Support Grows for Independent Audit of City Water, Sewer and Enterprise Funds

Alarms Raised by the San Diego Citizens’ Budget Project and Channel 10 Investigation Finally Causing Some on Council to Take Action

In a June 10 letter to City Manager Lamont Ewell, the Mayor and City Council, Councilmember Donna Frye writes “due to the allegations that these enterprise funds have not been used for their intended purposes, I am requesting that a public hearing be scheduled to allow this issue to be discussed…and (to) take action on an independent audit of the enterprise funds.”

At a City Council hearing on June 8, Performance Institute President Carl DeMaio detailed the raids on the water and sewer funds and issued his call for an independent audit of the city’s enterprise funds.

“We are thrilled that Donna Frye is taking the leadership role in advancing this audit. We call on the Mayor and the Council to follow her positive lead and create an independent audit of the water, sewer and other enterprise funds so the public can rest assured that their fees are going to appropriate uses,” DeMaio said.

White papers and analysis published by the Performance Institute on March 29, May 3, May 18, and June 8 identified serious problems with the city’s use of “Service Level Agreements” (SLAs) and other accounting shifts to transfer funds from the water, sewer and enterprise funds. On June 9, Channel 10 ran a provocative story that presented evidence of raids on water and sewer funds using SLAs that its reporters gathered and analyzed over several months. In FY 2005, more than $50 million in sewer department funding will be transferred to the General Fund using SLAs, with an additional $17 million from the water fund being transferred. This amount does not include the $2.3 million raided from water and sewer funds using the so-called “Right of Way” fees the General Fund imposes on water and sewer lines running under city streets.

The audit proposal advanced by the Institute at the June 8 Council meeting included a citizens’ task force that would oversee a complete audit of any and all transfers of funds and activities between the General Fund and the City’s Enterprise and Special Funds. The audit would examine “full cost of service” provided by General Fund departments to Enterprise and Special Fund departments to ensure that reimbursements are appropriate. Additionally, the audit would examine all city personnel supported by Enterprise or Special Funds to ensure that their actual job responsibilities involve activities that fall within the appropriate use of those funds.

Copies of the Institute’s previous analysis citing problems with transfers from the water and sewer funds are available on the San Diego Citizens’ Budget Project website at www.sandiegobudget.org. Based here in San Diego, the Institute is a national government reform think tank that promotes the principles of performance, transparency, competition and accountability in government.

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