Based on early returns, 2015 may be shaping up as San Diego mayor Kevin Faulconer's year of discontent.
Last week, former Bill Clinton aide/current Chargers lobbyist Mark Fabiani made some uncomfortable remarks about the GOP mayor's plans to build the team a new stadium.
Now comes city auditor Eduardo Luna with a report on a city contract payment system he says lacks essential controls against waste and fraud.
Big cost overruns on a city hall moving contract along with other worrisome findings during his office's audit of contract oversight have prompted Luna to take the unusual step of firing off a pre-audit warning to the director of the city's purchasing department.
"We are issuing this memorandum prior to completing our performance audit due to the significant inherent risks these conditions pose to the City," Luna says in his January 16 communication to Dennis Gakunga.
"The Citywide contract with MEK Enterprises (formerly known as Complete Relocation Services) was initially established in January 2011 to move or relocate City staff on an as-needed basis," the memo says.
"During September 2013 City payments reached the $1 million contract threshold allowed without City Council approval, and as of December 2014 the City has paid over $1.335 million without obtaining City Council approval.
"Of the $1.335 million paid to MEK, invoices totaling at least $632,000 were approved for payment by departments to move 450 personnel without sufficient supporting documentation to approve the invoice payments.
“The project manager informed us that the contractor had provided listings of employees and hours worked that were not verified, validated, or retained by the City employees.”
The MEK case, which involved a 2013 move from 600 B Street to 525 B Street, may be an indication of much bigger problems. According to Luna's memo, city staffers have failed to record and verify work done by a host of big-money city vendors.
"Contract administrators have not been assigned to monitor contractor performance for approximately 97 citywide goods and services contracts," says the document. "Purchasing & Contracting Department provided data showing purchase orders exceeding $123 million related to those contracts."
The memo goes on to say that the city’s purchasing department has repeatedly allowed contracts to be "issued without clearly defining responsibility for contract administration and monitoring.” In addition, "a significant control designed to prevent departments exceeding contract thresholds and contract award amounts can be easily bypassed," Luna says.
The city's financial monitoring system is supposed to have built-in safeguards against payments being made that exceed the value of a given contract, the memo notes.
"However, any requisitioning department can intentionally or unintentionally get around this control by omitting the contract reference (agreement number) when they create the purchase requisition.
“The avoidance of the contract award controls can result in exceeding contract limits without detection, including those approved by the City Council."
In a letter to Luna dated January 15, purchasing-department chief Gakunga lists a series of steps he is taking to improve accountability as well as embarking on an "ongoing review" of the city's financial reporting system.
"Although there have been significant improvements to the purchasing and contracting procedures and processes, as the City Auditor's memorandum points out there is more work needed to improve the effectiveness of citywide contract oversight," the response says.
"Over the last 18 months, new leadership in the Purchasing and Contracting department has taken a holistic review of citywide requirements and embarked on an overhaul of the department operations and procurement practices within the City."
According to Gakunga’s letter, his department "continues to work on a joint effort with the Office of the City Comptroller to develop robust reporting for improved monitoring, compliance and contract surveillance of citywide contracts."
The new system is being designed to "ensure threshold limits are not bypassed by the splitting of purchase orders" and "to detect shell purchase orders for budget control purposes."