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Balboa Park Audit: Everyone Was Inept, No One Was Corrupt

No one was corrupt, they just didn’t do a good job.

An audit [1] examining San Diego’s disastrous attempt to throw a yearlong party [2] marking the centennial of the 1915 event that transformed San Diego and Balboa Park found virtually everyone involved with the event deserved some blame for its failure, but didn’t find any explicit misuse of public funds. Instead, it reiterates the picture that emerged when the whole thing first collapsed: an ill-conceived event that failed to generate interest from anyone who could fund it, exacerbated by a series of leadership missteps and bureaucratic hurdles.

The city auditor’s office released Wednesday its investigation into Balboa Park Celebration Inc, (BPCI), the nonprofit created to throw the event, and other factors within City Hall that led to its failure. It sought to answer five questions spelled out by a City Council committee: Did BPCI misuse public funds? Did it comply with its contracts with the city? Did anyone get paid and not do anything? Did the city provide any oversight? And what other factors led to the failure?

BPCI signed contracts without following proper protocol, after miscommunication with the city attorney’s office.

City staff did an awful job of monitoring progress. Required presentations before a City Council committee didn’t happen.

Plus, Mayor Bob Filner was a jerk. Constant turnover in the mayor’s office didn’t help. BPCI struggled with spending restrictions on funding from the city’s Tourism Marketing District. BPCI was unsure of environmental regulations it needed to follow. And practically no one who had enough money to fund the thing had any interest in doing so.

No one stole or misused money, however, and the audit didn’t find any bribes, political favors or anything like that (although the whole purpose of awarding contracts through a competitive process is to avoid the reality or appearance of impropriety, and everyone failed on that front).

And for all the errors the auditors found, none is presented as fundamental to the event’s failure. Nowhere does it suggest, “If only BPCI had made its required appearances before the City Council, San Diego would be gearing up for the yearlong celebration it envisioned.”

Contracts Awarded Incorrectly

On 16 of 20 key contracts BPCI signed, it failed to fully follow requirements meant to “ensure fair practices and avoid appearances of impropriety or conflicts of interest,” according to the audit.

BPCI says that’s because it was acting on advice from the city attorney.

The funding agreement between BPCI and the city said it needed to have a competitive process for selecting contracts of certain values. For some contracts that meant getting three price quotes, presenting those to the board and declaring in the minutes what action was taken.

For larger contracts, it meant running a formal “request for proposal,” or RFP, in a newspaper, screening all responses, selecting a group of finalists and using a committee or the BPCI board to make a final selection.

Some of BPCI’s employees were hired by extending them a contract, and some of those hires didn’t follow the RFP requirements.

BPCI didn’t follow procedure when it hired local hotelier Mike McDowell as the organization’s second CEO or when it brought in former Mayor Jerry Sanders staffer Gerry Braun to run communications. Braun later served as interim CEO.

The audit says Braun  in March 2013 sent an email to the city attorney’s office seeking clarification.

“Per our discussion today, (BPCI) is not required as a term of its Memorandum of Understanding with the City to advertise or to issue RFPs in order to fill positions or engage with consultants.”

A deputy city attorney responded: “That is correct. There is nothing in the MOU that speaks to a process for hiring by BPC. Rather, the MOU acknowledges that BPCI is a separate corporate entity that operates independently of the city.” But, the attorney added that requirements “may exist elsewhere” in other laws that apply to nonprofits. But it wasn’t part of the operating agreement.

BPCI, according to the audit, says the emails show the advice was in reference to both hiring employees and executing contracts.

But the auditors didn’t completely buy BPCI’s argument. They point out the group followed the procedures when hiring its first CEO, who resigned after just four months.

In an interview, audit manager Matt Helm said the email exchange occurred many months into BPCI’s life, and the nonprofit wasn’t the city attorney’s client in the first place.

“We didn’t want to come down on either side because there clearly was a misunderstanding,” said Matt Helm, the audit manager. “When we run into a he-said, she-said, we just try to document it.”

For other major contracts, like those for Autonomy, the firm hired to program the whole event; Loma Media Partners, the firm hired to build a media strategy; and Utopia Entertainment Inc., which replaced Autonomy, BPCI followed procedures at first, but later renegotiated the terms in violation of protocol.

Delayed Deliverables

The city set up a bunch of deadlines for BPCI so it would know how the planning was going.

Sometimes BPCI met those deadlines, sometimes it didn’t. And BPCI was supposed to present its progress to a City Council committee every quarter. That rarely happened — BPCI went before the Natural Resources and Culture Committee five times out of more than 10 quarters.

And when BPCI did go before the committee, Council members didn’t ask any substantive questions or press the nonprofit on its progress.

The audit doesn’t say whether the missed meetings are the responsibility of BPCI, which was required to make them, or the committee’s chair, Councilman David Alvarez, who controls the committee’s meeting schedule and dockets items for discussion.

Helm said that’s another he-said, she-said issue. BPCI said they tried to get scheduled; a committee consultant had a different version of events.

“There was no documentation that we could review,” Helm said.

There Weren’t Any No-Work Contracts

One question auditors sought to answer was whether any of the contractors who received money from BPCI didn’t do what they were hired to do, or failed to deliver their work.

That didn’t happen, the audit found. The 10 highest-paid contractors accounted for two-thirds of BPCI’s spending, almost $2 million, but they all did what they were paid to do.

That’s partly because the contracts were so broad, it made it easy to comply, the audit said.

The City Did a Bad Job Watching Over the Whole Mess

The city’s deputy director for economic development was tasked with reviewing quarterly financial packets from BPCI, including invoices, checks and other financial documents. The city’s director of special events was meant to oversee contracts and review documents BPCI had to turn in to measure its progress.

“We found that there was little to no comment or feedback provided by city staff on any of the reports provided by BPCI,” the audit says.

Plus, the Council committee meant to provide quarterly check-ups didn’t ask any hard questions.

On the financial documents, the audit said city staff didn’t provide sufficient oversight.

The city attorney’s office told auditors there was enough detail on requirements, plus a clause in the contract that explained how the city could terminate the relationship if requirements weren’t met, to constitute “sufficient enforcement measures.”

The audit concludes, however, city staff could have demanded more information from BPCI so it could provide better oversight, but didn’t.

Filner Happened

The audit devotes an entire section to “other factors” that played into the burning bag of dog poo that was the Balboa Park Centennial.

One big one was the mayoral transition between Sanders and Filner. Specifically, the audit points the finger at Filner’s influence.

The section on outside factors mentions Filner’s name 29 times.

For one, it says an unrelated fight he had with the Tourism Marketing District — an organization that collects taxes from city hotels and spends them to market the city as a destination — delayed funding to BPCI, which caused it to cease work with some of its vendors and delayed overall planning.

BPCI employees also told auditors Filner’s grand vision for an event much larger than the one being planned hurt progress, that he ran off a fundraiser who proposed corporate sponsorships for the event, that he never fundraised for the event as he pledged to do, that he essentially took control of Autonomy away from BPCI and gave them new directions (an Autonomy partner denied this to Voice of San Diego in the spring) and that his decision to kill a much-derided early branding concept — EDGE2015 — further delayed things.

The audit also points to two regulatory issues that hurt the plan. BPCI couldn’t demonstrate the event would exclusively benefit hotels — a requirement to get TMD money. And, a lawsuit against the city created uncertainty over whether permits to use city parks, which would have been required for all the Centennial events, required environmental review.

The audit says BPCI’s meeting minutes show it received conflicting information from city officials on the latter issue, with positions shifting from one month to the next.

Finally, the audit says BPCI had a terrible time raising philanthropic funds or finding corporate partnerships. That was mostly because of economic factors out of BPCI or the city’s control, according to the audit.