A City Council committee Wednesday directed San Diego’s city auditor to investigate whether any fraud occurred in municipal purchasing contracts that were found to be lacking sufficient oversight for compliance.
A report on the issue delivered to the Audit Committee was “alarming,” Chairman Scott Sherman said. The members of the panel voted unanimously for the follow-up examination.
The auditor’s office is conducting a performance audit of the city’s Purchasing and Contracting Department, which is expected to take another 10 days or so. However, the oversight deficiency was bad enough that city Auditor Eduardo Luna issued an interim report last week.
According to the report, monitoring was insufficient on contracts for goods and services that involved more than one city department. Officials with the departments thought oversight was being provided by purchasing and contracting. Meanwhile, purchasing and contracting employees believed the affected departments were overseeing the contracts.
Luna said in the report that the lack of oversight of citywide contracts opens the municipal government to a risk of overpayments, not receiving the goods and services, receiving substandard goods and services, and not obtaining required City Council approval when payments climb over the $1 million mark.
“This is a fairly significant internal control weakness area; it does expose us to significant fraud risk,” said Thomas Hebrank, a public member of the Audit Committee.
An example of a contract that went bad involved the move of 450 municipal employees from leased office space in one downtown building to another two years ago, which then-Mayor Bob Filner said would save the city money. The company hired to handle the move charged the city more than $1.3 million, but about half of that amount didn’t come with supporting documentation, Luna said in the report.
The City Council has not approved the expense over $1 million.
Purchasing and contracting Director Dennis Gakunga said he is aware of the issue and has been going through contracts that impact multiple departments to assign them administrators — a process which should be completed by April 30.
Ron Villa, a deputy chief operating officer for the city, said enough checks are in place throughout the purchasing and contracting system that fraud would not be widespread.
—City News Service
