Turning the page? SANDAG checks off flurry of longtime audit problems, but high-risk issues linger, report finds

In the final years of the embattled old leadership at the San Diego Association of Governments, audits and their unflattering findings were stacking up.

Precise ways SANDAG could reform itself went unheeded, leaving dozens of outstanding recommendations for the regional planning agency’s contracting system, how staff report their expenses, the troubled toll collection system on state Route 125 and more.

Since most of the agency’s old guard departed in a flurry of resignations more than a year ago, SANDAG’s new leaders have moved to make many of the outstanding reforms called for by auditors, a new report finds.

In the last three years, a series of audits and investigations have identified roughly 150 areas of improvement for SANDAG. About half of those recommendations have now been completed — the vast majority since last summer, just after new CEO Mario Orso took the reins.

“I can tell you that we feel these are good results,” SANDAG Independent Performance Auditor Courtney Ruby told the agency’s audit committee on Friday.

But despite the progress, what the agency still hasn’t fixed poses exceptional risk to its operations, Ruby has said.

Most of SANDAG’s unresolved audit findings involve its contracting and procurement — a critical area, as the agency spends hundreds of millions of dollars farming out the building and maintenance of the region’s infrastructure to private companies.

“Our public thinks there’s a lot of stalling going on,” said Jack Fisher, the Imperial Beach City Council member who chairs SANDAG’s audit committee. “I think it’s absolutely the opposite. The priority is on the most substantive things, and that’s because of the risk the agency has.”

The new report from SANDAG’s Office of the Independent Performance Auditor assessed the agency on how it has instituted the recommendations of eight different internal audits and investigations since 2022.

In all, the report shows the agency has boosted training for staff on contract invoicing, updated faulty policies and imposed more rigorous requirements for changing existing contracts.

But a host of other recommendations concerning contracting remain outstanding, and many of those findings are nearly three years old. 

“I personally think having audits coming from (2022 and 2023) still not cleared is not industry standard as a best practice,” said Agnes Wong Nickerson, a San Diego State University official who sits on the audit committee.

“But I can also appreciate that a lot has been done in the last year,” she added. “It really demonstrates the current management are working hard.”

Adding to the work SANDAG has ahead is a new audit from earlier this year probing its no-bid contracting practices.

That new audit found the agency faced little oversight in how it doled out no-bid contracts and often violated its own policies for doing so.

Among its findings, the audit found that SANDAG staff gave improper blanket approval to 50 no-bid contracts via email, boosted spending on one contract by more than 3,000% and likely showed favoritism to a trio of companies — one of which, HNTB, was involved with overseeing the faulty toll-collection system on state Route 125.

SANDAG leadership endorsed that audit’s findings and vowed to implement them.

Further holding back SANDAG’s contracting reforms is its flawed internal software for tracking its accounting, budget and contracting, according to past audits.

Since 2020, the agency has twice changed its record-keeping software due to limitations to how it can track and share key information. A third change is slated for this year.

About a dozen of the agency’s still-pending audit findings involve its software system.

Beyond contracting, the agency continues to have a handful of outstanding recommendations from investigations of its administration of the SR-125 toll road.

After two internal investigations of the toll road last year, SANDAG still has not proven to internal auditors that the system is operating correctly, though the agency recently shared progress with auditors which the office is reviewing.

Early last year, SANDAG rushed into a contract with Deloitte to take over the toll road but failed to ensure the new vendor’s financial reporting system was going to work, a past audit found.

SANDAG has still not fully implemented a process to make sure multimillion-dollar contracts actually meet agency goals, a key finding of the auditor’s office probe of the Deloitte partnership, according to Ruby’s report.