An audit released today found that the city of San Diego has lax policies for hiring employees who are not part of the civil service system.

Among other things, the audit found that the city does not have sufficient policies for checking the references of applicants for positions that are unclassified, or “at-will,” nor does it do adequate criminal background and other record checks of these prospective employees.

The audit, done by the consulting firm Sjoberg Evanshenk Consulting, Inc., was in response to a May 7 story by the Union-Tribune on Hildred Pepper Jr., the city’s contracting administrator.

The story focused on Pepper’s tenure as the chief contracting officer for Detroit Public Schools. Audits of the school system found evidence of questionable accounting practices while Pepper was working there, and the Union-Tribune story suggested that Pepper was involved in the those practices.

The Sjoberg Evanshenk audit found no evidence of wrongdoing by Pepper while he was employed by the school system, and, in fact, discovered that Pepper might have been a whistleblower. However, if Pepper had been involved in wrongdoing, the city would have had no clue when it hired him.

“Based on the absence of an in-depth investigation of Mr. Pepper’s education,

employment and professional background, we believe that the City did not conduct a thorough background investigation prior to his hiring,” the auditors concluded.

The auditors found, for example, that the city’s personnel department checked through local San Diego area conviction records and the California Department of Justice and found no criminal history for Pepper before he was hired.

However, they concluded that the background check “was insufficient since he was a Michigan resident.”

No information has come to light that would indicate the Pepper has a criminal history in Michigan or anywhere else.

Auditors also found that City Chief Financial Officer Mary Lewis, Chief Operating Officer Jay Goldstone and other city officials did not call references that Pepper had provided when they interviewed him. And they did not contact anyone in Detroit before hiring Pepper, even though he told them that his relationship with the Detroit School Board was “contentious.”

The only references city officials contacted were people from San Diego who had brought Pepper to their attention as a possible candidate.

Because of their lack of due diligence, the auditors determined that city officials were largely unaware of the situation in Detroit. They didn’t even do basic internet searches that would have given them information on the problems in the Detroit school system, according to the audit.

The Detroit school system’s risk management department is currently under federal investigation for allegations of illegal wire transfers, according to the auditors. And an “independent party” told the city’s auditors that the contracting department, which Pepper oversaw, was not involved in the wire transfers.

Beyond his statement that he had a “contentious” relationship with the school board, Pepper did not offer any information regarding what had happened in Detroit during his interviews with city officials. But he did tell the auditors that he has been contacted as a witness by the Federal Bureau of Investigation, and is not a subject of the federal investigation, which the auditors corroborated.

The auditors recommended that the city “revamp the processes it uses to recruit and hire unclassified upper-level officials to be more rigorous, consistent and standardized.”


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