Tuesday, July 14, 2009 | While the Centre City Development Corp. may have problems identified by a recent audit, none appears so great as to doom the agency’s existence.
In a recently released report, auditors found numerous deficiencies at CCDC, the agency responsible for overseeing redevelopment in downtown San Diego. The audit, ordered by Mayor Jerry Sanders in the wake of last summer’s redevelopment scandals, uncovered lacking oversight, poor contract management and employees who gamed the agency’s sole-source contracting system.
Despite numerous problems the audit found, Fred Maas, the CCDC chairman, lauded the fact that the audit didn’t find fraud, theft or misuse of public funds. In a letter, he told the city auditor he was “heartened.”
That’s a telling detail about CCDC’s troubled last year: The absence of theft and fraud counts as good news.
The audit does mark a turning point for city redevelopment efforts and CCDC, an agency that has scrapped or restarted nearly $2 billion in developments in the last year because of its former president’s undisclosed financial relationships.
Independent audits into questionable practices revealed at CCDC and the Southeastern Economic Development Corp. are complete. SEDC’s audit, released last September, found that top officials there consistently resorted to clandestine methods to boost their own pay and perks, practices that auditors said rose to the level of fraud.
The mayor’s resulting proposal to overhaul the agencies and tighten oversight had been unveiled earlier this year. But it had awaited the CCDC audit’s completion to move forward. It returns to a City Council subcommittee for discussion Wednesday.
Still, CCDC’s audit raised enough questions to prod a deeper inquiry at the downtown agency. CCDC management is working to answer questions raised by the outside auditors, who found that CCDC staff misrepresented $1.7 million in sole-source contracts to its board as having been competitively bid. A sole-source contract allows a government agency to pick a contractor instead of receiving bids and picking the lowest-priced option.
Maas said CCDC was reviewing all sole-source contracts the agency has issued to determine whether they were properly represented to the board. He said he wanted to know whether staffers were intentionally misleading or whether necessary documentation was simply missing. That effort will go beyond the handful of contracts the auditors reviewed, Maas said.
“We’re going to have to look at it more holistically,” he said. “We need to make sure the appropriate procedures and documentation are in place.”
The agency had already taken some steps to address those issues before the audit’s release, tightening CCDC’s sole-source contracting procedures and lowering the threshold for a contract needing board approval from $250,000 to $50,000.
The audit’s findings won’t change Sanders’ proposed overhaul of CCDC and its counterpart, the Southeastern Economic Development Corp., said Rachel Laing, a mayoral spokeswoman.
Under Sanders’ proposal, CCDC and SEDC’s boards will be stripped of much of their independence. Like the police and fire chiefs, SEDC and CCDC’s top executives would answer to the mayor instead of an appointed board. His proposal would give the mayor the power to hire the executives (with City Council confirmation).
While Sanders’ effort will proceed unchanged, the agency still has questions to answer from City Council members.
Councilman Kevin Faulconer, whose district includes CCDC’s focus area, said he was concerned about the internal control weaknesses revealed in the audit as well as problems with contract oversight. In some cases, the audit found, CCDC staff didn’t tell the agency’s volunteer board of directors about contract change orders that it was supposed to. Auditors also said CCDC management had purposely signed contracts for less than $250,000 to avoid needing board approval — even though at least one contract eventually exceeded $1 million.
“You have clear rules and regulations for a reason,” Faulconer said. “If those aren’t being followed, I want to know why.”
Councilman Carl DeMaio said he was concerned that agency employees had deliberately manipulated the agency’s contracting process to avoid oversight.
“I don’t think ignorance is an excuse I can buy,” he said. “I think it was done knowingly.”
DeMaio said the City Council should push forward on Sanders’ proposal, then have the mayor hire a new CCDC president. That person should “clean house,” DeMaio said.
“CCDC is running out of time,” he said. “If it doesn’t change its practices and instill more accountability and transparency, it will lose support for its very existence.”
While DeMaio and Faulconer both said they supported keeping CCDC, Councilwoman Donna Frye said the agency should go. Its duties should be folded into the city’s Redevelopment Agency, which oversees revitalization efforts in neighborhoods such as Linda Vista, City Heights and North Park. She acknowledged, though, that the idea had little support on council.
Frye criticized the agency for having an institutional “arrogance” but said it was becoming more responsive to the public largely because of media attention.
“Unfortunately what we find is that when people can cut corners, they will,” Frye said, “and they’ll continue to do it.”