Friday, January 20, 2006 | Officials overseeing two agencies crucial to San Diego’s exit from financial and legal crises are bristling at structural changes and political maneuvers that would allow Mayor Jerry Sanders more involvement into their affairs.

Sanders was elected last November to fix a city tattered by problems with its pension system and financial reporting, but he’s encountered early pushback from new audit and pension officials, who believe they, too, were brought in to play reformer and are weary of having independence breached.

Thanks to a new form of government that took hold this month Sanders will have more control over the office responsible for ensuring the city’s books are sound than any other mayor in the city’s history. And, fresh of a November victory, he has the mandate from voters to reform the city’s past practices.

Sanders has said that his greater reach will allow voters to hold him accountable.

“No matter what the problems may be – or who caused them – I take responsibility for them and am willing to be held accountable,” Sanders said in the State of the City address last week.

A week after those remarks, the city’s in-house auditor and several retirement trustees worry about the mayor’s involvement in their affairs.

In a report his office finalized Thursday, city Auditor John Torell expresses concern that the city’s new strong-mayor form of government leaves him underneath the mayor in the city’s structure – a position that could compromise the independence so important to the auditor’s job.

“In order to effectively carry out the role of the Auditor & Comptroller, the office must be independent or free from the control or influence of others in the normal chain of command,” the report states.

“I don’t think reporting to mayor is best way to do it,” Torell said in a later interview.

Although some trustees originally agreed to Sanders’ request to step down after Friday’s retirement board meeting, it appears that all but one of the six citizen trustees will stay put for now.

Trustee Thomas Hebrank supports Sanders’ reforms in general and originally agreed to step down when asked. However, he quickly changed his mind after Sanders announced his support for City Attorney Mike Aguirre to become the pension board’s lead attorney. Hebrank said that in November 2004 voters approved a new makeup for the pension board with specific reasons in mind.

“There were supposed to be seven completely independent members on there. People who are appointed should be above city politics and not beholden to the city government,” he said.

The proposition sprung out of concerns that union representatives and city management representatives who controlled a majority of the pension board put the pension system at risk by serving the city and unions first.

The Auditor’s Office and the San Diego City Employees’ Retirement System are both at the center of various civil and criminal investigations into the city’s finances. The Securities and Exchange Commission is investigating errors and omissions in the city’s financial statements to the public – which were prepared by the Auditor’s Office under former Auditor Ed Ryan.

In addition, the U.S. Attorney’s Office and the District Attorney’s Office have filed criminal corruption charges against a number of current and former pension officials.

Concerns over the veracity of the city’s financial reporting have left its credit rating and access to Wall Street cash for vital projects suspended. (Torell and the remaining citizen trustees overseeing the retirement system were appointed after the probes began.)

University of California, San Diego political scientist Steve Erie said the mayor and San Diegans may be willing to bend certain checks and balances that theoretically ensure good government because the city is in such bad shape.

“It might be because we’re in times of crisis, so you may be willing to, for just this one time, give the mayor a little more authority,” Erie said. “But over the long haul, you’re better off with these positions being more independent.”

Torell is scheduled to report to the City Council on Monday that the city has various flaws in its financial reporting procedures. He said his office needs better technology and that department heads need to be better trained and take more responsibility for their fiscal decisions. But he insists that his position in the city hierarchy is the biggest flaw in the reporting structure.

“I can have the best controls in place, issue an annual financial report, but still have to be concerned that the top of the organization saying, ‘It’s a little strong here, maybe we should tone it down,’`” he said.

Sanders spokesman Fred Sainz said the hypothetical situation Torell posed would never happen. He noted that the auditor’s relationship to the mayor was approved by the voters.

Torell argues that there are a number of alternatives that would allow him more independence. He said he would rather the position be appointed to a term of 10 years, and that the council be able to fire him with a unanimous vote. Another option, he said, would be to have a few council members and some private citizens serve as an audit committee, which would directly supervise the City Auditor’s Office.

Councilwoman Donna Frye and Erie support making the auditor an elected position – something Torell doesn’t like, but would prefer to the current scenario. Torell, who was hired in March to reform the Auditor’s Office, said politics would play a bigger role than the candidates’ qualifications.

He said members of Kroll Inc., the risk consulting firm investigating the city’s books for legal and accounting irregularities, have told him they agree with his report. Council President Scott Peters said he doesn’t have an opinion on the auditor matter, but believes that Kroll would likely weigh in on the issue in its report.

Calls placed to Kroll consultants were not returned Thursday.

Sainz said voters elected Sanders to be held accountable for all of the city’s operations, and that the city is suffering from mistakes made by auditors who had too much independence.

“Ed Ryan was an independent auditor. He reported to the council and that experiment didn’t work,” Sainz said.

Sainz chalked up rebukes to Sanders’ calls for resignation to trustees’ dislike for Aguirre, who has knocked heads with pension officials since taking office.

Hebrank, who was appointed to the SDCERS board in September, disagreed.

“This is more important than the whole Aguirre thing,” he said.

Critics of the current retirement board say trustees were slow to release confidential documents being sought by federal investigators and auditors and that they refused to dismiss two top officials under investigation who were eventually indicted by a grand jury this month. In his State of the City address, Sanders emphasized the need to start over at SDCERS.

Hebrank noted the City Charter already designates a spot on the pension board for a representative of the mayor. He said that it was inappropriate for the mayor to involve himself in retirement board’s affairs, just as it wasn’t right for union members to lobby him to stay on the board. Members of the city’s white-collar union sent letters to trustees this week, urging them not to step down.

“We are not there to represent the interest of the mayor or the city government or the union members,” he said. “We’re supposed to be independent.”

Please contact Evan McLaughlin directly at

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