By Norma Damashek / NumbersRunner / July 9, 2019
Question #1: Ever wonder what an auditor does?
I was introduced to the term auditor at an early age. “If anyone asks you what your father does for a living,” my mother instructed, “just say he’s an auditor.” Many years would pass before I figured out that auditor was more than a code word for daddies who ran numbers and booked bets.
Auditors could also be professionals in public and private institutions who assessed financial documents and business transactions for accuracy and legal compliance. Numbers runners, yes, but respectable.
A decade ago, Eduardo Luna was hired as San Diego’s City Auditor. He had the training, experience, and commitment to public service to withstand political pressure while running the office of City Auditor “to advance open and accountable government through accurate, independent, and objective audits and investigations that seek to improve the economy, efficiency, and effectiveness of San Diego City government.”
Eduardo Luna’s prescribed ten-year term in office recently expired. But before he moved on I got a first hand look at how an independent, ethical public auditor pursues the job of exposing fraud, waste, and malfeasance within city government.
This summer, a new City Auditor will be appointed. Under City Charter provisions the mayor selects the City Auditor for a ten-year term, subject to City Council approval.
Question #2: Who remembers the Kroll Report?
Once upon a time our city was in such deep financial and ethical trouble we were branded Enron-by-the-Sea.
Back then, former mayor Susan Golding — deftly assisted by former city manager Jack McGrory and Golding’s chief of staff Kris Michell (currently recycled as San Diego’s chief operating officer under mayor Kevin Faulconer)– had managed to suck the city coffers dry while hosting the 1996 Republican National Convention.
With loyal help from then-city auditor Ed Ryan, officials engaged in cooking the books and padding the budget through disastrous agreements with municipal union leaders to underfund the city’s pension system while simultaneously amping up pension benefits. With nary a peep from the city auditor, San Diego’s future was put up as collateral.
The enormity of ongoing financial mismanagement and falsified financial statements and disclosures eventually hit the fan. By 2004 investigations were initiated by the Securities and Exchange Commission, US Attorney’s Office, and San Diego District Attorney.
Finally, the City Council got on the ball and retained Kroll, Inc., a governmental risk management firm, to conduct an independent investigation.
The resultant 400-page, $20 million Kroll Report excoriated San Diego politicians and upper management for financial dishonesty, securities fraud, gross lack of accountability, egregious cover-ups, non-transparency, obfuscation, and denial of fiscal reality.
According to the San Diego Business Journal:
“dozens of local officials and municipal employees put their own welfare ahead of the taxpayer for close to a decade, then tried to keep the lid on their wrongdoing…the evidence demonstrates not mere negligence, but deliberate disregard for the law, disregard for fiduciary responsibility and disregard for the financial welfare of the city’s residents over an extended period of time…”
The newspaper editorial ruefully added that “we here in America’s Finest City just shrug our shoulders and mumble that it’s business as usual.” Of course, it takes coordinated teamwork to maintain business as usual.
Question #3: Anyone here look familiar?
The Kroll Report called out many city officials for being “negligent in the fulfillment of their duties” and for “recklessly or intentionally allowing the city to issue false reports regarding its true fiscal health,” including:
- Previous councilmember Ralph Inzunza (now writing his 2nd semi-autobiographical novel)
- Previous councilmember George Stevens (died in 2006)
- Previous councilmember Byron Wear (now a land use/transportation consultant)
- Then-sitting mayor Dick Murphy (now retired. “You can delegate authority, but you can’t delegate responsibility,” he once declared)
- Previous councilmember Scott Peters (now US Congressman)
- Previous councilmember Toni Atkins (now California State Senator)
- Previous councilmember Jim Madaffer (now public policy consultant and SD County Water Authority Board chairman)
- Previous councilmember Brian Maienschein (now California State Assemblyman and latest SD convert from Republican to Democrat)
- Past city manager Mike Uberuaga (now ??)
- Past city manager Jack McGrory (now CEO real estate/investment LLC and California State University Board of Trustees)
- Past city attorney Casey Gwinn (now CEO San Diego County YWCA, President National Family Justice Center Alliance)
- Previous city auditor/controller Ed Ryan (now??)
- And previous councilmember Donna Frye—but note that she was the sole official in the entire bunch to have publicly protested and decried city malfeasance (now president emerita of CalAware)
- Also named were a former deputy city manager, city treasurer, assistant auditor, retirement administrator, utilities finance administrator, wastewater deputy director, deputy city attorney, and assistant city attorney
Question #4: Things have changed since the bad old days, haven’t they?
In 2007 the city was halfway through a 5-year trial period of our switch to a “strong-mayor” form of government, a magic potion sold to San Diego voters guaranteeing political transparency, crystal-clear government accountability, and knowing precisely where the buck stops in city government.
With mayor Jerry Sanders occupying the catbird seat a Charter Review Committee was convened to tie up loose ends about substantive issues, like:
…when was the right time to add a 9th city council district?
…how many council votes should be required to override the mayor’s veto?
…was it a good idea for the city’s chief operating officer to be a mayoral (i.e., political) appointee?
…should the city auditor be elected by the voters (to maximize workplace independence) rather than appointed by the mayor (the person in charge of the departments the city auditor would investigate)?
The committee resolved these questions, but not necessarily wisely:
…Our city council now hosts a 9-member array of colorful personalities and political persuasion.
…Despite a Democratic super-majority, council overrides of mayoral vetoes remain rare.
…The city’s COO, appointed and answerable to the mayor, is currently a well-oiled, longtime political insider.
…As for the city auditor — despite the pretense of an expensive national search for the most talented candidate to fill the vacancy, the mayor selected a team-playing San Diego insider, well-versed in the don’t-upset-the-applecart rules of the old guard game.
In other words, our first and only independent city auditor steps out the door, only to be replaced by a throwback to the bad old days of yesteryear.
Question #5: Now what?
Kevin Falconer will be out of office soon enough. But it’s a grave mistake to assume that the private interests controlling this mayor will walk away when he’s gone. Mayoral candidate Todd Gloria is already in the bag. Candidate Barbara Bry has yet to soar on her fledgling independent wings.
One thing’s for sure: installing a proxy city auditor means controlling the city’s system of checks and balances for the next ten years.
This isn’t a political party issue. This isn’t a conservative versus progressive standoff. It’s a question of protecting the public purse and creating and maintaining honesty and integrity in city government.
On Wednesday of this week, the city’s audit committee will meet and review Faulconer’s choice for city auditor. Eventually, the city council will vote to confirm (or not) the mayor’s hand-picked choice. We’ll soon find out where our elected councilmembers stand on issues of good government, public integrity, and city reform.
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