Audit reveals San Diego spent millions on contracts without required approval
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Mayor Todd Gloria and his staff increased spending limits on city contracts without required city council approval, and sought late approval for millions of dollars in additional spending, a July audit revealed.
Why it matters: Violating city contracting rules shows a lack of public oversight and transparency in how millions of taxpayer dollars are spent.
- The delayed timing can put pressure on the council to approve contracts to prevent disruptions in city services.
- City vendors working under contracts without proper approval are also at risk of not being paid for their work.
The big picture: The 50-page report from City Auditor Andy Hanau found that overall, 42% of contract alterations totaling $155 million were brought to the council in an untimely manner, retroactively or not at all.
- That covers about 30% of contract dollars.
- The audit also found incomplete and inaccurate contract information and unwritten policies led to work inefficiencies and staff errors.
- The scope covered contracts active between 2017 and 2023, which were under Gloria's and former Mayor Kevin Faulconer's administrations.
Context: The city spends hundreds of millions of taxpayer dollars annually on outside contractors to provide city services, including operating homeless shelters, supplying public safety equipment, maintaining parks and running trash collection.
- External contracts account for about 16% of the city's operating budget.
- For oversight and transparency, local ordinances require city council to review and approve alterations for contracts that exceed five years or have increases greater than $200,000.
Case in point: In 2023, a contract for equipment rentals was approved for about $14 million and upgraded to over $18 million by the city council. But then it was boosted two more times without proper approval by $6.7 million total.
What they're saying: "At times, the city has sought retroactive approval of contracts in order to ensure that there's no delay in delivering services," which occurs with "a small percentage of our overall volume of contracts," mayoral spokesperson Dave Rolland told Axios via email.
- City spokesperson Nicole Darling told Axios via email that late approvals or changes to spending limits are often "driven by urgent [operational] needs combined with unexpected administrative challenges."
- Updating the municipal code could "allow for necessary flexibility in decision making," she said.
Between the lines: The audit found that the problems stemmed from confusion around approval requirements, not having well-defined contract administration roles and responsibilities, and the city lacking a formalized contract amendment process.
- The audit made 13 recommendations to fix that.
- They include bringing unapproved active contract alterations to the council for retroactive approval, clarifying approval requirements, and creating a formalized process and a policy outlining where contracts are electronically stored and managed.
Yes, but: Some of these issues have persisted as previous audit recommendations related to system controls and accuracy were never implemented.
Flashback: An audit last year found the city violated rules and spent millions of dollars on "emergency" purchases, the Union-Tribune reported.
- Another report from 2019 said the city wrongly approved millions of dollars in contracts, per the U-T.
What to watch: In her official audit response, Purchasing and Contracting Department director Claudia Abarca acknowledged the recent findings and agreed with every recommendation.
- "Good contract management … is crucial for ensuring public funds are used efficiently and responsibly," she wrote, committing to promptly addressing the issues by improving policies and practices.
- The timelines for proposed changes range from the end of the year to December 2025.