San Diego Association of Governments leaders are seated during a Jan. 13, 2023 meeting. (Sandy Huffaker for inewsource)

The San Diego Association of Governments’ internal auditor, whose damning reports have exposed major policy problems and drawn scrutiny on current leadership, is retiring — and she may be the agency’s last in-house watchdog.

SANDAG board leaders are considering replacing Independent Performance Auditor Mary Khoshmashrab with outside consultants when she leaves later this year. It’s also a move that could keep her office’s oversight function hanging in the balance — and one that has left members of Khoshmashrab’s five-person team with unanswered questions on whether they’ll still have jobs.

Officials also decided to delay any decisions on policy changes the agency’s Audit Committee is seeking to gain more independence from the board.

Why this matters

With a $1 billion annual budget, the San Diego Association of Governments is a taxpayer-funded planning agency that helps make transportation and other long-term regional decisions. Reports from its independent performance auditor have flagged serious policy and documentation problems at the agency.

“I want to make sure that I’m on the record saying that I don’t have a preference,” Chairwoman Nora Vargas said at the board’s Executive Committee meeting Friday. “I just want to make sure that we do our due diligence.”

Since Khoshmashrab joined the agency in 2019, her audits have revealed improper severance payments, employee credit card misuse, and millions of dollars worth of increases to consultant contracts with little documentation. Her office also found the agency lost $1.8 million in revenue while it knowingly left malfunctioning equipment along its State Route 125 toll road.

Her findings have prompted public criticism of the $1 billion, 400-person agency, and at least one board member has called for a review of CEO Hasan Ikhrata’s job performance.

The decision to have SANDAG’s legal counsel study other options to replace Khoshmashrab means any possible recruitment would be delayed at least a month. Rebecca Jones, the lone Executive Committee member to oppose the delay, questioned why officials wanted to postpone and said it “seems like we are trying to do everything to stop this process from moving forward.”

“I feel like we are absolutely slow-walking this,” Jones said. “I can’t think of any other word that actually fits what’s happening here today.”

Sean Elo-Rivera, the board’s vice chair, disagreed.

“A request for a legal analysis of the pros and cons of some of those changes, an opportunity for us to discuss that thoroughly all sounds like good governance, not like any attempt to slow-walk or to reduce transparency,” he said. “By definition, there is more transparency because there will be more conversation.”

But Khoshmashrab herself raised concerns.

“The fact that any one member of the board or SANDAG management including the general counsel, knowing the inherent risk and control risk this agency has had and continues to have and given the amount of federal and other public funding types that flows through this agency, would consider an outside consultant over an established internal office (OIPA) should be gravely concerning to the public regardless of the party preference,” she said in a statement to inewsource.

Independent Performance Auditor Mary Khoshmashrab attends the San Diego Association of Governments’ Audit Committee meeting remotely on Jan. 13, 2023. (Sandy Huffaker for inewsource)

The independent performance auditor position was created in 2017, under a state law that was passed after SANDAG knowingly overstated revenue estimates during a campaign for a proposed sales tax hike. At the time, the agency’s board decided to make the job an internal position.

The state law also created the agency’s Audit Committee, whose members include outside CFOs and the former auditor of the Port of San Diego. The committee unanimously recommended moving forward with a recruitment process over the hiring of an outside official, arguing that keeping the position in-house is more cost-effective, maintains the auditor’s independence and would avoid a monthslong proposal process to hire an outside firm.

Audit Committee Chair David Zito told board leaders that any gap in leadership at the independent auditor’s office would hurt Khoshmashrab’s already-small team.

“If the team itself feels like that it might not exist in a couple months, then you’re at high risk of people just leaving and then the whole thing can fall apart,” Zito said. “And that’s what I would worry about and that’s why I want to make sure we move on this quickly.”

Khoshmashrab’s audits have found the agency lacks adequate oversight, proper documentation and sufficient employee training. Last year, her office found “improper” and “questionable” payments on taxpayer-funded purchase cards, including nearly $70,000 at local restaurants and almost $250,000 in transactions on non-working days.

As inewsource previously reported, some of SANDAG’s highest-paid staff made it a regular practice to hold business meetings at fine-dining spots and with bills topping out at more than $100 per visit. An outside government ethics expert described the transactions as a “clear abuse” of public money.

For her work, Khoshmashrab last year received a 10% salary increase that brought her base pay up to $243,000. Her office has produced the audits despite being staffed far below the 15-person team she has said she needs.

Audit Committee member Stewart Halpern said while Khoshmashrab’s findings “are not necessarily always complimentary and have been controversial,” they have improved the agency and protected taxpayer funding.

“How do you expect to attract serious people when it becomes clear that the board seems to not really pay much attention to the well-intentioned and professional judgment of the advice of its Audit Committee members?” Halpern said at a meeting Friday. “I think that’s a problem.”

Khoshmashrab’s latest audit, expected to be released in April, will further examine SANDAG contractors’ performance, invoicing and any potential fraud. She has already warned the Audit Committee that the report has been difficult to complete because of the agency’s poor records management.

Khoshmashrab plans to retire by July, but has told officials she’s willing to stay on longer to ensure a smooth transition.

Type of Content

News: Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.

Jennifer Bowman serves as inewsource's Assistant Editor. Before that, she was an investigative reporter focusing on government accountability issues in southern San Diego and Imperial counties. She also used to cover education. She’s happy to be back in her hometown after stints at daily newspapers...