REGION — Further investigations into SANDAG’s handling of the state Route 125 tolling system confirm that the executive team knew of issues early on and that the agency acted hastily rather than following best practices when transferring over the tolling back-office system to another vendor earlier this year.
Independent Performance Auditor Courtney Ruby shared the results of two investigations with SANDAG’s Audit Committee on Oct. 11. The board of directors will discuss the results on Oct. 25.
One was a companion investigation to an initial audit completed in March regarding the issue-ridden South Bay Expressway tolling system. The initial audit found that executives knew about major issues for over a year and a half before informing the board of directors, and that financial reports from vendor ETAN Tolling Technologies could not be relied upon.
The system incorrectly charged more than $90,000 to at least 57,000 motorists’ accounts, costing SANDAG an estimated $2 million in lost revenue.
The companion investigation, completed Oct. 7, confirmed that executive team members knew about ETAN’s financial reporting issues as early as mid-2022 but that their exact time of knowledge for each staff member depended on their proximity to the SR-125 system and former CEO Hasan Ikhrata.
It also confirmed that members of the Board of Directors were not informed of the significant issues until a closed-session meeting in October and that SANDAG executive staff were working to procure a new tolling system vendor in 2022 and 2023 without the board’s knowledge.
“These paths demonstrated a wasteful use of public resources and a lack of transparency, accountability and internal coordination,” the audit stated.
Ruby also shared the results of a whistleblower investigation into a complaint received by the auditor’s office in May. The complaint alleges that SANDAG failed to ensure that its financial accounting needs would be met during the selection of Deloitte and A-to-Be as the new back office system (BOS) vendors to replace ETAN.
SANDAG’s board of directors voted in January to approve a $28 million sole-source contract with Deloitte and A-to-Be to take over toll road operations from ETAN, a transition planned to take around seven months. However, Ruby’s office found that SANDAG rushed to fix the myriad of issues through the new contract, leading to drastic oversights that have created even further issues.
For example, the audit found that SANDAG did not define specific requirements for the new system and failed to ensure that Deloitte and A-to-Be’s systems provided the needed financial reporting software.
In April, SANDAG discovered that they were missing a critical component needed to integrate the new BOS properly. This will require additional time for implementation beyond the original seven-month timeframe. The audit said this could have been prevented due to better planning.
“SANDAG embarked on an expedited and uncoordinated process to replace ETAN’s back-office system. Best procurement and project management practices were not utilized, and lessons learned from the prior ETAN BOS implementation were ignored,” the report stated.
For the time being, already overworked finance staff will have to manually complete financial accounting work that was supposed to be done automatically as part of the new system.
SANDAG Audit Committee Chair and Solana Beach City Councilmember Dave Zito was at a loss for words regarding the findings.
“Having been on the audit committee for over four years now, this is the most damning report I’ve seen so far. It’s just really scary to think that we went out to procure a system to fix and address the issues with the existing system, and those requirements weren’t even defined or analyzed,” Zito said.
Committee Vice Chair and Del Mar City Councilmember Dave Druker called the situation disheartening.
“When this was all presented, the idea was ‘what was gonna solve it all,’ and obviously the staff did not do their due diligence on that and set the requirements up,” Druker said.
Ruby’s office outlined several recommendations to address these issues, namely, requiring further analysis for vendors to ensure they meet clearly defined project requirements before being awarded multimillion-dollar contracts.
Other recommendations include clearly defining senior management roles and requirements for sufficient project management skills, revising sole-source contract policies, and requiring a formal post-evaluation of all multimillion-dollar projects to document lessons learned and needed corrective actions.
SANDAG CEO Mario Orso, who was hired by the board in April, said the agency is committed to addressing these issues and not replicating these mistakes going forward.
“It is a heavy lift in front of us, but like I tell the team, a long journey starts with the first and second step, so here we go,” Orso said.
The same day, the board of directors also discussed the process of eventually removing the tolls from the road, which is expected to take decades.
