The Morning Report
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The auditors working on the city of San Diego’s long-stalled, but vital, fiscal year 2003 audit have asked for an additional $1.8 million, weeks after the Mayor’s Office had expected to already have the audit wrapped up.

In addition, the Mayor’s Office has asked that a second auditing firm already employed by the city be given an additional $1.4 million for a variety of auditing tasks, including a re-audit of the Redevelopment Agency’s 2003 financial statement and a fraud investigation related to the city’s 2003, 2004 and 2005 financial statements.

City leaders have been waiting for the audit work to be completed since 2004, as the hold-up has left the city suspended from Wall Street and unable to borrow large sums of cash inexpensively to do such things as build fire stations and upgrade outdated sewer systems.

Mayor Jerry Sanders had expected the audit to be completed Oct. 27 following the release of the investigation from private consultants Kroll Inc. Read my pal Evan McLaughlin‘s story from this week about the tortured saga and related “consultant pretzel.”

If the payment is approved, KPMG will have collected $6.2 million. It would be the ninth amendment to the KPMG contract. The Mayor’s Office said the funds for the new payment would come from the already-completed fiscal year 2006 but go toward expenses incurred in fiscal year 2007.

In addition, the mayor has asked the council to approve a total of $1.4 million in contracts for auditing firm Macias, Gini & O’Connell.

The funds will go toward a host of auditing functions, some previously known and others new. Here’s how it breaks down:

  • $135,000 and $70,000 for the fiscal year 2004 and 2005 audits, respectively.
  • $75,000 to reaudit erroneous Redevelopment Agency financial statements from 2003, $93,600 to redo the audit related to the city’s expenditure of federal funds, and $158,725 for an ongoing fraud investigation in connection with the 2003, 2004 and 2005 audits.
  • $888,634 for the required audit of the fiscal year 2006 financial statements.

We’ve placed a number of calls with officials from the offices of the mayor and auditor and are waiting for return calls.

ANDREW DONOHUE

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