To much fanfare three years ago, the city of San Diego hired a Boston-based securities attorney as an independent monitor of its financial practices following the city’s pension underfunding and disclosure scandals.

Now the attorney has issued his fourth and final report on the city’s response to the scandal. He’s given San Diego an almost clean bill of health.

“The city has made dramatic progress over the last several years in a number of areas to create a ‘culture of compliance’ to replace the ‘culture of expediency’ described in the Kroll Report,” the attorney Stanley Keller wrote in his Feb. 24 report.

Keller was hired to be the independent monitor required as part of the city’s settlement with the federal Securities and Exchange Commission in fall 2006. An independent monitor was also recommended in the Kroll Report, the $20 million outside investigation that detailed the city’s fiscal woes and lack of accountability.

Positive steps the city has taken over the last four years, Keller wrote, include increasing the mayor’s power and accountability through the “strong mayor” form of government, an audit committee, an independent internal auditor and a committee on the city’s bond disclosures.

Still, Keller found “one area where progress has lagged” — the city’s internal controls over its financial reporting, or a system of checks and balances to ensure financial statements are accurate.

For two years, Keller wrote, the city made little to no progress toward better internal controls. But Keller hoped the oft-delayed implementation of a city-wide computer system would push the issue forward. The city still will need outside experts to develop its practices and might not meet next year’s deadline for an outside audit of external controls, Keller wrote.

Keller isn’t the only outside analyst to raise concerns about the city’s financial controls. Its external auditor has, too.

The auditor, Sacramento-based Macias Gini & O’Connell, said the city had “significant deficiencies” in its internal controls when evaluating the city’s 2009 annual financial report last month.

City Council approved that report, by a 7-1 vote, noting that this one was the first completed on time since the city’s prior financial scandals. But Councilwoman Donna Frye used colorful language to explain why she was voting no and why she “probably will never sign off on one of these documents.”

I won’t vouch for it. I won’t swear to it. I won’t file it. I might turn it into a paper airplane and throw it back at you. Not that I don’t appreciate your work, but there just doesn’t seem to be a commitment to get certain things done like fixing the internal controls over financial reporting, which concerns me a great deal.

Both the audit committee and the City Council are scheduled to hear Keller’s report next Monday. The Office of the Independent Budget Analyst is recommending the City Council and Mayor Jerry Sanders’ Office issue a response to Keller’s report like they’ve done in the past.

— LIAM DILLON

Leave a comment

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.