City of San Diego officials in one fiscal year spent more than $4 million on goods and vendor services using unplanned purchases — some without proper oversight and others without the necessary approval from City Council, according to a report released last week.
The report from City Auditor Andy Hanau’s office, prompted by an employee concern, found departments wrote 240 of what are known as “confirming purchase orders” during the 2022 fiscal year.
With no spending limit, the process is meant to be used for non-routine purchases “that could not be planned for by operational staff,” the report said. For example, the city may use a confirming purchase order to maintain services after a vendor contract expires because it can take months to reach a new agreement.
Last week’s report was not an in-depth review that examined related contracts, but it investigated whether the practice of using unanticipated purchase orders leaves the city vulnerable to spending abuse, wasted money and fraud.
While the vast majority of last year’s unplanned purchases were for “relatively small dollar amounts” under $25,000, others were larger: Five invoices exceeded $150,000 to make up nearly 40% of the total amount of confirming purchase orders. One of them was more than $357,000.
Though auditors did not explicitly say that city staff abused funds or committed fraud, their report found some of the instances “could be considered mismanagement.” They also warned the process could be unfair to vendors seeking to do business with the city through its standard purchasing rules.
Nearly 60% of the unplanned purchases happened because of staff errors and poor planning. Many of the confirming purchase orders would be prompted by expiring contracts or because of a “lack of staff training, turnover, and misunderstandings.”
Even the auditor's office needed a confirming purchase order for electrical work costing more than $14,000 last year, the report noted.
On one occasion, the report found a janitorial business was getting paid via confirming purchase orders for an extra two years after its contract expired. As a result, the city paid an additional $2 million without the required City Council approval.
Another finding: A department’s “administrative misinterpretation” led to staff incurring over $119,000 in expenditures to a vendor with no contract in place.
The report listed the Library, Real Estate and Airport Management, Public Utilities and Parks and Recreation as the departments that most frequently used confirming purchase orders.
Four previous internal reports dating back to 2015 have flagged issues related to the city’s purchase order process. While the reports have said improved training and monitoring could reduce the need for unplanned purchases, the city has yet to fully implement all of the auditor’s recommendations.
Management agreed with the report’s findings and said that it will make changes in response. Among them: clarifying the city’s definition of confirming purchase orders and determining an approach to publicly disclose these types of transactions by May 2024.
