The City of San Diego Redevelopment Agency director and 4th District council member Tony Young was recently heard to say that a little fiscal mismanagement was part of any government agency, and that the $20 million or so involved in the Southeastern Economic Development Corporation (SEDC) was not all that much by comparison with other larger agencies.

From http://www.sandiego6.com/news/local/story.aspx?content_id=c57e880b-a690-40b9-bee3-745d00aa829e :

Tony Young, who pushed for an audit of the SEDC, said the money involved with the troubled redevelopment agency was "peanuts" compared to other large city agencies and departments.

"(Fraud) is not just here, it's not just the SEDC," Young said at a meeting of the City Council's Audit Committee. "It's human nature and shows what will happen when you don't pay attention."

Since the Macias Consulting Group (MCG) SEDC audit report to the City of San Diego (http://www.sandiego.gov/auditor/pdf/sedcauditreport.pdf), we should all be paying attention. After all, it is our money.

Before delving deeply into the SEDC audit report, there needs to be a comment made on the methodology used and revealed by MCG, which stated that it attempted to evaluate SEDC goals and performance measures. This is absolutely reasonable, since SEDC board members and executives were interviewed about those goals and measures, and understanding what those interviews provided does help to give us better understanding of what went on under SEDC’s outgoing president, things that generally happened without much reporting to either the City of San Diego or even to SEDC’s own board of directors.

According to MCG, six out of ten developers who had SEDC projects under “formal development agreements” during the audit period responded by documenting their contacts with SEDC for “adequacy and appropriateness.”

In contrast, MCG noted that of the six developers who started the SEDC project approval process but dropped out without obtaining SEDC project approval, every single one declined to participate in the audit for “adequacy and appropriateness” of SEDC goals and measures.

Aware people should be detecting a stench about now.

For me, the ripeness comes in waves on considering voiceofsandiego.org (VOSD) revelations that the outgoing SEDC president enjoyed what MCG refers to in the following paragraph (MCG Final Report page 15):

“We found that SEDC lacks internal controls to ensure that day-to-day activities are conducted in a sound manner because SEDC’s operating agreement provides the SEDC President with broad discretion over operations. To reduce the risk associated with the President’s overarching authority within the Agency, secondary controls, such as Board of Director oversight, and other secondary controls designed to ensure the appropriateness and reasonableness of expenditures are imperative to ensuring soundness of day-to-day activities of the Agency. However, oversight by the SEDC Board of Directors was weakened by SEDC’s repeated omission of critical budget information.”

In a previous blog, I described the top-heavy structure of SEDC in its 15 positions revealed in last year’s proposed SEDC budget. VOSD later reported that at least two top positions were left unfilled to allow for a large-enough personnel budget “surplus” that was used for questionable bonuses (more on that later). In any case, the outgoing president’s “overarching authority” generally means that if SEDC made “repeated omission of critical budget information” as MCG indicates above, then it was actually the outgoing SEDC president who was responsible for those omissions of critical budget information.

As SEDC’s board was generally not informed, so too were the individual directors of the City of San Diego Redevelopment Agency AKA San Diego City Council.

Because the SEDC board of directors gave the outgoing president ninety days to vacate her office, we can only assume that this outgoing SEDC president is exercising her “overarching authority” over the clerk with the paper shredder right now, given previous reports of delayed documents for external audit before their approved release by SEDC. Assuming anything less would be too naïve even for me.

Despite a declaration of recall war against Tony Young by certain SEDC-paid consultants, he comes off looking the best in this mess. His office was calling for the replacement of expired-term SEDC board members at least a year ago, not long after the Independent Budget Analyst raised red flags about unsupported budget changes in San Diego redevelopment agencies (http://www.sandiego.gov/iba/pdf/06_31.pdf , http://www.sandiego.gov/iba/pdf/report06_25.pdf). With SEDC essentially operating within Young's 4th District boundaries, he may be the one city redevelopment official to have at least some contact with and insight into SEDC, but he does have plausible deniability as being even farther out of the SEDC presidential loop than SEDC’s own board of directors.

The VOSD-reported fact that the new SEDC board chairman didn’t even know what the president’s salary was until VOSD reported it is not encouraging (http://www.voiceofsandiego.org/articles/2008/09/03/this_just_in/708fbi090308.txt).

To sum up this barely-scratching-the-surface blog so far, SEDC was apparently the private-public playground of the deal-maker/breaker outgoing SEDC president, and nobody who played the game and lost has anything to say about it that could appear in a PG-13 MCG audit.

I don’t yet know to what detail MCG’s audit pursued any allegation of lax reimbursement of claimed SEDC food and entertainment expenses, but one may suspect that the SEDC corporate board counsel was on a three-martini intravenous drip.