Thursday, Dec. 7, 2006 | The San Diego City Council unanimously agreed Wednesday to allow three of its own to sit on the newly formed panel that will supervise the city government’s operations and finances. But selecting a chairperson for the committee will prove more divisive, with two council members – Kevin Faulconer and Donna Frye – both eyeing the post.
The decision to fill the Audit Committee with three council members marks a temporary victory for the legislative body after its members stood rigidly opposed to Mayor Jerry Sanders on the issue since it surfaced in August.
Sanders, taking a cue from the Kroll Inc. consultants, wanted to appoint two of the oversight board’s three members. But he backed away from his position over the course of the last week and bowed to the council’s stance – at least until 2008, when voters can change the City Charter to accommodate his desired committee structure.
After it is finalized early next year, the Audit Committee will have an elevated role in overseeing audits of city functions, the preparation of financial reports, and employees’ whistleblower complaints. The organizational shakeup comes as San Diego attempts to clean up after a financial scandal that has been compared in magnitude to those of Enron and Orange County.
Officials said Tuesday’s move was needed to add a level of oversight detached from the mayor’s administration in order to provide a set of checks and balances. The council did not decide how much support staff the Audit Committee would need, but ruled out allowing the mayor’s staff to participate in its work.
“In no way should you use the mayor’s staff. That would immediately harm your independence,” City Attorney Mike Aguirre said.
Aguirre opined last week that city law prohibited Sanders from making the appointment of citizens to the committee, but the mayor wants to amend the charter through a vote of the public so he can recruit financial experts to sit on the board.
The move was part of a larger struggle between the council and Sanders over the city’s watchdog function. After the strong-mayor form of government took effect last year, the city auditor was moved under the supervision of Sanders, who is the executive of the city bureaucracy that the auditor is assigned to inspect.
When Kroll released its recommendations in August to allow the mayor to appoint two members of the audit committee and to pick the auditor general, Sanders embraced the plan wholesale. Aguirre, council members and financial professionals from abroad cried foul, pointing out that Kroll used outdated guidelines from the Government Finance Officers Association when it formulated its suggestions.
Wednesday’s unanimous council vote was soon followed by a madcap sequence over the nomination of the Audit Committee’s members and its chairperson, as both Faulconer and Frye both said they wanted to head the panel.
While two council members endorsed Frye for the top spot during the meeting, others said they were put in an uncomfortable position of selecting between their two colleagues without having time to review the nominations first.
After a number of awkward speeches by city officials, the vote on the committee’s membership was delayed until the council’s first set of meetings after the New Year.
Frye – who initially wanted forge ahead with a vote Wednesday – and other council members decided to postpone filing the panel’s seats after Council President Scott Peters and one of the five members of the public in attendance objected to making the appointments in haste.
Peters said he did not believe that the public was not properly notified of the planned appointment of Audit Committee members – as is mandated by the state’s open meetings laws – before Wednesday.
“It’s not exactly openness in government, is it?” Peters said.
In addition, Peters said council members ought to have enough time to decide who they would support for the committee and whether they would want to be nominated themselves.
Councilman Jim Madaffer, who nominated Frye to head the committee, said he thought postponing the appointments would make the council “appear indecisive on an issue that the public has watched ad nauseum.”
“Out of anybody, she’s proven that she can crack open the books and dig into it,” Madaffer said.
In October, Frye submitted a 41-item list to the city’s bookkeepers about criticism she had for the draft of the city’s 2003 financial audit, which is being withheld by KPMG. Frye told council members that she would be “honored” to head the panel.
Faucloner said he wanted to lead the panel because, “From a financial reform perspective, it’s one of the most important roles to instill confidence in people that their money is being spent appropriately at City Hall.”
Madaffer later withdrew his nomination at Frye’s request, although he said that the selection of the position will be likely be subjected to behind-the-scenes “politicking.”
“I don’t think this should be debated and discussed outside the public view,” Madaffer said.
Madaffer’s concerns come at a time when members of the City Council acknowledge that another appointment, for the Port Commission, has been largely vetted in private among supporters of certain candidates. While names for potential nominees have been floated to the different council offices over the past several weeks, the first public nomination – for sitting Commissioner Stephen Cushman’s reappointment – was announced Tuesday.
The runoff between Frye and Faulconer appear to some to be a choice between two candidates who have strong ties to Aguirre and Sanders, respectively. Frye has been the most vocal supporter of Aguirre’s legal challenge to pension deals that increased employee benefits by an estimated $900 million. Faulconer has been a reliable ally for Sanders since his election a year ago.
Opponents of Frye’s nomination are likely to point to her role in the approval of faulty bond disclosures in 2002 and 2003. The Kroll consultants have determined that Frye and four other sitting council members were negligent in allowing the release of the erroneous information. The Securities and Exchange Commission last month concluded that the city as an entity committed fraud, although no individual city officials have been charged or sanctioned to date.
Council members provided some hints about how the committee’s makeup might shape up. Councilman Tony Young said he endorsed Frye. Councilwoman Toni Atkins said she would consider a spot on the board, but – along with Aguirre – asked Peters to serve too.
When Aguirre made the unusual move of suggesting Peters, a frequent foe, for the committee, the council president said he wanted to have enough time to decide whether he could handle the additional workload.
Peters and Aguirre both cautioned Frye about her workload if she were to take on the Audit Committee’s top post, saying that coupling that responsibility with her job as the chairwoman of the Natural Resources and Culture Committee could prove to be too burdensome.
Faulconer, as a junior member of the council, does not chair any other committees.