Slow-Walking the SFPUC Audit
In a March 24 letter from the Controller’s Office, Mark de la Rosa, Acting Director of Audits, notified SFPUC’s Acting General Manager, Michael Carlin, of an impending audit. This audit will target “SFPUC’s Community Benefit/Social Impact Partnership Program” and “assess the appropriateness and effectiveness of SFPUC’s governance and oversight of the program, including social impact partners’ program outcomes.” Although the Board of Supervisors had requested this audit back in July 2019, bureaucratic shuffling and delays almost turned it into a spectral fantasy.
As the Westside Observer previously reported, any audit of the SFPUC by the Controller’s Office could be tainted by a conflict of interests. That’s because Deputy Controller Todd Rydstrom, who oversees the Audits Division, served as SFPUC’s Assistant General Manager and Chief Financial Officer from 2008 to 2014. The audit may well probe some of his past decision-making involving the SFPUC Community Benefits Program.”
The PUC’s Community Benefits Program “invites” would-be contractors to donate money and services to community charities and non-profits. To incentivize this philanthropy, contract bids that pledge community give-backs receive extra points. Championed by former Assistant General Manager for External Affairs, Juliet Ellis, the program has been roiled by pay-to-play allegations.
Following the departure of her boss Harlan Kelley, Ellis bailed out of the PUC this January - as their travel, expense and reimbursement reports came under federal scrutiny. She has since found refuge with PromisePay, a financial technology start-up that creates payment plans for folks who struggle to pay utility bills, traffic fines, child support and the like. Ironically, Ellis herself may have left the PUC with unpaid bills. Several catering outfits are reportedly clamoring to get paid for gourmet dishes that Ellis previously ordered. If confirmed, these lapses, like Ellis’s lavish $900 brunch in October 2019, reflect poorly on PUC Finance Officials who approve such expenditures.
Finally, the Controller’s Office has responded to the fall-out from an FBI/US Attorney investigation of the SFPUC, plus Marina Times articles like “Friends with Community Benefits,” reporting by the Westside Observer and NBC Bay Area television , as well as a whistleblower complaint dating back to January 2018, protests by the SF Labor Council, and calls for an audit by Supervisor Gordon Mar. However, this long-stalled audit entails further delays and constraints that may convert it into an archeological dig for ancient antics of long-gone culprits.
Contractual Delays and Constraints
Via a public records request, the WSO obtained a copy of the contract that awarded the SFPUC audit to Sjoberg Evashenk Consulting (SEC). The Controller’s Office indicated that it sought a “performance audit” whose “scope and objectives will be finalized at the end of the audit’s survey phase, when all of the program’s relevant risks have been identified.” What that means is unclear. Identifying “relevant risks” could impose accounting rigor or allow wiggle-room.
The SFPUC audit is one small part of a $1,737,300 multi-year, multi-audit contract issued to SEC in July 2019 - recommended and signed by Deputy Controller Todd Rydstrom. The portion allotted to the SFPUC audit – scheduled for fiscal year 2021-22 - comprises 500 hours of work, at a cost not to exceed $82,500. The final report is due by 9/30/22. That’s a year and a half away.
The contract curtails the independence of the SEC auditors. For example, section 8.1.1 states; “City shall have the option, in its sole discretion, to terminate this Agreement, at any time during the term hereof, for convenience and without cause.” As for oversight; “the Contractor’s Team shall report on its progress… tasks and deliverables for review, input, decision-making, and approval by the Controller’s Project Lead.” Specifically; “The deliverables review process may be iterative and may, at the City’s discretion, require face to face meetings of the City’s and Contractor’s Teams prior to the City’s final approval of work products and deliverables. The Contractor is responsible for submitting draft materials to the City’s Team for review and incorporating City feedback.” Another clause states; “The audit projects and scope may change, at the City’s sole and absolute discretion…” Finally; “The Contractor shall provide a draft report to CSA Audits for review and approval. CSA Audits may suggest revisions to the Contractor.” It’s perfectly reasonable oversight – and potentially censorious meddling – especially if Todd Rydstrom stays on the “City’s Team.”
Potential Conflicts of Interest
As the Westside Observer previously reported, any audit of the SFPUC by the Controller’s Office could be tainted by a conflict of interests. That’s because Deputy Controller Todd Rydstrom, who oversees the Audits Division, served as SFPUC’s Assistant General Manager and Chief Financial Officer from 2008 to 2014. The audit may well probe some of his past decision-making involving the SFPUC Community Benefits Program.
Appropriately, the audit will be conducted by a qualified 3rd party. Outsourcing the SFPUC audit seems to side-step Rydstrom’s potential conflict of interests. But there are reasons to worry. For one, City consultants often serve as hired guns rather than truth seekers. Those who unearth smelly skeletons risk losing future contracts. As detailed above, the Controller’s Office is keeping a tight leash on this audit. Lastly, Todd Rydstrom’s name appears on the audit notice to the SFPUC, suggesting that he has yet to recuse himself.
Dr. Derek Kerr is a San Francisco investigative reporter for the Westside Observer Contact: email@example.com
April 8, 2021