described holdover leases (especially on Mission Bay for entities like SeaWorld and large hotels) as “corporate welfare” that disadvantages small businesses and residential renters. She urged the committee to ensure corporate lessees pay fair market value.

• Public Comment on City Auditor's Annual Report:

  • Lori Soldania emphasized that audits have life‑and‑death implications, citing the CARES Act audit. She argued that the audit focused too narrowly on shower costs at the convention center while ignoring the larger issue of police/fire receiving over half of CARES funds, when Project Roomkey could have provided safer housing.
  • Joy Sanyata (District 3) thanked the City Auditor and staff for their work, especially the parks and recreation equity audit, and praised growing collaboration.
  • Martha Sullivan reiterated the need for independent legal counsel for the City Auditor, comparing it to the independent police commission.

• Public Comment on Monthly Activity Report:

  • Lori Soldania again supported independent legal counsel and urged the auditor to examine police response to homelessness, including overtime for moving shopping carts, citing equity concerns and derogatory language used by dispatchers.

Discussion Items

• Performance Audit of the City's Lease Management and Renewal Processes:

  • Presented by City Auditor Andy Hanau, Principal Performance Auditor Nathan Otto, and Performance Auditors Shady Mattar and Nikki Kalmas.
  • Key findings: 24% of active leases (101 of 421) were in holdover as of July 2021, a rate far higher than benchmarked cities (Austin, Seattle, Houston all below 5%). Many holdovers had lasted over a decade, leading to potential lost revenue and perceived favoritism. The Department of Real Estate and Airport Management (Dream) is significantly understaffed relative to comparable agencies. Only 23% of sampled leases had up‑to‑date insurance documentation, and inspections were infrequent (31% inspected; average once every three years from 2011–2021). Only 61% of leases contained a financial disincentive clause for holdover.
  • Dream agreed to all 14 audit recommendations, with a target implementation date of February 2024.
  • Vice Chair Moreno moved to accept the report and forward it to the City Council, seconded by Committee Member Halpern. The motion passed unanimously.
  • Committee members discussed the need for additional staffing for Dream, the lack of a formal prioritization process for renewals, and the importance of setting measurable benchmarks for reducing holdovers. Dream Director Penny Moss noted that the Surplus Land Act and coordination with HCD are new challenges, and that she will request additional positions in the upcoming budget.

• City Auditor's Annual Activities and Accomplishments Report for Calendar Year 2021:

  • Presented by Andy Hanau. The office issued 8 performance audits, 1 agreed‑upon procedures review, 1 hotline investigation, and 4 quarterly hotline reports. 58 recommendations were made, with 98% accepted by management. Notable audits included the Climate Action Plan, industrial wastewater (Part 2), CARES Act funding, major building acquisitions (101 Ash Street), and equity in recreation programs.
  • The office also launched an interactive recommendation follow‑up dashboard and is pursuing a ballot measure for independent legal counsel.
  • Committee members praised the office's work, especially the equity audit and the fraud hotline. Committee Member Halpern inquired about the police body camera audit; Hanau confirmed that data (over 400 videos) is now being received after a delay due to COVID. The committee accepted the report without objection.

• City Auditor's Monthly Activity Report:

  • Hanau reported that since the last meeting, the office issued the lease audit and the annual accomplishments report, and a memo on independent legal counsel. Three audits are in fieldwork (workers' compensation, SDPD body cameras, code enforcement); two are in planning (fire‑rescue 911 system, Get It Done app); six have not yet started, including the vehicle towing audit requested by Chair Whitburn. A new senior IT auditor has been hired. The office expects to substantially complete about 80% of the FY22 work plan.

Key Outcomes

• Vote on Lease Management Audit: Motion to accept the report and forward to City Council passed unanimously (5-0).
• Acceptance of Annual Report: The committee accepted the City Auditor's 2021 accomplishments report.
• Continued Oversight: The committee will receive a recommendation follow‑up report in March 2022. The next meeting is scheduled for Wednesday, March 16, 2022, at 9:00 a.m.
• Independent Legal Counsel: The City Auditor's memo on independent legal counsel was referred to the Rules Committee for discussion that afternoon.