REGION — A scathing follow-up report recently issued by SANDAG’s independent auditor calls for further investigations into the agency’s high contract awards due to non-competitive procurements, inadequate internal controls and a reported lack of cooperation from executive leadership.
The Office of the Independent Performance Auditor’s report, released on May 5 to SANDAG’s audit committee, shows a review of contracts from July 1, 2017, to June 30, 2021.
The report identifies “weakness in system controls, such as missing information, signatures, itemized breakdowns, little documentation and a lack of oversight.”
“…Auditors attributed findings due to poor planning and too vague or generalized contract language that allowed for varying levels of interpretation and manipulation contributing to numerous amendments,” the independent auditor wrote in the May 5 report.
But the investigation, led by outgoing Independent Performance Auditor Mary Khoshmashrab, was reportedly hindered by SANDAG’s executive team in securing specific contracts.
“However, during this review, some members of management did impede the auditor’s ability to obtain information by refusing to provide OIPA (Office of the Independent Performance Auditor) with unlimited, unrestricted access, stating concerns of confidentiality,” the report states.
The auditor’s office was able to secure all of the requested contracts, but when it came to staffing levels, the auditor did not receive unfettered access to the payroll system due to employee privacy concerns unrelated to the audit, according to a source familiar with the situation.
The SANDAG executive management team attempted to provide the auditor with the requested information but wasn’t able to do so in a timely fashion in a format that met the needs of the auditor’s office.
The report found no indication of intentional wrongdoing or fraud by agency staff.
SANDAG CEO Hasan Ikhrata disputed the report’s claims and other findings, saying executive management “fully cooperated” with the internal review.
“After receiving the draft report, management was concerned when it learned that certain records could not be found,” Ikhrata said, noting staff agreed with all findings from the first part of the audit. “Management has since verified the existence of most of the ‘missing’ documents and welcomes the opportunity to provide copies to the OIPA and Board (sic).”
Missing invoices
The report found contracts had incomplete documentation and missing invoices. Out of 15 contracts, 27 digital invoices totaling more than $272,000 were missing from the official folder of records. The invoices were later found in the agency’s financial system (OneSolution) reports. Auditors also found 21 digital invoices totaling $311,933 in the official folder of records but missing from the OneSolution system reports.
The report further identified 36 task orders (out of 46) required for competing vendors were not properly completed, lacking sole source justification.
The report also states the SANDAG board weakened internal controls due to excessively delegating oversight authority to staff, along with executive leadership’s retroactive procurements to pay for unauthorized work.
The findings also show SANDAG awarded third-party contracts for services that could have been performed by in-house staff, including 21 contracts for human resources and 93 contracts for the Office of the General Counsel — a combined total of more than $44 million.
“The GAO’s Opportunities for Oversight and Improved Use of Taxpayer Funds Testimony document states, ‘that no government should waste its taxpayers’ money, whether we are operating during a period of budget surpluses or deficits,’” the auditor wrote. “Further, it is important for everyone to recognize that waste, fraud, abuse, and mismanagement are not victimless activities. Resources are not unlimited, and when they are diverted for inappropriate, illegal, inefficient, or ineffective purposes, both taxpayers and legitimate program beneficiaries are cheated.”
Khoshmashrab also warned that not properly storing or reviewing individual score sheets could lead to collusion between staff and leadership to award contracts to preferred vendors and collusion between staff and vendors to award contracts.
Vendor Z
The report examined a contract with “Vendor Z,” originally awarded $25 million for on-call environmental planning and architect and engineering design services. However, the final contract amount had ballooned to over $128 million — a 412% increase from the original award.
Vendor Z was awarded 48% of the original advertised amount of $260 million, which was “to be shared amongst all the on-call firms over a period of seven years.” The auditor found excessive contract amendments, leading to “overuse of internal resources and ineffective government practices.”
Additionally, 10 task orders associated with Vendor Z’s contract required competitive bidding but were never offered for competition.
In October 2022, Khoshmashrab released the first part of the report, identifying $290 million in questionable contracts from SANDAG’s top 30 vendors. The leading 10 vendors were found to have tens of millions of dollars in questionable contracts.
The October audit also found the “original amount” field was left blank in 447 out of 1,627 total contracts — meaning no dollar amount was assigned to the contracts. Of 308 on-call contracts (only pay for services as needed), nearly 88% were missing an original dollar amount.
CLARIFICATION: A previous version of the article stated the auditor’s investigation was hindered by SANDAG’s executive team. To clarify, SANDAG management provided all necessary documentation in PDF format but was unable to provide the same information in a timely fashion and in the format the auditor required.
