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San Diego path to dope dispensary licenses ripped
Big losses, misplaced fees of the 125 toll road
The auditors say “We were unable to verify the completeness of the list of applications at San Diego because it did not maintain a comprehensive list of applications it received for adult‑use cannabis businesses."
Up in smoke A March 28 audit report by California State Auditor Grant Parks has found gaps in the way the city of San Diego hands out pot permits, raising the specter of incipient corruption. “Because San Diego did not maintain the records of applications for adult-use cannabis permits, we were unable to accurately identify the number of applications,” says the document.
In addition, per the report, “Of the six local jurisdictions we reviewed, four – the cities of Fresno, Sacramento, South Lake Tahoe and the county of Santa Barbara — have chosen to require a competitive process that requires scoring of permit applications for either all or some permit types. The remaining two local jurisdictions — Monterey County and the city of San Diego — have chosen not to require a competitive process that scores applications.”
Raising more doubts about the selection process, San Diego and three other jurisdictions “did not require individuals involved in reviewing cannabis business applications to sign impartiality statements.” Notes the report: “In any process that requires impartiality or that may be susceptible to bias, it is important to consider and implement safeguards, such as using impartiality statements, to prevent undue influence and strengthen confidence in the integrity of the process.”
Auditor Grant Parks
The auditors went on to say that “We were unable to verify the completeness of the list of applications at San Diego because it did not maintain a comprehensive list of applications it received for adult‑use cannabis businesses. Further, San Diego did not maintain the records for applications in a cannabis-specific location in storage, which did not allow us to manually search for the applicable applications.”
San Diego’s background checks were also spotty, though the auditors credited the city for some recent computer changes. “San Diego could not demonstrate before December 2021 that it followed its documented process for ensuring that applications were complete. San Diego’s policy states that its minimum submittal requirements checklist establishes the minimum details that must be included in all plans and documents required to be included in the application and that staff will review applicants’ documents against this checklist.
“For applications submitted before December 2021, San Diego simply entered into its tracking database the date the application was deemed complete. However, for 13 of the applications we reviewed, San Diego could not provide evidence that it followed its policy to compare the applications to the checklist, all of which were submitted before December 2021.
“San Diego’s project manager stated that the local jurisdiction’s adoption of an online permitting process in December 2021 has improved its documentation and record retention. In fact, we reviewed seven applications that San Diego received after December 2021 and verified that city staff had performed appropriate checks for completeness using the online system.”
For whom SANDAG tolls A long-festering accounting scandal involving big losses and misplaced fees at the State Route 125 toll road — owned and operated by the San Diego Council of Regional Governments, commonly called SANDAG — is newly detailed in a March 26 investigative report by Courtney Ruby, the agency’s independent performance auditor. SANDAG bought the troubled toll road out of bankruptcy in December 2011, per the document.
On December 16, 2016, the agency’s board gave a contract to Plano, Texas-based ETAN Tolling Technology, Inc. to handle Back Office Systems for both the toll road, known as the South Bay Expressway, and SANDAG’s I-15 Express Lanes. Ruby’s report says auditors found a host of troubles stemming from that deal. “ETAN’s implementation of the Back Office System [for the I-15] Fastlane was headed for trouble from the beginning,” according to the document. But “SANDAG executive management failed to address the situation in a timely manner, including informing the board of directors.” As a result of a series of subsequent failures, “At least $1 million in revenue has been lost due to a function in [the] ETAN [Back Office System] not being turned on.”
The South Bay toll road has fared no better. “The [SANDAG} Finance department lacks adequate internal controls including proper review and supervision to ensure [State Route] 125 financial information is accurately recorded, accounted for, and reported accurately,” the audit says. “SR 125 went live on June 6, 2022 with the knowledge that ETAN did not fulfill many of its contractual requirements.”
Adds the document, “ETAN’s contract with SANDAG included having system documentation, and when asked why they only had 10% of the documentation complete for their baseline system, they responded that their government project before SANDAG required ‘minimal if any’ documentation. Regarding SANDAG, they confirmed ‘We had very little documentation on the system,’ and there was very limited baseline documentation.
“It appeared that ETAN personnel did not always know how to fix system problems and the lack of system documentation, or poorly written documentation, made fixing the problems difficult and time-consuming. ETAN also experienced significant personnel turnover during the project, contributing to a lack of historical knowledge, and at times insufficient experience to effectively manage and deliver the system they were contracted to provide.”
In-house staff does not escape criticism for the ensuing debacle: “The Finance department lacked sufficient internal controls including proper supervision and timely reconciliation. Senior Financial Management allowed the situation to persist and did not intercede at an operational level to ensure the reliability of the financial information, instead they dismissed concerns as not material.”
Adds the report, “The ETAN [Back Office System] to this day does not meet many of its requirements, fails to provide most required financial reports, and overall ETAN’s BOS has not reached system acceptance. Per ETAN’s contract, System acceptance was scheduled for September 19, 2018. Instead, ETAN’s BOS continues to require excessive amounts of SANDAG’s staff and consultants time to keep it operational until SANDAG can transition to a new back-office system.”
As a result, the audit notes, SANDAG’S board of directors voted to remove ETAN and approved sole source contracts with Deloitte and A-to-Be on January 12, 2024. “The migration to a new Back-Office System, per SANDAG management, is anticipated to take 7 months to complete.”
Reported KNSD TV January 15, after the switch was announced: “ETAN has been paid $8.4 million and will collect an additional $1.3 million.” Some of the allegations against ETAN and SANDAG management first appeared in a wrongful termination lawsuit filed last November by ex-SANDAG finance director and whistleblower Lauren Warren.
— Matt Potter
(@sdmattpotter)
The Reader offers $25 for news tips published in this column. Call our voice mail at 619-235-3000, ext. 440, or sandiegoreader.com/staff/matt-potter/contact/.
Here's something you might be interested in.
San Diego path to dope dispensary licenses ripped
Big losses, misplaced fees of the 125 toll road
San Diego path to dope dispensary licenses ripped
Big losses, misplaced fees of the 125 toll road
The auditors say “We were unable to verify the completeness of the list of applications at San Diego because it did not maintain a comprehensive list of applications it received for adult‑use cannabis businesses."
Up in smoke A March 28 audit report by California State Auditor Grant Parks has found gaps in the way the city of San Diego hands out pot permits, raising the specter of incipient corruption. “Because San Diego did not maintain the records of applications for adult-use cannabis permits, we were unable to accurately identify the number of applications,” says the document.
In addition, per the report, “Of the six local jurisdictions we reviewed, four – the cities of Fresno, Sacramento, South Lake Tahoe and the county of Santa Barbara — have chosen to require a competitive process that requires scoring of permit applications for either all or some permit types. The remaining two local jurisdictions — Monterey County and the city of San Diego — have chosen not to require a competitive process that scores applications.”
Raising more doubts about the selection process, San Diego and three other jurisdictions “did not require individuals involved in reviewing cannabis business applications to sign impartiality statements.” Notes the report: “In any process that requires impartiality or that may be susceptible to bias, it is important to consider and implement safeguards, such as using impartiality statements, to prevent undue influence and strengthen confidence in the integrity of the process.”
Auditor Grant Parks
The auditors went on to say that “We were unable to verify the completeness of the list of applications at San Diego because it did not maintain a comprehensive list of applications it received for adult‑use cannabis businesses. Further, San Diego did not maintain the records for applications in a cannabis-specific location in storage, which did not allow us to manually search for the applicable applications.”
San Diego’s background checks were also spotty, though the auditors credited the city for some recent computer changes. “San Diego could not demonstrate before December 2021 that it followed its documented process for ensuring that applications were complete. San Diego’s policy states that its minimum submittal requirements checklist establishes the minimum details that must be included in all plans and documents required to be included in the application and that staff will review applicants’ documents against this checklist.
“For applications submitted before December 2021, San Diego simply entered into its tracking database the date the application was deemed complete. However, for 13 of the applications we reviewed, San Diego could not provide evidence that it followed its policy to compare the applications to the checklist, all of which were submitted before December 2021.
“San Diego’s project manager stated that the local jurisdiction’s adoption of an online permitting process in December 2021 has improved its documentation and record retention. In fact, we reviewed seven applications that San Diego received after December 2021 and verified that city staff had performed appropriate checks for completeness using the online system.”
For whom SANDAG tolls A long-festering accounting scandal involving big losses and misplaced fees at the State Route 125 toll road — owned and operated by the San Diego Council of Regional Governments, commonly called SANDAG — is newly detailed in a March 26 investigative report by Courtney Ruby, the agency’s independent performance auditor. SANDAG bought the troubled toll road out of bankruptcy in December 2011, per the document.
On December 16, 2016, the agency’s board gave a contract to Plano, Texas-based ETAN Tolling Technology, Inc. to handle Back Office Systems for both the toll road, known as the South Bay Expressway, and SANDAG’s I-15 Express Lanes. Ruby’s report says auditors found a host of troubles stemming from that deal. “ETAN’s implementation of the Back Office System [for the I-15] Fastlane was headed for trouble from the beginning,” according to the document. But “SANDAG executive management failed to address the situation in a timely manner, including informing the board of directors.” As a result of a series of subsequent failures, “At least $1 million in revenue has been lost due to a function in [the] ETAN [Back Office System] not being turned on.”
The South Bay toll road has fared no better. “The [SANDAG} Finance department lacks adequate internal controls including proper review and supervision to ensure [State Route] 125 financial information is accurately recorded, accounted for, and reported accurately,” the audit says. “SR 125 went live on June 6, 2022 with the knowledge that ETAN did not fulfill many of its contractual requirements.”
Adds the document, “ETAN’s contract with SANDAG included having system documentation, and when asked why they only had 10% of the documentation complete for their baseline system, they responded that their government project before SANDAG required ‘minimal if any’ documentation. Regarding SANDAG, they confirmed ‘We had very little documentation on the system,’ and there was very limited baseline documentation.
“It appeared that ETAN personnel did not always know how to fix system problems and the lack of system documentation, or poorly written documentation, made fixing the problems difficult and time-consuming. ETAN also experienced significant personnel turnover during the project, contributing to a lack of historical knowledge, and at times insufficient experience to effectively manage and deliver the system they were contracted to provide.”
In-house staff does not escape criticism for the ensuing debacle: “The Finance department lacked sufficient internal controls including proper supervision and timely reconciliation. Senior Financial Management allowed the situation to persist and did not intercede at an operational level to ensure the reliability of the financial information, instead they dismissed concerns as not material.”
Adds the report, “The ETAN [Back Office System] to this day does not meet many of its requirements, fails to provide most required financial reports, and overall ETAN’s BOS has not reached system acceptance. Per ETAN’s contract, System acceptance was scheduled for September 19, 2018. Instead, ETAN’s BOS continues to require excessive amounts of SANDAG’s staff and consultants time to keep it operational until SANDAG can transition to a new back-office system.”
As a result, the audit notes, SANDAG’S board of directors voted to remove ETAN and approved sole source contracts with Deloitte and A-to-Be on January 12, 2024. “The migration to a new Back-Office System, per SANDAG management, is anticipated to take 7 months to complete.”
Reported KNSD TV January 15, after the switch was announced: “ETAN has been paid $8.4 million and will collect an additional $1.3 million.” Some of the allegations against ETAN and SANDAG management first appeared in a wrongful termination lawsuit filed last November by ex-SANDAG finance director and whistleblower Lauren Warren.
— Matt Potter
(@sdmattpotter)
The Reader offers $25 for news tips published in this column. Call our voice mail at 619-235-3000, ext. 440, or sandiegoreader.com/staff/matt-potter/contact/.
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