DIVIDED SANDAG BOARD TO EXAMINE AUDIT CLOSELY
An audit that exposed deep and public divisions between the San Diego Association of Governments executive director and the agency’s independent auditor will be examined in closer detail over the coming months, the governing board decided Friday.
The elected officials who oversee the $1.2 billion regional transportation and planning agency appeared nearly as divided as the SANDAG staff, however, with directors split on a pair of board motions that were very similar.
In the end, the SANDAG board voted 13-6 to receive the auditor’s findings and directed Executive Director Hasan Ikhrata to create an action plan to be brought before the audit committee and to the full board for future consideration.
The motion also called for hiring a second independent law firm to review the findings from auditor Mary Khoshmashrab, who concluded in her report that payments totaling hundreds of thousands of dollars were improperly made to former SANDAG employees without board approval.
“We’re not rejecting anything out of hand,” said Poway Mayor Steve Vaus, who is the SANDAG chairman. “We’re going to take more time and more input. The most important thing to me today is that we have
an outside expert give us a clean bill of health on this.”
The audit committee already retained an outside law firm to review the independent auditor’s report, a collection of findings and recommendations that raised serious questions about Ikhrata’s management practices.
That legal opinion concluded that staff raises, bonuses and severance payments to former employees that Ikhrata approved without the board’s knowledge did not constitute illegal gifts of public funds.
Vaus and other directors wanted a second opinion because the initial review was done by a law firm hired by the audit committee, whose chairman publicly questioned whether Khoshmashrab’s findings were legal and appropriate.
It was not clear Friday who would perform the secondary legal review or when it might be completed. But this time the firm will be selected by the board’s executive committee rather than the audit committee.
The audit under discussion Friday was released publicly just ahead of the board meeting.
Among other findings, the report found that Ikhrata added to his executive staff without informing the board.
It also said he gave raises and bonuses to employees and approved severance payments to people he fired without telling the board and before the terminated workers filed legal claims against the agency.
The report called for an investigation into those awards.
Khoshmashrab also said Ikhrata regularly exceeded his authority and made decisions that should have been left to the board of directors.
“Since management is setting policy (it) should be implementing, a conflict of interest exists,” the Office of the Independent Auditor concluded. “There is a significant risk that management could make changes to board policy and override established controls.”
Ikhrata and his management team rejected any assertion that they violated board policies or exceeded their own authority.
“We are not here to do battle but to remain transparent, as we always have been,” Chief Planning Officer Ray Traynor said Friday. “We remain committed to working with you, the board, to carry out these responsibilities you have entrusted to us.”
Audit committee Chairman William Baber previously had refused to disclose the report because he said it would expose the agency to lawsuits from unnamed employees who received payments from Ikhrata without board approval.
He labeled the report a draft, even though Khoshmashrab insisted it was her final work product and sent her version to the full board last month without the audit committee’s approval.
Baber also revised portions of the 140-page report and ordered others redacted before releasing his version. At last week’s committee meeting, he and volunteer Paul Dostart put their own findings and recommendations forward for board consideration.
The audit committee’s response to Khoshmashrab’s report did not sit well Friday with several SANDAG directors.
County Supervisor Kristin Gaspar said she was concerned with how the report was handled, calling the audit committee and management’s actions blatant interference with an office that was designed to be independent.
“This should never have happened, and it should never happen again,” Gaspar said. “I just have a big problem with our audit committee being able to hire legal counsel without ever doing a legal check-in with the board.”
Rebecca Jones, a SANDAG board member who is the mayor of San Marcos, also criticized the staff and audit committee response to Khoshmashrab’s report.
“I’m not sure why anyone but our auditor is weighing in on whether the findings are valid,” she said. “Where we are today has been shocking to me personally, then (Khoshmashrab) being attacked by some members of our audit committee and some members of our staff. This has to stop.”
Jones made a motion to accept the auditor’s report and direct both Ikhrata and Khoshmashrab to work together on plans to implement the recommendations within 90 days.
The motion included a stipulation that no future
“This should never have happened, and it should never happen again.” SANDAG board member and county Supervisor Kristin Gaspar
audits be redacted in any measure as well as a plan for the Khoshmashrab report to be peer-reviewed by a third-party auditor.
But the motion by Jones failed on a 10-9 vote.
San Diego Councilwoman Vivian Moreno was among those who rejected Jones’ motion, in part because she saw nothing illegal about the payments Ikhrata approved.
“I do not see any evidence that any crime was committed,” said Moreno, who offered the successful motion.
Chula Vista Mayor Mary Salas supported Moreno’s effort to formally receive the auditor’s report, consider its and the audit committee’s recommendations, and retain another independent law firm to review Khoshmashrab’s findings. Salas said that would be a good step toward improving governance at the planning organization.
“We didn’t really have that focus and oversight about what was going on” she said. “However, what was done was within the purview and it was legal. This is an excellent time for the board to regain control, examine those policies and put forward those recommendations we want.”
The Office of the Independent Auditor was created in 2018 as a result of reform legislation passed by the California Legislature after SANDAG was found to have misstated the terms of a 2016 ballot measure — and then covered up its actions.
Khoshmashrab, a career auditing professional who has worked in state government for decades, was hired last year to fill the position mandated by Assembly Bill 805.
This was the first report issued by her office.
Ikhrata was hired in 2018 to succeed Gary Gallegos, the longtime executive who was forced out after the 2016 scandal.
Ikhrata came to San Diego from the Southern California Association of Governments, the Los Angeles area counterpart to SANDAG,
The San Diego Uniontribune previously reported that Ikhrata was the subject of misconduct allegations in an audit of SCAG business practices in 2018 and in a federal lawsuit filed the prior year but was dismissed last year.