Good morning, Lauren.

Can you please do an audio check for us?

Sure, absolutely.

Good morning.

How are y'all?

Thank you.

Great thanks.

You sound great.

Awesome.

Thank you.

Good morning and welcome to the audit committee meeting of January twenty first, twenty twenty-six.

Our committee liaison, Natalie Kessler will go over instructions for today's meeting.

Thank you, Chair.

Well, members of the public are able to attend the meetings in person.

This meeting is being televised and live streamed in this on the city's website, and the council administration will continue to make arrangements for the public to comment using the Zoom webinar platform.

Members of the public who wish to provide virtual testimony must enter the virtual queue by raising their hand before the virtual queue closes.

The queue will close when the last virtual speaker finishes speaking or five minutes after in-person testimony ends, whichever occurs first.

This will allow for better meeting management between the two platforms and ensure the committee is able to manage and conduct city business.

We appreciate the public's cooperation.

Natalie, please call the roll.

Committee member Halpern.

Here.

Committee member Mafia.

Present.

Committee member Tapsuri.

And Chair Council Member Moreno.

Present.

Also attending the meeting today is Andy Hanao, our city auditor.

Jeff Peel, Assistant Director for the Department of Finance.

David Carlin with the City Attorney's Office.

Aaron Noel with the IBA.

Kevin Smith, Committee Liaison.

And I'm sorry, committee consultant and Natalie Kessler, Committee of the Aison.

Natalie, please continue with public comment instructions.

If you're in person, please complete a speaker slip located at the entrance of chambers and place it in the box near the public comment microphones.

Please do so in a timely manner to ensure proper meeting management.

In-person testimony will conclude before virtual testimony begins.

Members of the public can join the webinar by computer, tablet, or smartphone by accessing the link listed online in the preamble language of the agenda on the city's webpage.

If you need to participate by phone, please dial 16692545252.

The webinar ID is 1612 1114 pound.

This information is also available on the agenda.

Members of the public who wish to provide virtual testimony must enter the virtual queue by raising their hand before the virtual queue closes.

And the queue will close when the last virtual speaker finishes speaking, or five minutes after in-person testimony ends, whichever occurs first.

Please note that if you're watching via City TV 24 or online, there may be a delay.

Please participate via the audio on your phone and mute your TV or computer when it is your turn to speak.

And if you wish to speak on a particular item, wait for that item to be called and then raise your hand to speak by tapping the raise your hand icon.

Or if you're a column participant, press star nine on your phone.

If you raise your hand during a non-comment period, your hand will be lowered.

Chair.

Thank you for reviewing those instructions for the benefit of the public.

A quorum is now present.

For the public's awareness, we will be taking some items out of order today.

The first item is gonna be um one, actually, items one through three.

Uh then we're gonna take up uh items six, four, five, seven, and eight.

Um, once again, the order will we will hear the items is one, two, three, six, four, five, seven, and eight.

And now we're gonna take up non-agenda public comment.

Uh, the council members respect and appreciate the public's input and are fully committed to protecting every participant's free speech rights at council and also at committee meeting.

Natalie, please proceed with non-agenda public comment.

Per rule 2.7, non-agenda public comment is an opportunity for members of the public to comment on items that are not on the agenda, but within the subject matter jurisdiction of the committee.

Each speaker will have two minutes, and we have not received any speaker slips from individuals in chambers.

There are five hands raised in the virtual queue.

I've started the five-minute timer.

Blair Beekman, please unmute and begin.

All right, thank you.

Blair Beekman, I'm first today.

Hi, everyone.

Um, I'm almost done cleaning my storage space after four months, five, six months now.

And um, I'm I'm moving into a smaller storage space, uh, a lot cheaper.

I'll be back in San Diego uh the first of February.

So I'll be back in town.

It'll be nice to return from the Bay Area.

Um we're doing some good work with flock issues uh in Oakland.

Uh hope you can be looking into it.

Um I wanted to mention uh I'm trying to better grasp what's going on in the Minneapolis area, how it relates to San Diego.

We went through a lot uh last year uh in this early summer, you know, in issues with ice uh rags, and they came in way too strong.

I think we learned incredibly important lessons that we have to demand and really make sure that ICE agents in San Diego County work and act in ways that uh de-escalate situations and they're not over militarized.

I think we have to bring that point home every time we talk to ICE agents and have our conversations about ice.

And when we do, that creates a standard and an expectation of how they can work well so they don't freak out.

I mean, obviously, because of the war in Venezuela, they freaked out, and they just started going nuts in Minneapolis.

We have to bring them back to humanity.

We have to continuously work on asking for humanity.

Good luck in our efforts.

We can do that in San Diego.

Thank you.

Thank you.

The next speaker is Becky Rapp.

Please unmute and begin.

Good morning, Chair and members of the audit committee.

My name is Becky Rapp, and I'm here to ask Committee to consider a full audit.

Becky, I'm going to pause your time.

The connection discussed expensive Becky.

The connection is hard to hear you.

Can you try again?

Okay, we can come back to you.

Al Del Mastro, please unmute and begin.

Hi, my name's El Del Mastro, and um I um I'm a concerned citizen of San Diego.

I'm a senior, I'm a disabled veteran, and um, you know, what's been laid on the public is been amazingly uh discouraging.

I'm a senior, I'm a disabled veteran, and um, you know, what's been laid on the public has been amazingly uh discouraging how you guys were able to put in this trash tax by saying it was only going to affect single family homes and uh and how it would give apartment owners or people who had lived in apartments some kind of break, and uh it did the complete opposite.

It's a miss misleading and um, you know, you guys really catered up to Shawnee La Rivera over this, and he keeps putting stuff in there.

He's spearheaded parking at the Balboa Park, and now he wants nothing to do with it.

Uh now he wants to put another law in.

I saw him on television where uh he's saying that why shouldn't billionaires pay their fair share that live in San Diego that own a second family home.

Like there's that many Texas billionaires who's on television saying Texas billionaires are going to be affected by this.

But how about a hard working person that has a condominium down time that isn't his primary residence?

Why are we gonna punish that guy?

Why are we gonna punish a guy who worked his whole life and maybe has a small business or had a small business in the desert and wants to have a uh a small home in San Diego?

Why are we gonna punish him with this law by hiding, by hiding uh, you know, uh um what is it, uh ADUs or not ADUs, but uh, you know, with the rentals, the uh housing rentals, how how a billionaire, how he's using bait and switch by by claiming billionaires are gonna be the ones that are affected.

But it's I don't know how many Texas billionaires literally live in San Diego that have a house.

And if they had to give it up or rent it, their house is probably 25 million dollars.

How is that going to be a good thing?

Thank you for that concluding statement.

This does conclude your time.

Thank you.

Our next speaker is Terry Ann Skelly.

Please unmute and begin.

Good morning, audit committee chair Moreno.

My name is Terry Ann Skelly.

I'm a planning group member where we recognize the importance of taxes and fees that are collected and accounted for through your audits.

We often wonder if the city has the capacity to enforce the laws regarding the collection of taxes and fees from those who don't pay them.

I'm interested in an audit of fees and taxes related to marijuana businesses.

Are they diligent and paying them?

And if not, is there enforcement against them?

Of special interest to me is whether we are receiving law enforcement, mine, or decoy operations for marijuana storefronts and especially for deliveries.

This was one of the issues we thought would be paid for through marijuana business taxes and fees.

This audit would be very welcome to parents, educators, public health advocates, and others who work on behalf of youth.

It's a beginning in recognizing that there are real costs of marijuana consumption to young adults, families, neighborhoods, and society in general.

The costs are extremely high in mental health costs alone, which is becoming more clear with each news study, and which parents in this city would describe to you in heartbreaking detail.

Thank you for your consideration of this investigation into marijuana marketplace and the access of young people to it.

This could be important work for the audit committee.

Thank you for hearing my concerns this morning.

Thank you.

The five-minute timer has concluded.

The original, please unmute and begin.

2026 is a new year and a new opportunity to do the right thing.

Vivian and Henry, you guys know that I've been talking to you guys about Tent City and the fraud waste and abuse that has been taking place since it's opened.

And I'm just wondering how many more people need to die because 25 people shouldn't have had to have their lives be lost because there's not only fentanyl being trafficked, but there's sex trafficking that's happening there.

People are being raped on a regular basis as well.

Unfortunately, I don't have that total number because you know I speak on behalf of these people that are afraid to come out because they get retaliated against.

They get kicked out of what's you guys consider safe sleeping.

Teresa Smith is racketeering with all of the fraud that is coming out and being exposed.

You guys could be on top of this.

In fact, the audit um any uh whatever party in the city already is aware of this.

You guys are aware of this.

I shouldn't have to report time and time again that somebody else has died because there are people that are being hired that are from halfway houses, they have ankle monitors, they're on parole.

These are not people that are equipped to deal with the homeless population.

So imagine what it's like to know that time and time again, your friends keep passing away, and you have no opportunity to get into housing because that is not what happens there.

It isn't.

And so I'm asking you guys once again to police audit dreams for change and downtown partnership because all downtown partnership does, downtown is shift people around.

The mayor sit there and did his state of the city and showed pictures of the homeless that were there and they were gone.

They're there every night.

They have to leave every morning.

So things are not being done to help the homeless, but you know what?

It's filling people's pockets.

But people are losing their lives, they're being raped, they're being trafficked.

And when fentanyl is there, that is a weapon of mass destruction.

It is absolutely imperative you do something immediately.

This does conclude your time.

Our next speaker is Madison Rapp.

Please unmute and begin.

Hi, thank you.

So I'm here to raise an audit and oversight concern related to upcoming federal changes affecting hemp derived THC products.

As you may know, a recent federal spending bill signed by President Trump includes a ban on most consumable hemp products beginning next November.

A new report from the nonpartisan Congressional Research Service makes clear that enforcement remains highly uncertain.

It is not yet known whether federal agencies will redirect resources towards these products or continue their current practice of limited enforcement.

What this uncertainty means for San Diego is that much of the immediate burden may fall on local governments.

Until Congress clarifies enforcement priorities or establishes a new regulatory framework, cities and counties will be left managing market confusion, enforcement disputes, and potential litigation, particularly as federal and state cannabis laws become increasingly misaligned.

At the same time, hemp derived THC products have been widely sold through convenience stores and gas stations, often without age restrictions or testing requirements.

In other states, this has already created significant regulatory and enforcement pressure.

Because these products have largely operated outside the regulated cannabis system, they have undercut taxable cannabis sales, reducing expected revenue while also shifting compliance and enforcement costs onto local governments without dedicated funding.

From an audit perspective, this represents a foreseeable fiscal risk.

San Diego should be preparing now for increased administrative, legal, and budgetary strain.

I urge this committee to begin assessing potential enforcement costs, revenue impacts, and legal exposure ahead of the federal deadline to avoid reactive spending and protect taxpayers.

Thank you for your time and oversight.

Thank you.

Good morning.

This proposal raises um important concerns.

There have been ongoing questions about whether taxes and penalties from the currently permitted marijuana businesses are even being collected.

Penalties are reportedly continuing to occur, and the public does not have a clear understanding of why these issues remain unresolved.

The proposed ordinance includes very high penalties for illegal delivery operations, which sounds promising, but enforcement should begin with accountability inside the city's own system.

If permitted businesses are not fully paying what they owe, we need to understand why and how that will be corrected.

Residents deserve confidence that tax collection, penalties, and compliance are being properly managed.

And an audit would help provide transparency and restore public trust.

So I ask this committee to please prioritize better oversight of the marijuana department and agendize this issue so these questions can be reviewed openly and clearly.

Thank you.

Thank you.

And Chair, this concludes non-agenda public comment.

Thank you.

We're now going to move on to committee members, mayoral staff, city attorney, and the IBA, uh, IBA's office for comments.

And I will kick us off.

Um, first off, I want to welcome uh council member Henry Foster.

Um, very excited to have you in the audit committee, and I look forward um to working together on behalf of the uh residents of uh the city of San Diego.

Um, I also want to um let everybody know that uh today is our committee consultant, Kevin Smith's last committee meeting and also last day in district eight.

Um, very sad.

Uh he is my chief of policy, and he's been for the past seven years.

Uh and we've actually been working for the past 15 years together, and I want to uh thank him uh for all of his hard work and his um even hand, I will say.

Um, just a really really great human being, and um looking forward uh to the next chapter um of um of your career, and I wish you well.

So thank you.

Um also uh would like to introduce uh my new uh committee consultant and also uh chief of policy Robert Broom Broomfield.

Uh he is sitting here, and please be nice to him, at least for the first few months.

Um, with that, I am going to kick it off to Aaron Noel with the IBA's office.

Thank you, and good morning, Chair Marino and members of the committee.

I'm providing a reminder that the city continues to have an ongoing open recruitment for a public member seat on the audit committee for anyone who may be interested in serving eligible applicants, must have at least 10 years of experience as a certified public accountant, a certified internal auditor, or other professional financial or legal experience in audit management.

There's a link on the audit committee website with information and an application.

So anyone interested can reach out to the office of the IBA if you have questions or would like additional information.

And this concludes my comments.

Thank you.

Thank you.

And I see Andy Hanao on the lights.

Uh thanks.

I just also wanted to uh quick welcome Vice Chair uh Foster.

He's always paid a lot of attention to our work even before you were a council member.

So looking forward to working with you even more closely.

And also wanted to uh thank Kevin Smith.

Um, as you all know, it takes a really good committee consultant to keep this on moving, and he's done an excellent job.

Um, so I wish him well and glad we'll see him in the clerk's office and welcome uh Robert, looking forward to working with you.

Thank you.

Wonderful, thank you.

Uh Councilmember Foster.

Uh yes, um, thank you, Chair.

Um, just really quickly just want to um say thank you for the warm welcome um to yourself and uh the team.

Um looking forward to um the good work that this um committee has done over the years um as we uh continue to uh meet our obligations and um look at how we can be the best city of San Diego we can be.

Um also um just want to take a quick moment and say thank you to Kevin for all of your work um working with you over the years.

Um truly has been a privilege, um, and I'm just glad to hear you're not going too far.

So um look forward to continuing uh to work with you in your new capacity.

So thank you, and also welcome to the new uh committee consultant.

So thank you.

Thank you.

Uh committee member Halpern.

Uh thank you, Chair.

Also just want to take a second to welcome our two new team members, the new councilman, as well as Robert, and with regard to Kevin, you know, when it was announced that he was moving on to a new position.

I can't tell you how many times I'd heard, oh my god, you know, Kevin is just so amazing.

You're gonna miss Kevin so much.

And every time I said Kevin, I know.

And so uh just wanted to wish him the very best and uh thank him for everything that he's done to help me as well as this committee.

Thank you.

Thank you.

Uh do we have um any requests for continuance?

No.

Uh hearing none, we're now gonna take up our consent agenda.

Uh, do we have any requests to pull an item from the consent agenda?

Hearing none, we're now gonna move forward with public comment on the consent agenda.

Uh Natalie, please proceed.

The public comment period for the consent agenda is now open.

The consent agenda includes item one approval of the committee minutes from November 12th, 2025, and item two, city auditors quarterly fraudline hotline report, fiscal year 2026 quarter two.

Please note that each speaker will have one minute per item.

We have not received any slips here in chambers.

There are two hands raised in the queue for the consent agenda.

Blair Beekman, please unmute and share which item or items you wish to speak to.

Um, item one, and I thought I heard uh a clarification.

I thought I heard the chairperson say that item three was a part of the consent agenda now.

Items one and two are on the consent agenda.

Okay, great.

Thank you.

All I need to know.

Okay, um, so yeah, just uh I want to speak to item one, please, the committee of minutes uh from November 12th.

You had an issue on working on uh Mission Bay Park and regional park issues overall.

I just wanted to offer a friendly reminder in all of the important work that Councilperson Moreno is doing about uh getting future parks within uh the OT Mesa area, and that can be happening and take place.

Um again, uh what I've been trying to say for a few months now.

It's important that we have to also be considering the surveillance technology involved, and that maybe is what's slowing things up a bit.

We have to be very clear that our surveillance technology in our parks is working well, and that is data is being shared in good terms.

We're really trying to figure that out, and I hope that councilman council president Moreno can have patience with that, and I want to describe that to the public as part of the process of building the future of OTE Mesa Parks.

I think it's an important conversation we need to be having regularly to do that.

Thank you.

This does conclude your time.

The next speaker with their hand raised.

Andrea Ebbing, please unmute and share which item or items you wish to speak to.

Hi, I'm gonna do um the number two um city auditors quarterly fraud hot hotline report.

Also wondering why we get uh one minute when there's like nobody here.

So just FYI.

Kind of weird.

Um, so the quarterly fraud hotline report.

I don't know how it can be accurate when the um when we're reporting to like the city attorney's office or the sorry, the DA's office.

Um, and the fraud hotline is it's like there's no point.

I've been reporting fraud for years, and nothing happens.

Um, and the fraud, waste and abuse taking place in the homeless and addiction um uh arena.

So the person that is closest to me works in that industry, and he is mentioning multiple fatalities at 10 city.

Uh, and if fentanyl is a weapon of mass destruction, then why are we buying fentanyl distribution um and theft from the rehab owners that we're awarding contracts to?

Because I reported it over and over and over again, but nobody did a thing about it except for award the person, the fraudster, five million dollars of taxpayer dollars.

Thank you.

Thank you.

And Chair, this concludes public comment on the consent agenda.

Thank you.

And I'm now going to turn it over to committee members for questions or comments, and also to entertain a motion on the consent agenda.

Uh, Councilmember Foster.

Uh, yes, thank you, Chair.

Um, I did have the pleasure to um go back and watch the November meeting.

Um, again, just would like to thank um the audit committee uh for the topics that were discussed, um specifically the KPIs.

Um, I think that was a very important um discussion, um, as I think it identified some necessary um next steps as we continue to do the good work to bring our budget deficit in line and to make sure we are running as efficiently as we can and to make sure they're useful tools.

I don't think that's an unreasonable ask and um something that we um I feel are truly obligated to uh determine and deal with.

So um with that, I will move the consent agenda.

Thank you, and happy to second that motion.

Uh so we do have a motion on the chair with the second, and if we could go ahead and put the vote up.

Wonderful.

The motion passes with uh committee member Tapsuri absent.

Uh thank you for that.

We're now going to take up our discussion agenda.

Natalie, please introduce item number three.

Item three, fiscal year 2025 annual comprehensive financial report.

And if you'd like to call into the meeting to make comment on item three, please call one six, six, nine two five four, five two five two.

The webinar ID is one six one two two two, one one one four pound.

Chair.

Thank you.

And staff, if you could please introduce yourself for the record and let us know how much time you need for the presentation and begin when you're ready.

Good morning.

My name is Jeff Peel.

I'm the chief accountant in the Department of Finance, and I'm here with William Wiseman, Financial Operations Manager in the Department of Finance and Kathy Ly, the partner with Crow LLP.

We'll need about 12 to 15 minutes for the total presentation.

We are here to present the fiscal year 2025 annual comprehensive financial report, the ACFAR.

Will and I will present our part of the presentation, and then we'll hand it over to Kathy, who oversaw the audit engagement for her part of the presentation.

The ACFER is prepared based on accounting standards established by the government governmental accounting standards board for all state and local governments.

Entities are required to follow these standards for consistency and comparability to other governments.

The main users of this document are investors and rating agencies.

This document helps the city in issuing bonds, commercial paper, and other financial mechanisms.

Rating agencies develop created credit ratings based on the information in the ACFER.

And the document also provides a starting point for the budget development process.

The actor is very different from the budget monitoring reports.

These are financial statements as of June 30th, 2025.

It is a backward looking document that provides a snapshot of the city's finances as well as critical disclosures that supplement those numbers.

Management is responsible for monitoring the internal controls over financial reporting.

The city has put into place many controls to reduce the risk over financial reporting, such as multiple reviews based on materiality, checklists, department director certification, as well as certification from the disclosure practices working group, DPWG.

The ACRA is made up of three sections.

The first section is the introductory section, which includes the letter of transmittal.

The letter transmittal provides the details about the city, major accomplishments, and economic trends that have happened within the fiscal year.

This section also includes the certificate of achievement for excellence in financial reporting for the FY24 annual comprehensive report, making this the 11th consecutive year the city has received this honor.

Our department has submitted the FY25 ACFER to GFOA for consideration for this award.

Next is the financial section, which includes the city's external auditor's opinion, the management discussion and analysis, financial statements, and note disclosures.

The management discussion and analysis details material variances within the government wide statements.

The third section within the ACFAR is the statistical section, which provides data to help users assess the city's economic condition.

The data includes financial trends, revenue and debt capacity, demographic statistics, and economic information.

There were two new GASBE standards implemented this year.

The first and the most significant from an implementation standpoint was GASBY 101 for compensated absences.

This was a change in how we value our compensated absences.

There was no change in the disclosures, just how the liability balances are calculated.

Prior to implementation, our compensated absence balances, our compensated absences liability was comprised of annual leave and compensatory time off.

Under the new standard, we also pick up annual leave, department discretionary leave, rental leave, and earn sick leave, as well as the defined contribution pension amounts associated with those balances.

This helps standardize reporting across entities and helps capture the total impact of these of these liabilities.

Second statement implemented this year was GASBE statement number 102 for certain concentrations for certain risk disclosures.

This requires disclosure of certain risks that could impair the city's ability to provide services or meet financial obligations.

There was no impact on the financial statements this year, but it is something that we'll have to continue evaluate over the course of the year and during the ACFAR preparation process.

To cover some major fund highlights, the city has three major funds from an ACFER perspective: the city's consolidated general fund and the water and sewer utilities.

The consolidated general fund ended with a total fund balance of 414.6 million.

That included emergency reserves of 17.6 million and stability reserves of 99.5 million.

Both of those are consistent at prior year balances.

The water fund ended with a total net position of 2.3 billion and remains stable with a decrease of less than 1% compared to FY24.

The sewer fund likewise ended with a total net position of 2.8 billion and remains stable with an increase of less than 1% over the prior year.

Our external auditor, Crow completed the audit on December 17th and found no significant deficiencies and no material weaknesses in internal controls.

It was a clean audit opinion.

And that concludes our presentation, and we'll pass it over to Kathy Lai, the partner with Crow for their part of the presentation.

Good morning.

As Jeff mentioned, for the record again, my name is Kathy Lai, and I'm not at partner with Crow and the lead engagement partner on the City of San Diego.

With me today, I also have Joseph Wajaya, he's our lead senior manager, and in the audience, we have Miyuki Freeman, one of our lead managers on the account.

It's a pleasure to be here with you today.

We have a brief presentation.

I wanted to go over the audit objectives, what Crow was engaged to perform for the city.

Second, I wanted to cover our audit results.

And then third, I wanted to follow up with some required communications.

Next slide.

All right, so our audit objectives.

We were engaged by the city to express an opinion on whether or not those financial statements for the city are fairly stated in accordance with generally accepted accounting principles.

As an auditor, we perform our audit in accordance with generally accepted auditing standards as well as generally government auditing standards as well.

And those standards require that we perform our procedures to obtain reasonable assurance that those financial statements are fairly stated.

Our audit includes consideration of internal controls over financial reporting, but it's important to note that we don't express an opinion on the effectiveness of internal controls.

Management is responsible for the design and implementation as well as the effectiveness of those internal controls.

Those are our audit objectives.

Next on our audit results, I'm pleased to report, as management has alluded to, that we have issued an unmodified opinion on the annual comprehensive financial report and likewise for the enhanced infrastructure financing district.

Essentially, my opinion states that those financial statements are fairly stated in accordance with generally accepted accounting principles.

So if that statement is unmodified, it's actually excellent news.

On the next slide here, just wanted to make you aware that we did have other reporting compliance reports that we had performed.

We did an agreed upon procedures, uh, the GAN report to comply uh with section 1.5 of the California Constitution.

There were no findings reported in that report as well.

I'll go ahead and wrap up here with some required communications.

First up, with respect to significant accounting policies, um, we're required to inform you of um those significant accounting policies.

Management has done a great job of that.

It's in footnote one of the report, and we have no comments uh with respect to those.

Um second, it's important to note that in every set of financial statements, there are management's judgments and accounting estimates that are included.

A great example of that would be your pension and OPEB post employment retirement health care benefit liabilities where management utilizes actuaries to develop those estimates.

Um we have reviewed those, and based on our review, we have no comments to note today.

On the next slide here, every year I mentioned our job is to determine whether or not those financial statements are fairly stated in accordance with generally accepted counting principles or gap.

And the governmental accounting standards board or GASB actually establishes what gap is.

And they issue new accounting standards from year to year.

In this particular year, management was required to consider GASB 101 related to compensated absences, as well as GASB 102 for certain risk disclosures.

You'll see in the footnotes, um, particularly footnote one Z that due to the implementation of GASME statement number 101, um, it required management to uh restate their net position so that they could comply with the accounting standard.

So we've reviewed that and have no comments there, and there were no material um impacts related to GASB 102 related to certain risk disclosures.

On the next slide here, um, I'm pleased to report that we did not note any material corrected or uncorrected misstatements to bring to your attention today.

And then last but not least, on the next slide here, uh, we did not note any of these items noted on this slide.

Um, in fact, it was quite the opposite.

Management was very agreeable and accessible to the auditors, and we certainly appreciate their cooperation throughout the audit.

And I did want to point out that last bullet point and just stress that Crow is independent of the city of San Diego as your independent auditors.

And with that, that concludes my presentation.

I'm happy to address any questions that you may have.

Thank you.

Um we are now gonna proceed to public comment for item number three.

The public call the public comment period for item three is now open, and we have not received any speaker slips here in chambers.

There is one hand raised in the virtual queue, so I've started the five-minute timer.

Andrea Ebbley, excuse me, Andrea Ebbing, please unmute you'll have two minutes to speak to item three.

Hi guys, thank you.

It's Andrea Ebbing.

I appreciate the two minutes.

That's awesome.

Um, and I just wanted to say that I still don't see anything about the 152 million dollars of other pay that was paid out to city employees in 2024.

So 152 million dollars of something called other pay on transparent California, which is not penetion benefits, um, regular pay or um or overtime.

So overtime was like 150 million, uh, and the other pay was 152 million, and then for the county, it was 70 million, right around 70 million.

Um that was a 10 million dollar increase from 2023, in which other pay was 142 million, and uh 60 million went to county employees.

Now, when you go on to um Transparent California to look at the city of San Diego and the county of San Diego, um, there's like a note on the top that they had received communication from, I believe it was the county of San Diego, um, that like something was put into a different area.

It's like a big red box on the top, alert on the top of the page that there was kind of like a strange, it's an anomalous uh thing even for their system because they go off of tax records.

So I would be interested to know what that is, like what is that about?

I feel like it ties into pension somehow, but um that's a lot of money.

And we don't know what's going on with it.

Um and I started this with um the other pay about a year ago, and Charles Monica um had mentioned somebody that I identified as well to be kind of anomalous, which was a person named Sarah Looney.

I think she was supposedly employed by the city of San Diego, an admin admin aide who made $530,000, and 337 of it was uh other pay.

So if we could look into that, that'd be great.

Thank you.

And Chair, this concludes public comment on item three.

Thank you.

And I'm gonna turn it over to committee members for any final questions and comments.

And I will start us off.

Um first off, uh, thank you both for the presentation.

Um, and I do have a series of questions I will direct to our independent auditor first.

Um was any audit work not performed due to any limitation placed on you by management?

Uh no.

Okay.

Can you explain the process your firm goes through to assure that all of our in um engagement personnel are independent and objective and risk and with respect to our audit?

Yeah, absolutely.

So Crow is a CPA firm.

We're subject to professional ethics as well as independence requirements.

And uh we do annually do independence requirement checks uh for individual employees where employees are required to complete and certify their ethics and independence training, attesting to their independence, not only related to their audit and attestation clients, but also their personal independence.

Um and then Crow as a firm, we also maintain systems, for example, within Crow, our we have an active system called COMPASS, and it's a centralized system that checks for conflicts and entity management system that's the primary data source for both client and vendor relationships with Crow.

Um and it's a platform that we utilize to monitor independence and conflict checking throughout the year.

Um, and as part of our client engagement acceptance process for all new clients, we also do an existing um uh independence checks as well.

And then all non-audit services provided by Crow um, you know, to the city have the appropriate safeguards that are in place under our professional standards that don't impact our independence and objectivity of the work uh when we're performing that related work.

Um and again, just to confirm we're not aware of any independence matters related to the services provided for the city.

Thank you.

Uh was the audit performed in accordance with generally accepted auditing standards or generally accepted government auditing standards, if not why?

Uh they were actually in fact performed with both, uh the generally accepted auditing standards as well as generally accepted government auditing standards.

Okay, thank you.

And do the financial statements contain deviations from generally accepted accounting principles?

And if so, why?

No.

Were any new accounting principles adopted?

Were any changes made, or did you recommend any changes in the accounting policies used or their application?

Um yes, as covered in our presentation as well as management.

Management was required to adopt two accounting standards, CASME statement number 101 related to compensated absences, and GASP statement number 102 related to certain risk disclosures.

And uh with respect to GASB 101, there was an impact related to the city, and that's disclosed in the footnotes as well as highlighted in our independent auditors report.

For GASB 102, there was no material impact related to that uh implementation.

Thank you.

Were there any significant accounting adjustments affecting the financial statements in the prior year or the current year?

Uh yes, again, as I mentioned related to GASME statement number 101, the required implementation required management to restate net position to comply with the accounting standard.

So you'll see both of the footnotes to the financial statements, the financial statements, as well as the independent auditors report that they highlight that they had to restate uh net position for governmental activities uh to the tune of about 18 million or so, and then likewise for the business type activities for about 4.5 million.

And so that's all disclosed in the uh ACFAR as well as our opinion.

Thank you.

Are are there any areas of the financial statement, including in the notes, in which you believe we could be more explicit or transparent or provide more clarity to help a user better understand our financial statements?

Uh no, none come to mind.

Okay.

Have you expressed any concerns or comments to management with respect to how our presentation, including the notes or management's discussion and analysis could be improved?

Uh no.

And based on your audit procedures, do you have any concerns as to whether management may be attempting to commit management override?

Or have you noticed any biases as a result of your audit test with respect to accounting estimates made by management?

Uh no, we didn't experience any of those issues.

Okay.

Did you encounter any difficulties in dealing with management in performing the audit, including any disagreements with management regarding any accurals, uh curals, I'm sorry, estimates, reserves, or accounting principles?

And do you have the full cooperation?

Did you have the full cooperation of management and staff?

We did not experience any of those matters that you noted, and we did have the full cooperation of management.

Thank you.

Were there any accounting issues on which you sought that advice of other auditing firms or regulatory bodies?

Uh no, we did not.

Okay.

Can you describe any difficulties you encountered while performing the audit, for example, delays by management and allowing you to begin the audit, lack of access to information, unreasonable timetables, or unavailability of personnel, et cetera?

We did not experience any of those matters.

Okay, can you discuss your impression of the performance of the city's financial management in terms of the completeness, accuracy, and faithfulness of financial reporting processes?

Yeah, absolutely.

Um I'm in my 25th year now of auditing governments across California and throughout the country, and and I've observed cities' financial management team having a very proactive approach relative to implementing new accounting standards.

Um I sense a genuine desire to ensure that their annual comprehensive financial report is both complete and accurate.

They ask uh really good questions, you know, relative to understanding the standard and likewise when they have implementation questions along the way.

Um they're they're always really good about um you know consulting amongst themselves first and kind of bringing forth uh to us kind of their best uh thoughts with respect to how to move forward.

Um in addition to that, we've also uh observed that the city has a history, as uh both Jeff and Will alluded to, um, to receiving the certificate of achievement uh for excellence in financial reporting uh from the government finance officers association or GFOA for short, which is actually a voluntary um award uh that not all of our respective clients um vie and strive to obtain that and uh I understand that the city actively does that, and as I think Jeff mentioned, I think are in their 11th year and are applying for it for the 2012 2025 fiscal year as well.

Thank you.

Um can you describe any situation in which you believe management has attempted to circumvent the spirit of generally accepting accounting principles, but has yes but has yet complied with them?

We have not experienced that with management.

Would you characterize management's application of generally accepted accounting principles as conservative, aggressive, or somewhere in between?

Uh based on my experience, they appear to be a conservative.

Are there any new uh pronouncements or um andor areas of potential financial risk affecting future financial statements of which the audit committee should be aware?

Um yes, as I mentioned before, the governmental accounting standards board or GASBY for short issues new accounting pronouncements from year to year, and they try to strive to issue those with a rolling implementation date so it doesn't overwhelm management of particular governments.

There are three that are coming up, two in the next fiscal year and then one in fiscal year 27.

The two that are going to be implemented in the following fiscal year, so June 30th, 2026, is GASBE statement number 103, which is in relation to the financial reporting model improvements.

Um that will actually have some changes, you know, relative to their MDNA, their budgetary statements.

Um it also redefines uh and clarifies operating and non-operating revenues and the classifications that will take place there.

So there will definitely be some changes that management will have to kind of review related to implementation for next year.

There's also GASPE statement number 104, which is uh enhancing the disclosures of certain capital assets.

I want to highlight that it doesn't change the recognition and measurement of capital assets.

All it does is just enhance uh the respective disclosure requirements.

Uh for example, within the capital assets disclosure within the annual comprehensive financial report, it requires them to break out certain uh capital assets separately from the rest of the population, like intangible assets or subscription IT arrangements.

And then last but not least, in fiscal year 2027, GASPE statement number 105 covers subsequent events.

There is existing accounting guidance related to this, but this strives to just enhance those definitions and provides um better for better clarification related to recognized subsequent events and unrecognized events.

And those are the three that I'm aware of as of today.

Thank you.

How would you compare the city's financial reporting with that of comparable government entities with which you're familiar?

Yeah, so as I mentioned before, um, you know, my impression of financial management and the reporting team is that they strive to get to the right answer relative to the completeness and accuracy of their annual comprehensive financial report.

Um I do note that they do appear to be skilled uh within their craft of financial accounting and reporting.

They seem to be well informed relative to existing as well as new accounting pronouncements.

A great example of that is there is uh the Cal CPA entity, as many of you are aware of, and they have actually what's called the governmental accounting and auditing committee or the GAC for short.

I actually sit on that committee, as well as some of your members of management have been on that committee, um, as well as chairing that respective committee.

And so just to explain what that committee does is they come together annually twice a year, as well as communicate throughout the year to discuss emerging risks and issues pertaining to governments as well as new accounting standards.

Um they actually put on a conference for governmental accounting as well as auditing annually every year, as well as discuss emerging issues and try to work through those, and if they notice that there are accounting issues that are out there that are germane to this area, they they publish white papers to try to help uh other respective governments, accountants, and auditors alike to try to get to the right answer related to implementation.

Um so when I see that kind of participation on a voluntary basis, that to me is a good indication that these individuals are very interested in making sure that they get to the right answer, you know, relative to the implementation of new accounting standards.

Uh one other comment here uh that I wanted to mention.

I I am also aware of the city's disclosure practices working group or the DPWG for short, um, that's comprised of various members of the audit committee, perhaps as internal audit group and as well as management.

And I understand that their main purpose is to come together and to review the annual comprehensive financial report as an additional layer for appropriate disclosures and financial reporting.

So when I think about all of these and things in totality and compare you know the city's financial reporting with that of comparable governments, seeing all of these activities in place, I think are a very positive sign.

Thank you.

And can you please explain the significance of any significant deficiencies or material weaknesses referenced in your letter or report dealing with the city's internal controls?

Yeah, as I mentioned uh before in our presentation, we did not note any significant deficiencies or material weaknesses during our fiscal year 2025 audit.

Thank you.

Um there any questions that I have not asked that should have been asked?

If so, what are those questions?

I'm not aware of any.

Thank you.

Okay, is there any information you're aware of that you believe should have been disclosed or included in the ACFA that's not currently in the document before us?

I'm not aware of any.

Okay, I also have a question regarding the process issues that have been identified related to the city being unable to accurately deposit revenue into the correct account.

Um, last year we established that the amount of revenue impacted by this issue did not rise to the level of materiality to be disclosed within the ACFER.

However, since this document is backward looking over uh the time uh at which this internal control failure took place and was being addressed, in your professional opinion, should the problems with the internal process related to the deposit of lease revenue be disclosed in this document.

Yeah, and I again um as I mentioned before, with respect to the annual comprehensive financial report, um the accounting standards are quite prescriptive as to what is included uh in the financial statements uh under the accounting standards, whether it's the financial statements, the notes, the MDNA, the statistical section, supplementary information.

It's it's highly prescriptive with respect to what's required to be included.

Um with respect to the transmit a letter, that could be an area where management has discretion in regards to what they include.

That is not actually covered.

It's an unaudited section, it's not covered under those accounting standards, and management does have, in fact, discretion.

Um I'm not aware of a requirement, you know, relative to those process issues under generally accepted accounting principles to be included in the annual comprehensive financial report.

But I am aware that management has already disclosed that in their internal controls report that they have done in the city.

And we also had discussions with them with respect to their progress, you know, relative to fiscal year 2025, and um did agree that it didn't rise to the level of um a material adjustment and the amounts were certainly below the quantitative thresholds that we calculate for materiality, you know, for our purposes for the financial statement audit.

Um but we you know, to with respect to whether it needs to be disclosed in the ACFR, um, there are no requirements uh from what I'm that I'm aware of that would require that, although these are management's financial statements, and as I mentioned before, within certain sections like the transmit a letter, there is uh latitude there for management's discretion, uh, but it's really a management decision.

So my question, I I did I heard an answer, but I didn't hear a direct answer.

So I'm gonna ask you again.

Sure.

Um, should the problems with the internal process related to the deposit of lease revenue be disclosed in this document?

Your professional opinion.

Yeah, I'm not aware of a requirement for that disclosure.

Um, and it's up to management to whether or not they want to disclose that.

And I suggested um the areas in which you could include that where it wouldn't be out of bounds related to the accounting standards.

So no, shouldn't thank you for that.

Um is there anything preventing us from disclosing it in the ACFER or transmit a letter?

Um not that I'm aware of.

Thank you.

And finally, if this issue is not disclosed in this document, how would uh potential investors be aware that the problem exists?

Again, my understanding is that there have been public audits, you know, through the city auditor's office uh where the matter has been um disclosed, and then likewise within the city's internal control report that they perform, and I think that matter has been disclosed as well.

Um so I think those are two public documents that should be readily available to anyone that would like to read about the issue.

Thank you.

Thank you for answering all the questions.

And you're welcome.

Um my next set of questions is to staff.

I don't know if Mr.

Peel is gonna be um responding to this, but to your knowledge, is there any information that should have been disclosed in the ACT for that has not been disclosed?

No.

Are there any questions we have not asked that should have been asked?

No.

Okay.

And I'll also ask you about how you believe potential investors in the city would be aware of the problems related to accurately depositing lease revenue into the proper account if it's not disclosed in this document.

Are potential investors made aware of the city's annual internal controls report?

Those two documents.

Uh I'm sorry, the uh annual internal financial controls report is uh is located on the city's website and is available uh within all the other financial statements uh and the annual comprehensive financial report on the city website, uh, as well as the city auditors uh uh recommendations uh and uh findings to uh that particular audit.

Okay, so they could find it on the web, essentially.

Yes.

Okay.

Um thank you.

Um I think our uh financial management staff uh continues to do a great job on producing the act for each year, and I greatly appreciate the commitment you have to ensuring that this document is complete and accurately reflects the financial conditions of the city.

Um I also want to thank committee member mafia for serving as the audit committee's represent representative to the disclosure practice working group, uh, which reviews this document as well as um the preliminary official statement prepared for bond offering.

Um I obviously take this job very serious um as this is um the city's money, the uh public's money that we're dealing with.

So um with that, I'm happy to uh to move to receive the report and for forward it to city council for consideration.

And that does conclude my comments, and I see uh committee member Mafia on the light.

Uh-huh.

Thank you, Chair.

Uh thank you for your report.

Uh good work uh from everybody.

And uh just just to summarize, it seems like um we had our unmodified opinions, uh, no issues related to internal controls, so no significant deficiencies, no material weaknesses, uh, and full cooperation from the management team.

And so overall, I think from an audit committee members' perspective, that's you know, just about as clean uh of an audit report uh that that we can receive.

And so um just wanted to send off my appreciation and thanks to the team and everybody involved.

This obviously isn't something that just happens in December, which is when the report happened.

This is months and months of hard work uh and really throughout the year of having sound uh accounting policies and procedures and systems and processes in place.

Uh and even though we have uh Jeff and William here to represent the team, it's many, many more team members than that that are involved in this process.

So please pass along our congratulations and thanks uh because this is a an extremely important process that we go through as a city to have an independent firm come in and take a look at uh our financial records and our financial reporting.

Um so thank you for that.

Um maybe just a couple of quick uh follow-up questions.

Um significant deficiencies, no material weaknesses, um, but through the course of the audit, sometimes there are matters that might come up, um, maybe like best practice type recommendations or things that might be discussed.

Anything that comes to note, anything that you recall having discussions with that um could make the financial reporting better going forward.

No, nothing comes to mind, but as I mentioned earlier, there are some new accounting standards that are coming up, and uh, you know, some of them can be hefty, you know, with respect to the consideration of management and and how it um impacts management's financial statements in the future.

And so I would encourage some of those discussions to take place rather early, um, in particular GASB 103 as it changes the financial reporting model in certain sections of the ACFR.

Perfect.

Thank you.

Uh and through the course of the audit, um, do you recall if there were any uh audit adjustments that were identified by the audit team uh that weren't identified by management?

So that tends to happen through the normal course of an audit where where items will come up and you know maybe smaller adjustments didn't rise to an internal control type issue, but uh any other adjustments that you recall uh as you went through the audit.

I don't recall any uh with respect to the audit adjustments and uh that would require your attention.

Yep.

Okay.

That's uh even more remarkable for the team if you've gone through uh that clean of an audit and not have an audit adjustments.

So congratulations on that.

And then my last question um is you know uh not maybe necessarily related to the financial statement audit, but um I believe there's additional reporting related to the single audit.

Um so the compliance portion.

Um I I believe your firm does that for us as well.

We do.

Okay.

Uh and what's the kind of timing of that and um when when do you anticipate that report will be completed?

Yeah, absolutely.

So statutorily, you need to have that audit issued by the end of March.

Um and our team is actually doing those procedures as we speak.

Um the city as large as it is, obviously has lots of federal funding and federal expenditures annually, and so we go through a process to select federal programs in detail, or in other words, major programs as defined in the literature that we test in detail.

And my understanding is we have about five of those that we're reviewing currently.

So we'll complete that work and then come back and and uh report with respect to those results.

Okay.

Uh was the delay of the 2025 compliance supplement uh did that cause any delay in any any of your procedures, or do you anticipate um any issues with getting it uh completed by uh March 31st?

Well, first off, I'm delighted that you're aware that there was a delay.

Um it's like speaking to another auditor is refreshing, certainly.

Um it was not uh fun for our for our firm as well as the accounting profession.

The federal government had experienced significant delays, and so they weren't able to get the audit guides for the federal grant audit or the single audit out timely.

Um it was significantly delayed.

Thankfully, we have it now, and so we're able to go through our procedures as planned during the normal time period that we had originally planned on.

Um, but some other governments weren't so fortunate uh for those that try to complete it before December.

Thank you very much.

Thank you.

Um moving over to committee member Halpern and just reminding folks that this is an action item, and we do need a second.

Thank you, Chair.

I'd be happy to second.

Um but nice to see you again, Kathy.

Thank you so much um for coming and for the comprehensive report.

I just want to follow up on one of the questions that the chair asked with regard to independence.

Sure.

You referenced a database uh that your firm uses for checking that sort of thing.

Yes, we have several systems, but I mentioned one of them.

It's called Compass.

Got it.

Okay.

So um you guys um maybe not you individually, but I believe Crow is engaged by the city's um SDG franchise compliance review committee.

You worked on that most recent annual audit.

I think that was an engagement that was in place prior to you guys becoming engaged for the city's ACFER.

Is that the type of thing that would have popped up in your database when you were reviewing things?

Yes, absolutely.

Thank you for the question.

And so as the lead engagement partner, I'm primarily responsible for making sure, even before we propose, that there are no independence concerns.

And my understanding was that project was performed under yellow book standards or government auditing standards and was in fact also a performance audit.

And so they're required to follow the independence requirements as well for the city.

And so there were none uh that came to our attention, you know, related to that particular audit.

Okay, so in that case, the way it would work is you internally reviewed that and felt this is not an independence issue, and so therefore shouldn't have been a concern or an issue in pitching the business or taking on the business for doing the ACFER.

Absolutely.

If there was, we would not have proposed because we wouldn't have been considered independent and qualified under the requirements.

Got it.

Okay.

And I appreciate your response.

And I just bring it up because uh apparently our review committee was actually not aware that that was going on at the time the the selection was made.

And I'm not suggesting that there is an independence problem.

I was really mostly concerned that the information was at least um had your attention, even if not ours, unfortunately.

Thanks.

So appreciate it.

Um I have a question for staff, if I could.

Um so um first of all, congratulations on the clean report.

Um especially as my colleague mentioned, if there were even no minor adjustments.

I mean, that's really pretty amazing.

So the finance team should feel really good about that, and and we appreciate you.

Um the one thing I'm I'm uh curious about is um whether you've had updates with the rating agencies recently based on the most recent financials.

I know the last time I think there was a change, was a positive change with Fitch.

I think it was a couple of years ago, so that's all good news.

But you know, obviously everybody's talking about you know the financial picture for cities across the country has been quite different.

So I'm just curious if you've had those rating agency updates.

Yeah.

Committee member Halpern, uh good morning, Roland Trevelity Financial Officer.

Maybe I can address that question.

We uh continuously engaged with the rating agencies.

We just uh issued a a bond.

Um, and that typically has a lot of interaction with the rating agencies where they look at many aspects of the city, including the financial statements, they uh maintain the same rating.

Uh so there's really no change coming from this specific report.

Great, thank you.

Appreciate it.

That's all that's all I have, Chair.

Thanks.

Wonderful, thank you.

Oh, uh Councilmember Foster.

Yes, thank you, Chair, and um thank you for the presentation um and the information.

Um as I'm new to this um committee and and um as I'm reviewing this, uh I guess if you can kind of help me to better understand um I don't know if it's process or intent.

Um but as as we've you know, I think the questions were asked about deficiencies and material weaknesses, right?

Um and it looks like there were no significant um findings, um, if I understand the report correctly.

Um thing is I look at um one of the auditor reports as we talk about the deficiencies, the last line um of the report says um it says however material weaknesses or significant deficiencies may exist that have not been identified.

We're approving I I kind of feel we're we we went through a process, we're approving a report.

It seems like we are saying we are meeting the appropriate standards, but yet I have a this what I feel is a disclaimer that leaves me at somewhat of a loss, and I guess I would ask the auditors or department of finance, what efforts I I understand what we do as an audit committee, but how are we to then identify that?

Because I'm just not squaring that up from a practical sense.

Sure, I'll take an attempt to address your question.

It's a it's a really good one.

You know, in our your the report that you're referring to is the yellow book report, the auditors report on internal controls of our financial reporting and uh compliance with other matters, etc.

in accordance with government auditing standards.

And in there, uh in the first paragraph, it highlights what um what we have audited, and that is to determine we've audited the financial statements of and it lists different opinion units, just to give some explanation there, um, which all collectively comprise the city's financial statements, but they're divided in different opinion units.

Um, and you can see those, you know, via various columns within the financial statements.

Um and it's to determine whether or not those financial statements again are fairly stated in accordance with generally accepted accounting principles.

And those accounting principles are just established by the governmental accounting standards boards, and that is the scope of our audit.

That's why at the beginning of our presentation, I think it's very important to cover what our audit objectives are.

Um we were not engaged to express an opinion on internal controls.

Um so when we perform our financial statement audit, we consider certain internal controls of our financial reporting, but it's only for the limited purpose of the first paragraph in our report.

Um if we come across significant deficiencies uh which by definition warrant the attention of the governing body, or worse yet, material weaknesses where they're material in nature, um, then those are written findings that would be included in that respective report.

I think that sentence that you're referring to highlights the limited purpose uh described in the first paragraph of that opinion, um, which is not designed to identify all deficiencies and internal controls that could be material weaknesses or significant deficiencies because again our scope is limited to just determining whether or not the financial statements are fairly stated in accordance with generally accepted accounting principles, and that's it.

That is this that is the the audit objective.

And so there could be out there other different um deficiencies or significant deficiencies that we have not identified in a in the scope of our respective audit.

And that's why that disclaimer is included there to allude to our you know, again, what we've been engaged to do, and that there are limitations there.

Um so you you're correct in bringing that up.

Okay, so it it seems like we are doing this as an as an exercise in regards to mandated mandated requirements.

I'd like to think for fiscal strength, um which I think sets a low bar, but it sounds like based on that conversation, as is based on in how we engaged, that um it seems to leave the door open that we need to maybe do a little more to really get to the bottom of um all the issues that we are continuing to find as we do our independent audits, right?

For example, I can ask you if our fiscal our fiscal strength is what it is.

Why am I continuing to have contracts that are expiring overruns paying on contracts that are not expired?

If it's a simple financial um check where if we say our expenditures are $5.1 billion, and we are just saying we are not going outside of that $5.1 million, I think that clarification would be stated, um, which I hate to say it, this is just a theatrical show and not really of substance, um, which is problematic for me.

Um but also um uh Rolando, you have some comments that you would like to add.

Absolutely, Councilmember Foster.

So maybe stepping back a little bit on what this report is supposed to do.

Uh this this report is supposed to present the city's financial position as of June 30th, what are our assets or liabilities, the activity for the year, ravenous expenditures, how that financial position changed.

The standards that are established by GASBY, the the authority that sets, they want to make sure that every municipality is reporting these figures consistently.

And they set a uh a number of rules uh for accountants to follow.

If you're gonna be reporting uh an asset, you you you need to record it at cost, things like that.

So what the auditors are doing, and they're they're saying, well, these are the standards, this is what management's doing.

Are they doing things in accordance with the standards?

So that's the exercise.

And the idea is management is responsible for establishing a series of a set of internal controls to make sure that we don't make material mistakes that would distort the numbers in the way that investors that are investing in our bonds would would buy the bonds and then find out that there was a significant error, right?

So I know there's internal controls basically span the entire operation, whether it be compliance with water quality, whether it be it's anything that management does requires internal controls.

But the scope of the work that's being presented here is specific to the financial statements.

Are they accurately being reported consistent with the standards, consistent with other municipalities?

And do we have a set of internal controls that make sure that every year that we issue the financial statements, those are accurate?

The city has one more level of control that was established by the municipal code when the Kroll report was issued 20 years ago, which requires us as management to certify to the City Council that the internal controls that we establish to prepare the financial statements are in fact appropriate.

And we do that, we certify the mayor's certifies, I certify uh the controller will certify.

So that's something that other cities don't do, but we do, and we present if we do find something, it's never going to be perfect.

If we find something, then we make sure we disclose it to council like we did last year with a lease issue that Councilman Moreno brought forward.

Hopefully that helps give some context of the exercise that we're presenting here.

Somewhat I guess it I guess this still leaves me in the position of have we truly identified all of our liabilities as we talk about a balance sheet, right?

Where you talk about revenues, you talk about your assets and your liabilities.

My question is do we truly understand what that number is and are we projecting it and have a handle on that?

Based on our common practice and what I see, that is very difficult for me to sit here in front of the public and say, I agree.

Right.

Um the the other thing that I will say is this um I found it interesting as we talked about um different funds.

Um there was a there was a specific um item um relating to fund balances and and and other items.

Um one in there was grants where he clearly indicated that the grants are not budgeted, but the expenditures are.

And this is where I get into as we talk about accounting principles and identifying liabilities.

I know specifically there are grants where I ask that have a match that have certain requirements where they are expenditures, where I have specifically asked, how are we meeting these obligations?

And I have trouble getting uh clear um precise answers as to how we are meeting those obligations.

And um, and so that's why I'm asking the questions I'm asking to understand what you are representing to us, and just with that statement there, I feel like um, as we are certifying this and saying we are are okay, uh I have to continue to question that somewhat as I look at the questions that I go through on a daily basis and the responses that I receive or or what I would say are not necessarily sufficient to say, hey, um we we we we are uh projecting these um city matching funds and and how we are um executing um properly.

So um those are my concerns.

I think we'll continue to talk through this as I am part of the the this committee.

Um but just interesting concept in and Rolando, you know, I am truly looking at how we can um take care of all of the um budget issues that we have, um, but at the same time, um the only way that um even the mayor, he's only as strong as the information that he has, and as accurate as that information is.

Um I just want to make sure I stress that importance that we are doing our due diligence, and we're just not simply stopping at a bar that a a state or federal level may set that as the bare minimum.

I think we need to do what's in the best interest of the city.

So um I'll leave that there.

Um thank you, Chair for the time.

Thank you, thank you.

Um I I do have uh a follow-up.

Um you mentioned that reviewing the internal controls is not part of this contract.

Um do you review internal controls under other contracts you have with other public entities?

Uh personally, with my existing clients, we do not.

Um and when you say review, I interpret that as issue an opinion, you know, relative to the operating effectiveness.

I do know that my firm does conduct uh such um audits.

Uh and you would recall on your counterparts in the in the SEC world, you know, post Sarbanes Oxley, there are SOCS audits and there's internal control audits that do take place for other types of entities.

Okay, wonderful.

Well, I I would just state that that that's something that we probably should consider, especially given um the um comments and questions we we've had today, and something that I've been thinking about.

And so um we'll leave that, we'll we'll table that and uh hopefully come back to that um this year.

Uh committee member Halburn.

Uh thank you, Chair.

I did have a follow-up um prompted by um council member Foster's uh first question, which I appreciate.

Um I I totally understand your answer, which is makes total sense the notion of it's about scope, right?

Right.

So um, you know, presumably scope and decisions about testing um in part are influenced by your assessment of the risk environment, right?

You're nodding, so I'll take that as a yes.

So I guess my question is um does the revelation of the lease revenue collection issue in any way, you know, even a little bit, you know, change your view about the risk environment so that you feel it would be appropriate to sort of notch up the depth when you're considering scope.

And I can't remember the specific timing of all this, so maybe it's one of those things.

Well, 2025 scope was already and testing was already determined, but you know, you you get the gist of my question, right?

So does does that occurrence in any way change your view about um how you assess this the scope and the risk environment?

Thanks.

Yeah, uh absolutely my understanding was um you know the issue was raised in 2023, perhaps 2024.

Um, but just broadly, you know, relative to our um financial statement audit approach, we do go through as those standards require a risk assessment, you know, related to financial statement accounts.

We determine um through our audit strategy map and identify key accounts, and there's a lot of things that go into that, you know, related to quantitative measurements is the account even material to the financial statements, right?

Knowing that our scope is to determine whether or not they're they're materially correct.

Um and so we do consider you know the risks um associated with account uh from a variety of different factors, and from there devise an audit plan, which could include the consideration of internal controls, or if that um is an area, an approach we don't want to take, we can go straight to substantive test work and perform procedures such that we have reasonable assurance that those financial statements are fairly correct.

And so um, you know, in that in this particular area, because of that process issue that was raised, you know, we did have conversations with management as it was brought to our attention in the 2025 fiscal year.

And my understanding, and hopefully you'll hear from management, is that it's trending in the right direction, that those moratoriums related to the audits, I think were lifted in April of 2025, and that the reconciling items um, you know, as initially noted are dwindling to amounts that on a net basis I believe are below the minimus thresholds for our purposes for our financial statement audit.

And so um my understanding is that they are trending in a positive direction to resolving those matters that were identified in 2024 and and prior.

Gotcha.

Okay, I guess the only other thought that comes to mind is you mentioned that um in consideration of this issue that came up.

You had conversations with management about you know their thoughts, your thoughts.

I'm just curious if as part of that you considered the notion or perhaps consulting with the chair of this committee to engage this committee as part of that conversation, knowing that ultimately you'd sort of have to come here and go through this.

Sure.

Yeah, again, we we interview members of management, senior management, as well as um you know, uh Chair Moreno as well.

We did um we do interviews under the professional standards related to fraud and and otherwise um we as part of that interview we ask about are there any other matters that we should you know come to mind um and had discussions related to that.

Um I don't recall having an additional discussion, but again, this is just based on memory uh related to the uh the lease process, although we have had discussions um with the city auditor's office as well as um executive management as we've conducted our audit.

Got it.

Okay, thank you.

No more questions, Chair.

Thanks.

Thank you.

Um I do not see anybody else on the light.

And there is a motion with a second.

So we will now take the roll.

Please vote.

Wonderful.

And that motion passes with committee member Tap Shuri absent.

Thank you.

And that concludes item number three.

We are now going to hear item number six, which is an informational item.

Natalie, please introduce item number six.

Item six, Office of the City Auditors Peer Review, July 1st, 2022 through June 30th, 2025.

Chair.

Thank you, staff.

Please introduce yourself for the record and let us know how much time you need for the presentation.

And please feel free to begin when you're ready.

Good morning, Chairman Committee members, Andy Hanous City Auditor.

I'll just briefly uh kick this item off.

I think we need about five minutes.

So people often ask who audits the auditors.

And we do get audited every three years through a process called peer review.

The association of local government auditors independently selects a team of auditors from around the country to verify our compliance with government auditing standards.

And I'm very happy to report that we received the highest pass rating, which means you can be assured that our reports are independent, objective, and accurate.

So I really want to thank the peer review team for their work and their professionalism.

They are the team lead, Lauren Evans, who's an audit manager with the city of Raleigh, North Carolina.

Van Lee, who is now retired, but was previously an audit manager with the city and county of Honolulu Auditor's Office.

And Daniel Partita, who is an auditor with Clark County Nevada.

So it's great getting to know them and sharing insights with one another.

And with that, I'll turn it over to the team lead, uh Lauren Evans for the details.

Thank you, Andy.

And good afternoon from here in Raleigh.

Hopefully y'all are having some good weather.

We're uh definitely in the cold right now, uh high 40s today, and maybe an ice storm this weekend.

So I definitely miss that San Diego weather that I experienced in December.

Um and thank you all for your time today.

Uh Andy did a really great intro.

I'm just gonna add a few more bullet points here.

Um we did the peer review, it was really just a one week on site.

Um I'll just discuss a little bit of what we reviewed and and what we looked at.

Um for myself, just a little background.

My name's Lauren Evans.

I've been with the Office of Internal Audit here at the City of Raleigh for nearly seven years now.

I am an audit manager.

Uh my previous experience before government was slightly different.

I was actually in the corporate side of auditing, uh, doing the SEC auditing, like your external auditor had mentioned previously.

Before I had about four and a half years with the big four firm.

Um, and I also did a year in corporate accounting.

Um I'm also a CIA, which is certified internal auditor.

Uh, those are necessary now for our ALGA audits.

Um, it's it's just our way of making sure that you have somebody that um has taken, you know, there's a test with the IIA to receive the certification.

Uh it covers all yellow book standards and requirements that auditors need to adhere to.

Um the reason why I'm talking with you today is just to talk about the ALGA process for peer review, um, who ALGA is and just a little bit about how San Diego did.

Um next slide, please.

Thank you.

AUGA stands for Association of Local Government Auditors.

Uh basically, we're a lot of government audit shops around the uh the nation that come together.

I think we have a little more than 2,500 individual members, which is awesome.

Um we're all kind of coming from different sectors of local government, whether it's a municipality, a county, uh school district, uh, election offices.

You can see the list there, and then at least for how we use ALGA, you know, it's all you know, complexity of things from CPE, whether it's online or we have an annual conference that we can attend, um, auditing resource guides, and of course, the peer review process where we independently are reviewing other shops around the country just to make sure that they're in accordance with government auditing standards, uh, which is really our yellow book standards.

Next slide, please.

Thank you.

Um, so in order for um San Diego to be able to really make sure that they say, hey, you know, we are compliant with standards.

Um, there is a necessity by the professional uh standards to actually have an independent review team.

And it has to be requested by San Diego.

Essentially, there's a statement that goes into audit reports that allows for compliance.

And as long as you have a pass rating, you're able to have that statement there.

If not, there's usually a modified statement you have, or you just are not compliant with government auditing standards for San Diego.

They have received a pass rating, which means they are compliant.

When it comes to the actual peer review team, it usually is an on-site process.

It's about one week on site.

Alga pays for those expenses, along with what we're actually reviewing is really kind of the internal controls actually of the audit shop themselves.

So what will happen, audit shops usually have these big policy and procedure guides that will tie in reference to the professional standards.

And what we like to do is come in and say, okay, can we see that your standards are, you know, are meeting the professional standards, and then can we see that see that play out in practice?

So we'll look at a few sample audit reports and just make sure that you know what what should be occurring is actually occurring.

Um below you can see some of those bullet points, at least of the whole process that we're looking at, where it's really all the way from the planning aspect, and then towards the end, which would include a kind of a self-review that the audit shop does over its own work papers as well.

Next slide, please.

Thank you.

The period that we have looked at is that three year period from July 1st, 2022 to June 30th, 2025.

Um, for us from a process perspective, we primarily interviewed the audit shop themselves, since they're the ones that you know have had a strong hand in creating the audit plan, performing obviously the audit work itself.

And we really wanted to get a good flavor of how the audit shop works, even with its different staff.

So we were choosing different levels of staff, whether they were senior to just beginning level, um, just starting or transferred in.

It was really great to just get a flavor of the whole operation for for the office itself.

Um, and the next bullet point I have around spot checks, that's really just you know, that kind of operational feel of how the shop did.

Um, we like to really look at, as you can imagine as auditors, almost pretty much everything related to the operations themselves.

So we looked at the audit manual, training records, CPA, staff qualifications, performance evaluations, even those checklists for self-reviews.

Um it was really quite thorough, um, along with doing the few sample reviews of audit projects, which would have included all the the work papers, whether they were in the planning phase all the way towards the end, those self-reviews.

Um, and for us, uh, next slide, if you will, please.

For San Diego, congratulations.

Y'all have passed with the clean opinion.

Um, we did not find any significant deficiencies.

Um, and some of these points I do want to highlight is it speaks very well of your audit shop itself.

Um, when we were actually on site, the the senior management, which was Andy and uh you know, Matt, both were very, very thorough and meeting with us, providing the documentation we needed.

If for whatever reason, because it was right before the holidays, if there was more time that was needed, we at least had the transparency and the knowledge, and I just thought it it was a great professional experience to be able to interact and see how another shop does, but also how hands-on uh senior management was as well.

Along with that being supported, I would say in the interview phase, when we were interviewing the one of the managers and quite a few of the staff, they all echoed a very similar point where it is very supportive from the senior management there.

Uh, you do have an interest, I would say, in at least the training aspect, and that's very important for auditors and required by our professional standards as well to have certain educational CPE, and that's something that they were wanting staff to be able to have, not just from a check the box, but hey, what do you want to take?

Where do you want to take your career from an audit perspective?

Even managers were helping to chime in, you know, about their staff themselves.

Uh, if they felt maybe you could grow in some data analysis classes, here's some that I can find for you and send.

And all of that was very, very supportive.

Um, you don't often see it because audit shops can be so busy, but it sounded like, and what we were seeing, there's a really good commitment to getting folks trained, uh supportive environment, uh, transparency among the team from what we were seeing as well.

Um, and even just the office manual itself was very detailed.

For us and Raleigh, we're in the process of updating our manual.

So I plan to use San Diego's as a very nice structural guide for how we can implement uh at least our step by steps that can help our new staff that come on board.

Um it was really well done by by San Diego.

Um, and lastly, you know, something that was echoed in the last peer review that um occurred.

Um, and something we saw as well, you know, there really is a valuable risk assessment process occurring.

It's something that auditors uh do struggle with, it's the risk assessment process itself because you have so many different ideas of things that you could audit, and it can be very hard to focus and hone in on what you need to work on and review for your city.

And we thought Lady San Diego had a had a very good process at least of weeding through the different risk.

Um I I guess with that said, um wanna thank you for your time.

Um happy to answer any questions y'all may have.

Um thank you.

This concludes the presentation.

Yes.

Yes.

Okay, wonderful.

Thank you.

Um, as a reminder, this is an informational item, so no motion is needed.

Uh, we are now going to proceed to public comment for item number six.

Thank you, Chair.

The public comment period for item six is now open, and we have not received any speakers' lists from individuals in chambers.

There's one hand raised in the virtual queue.

Kathleen Lippitt, please unmute and provide your comments.

Thank you for your presentation.

That was informative.

I had never heard of ALGA.

Um, however, I it it brings to and it's great that it brings together different sectors, et cetera.

What is puzzling to me is how the city has managed to receive a positive ALGA review, considering its fiscal deficits and how the city had to scramble to backfill some of those deficits.

However, there are still gaping holes, such as the unpaid um union pensions that are lurking in the background, and some estimates are 600,000 to 800,000 dollars.

So that's really puzzling to me.

I don't understand why the audit wouldn't look at uh those different aspects.

So thank you for letting me speak.

Thank you.

And Chair, this concludes public comment on item six.

Thank you.

I will now turn it over to committee members for questions and comments.

And um I want to thank you for the presentation.

I think it's amazing to see a review of our city auditor by your peers that highlights the areas in your office, um, the way it excels and passing with the highest ranking.

Um, your colleagues and peers clearly hold the work of the Office of the City um auditor in very higher.

And I think that's something to be very proud of.

So I want to take a moment to congratulate you and all of the staff and um and just say kudos, kudos, and keep up the good work.

And um, just reminding folks also that this is an informational item.

So no motion is needed.

Uh so this will conclude item number six.

Uh, Natalie, please introduce item number four.

Thank you, Chair.

Item number four, city auditors annual activities and accomplishments report for calendar year 2025.

Thank thank you.

And staff, uh, once again, please introduce yourself for the record and let us know how much time you need for your presentation.

And please begin when you're ready.

Uh good morning again, Chair Moreno and Committee members.

Andy Henau, City Auditor.

Uh, and joining me is Assistant City Auditor Matt Helm.

We're here to present uh the Office of the City Auditors 2025 accomplishments report, and we need about 10 minutes, please.

Uh, as you know, the Office of the City Auditor has an integral role in providing accountability and oversight for city operations and programs.

And our mission is to advance open and accountable government through accurate, independent and objective audits and investigations to improve the efficiency, effectiveness, and equity of San Diego City government.

We achieve that mission through a variety of core activities, including our annual risk assessment and work plan, which helps us uh focus our limited resources on the audit topics that will have the greatest return on investment for the city and our residents and taxpayers.

We then execute that work plan through our performance audits of high-risk city programs.

In addition, we also oversee the fraud, waste and abuse hotline and investigations of all material claims of fraud, waste and abuse.

We follow up on all of uh the audit and investigative recommendations that we make, and we present the results of audits and investigations to various stakeholders, such as the audit committee and city council.

In 2020 5, we issued 16 reports to communicate the results of our work, including audit reports, hotline reports, and recommendation fall-up reports.

And those reports contain a variety of recommendations to help reduce costs, generate revenue, improve public safety, and enhance efficiency.

You're familiar with with all the examples on some of these slides, but uh just to highlight a couple of them.

Our franchise waste hauling audit identified the potential to increase uh private waste hauling fees by millions of dollars per year, provided the city completes a legally uh required fee study.

And our uh audit of the grants program set forth numerous recommendations that uh once implemented will help the city better prepare for and pursue uh grants uh to assist with the city's budget challenges.

And I'll hand it over to Matt to cover uh some additional accomplishments.

Thanks, Andy.

Um, Matthew Helm, Assistant City Auditor.

Uh good morning, Madam Chair, members of the committee, Vice Chair Foster.

Welcome to the Cool Kids Committee.

It's great to have you aboard.

Um so, in the interest of time, I'm gonna step us through the next several slides fairly quickly, but wanted to focus on a few key 2025 accomplishments, especially those areas that may set up some of the issues that you'll hear in our upcoming budget proposal.

So here's an almost universal truth.

Uh, audits find things, we find problems.

Um, we also recommend solutions.

So this year we made 80 recommendations through our audits and investigations to address key issues that we identified.

And what's really important here is that number on the right.

We got 100% agreement to our recommendations this year.

We haven't had that in a while.

We've always been close, but uh that's a real testament to management working with us to get the yes on the issues that we find.

Uh, our recommendations, such as those I just mentioned, only have maximum value of management implements them.

We follow up on the status of our recommendations and report out to this committee twice yearly.

This year we also issued a follow-up report on the status of our confidential recommendations.

The really good news on this slide is the fact that management implemented 84 recommendations last period.

That's up from 48 last year.

So, again, uh a real testament to the work that management is putting in on their side of the fence.

Uh, here's a snippet of only some of the recommendations implemented last year.

I won't read through the whole list.

You can do that on your own, but the bottom line is that the implemented recommendations can and do yield a variety of benefits to the city, including revenue generation, cost avoidance, increased program efficiency and equity.

I'll now turn to a quick summary of once again a very active and successful year for the waste fraud and abuse hotline.

Uh, we had a caseload of 349 reports last year.

That's up from about 250 the year prior, and that huge caseload is managed only by two uh uh investigators.

Notably, we closed 113 hotline cases, and I'd like to thank management uh for their efforts to investigate the cases that we refer to them.

Uh so this committee has seen firsthand uh that our staff is our greatest asset.

One of them is sitting directly in front of me.

Um and this year, our own Chris and Ash got well-earned national recognition from the association of local government auditors by winning the rising staring star award.

So this recognizes the best and brightest in our profession and confirms uh what we already knew about Carissa.

So can congrats, Carissa.

The staff uh the next slide here just shows you know that OCA prioritizes continuing professional uh development of our staff.

We think you heard from Lauren on that, as evidenced by the more than 894 hours of staff training last year.

That training sometimes and does go beyond the minimum requirements set forth by our government auditing standards.

This slide shows the impressive number of staff that we have advanced degrees and professional certifications.

Uh, about 71% of staff have five years of audit and investigative experience for a grand total of 230 years of experience in the office.

So bottom line, and I think you know this, we got a bunch of smart people committed to public service, and they choose to work here, and we're grateful for that.

Uh we've done a number of presentations as you know, but last year we delivered 36 across 16 committees, council, and a host of other stakeholder events.

It's an important means of communicating what we do, how we do it, and why it matters.

We made a number of improvements this year in consultation with this committee in management uh to our recommendation follow-up report.

For example, last year we added an overall highlights page, uh, and that's shown here.

We also enhanced uh our online dashboard, which now makes it easy to see the history of the more than 1,500 recommendations OC has made since the inception of our office.

Next, in support of our ongoing commitment to increasing accessibility to our work, we added Spanish language translations of all report highlights last year.

We did that in conjunction with the communications department, so thanks to them for the help with that lift.

We also expanded our public outreach this year to obtain audit ideas for our annual work plan.

We did that through an English and Spanish language survey that was posted throughout the city.

We also made some improvements to improve the clarity of our annual risk assessment process by adding several several easily understood risk indicators that factor into our work plan development.

You just heard about peer review, so I'll skip that one here.

But again, on the next slide here, we also continue to refine our own internal uh processes.

For example, this year we added a staff evaluation process that included a 360 review for staff review of the management team.

Um and as this committee knows, uh, we've had a four-year effort that led to 67% of the voters approving measure A, which granted the audit committee and OCA the ability to utilize independent legal counsel.

I'm pleased to report that we're getting close to the end of the road on that, but working in consort with this committee, purchasing contracting the city attorney's office.

We had a very successful solicitation.

Uh the offer has been made out, and we're in the process of finalizing that.

So more to come on that in the very near future.

So with that, I'll turn it back to Andy to land the plane.

Uh thanks.

So we're looking forward to another productive uh year in 2026.

And as always, our top priority is to improve the efficiency, effectiveness, uh, and equity of city operations through our audit and investigative work.

We have a number of impactful audits uh already planned or in progress.

Uh just to name a few that you'll um be seeing the management of the city's leased uh golf course properties, um the unsafe camping ordinance, and the San Diego Police Department's internal affairs.

In the coming months, we'll conduct our annual risk assessment and develop our FY27 work plan.

Uh and consistent with the city's needs during a time when the general fund is facing deficits.

We'll continue to focus our work uh plan on audits that make the most of our public assets and identify additional areas for revenues, cost savings, efficiencies, and equity.

Uh we'll also continue to pursue major initiatives, including finalizing and onboarding independent legal council, developing OCA's first uh strategic plan to guide the office in the coming years, uh, and expanding on our public outreach initiatives.

Um sorry, we can go to uh slide 23.

Uh so to conclude, uh OCA continues to be a leader in local government performance auditing since the inception of our office.

We uh we've issued 309 reports and made nearly 1,600 recommendations uh to benefit the city and our residents, and management has implemented 81% of those uh recommendations, which again really shows uh the public benefit uh of our work as well as management's work to make the improvements we recommend.

Uh so we thank them for all of their efforts this year.

Uh and last but not least, as we wrap up, I want to thank OCA's very talented and dedicated staff for another uh great year.

OCA is a key asset for our residents and taxpayers, and all of the accomplishments we all of the accomplishments we just covered are only possible due to our uh staff's excellent work and so OCA and the city are very lucky to have all of them.

And that concludes our presentation.

Thank you.

Thank you.

And Natalie, we're pleased we're gonna proceed with public comment for item number four.

The public comment period for item four is now open, and we have not received any speaker slips from individuals in chambers.

There are two hands raised in the virtual queue.

Andrea Ebbing, please unmute and begin.

Elon Musk, you know, no matter what how you feel politically about uh Elon Musk or the D Doge uh situation, he was able to appeal to a very large audience in a very um like intelligent, high intellect group of uh younger people as well through this program.

And I think if we can do that same thing in San Diego and um better publicize this type of stuff that we can all participate and like the results and kind of like show metrics and make it fun and engaging and interactive.

I definitely uh support this, and I like the idea of this versus kind of this we've been in this dark, dingy, like you know, Narcan and Family Justice Center, and do you have workers' comp on all these billboards, right?

It's like absolute make San Diego just look pathetic and like broken and addicted.

What with a budget deficit the size of the budget deficit we have?

We really have to like be the spot again and be amazing and awesome and like a place that people want to come and attract tourism, attract um dollars to our uh small businesses, restaurant owners, that sort of thing.

So um if I I just talked about this at Sandag last week with the crime stoppers.

Um gosh, what a great program that is.

I I've heard of it, but I didn't really know what they did.

Um, but you know, if they had a quick, like uh easy to understand digestible statement put onto these billboards.

I thought I think it shows public engagement to build trust with the community again, and that will attract um tourism and local feeder markets and to not look so broken.

Thank you.

Thank you.

The next speaker is Blair Beekman.

Please unmute and begin.

Hi, uh, Blair Beekman.

Uh thanks for this item.

Thank you that um for Andy Ebbing's words and um what she's talking about.

Um I think tech accountability can really help uh, you know, that happiness uh in coming and visiting San Diego and what the mayor said in his uh state of the city speech.

People like San Diego.

Uh we should build on best practices of tech accountability to what what makes people happy when they think of San Diego?

Um I wanted to comment in all my work in Oakland lately, you know, a lot with in Oakland.

Um I was interested uh in a few ideas that you're talking about.

One is the unhoused programs of San Diego, your in-house ordinance.

Are you gonna be is that gonna be coming to audit committee uh to speak openly about because you guys are having a real bad problem in making clear in the public process what exactly is going on with um you know the ordinance issues?

How is that process going?

I don't hear anything in the public process.

I see some things on the news, but that's about it.

Um so and the audit department's great at speaking about uh subject matter that other committees have trouble speaking about.

So good luck in those terms.

Um trash issues.

Uh you got you seem to have a good uh uh uh Hollywood program and uh and your work with private uh agencies also.

So thank you that that is going well.

Um good luck in that continued good work.

I hope Oakland can learn some important lessons.

Um it's important to share uh good ideas with Oakland needs help with their trash issues.

Um good luck what can be developed together.

Uh you know, I I previously mentioned they've worked out a compromise in leaving flock in the next two years.

That's an awesome way to compromise.

I hope San Diego can be doing the same as Oakland with the flock issues.

Thank you.

Thank you.

Our next speaker is Zoom user.

Please state your name for the record and begin.

Uh can you guys hear me?

Yes.

Oh, cool.

Amen.

This is like uh listen to this stuff.

It's kind of like the Fox Garden, the hen house, and the city's laying the eggs, but the Fox doesn't really want to go after the hens because they keep laying the eggs and paying everybody.

So we should get an outside forensic accountants and pay them 20% for the fraud they find.

And then call in the doge team, get some young guys from UCSD and let's see how good it is.

Man, call in the doge team.

Anybody illegal aliens are collecting Section Eight or collecting funds from the government, feds is totally fraud.

You know, it's through these NGOs, like even the YMCA is kind of in on the game.

So you guys might think the YMCA is cool, but they're not looking at the daycare centers that they're auditing and stuff, they're just giving them the money.

So everybody's got their hands in the pot here.

And the city is anytime you were those use those words and equity or equity.

That's a strike against you with Trump, man.

He doesn't want to hear diversity words, and he's already cutting off the state money.

So I know it's like the wheelbarrels heading down the hill, and there's a couple of cars at the bottom, but uh just be closer to bankruptcy than we think.

You know, and uh every time the sewage comes into Iwana, it's a big deal.

I got a different audit.

They should audit all the money they study those programs, like three million dollars to see it's it's a health hazard or whatever it is, or to study the parking at the double park.

And some fraud is how about the ultimate bait and switch of the uh trash collecting thing?

That that would put a used car salesman to shame.

That's the ultimate right under the eyes of the city attorney.

The bait and switch right out in front of everybody.

Thank you.

This does conclude your time, and sure, this will conclude public comment.

Thank you for the presentation, and also thank you to this uh auditor's office for all your excellent work over the year.

Um, I do want to recognize uh Ms.

Nash for being awarded the Association of Local Government Auditors Rising Star Award.

Um, the award recognizes the best and brightest among newer local government audit professionals.

Umgratulations, Ms.

Nash.

Um, and I do want to say that the city of San Diego is very lucky to have you, so thank you for your hard work.

Um the office of the city auditor does amazing work, and I want to highlight two reports that, if implemented, would have a significant impact on our budget deficit.

Um the grant audit gave us an insight on how the city can do a better job at positioning positioning itself to receive more grant funding uh to complete projects.

Uh the report found that we're still lagging behind what other large cities in California bring home in grant funding.

Uh, for example, uh the city of San Diego only receives $337 per capita.

Um I want to remind folks we have um about 1.5 million people.

Um, while the city of Sacramento with 535,000 people receives $770 per capita.

Um, it was also concerning to see that when looking only at capital improvement grants, other cities are receiving 85% more grant dollars per capita compared to San Diego.

Um, I would be remiss, and I do want to acknowledge um a lot of improvement has been made by staff, um, especially compared to where we were in 2018 when I started in this office.

Uh but we need to continue um to work hard to strengthen our efforts to procure grant funding to ensure that San Diego is getting its fair share, um, not only from Sacramento, but also uh from DC.

Uh, next, the fire rescue overtime audit found that fire rescue exceeds its overtime budget by 76 million dollars uh from fiscal year 2019 uh to fiscal year uh 2024, including 31.8 million in general fund impacts.

So improving the accuracy of overtime budgeting methodologies and staffing projection will help reduce the potential for large mid-year budget adjustments and general fund impacts.

Now, this is just a snapshot of the work that the auditors team has done and its impact to the city.

So um that concludes um my comments and I'm happy uh to move this item.

And if I can get a motion, please, uh second.

Thank you.

Uh committee member mafia.

I don't see anybody else on the lights, so we will now take the roll.

Thank you.

And the motion passes with committee member Tapshiri absent, and that concludes um item number four.

Uh Natalie, please introduce item number five.

Item number five, Office of the City Auditors Fiscal Year 2027 proposed budget.

Thank you.

And staff once again, please introduce yourself for the record.

Let us know how much time you need for the presentation and begin.

Uh thank you again.

Uh Andy Henas City Auditor Matt Helm, Assistant City Auditor.

We need about seven minutes, please.

As you know, per Charter Section 39.1, the audit committee recommends the Office of the City Auditors annual budget to the city council.

Uh the city is projecting a general fund budget deficit for fiscal year 2027.

And as a result, the administration has requested that OCA propose a seven percent budget reduction uh for FY27, which would severely impact our ability to perform charter mandated audit and investigative work.

We understand the city's difficult budget situation, and it's also important to understand that OCA helps the city cut costs and improve the responsible stewardship of taxpayer dollars.

And so cuts to OCA during times of fiscal austerity are counterproductive and would cost residents and taxpayers far more in the long run.

Therefore, we are requesting that personnel and legal counsel cuts OCA took in FY 2026 be restored, and that $54,910 in non-personnel cuts be continued on a one-time basis only for FY 2027.

As you know, and uh as was covered in the previous presentation, OCA conducts audits and investigations that have significant financial benefits for the city and our residents and taxpayers.

OCA's work helps reduce costs, increase resident revenues, increase uh efficiency, effectiveness, and equity of city operations, and it helps detect and prevent fraud, waste, abuse, and mismanagement.

OCA's mission and outcomes we deliver are always essential, but are even more critical when the city faces projected budgetary shortfalls.

And you heard a lot of examples in the accomplishments presentation, and I'll just cover uh one more here.

Our 2024 performance audit of police overtime recommended centralizing the assignment and tracking of overtime to help monitor overtime use and ensure that it's spent efficiently on the most critical police responsibilities.

And using that recommendation, uh SDPD expects to reduce overtime expenses by $9 million in FY2026, which is one and a half times the budget of the Office of the City Auditor from just one audit that we did.

Um cutting OCA's budget means the city uh will miss out on similar opportunities to help close the budget gap.

And I'll turn it over to Matt for a few slides on the composition of our budget and some of the impacts uh the current cuts have already had.

Thanks, Andy.

Uh good morning again, Committee Matt Helm Assistant City Auditor.

As Andy said, we just want to give you a quick flyby on the numbers and sort of where we're at.

So this slide shows OCA's projected FY27 budget broken down between personnel at the top and non-personnel expenses on the bottom there.

So this is our as is budget, as if no adjustments are made, and I'll give you a minute here.

So even without absorbing all the detail on that slide, you can clearly see that the universe of where we can cut is uh without reducing reducing staff or salaries is very small.

So given that fact here, we can attest that once again this year.

We also went scrubbed to our budget line by line to identify any areas that we could cut.

And I'll further reiterate that we understand the city's fiscal situation and we're by no means exempting OCA from the need to make uh cuts.

So as shown on the previous slide, um, 86% of our budget is personnel and expenses.

So and we are close close to uh being fully staffed with a couple recent vacancies.

So non-personnel expenditures make up only 15% of our budget, and that includes critical items that we really can't cut, such as the ACFER contract training expenses, which were required to carry uh 40 hours of uh of training per year, critical audit and hotline IT prep platforms, which were essential to our operations, and funding to implement measure A, which as you know is uh approved by uh 67% of the voters in 2024.

So, given that personnel makes up about 85% of our overall budget, even a 7% cut or anywhere close to that would result in significant personnel reduction salary for lows, potentially even layoffs.

This would have clearly have negative effects, which would disproportionately diminish our ability to provide our charter mandated core services, reduce our ability to identify revenues, cost savings, efficiencies, and equity improvements at a time when they are needed most, and reduce our oversight and accountability for city departments, agencies and programs, not to mention the impact that it would have on OCA staff morale recruiting and retention.

So I'll turn it back to Andy who will step you through our proposal, and then we're happy to take any questions.

So for additional context, it's important to note that OCA is becoming increasingly under-resourced compared to the city itself and peer audit shops around the country.

The solid blue line on this graphic shows OCA's budget as a portion of the city's total spending over the past 15 years, and it's basically a measure of our ability to provide audit and investigative coverage for the city's large and growing operations.

As you can see, uh a fairly steady decline over that time from a high of about a dollar and thirty-nine cents out of every thousand dollars the city uh spent uh a number of years ago to only 96 cents today.

And this is because over time the city has continued to add the spending and programs, while OCA has not been provided sufficient resources to keep up and has taken cuts uh in fiscal year 2018, fiscal year 2025, and now fiscal year 2026.

By comparison, the dotted line at the top at the top of the chart shows where comparable audit shops in other agencies are at around a dollar and fifty cents for every thousand dollars their organizations spend.

What that means is our peers are already 50% larger uh than OCA as a portion of their organizations and can thus provide much greater audit and investigative coverage of their organizations than we can.

As it stands, we currently get well over 100 requests for audits each year, and we can only include about eight of them uh on our work plan.

The bottom line uh is that OCA's budget uh needs to be restored so that we can complete the charter mandated audit and investigative work that voters intended when they created our office.

Therefore, in order to ensure OCA has sufficient resources to identify efficiencies, cost savings, revenues, equity improvements, and detect and prevent fraud waste and abuse.

We respectfully request that the audit committee recommend the restoration of the personnel and legal council cuts uh incurred in FY26 and continue $54,910 in non-personnel cuts on a one-year basis only.

And I just have one quick uh correction here uh from our memo.

Our memo states that uh the council approved those NP cuts as one time.

That was my impression based on uh the action that uh council member Foster proposed and the the discussion.

Apparently, that did not make it into the uh resolution.

Um so I just wanted to correct that.

Nevertheless, um the audit committee did recommend that that uh reduction be made one time uh and it was not, so we're asking for that to be um corrected.

Thank you.

Thank you.

Uh before we turn it over to the public, um uh the um IBA's office has comments, Ms.

Noel.

Thank you, Chair Marino and members of the committee.

I'm Aaron Oell with the office of the IBA.

Um I thought it would be helpful for the committee's discussion to know that in the most recent council budget priority memo updates uh received by our office earlier this month.

A majority of council members added support for OCA's budget, uh specifically a majority support OCA's request that $55,000 in ongoing non-personnel expenditures that uh was reduced in FY 2026 be restored and then included as a one-time reduction for FY 2027.

OCA is not proposing further reductions, although, as Mr.

Hanau noted, the administration generally is seeking 7% budget reductions for departments.

Um I'll note this is the only remaining reduction from the past two years that has not been restored.

Um the updated uh budget priority memos also for several council members noted independent offices like OCA that are charged with mandated requirements in the city charter or muni code should be reasonably funded to implement those requirements.

Um that the Office of the IBA's report on council budget priorities updates will be issued on January 27th and discussed at the February 4th budget and government efficiency committee meeting.

This concludes my comments.

Thank you.

Thank you.

Natalie, please proceed with public comments for item number five.

Thank you, Chair.

The public comment period for item five is open, and we have not received any speaker slips from individuals in chambers.

There are two hands raised in the virtual queue.

Blair Beekman, please unmute and begin.

Hi, Blair Weekman.

Can you hear me?

Yes.

Thank you.

I'm having a bit of trouble with my Zoom right now.

Thank you a lot for this item.

Um thank you.

Uh yeah, um, I in Mayor Gloria's speech, he talked about the importance of uh working and cleaning up budget issues.

Umakland is kind of in a put the same precarious position budget-wise that that San Diego is in.

And yet they have been able to work out their budget plans and their budget deficit that's still uh fairly certainly uh helping out you know, low-income communities and communities in need, neighborhoods in need that San Diego has seemed to have some problems with.

And I hope uh Mayor Gloria can learn how to balance that better and share that balance better in the public space in the future.

Um I I'm all for budget cuts, but man, we we can do it in a way that helps the community as well and local neighborhoods still, and we have to respect that.

Then and it's not gonna be all done in one year.

It's gonna take a few years, and that's okay.

And we have to learn to be talking in those terms.

Really, uh I'm impressed with what Oakland can be uh Oakland's care.

Uh they can have.

Uh good luck in conversations with Oakland.

Um other budget issues were was I thinking about.

What other budget issues were I thinking about?

I guess that's about all for me right now.

So thank you for your time.

Thank you.

Our next speaker is Andrea Ebbing.

Please unmute and begin.

Hey guys, so this is Andrea Ebbing, and I feel like I hear I'm hearing a similar pattern kind of across the board from city council meetings to county meetings to sandag.

And um it's like the people that oversee things, so oversight.

So if it's um from commission to police practices, being persistently consistently understaffed with no leadership, unable to complete um an investigation, feels purposeful.

Um there's a sandag audit committee that the threshold to join is just so high that anybody that actually has all those qualifications is probably uh a CPA or doing some kind of auditing for a massive corporation making tons of money, and therefore would not you know even have an interest in joining the committee.

So I feel like that is a thwarted process as well.

I feel like the cuts and underfunding of the um audit committee here is just another one example of this.

So the best way to prevent any real work from um coming to fruition is to thwart it.

You know, it's like a distributed denial of service attack, uh, like some kind of a hacking thing where they open up the the back door and allow so many things to come in that you're looking in so many different directions that you can't just do your job.

So when they're underfunded, understaffed, getting so many requests, unable to process them.

Um that feels to me a bit intentional, and I think that is a great way to break trust with the public.

Um yeah, I think that like still, it's like 152 million dollars of other pay.

There's so many questions.

Putting the Office of Diversity, Equity, Inclusion into the independent office or the independent budget analyst office.

Why, right?

It's like taking up valuable time they don't have their understaffed.

I think it's to prevent actual work from coming out of the office.

Thank you.

Thank you.

And Chair, this concludes public comment on it and five.

Thank you.

And we're gonna turn it over to committee members uh for questions and comments, starting with Vice Chair Foster.

Oh, yes, thank you, Chair, um, and thank you to the auditor for the presentation.

Um I think um just quickly, I won't spend too much time because I think we have already um acknowledged today here the importance of the city auditor's um office um as as I do my work on a daily basis.

Um you do hear me really try to hone in on accountability, transparency, um, and making sure we're running efficient.

And and I think that um the services you provide um really focus on those specific um items um as I tend to struggle um as as uh operation staff are bringing items forward um and what I feel are not necessarily um doing the internal work that needs to be done to identify um those types of um improvements.

Um and so um I think at this present time um with all of the issues that we have in front of us as you hear public comment in, um I think the city auditor's office um is a um is a department that will help us to further um build uh the trust that we need um with the public uh to continue to do the business that we are here to do.

Um so with that um chair, I will move um staff's uh recommendation.

Thank you.

I don't see anybody else on the light, so we do have a motion on the full floor.

Um first and foremost, thank you for the presentation and thank you to the auditor's office for your work on each and every audit that you do.

Uh, we do ask a lot of you each year, and your office budget needs to have the resources to finish the items included in the annual audit work plan.

Um the city auditor's office and the work they do is mandated by the charter, uh, which was specifically approved by the voters nearly 20 years ago.

Um, cutting the auditors' budget means less audits get done and more inefficiencies continue to exist in the city.

Um budget deficit or not, we need to make sure that we're being transparent on how and um who we conduct business with.

Um if you were to add up all the savings from all the recommendations uh from the last few years, it would total millions and millions of dollars.

Um at the end of the day, the city auditor's office exists uh to advance open and accountable government through accurate independent and objective um audits and investigations that seek to improve the efficiency, effectiveness, and equity of um the city government.

And it's sad to say that that didn't exist before you existed, and that is why this office was established.

So I would like to see uh this um office continue to have its independence.

Um, and um, in order for you to have that, we need to make sure that um the office of the city auditor has the budget to do exactly the work that you were mandated by the citizens of San Diego to do.

Uh so Mr.

Hanao, I appreciate your work, dedication, and leadership remaining to the office of the city auditor, um, and the excellent work your team continues to do.

Um, I'm happy to second the motion on the floor.

I do not see anybody else on the light, so we will now take the role.

Thank you.

And that mash uh that motion passes with committee member Tepsuri absent.

Thank you guys.

That concludes item number five.

And now we're gonna move on to our uh last two final items, which are uh part of the informational agenda.

Uh Natalie, please introduce item number seven.

Item seven, city auditors monthly activity report.

Chair Thank you.

And staff, once again, please introduce yourself for the record.

Let us know how much time you need for the presentation and begin when you're ready.

Uh thank you, uh Andy Hanao, city auditor.

Um we just need about two minutes for this one.

Thanks.

Uh so we've issued several reports uh since we last met.

Uh they're on this slide and they were all on today's agenda.

We have three uh audits in report writing, including audits of the city's management of its leased golf courses, brush management on private property, uh, and fire rescue dispatch.

We have three audits in the field work stage, including audits of cybersecurity, police internal affairs, and the unsafe camping ordinance.

We have three audits in the planning stage, including audits of citywide vehicle rentals, street light equity, and arts and culture funding equity.

Uh this slide lists the audits uh we haven't started yet.

I'll give you a second with that.

As far as other activities, our peer review uh was completed, as you heard earlier.

Uh we have implemented new standards uh put out by the U.S.

government accountability office, which went into effect back in December.

And a firm has been selected to provide independent legal counsel, uh, and we expect to bring that contract uh to the audit committee for review uh at a meeting, hopefully very soon.

So thank you again, Mr.

Halpern and Mr.

Mafia for all your all of your help on that.

Uh overall so far in FY26, we've issued seven reports, including three audit reports that contain 20 recommendations to improve the efficiency, effectiveness, and equity of San Diego City government, as well as one agreed upon procedures procedures review, our first two quarterly fraud hotline reports of the year, and our first recommendation follow up report of the year.

And that concludes my presentation and happy to take any questions.

Thank you.

And uh Natalie, please proceed with public item, uh public comment on item number seven.

Thank you, Chair.

We have not received any speakers' lips in chambers.

We will move to the virtual queue.

There are two hands raised in the virtual queue.

Andrea Ebbing, please unmute and begin.

As Andrea Ebbing, I'm just uh wondering if we um can so I saw the the activities that were being done, so thank you for that.

I wonder if we can um definitely look into that 152 million dollars of other pay and what that's about.

Um that's a big gigantic question mark.

I also kind of wonder uh this just occurred to me, like as I was watching you present, and I'm thinking, well, what did these cartel members do?

Like what did this like what have we learned from history?

And it was, you know, they they they're looking into the people that are managing the money, right?

So that's that was like their their way to get to the bottom of whatever it is that their opposing party was doing and things like that.

So I'm just wondering like if it would be possible somehow, this is just concept, but somehow to audit these treasurers, these like there's like two treasures for sure in San Diego that are involved in 20 years of FPPC violations.

Um Nancy Haley, who is uh Todd Gloria as Treasurer, and then C April Bowling.

So those two names uh are involved in 20 years of FPPC violations and appear on the two million dollars of identical campaign transactions that were reported for um Summer Stefan and Nathan Fletcher, um, their 460 forms.

So basically, what Nancy Haley had done, who is Todd Gloria's treasurer, um is basically filed both of their 460 forms as if so, like if if Andy Henau and I had done every single thing the exact same every single day for years.

Um so these two have two million dollars of identical reports.

Obviously, nobody's doing anything because you know we're it's a Rico Enterprise, Summer Stefan's the head of it.

There's a whole bunch of reasons why.

But Nathan Fletcher is continuing to report hundreds of thousands of dollars to those 460 forms through Nancy Haley.

So thank you.

Thank you.

Our next speaker is Blair Beekman.

Please unmute and begin.

Hi, thank you, uh Blair Beekman.

Thanks a lot for this item.

Um thank you.

That councilperson Foster is now on uh this audit committee.

It's nice to hear his voice uh, and especially for this kind of committee.

It'll be good for him to be here.

Thank you.

Um I wanted to comment uh a very uh interesting audit sessions going on right now uh within San Diego.

Thank you.

Um it's always interesting to see what auditors are working on in in a city.

Um it gives you a real clue how to uh think about issues, address issues.

Man, um equity, how to talk about streetlight equity, equity and street lights.

That's an awesome subject matter.

I mean, that's really you have to consider.

I I'm assuming you're considering how to talk about you know the tech that's being placed in local communities and in low-income communities.

Is that safe?

Is that equitable?

Is that fair?

Um that's the basic question.

I keep saying we can we can reduce the amounts of tech we have in a neighborhood and still do the same amount of public safety work.

And I hope that can be a part of the equation, how the this uh streetlight equity plan is working, and that open accountable practices can actually lead to streetlight repairs being done sooner if we have a good system in place.

Um you have other issues around uh cybersecurity.

If we can convince cybersecurity people, uh sorry, if we can convince cybersecurity people that we have good intentions and that we're trying to build our city and community future in good terms, I think that would reduce cyber hacking a lot.

And we have to be clear on that subject, what we're trying to build for our future.

And when we present that, that is how you end the outlawism that goes on with cybersecurity issues.

So good luck on those sort of efforts.

Thanks for your time.

Thank you.

And Chair, this concludes public comment.

Wonderful.

I don't see anybody else on the light, so that concludes item number seven.

Natalie.

Oh, I'm sorry, go ahead.

Before we conclude item number seven, we have uh Vice Chair Foster on the lights.

Thank you.

I'm sorry, Chair.

Um, and uh thank you again for the quick update.

Got I have a quick question.

Um, you have the SDPD internal affairs audit.

Can you um elaborate more on the scope associated with this so I can just have a better understanding of what it actually entails and if there's a a cutoff, you know, is there a wall between what internal affairs does, whatever findings are, and as it moves through the disciplinary process.

I'm trying to understand just what you're what this entails.

Sure.

So it's an audit of internal affairs, and so we're looking at um, you know, their their process for categorizing complaints and investigating complaints and whether they are done uh you know fairly in compliance with their policies and best practices, whether there's inconsistencies, um and so that's the that's the general scope.

Okay, and whether the and whether the discipline that that uh that is applied is fair and consistent.

Okay.

Um I appreciate that.

And and I guess um just a couple of things that maybe we can talk more in detail um offline, um, but certain things that that um certain feedback that I get from the public, and I'll use an example.

Someone calls IA or or there's a complaint that's filed.

IA in turn calls the complaint um and does an initial intake, I guess I will say.

What I find troubling is, and this is something that I have experienced is I often find that IA will go through an explanation of why you should not file your complaint.

And I find that problematic, and so um you know uh I want to make sure that we are really looking at this comprehensively from all of their internal policies um procedures that that they have in place.

Um let me ask this question as we are going through this process.

Also um uh let me ask this question as we are going through this process.

Is there any look at how the um if I re recall when we go through the appropriations um ordinance, there is a clause in there that talks about administrative leave and gives the chief of police the um sole authority to determine how that is used when it's used.

Um and I'm assuming that as IA is doing their investigations, there's a time where depending on what the issue is or or or what IA is doing, that there is a decision that's made as to how that will be utilized.

Is that part of that, or is that outside of that IA scope?

That is included uh in the scope.

Uh and also thank you for the um the feedback of what you're hearing from your constituents.

We're happy to to meet with you, and we are doing some pretty extensive public outreach on that uh audit as well.

Um we presented uh on the the audit scope at the commission on police practices meeting, and then that ended up being covered uh in the UT with our contact information.

So we've heard from quite a few members of the public, but we would love to hear from from more as well as yourself, so we'll reach out.

Okay.

Thank you for that.

Um one last question.

Um also an in and I don't know if this is a proper place, and I don't know, Andy, if we've looked at this.

I know um if I recall, we've had some conversation over the years on it, um, but don't necessarily know exactly where it lands as we talk about discipline um in results of investigations and certain things.

Um but also I do have a concern when we talk about um discipline or leave, um administrative leave or or whatever whatever the determination is made.

Um I often um have received um information that um or or there's allegations that um as a discipline is being um administered um that there are certain efforts made um per se if if the decision is to say hey you're off for a week or three days, whatever it is, that there are some initial steps on the front end where we are offering you overtime and certain things to cover said unpaid leave.

And so my question is has there ever been a look at a pattern to see as certain things are done to go back and do a cross-check to see if there has been any uh you you you may see a bump in overtime as they are approaching their um I I guess um intended time of leave.

If you understand my question.

I I think I do.

Um that is an interesting angle.

I don't think we had had thought of that or heard of that so far, but it's something we can definitely consider as we as we move forward.

Okay, we'll do it.

We'll fall back and have some additional conversation as you are going through this process.

And and again, if it doesn't fit, maybe there's another um audit that we need to discuss to really dive in and take a look at um how that is being administered and the decisions that are being made and impacts, right?

So thank you.

Thank you.

Now this does conclude item number seven.

Uh Natalie, please introduce item number eight.

Item number eight, audit committee member priorities for a calendar year 2026.

Chair.

Thank you.

Um I'll kick us off.

Um, I want to thank the committee members and the public uh for submitting your well thought out priorities.

Um essential to the success of the audit committee.

Uh I agree with many of the priorities that were suggested by community members.

Um a few that popped up to me included the auditors' term limit, um, also sufficient funding um for the office of the city auditor.

Um I just I want to let you guys know that I'm uh committed to working with all of you and your priorities this year.

I think together we can ensure that these priorities translate into actions that strengthen the city and serve our communities.

Um this is an informational item.

I do not see anybody else on the lights, and so um let's go ahead and proceed with public comment for item number eight.

The public comment period for item eight is now open, and we have not received any speaker slips from individuals in chambers.

There are two hands raised in the virtual queue.

Andrea Ebbing, please unmute and begin.

Okay, so this is Andrea Ebbing.

Thank you for the uh audit committee um priorities for the year.

I think this is an exciting time.

I think that a lot of people are starting to kind of see what's going on.

I do want to say too, like it's it's pretty brave of you guys, like Vivian Moreno, thank you for giving up your seat at the city council uh event.

The public should have been able to participate.

And then I think it inspired others to um to do the same.

And I think that um, you know, condescending remarks from people who are destroying the city while you're being given a bad name because of their bad deeds is not really cool.

So I apologize that that happened to you.

Uh Henry Foster, good line of questioning.

Thank you.

I appreciate that you're coming in.

Um, like basically nobody's like pulling the wool over your eyes, and I appreciate that.

So I think the more real, like we're we're all real open, no no need to um like sugarcoat anything, being real straightforward and direct about how you feel about things is extremely important to the public because we see you, we hear you, and when people are like placating to Gloria and all these people that are doing the wrong thing, it's very obvious.

So thank you for the straightforward candor.

Um the homeless indiction spending.

Um it can't go unnoticed.

I was on the David Webb show this morning on um Sirius XM to talk about the uh victim center fraud that's taking place in San Diego.

We definitely have our own Somali daycare fraud situation going on.

Um Mara Elliott was absolutely instrumental in this uh creating these fraudulent like shell company money laundering situations through a family justice center, what used to be a family justice center, which was launched by Casey Gwynn, our former city attorney, who has I have an email directly from him, and this is not just to me, it's all to the media and everywhere else.

It doesn't follow standards, it is not doing best practices, it's really not helping victims, um, but it was being used to launder money.

So thank you.

Thank you.

Our next speaker is Blair Beekman.

Please begin.

All right, thank you.

Blair Beekman.

Um, yeah, what I hope you can be working on is an audit committee in 2026.

Uh nice questions from uh Council Person Foster, by the way, on the previous item.

Um Sandag is working on uh good whistleblower protections.

Um that's an important concept for uh police internal reporting that um hopefully they can take some notes what's going on at Sandag right now in whistleblower protection uh and maybe that can help the IA process uh what they need to make uh you know uh safer process.

The whole goal is to make whistleblower protection safe and trusting and building care and sensitivity and therapy.

So um uh all of those things is what uh are our uh police internal reporting should learn to be about better and better, and that builds a better community.

To also ask um, is there a way to somehow a little tough question to some somehow audit federal ICE agents to make sure they're doing a good job to hold them accountable?

Is there ways to do that?

Um it could be a way to have the conversation about de-escalation and that practices are safe in San Diego.

Uh just an idea.

Hopefully, it can help.

Thank you.

Thank you.

And Chair, this concludes public comment.

Thank you.

Um I do not see any members on the lights, so that brings us to the end of item number eight.

Oh, I'm sorry, committee member halpern.

Before we if you just indulge, you know, um, for sake of emphasis, I uh two items I mentioned.

You know, with regard to the auditors budget, um, you know, I think the auditors' presentations about this are perhaps due to um inherent humbleness, but I uh you know, I think they really undersell the financial benefit to the city.

And so uh, you know, I I think, and I don't know how much time, you know you or your team has to spend on putting together this series of you know uh of memos trying to justify why we should maintain their budgets.

But you know, this happens year after year, and and I think uh we'd all benefit if there was a little bit more um appreciation for just just financially even the contribution that these audits make.

And um, and so perhaps there's a little bit less pain that can be inflicted in having to spend as much time as the auditor does um continuing to ask for these, you know, maintenance of his of his budget.

But but the other thing that I think um also shouldn't be undersold is I mentioned the second one is the notion of looking at term limits.

And um, you know, these the process of changing these kinds of things is a long one.

Um, as we saw with the approval process for getting uh independent counsel for the auditor, could be years and years.

The uh the the recent five-year renewal is probably gonna go a lot faster than anybody thinks.

I really think we should get ahead of this because I don't I don't know that people appreciate how rare it is, not just in California, but across the country, to have an independent audit function at the level of excellence that we have become used to and and is generally appreciated here.

Um with no disrespect to any of the auditors at other city governments, you know, we talked about this morning the um the A peer review, and I was interviewed in the last ALGA peer review for this uh department.

I was also interviewed at the peer review for the last time that Sandag had one.

And in each case, most of what the reviewers talked about is how much they learned from having looked at the city of San Diego's independent auditor function.

And so and and not the least of which is I participated in this in two searches at Sandag for their independent auditor.

I participated in the search committee for what culminated in Andes being hired.

And so I've probably seen more than about anybody else maybe alive, what the national um pool of candidates for these jobs is.

And I and I have to tell you that we probably don't fully appreciate the risk that this city would be facing in assuming that you know, five years from now we can just do a search and we're gonna get something anywhere close to what we have now.

So I really really want to emphasize my view based on my experience, the importance of thinking about this ahead of time before we're suddenly confronted with oh my God, you know, Andy's termed out.

And by the way, you know, Mr.

Now has gotten excellent performance reviews each of the years he's been in the job.

It it's not so much about him as an individual, it's about how relatively unique or what in what a small community San Diego is, and having the absolute highest in excellence of independent audit functions you know, here in California in our region, but across the country.

And so I just really want to emphasize that as something I hope the council, uh we as a committee will will take seriously before where our back is up against the wall on that.

Thank you.

Thank you.

Um so now this does bring us to the end of item number eight, and also brings us to the end of today's agenda.

Thank you to the members of the public and staff for your participation.

I will now adjourn the meeting of the audit committee to our next regularly scheduled meeting, which is on Wednesday, February 11th, 2026 at 9 a.m.

We are adjourned.