Senior managers at the San Diego Association of Governments accepted full responsibility for a series of failures in the state Route 125 toll-collection system that led to millions of dollars in lost revenue before they alerted the board of directors.
But discussion of key details about why the agency did not act sooner were delayed after directors of the agency known as SANDAG pushed the matter back two weeks.
In a report released ahead of the Friday board meeting, Interim Chief Executive Officer Director Coleen Clementson acknowledged that top managers should have addressed problems with the flawed software system much earlier.
“SANDAG management has closely reviewed the history of the toll operations project and found that there was a general breakdown in process, project management and consultant support that ultimately led to the need for a new back-office system,” she wrote.
“SANDAG management takes full responsibility for the failure of the toll-operations system, including failing to inform the board on a regular basis on this project and is taking decisive actions to prevent this from happening again,” Clementson added.
Board members were scheduled to receive and discuss the findings publicly on Friday afternoon, but the matter was delayed, presumably because an earlier closed session of the board stretched for some five hours.
It will now be the subject of a public discussion on April 26.
One key recommendation from internal auditor Courtney Ruby was for senior executives to provide the board — and the public — an explanation for the more than a year it took to begin searching for a new toll-system operator.
The delay forced SANDAG to issue a sole-source contract earlier this year.
In her response to the audit, Clementson said: “Management accepts this recommendation and will incorporate this into the board report for the April 12, 2024 meeting.”
The closed-session meeting Friday included interviews with potential chief executive officers, and three potential lawsuits confronting the $1.3 billion agency, according to the publicly posted agenda.
A new CEO could be named publicly as soon as next month, the draft May agenda notes.
If the successor is named next month, it would be much sooner than expected. SANDAG previously said an executive search was expected to take much the year.
Clementson’s response to the internal SANDAG auditor’s findings came amid an ongoing federal investigation into the agency’s practices.
The San Diego Union-Tribune reported the investigation two weeks ago, although the subject of the probe remains unclear. SANDAG officials alerted the staff to the U.S. Department of Justice investigation by email and urged anyone contacted to cooperate with federal agents.
Complaints from the public and even some board members about SANDAG leadership have swamped the organization in the wake of an eye-popping internal audit issued late last year that revealed broad failures in the SR-125 toll system.
Rather than force the contractor to correct the deficiencies or find a new provider, SANDAG management continued to pay the vendor and a consultant that was supposed to be monitoring the project for years, the audit found.
Former CEO Hasan Ikhrata, who resigned late last year, did not tell the board of directors about the problems until October, two months before he resigned. He told directors in December that until then he had not considered the failures important enough to alert them.
The flawed tolling software, which mischarged drivers for years and cost the agency millions of dollars in uncollected tolls, came to light publicly after a former finance director said she had refused to sign off on internal reports that could not be properly reconciled.
Finance official Lauren Warrem was fired and is now suing the agency for wrongful termination.
The agency is also facing a class-action lawsuit from drivers who say they were wrongly charged after using the tollway.
Chief Financial Officer Andre Douzdjian, who supervised Warrem and was in charge of managing the SR-125 tolling revenue, submitted retirement papers last month in the wake of the scandal.
Douzdjian will nonetheless remain on the SANDAG payroll through June 28, the agency confirmed Friday. He was paid $304,000 in 2022, according to the online public salary database Transparent California.
He and Ikhrata made the decision to terminate Warrem last fall after she said she refused to sign off on internal financial reports.
In her management response to the audit, Clementson did not publicly identify the senior managers responsible for the delays in informing the board or finding a new vendor. But it has been clear at prior discussions that many board members and public observers blame Ikhrata and to a lesser extent his longtime CFO.
The interim CEO herself told the board last month that she did not learn about problems with the ETAN Tolling Technology software until October, when the SANDAG board was finally briefed on the issue during a closed-session meeting.
Earlier this year, the board voted to hire a new provider for the toll system.
The agreement will pay Deloitte and A-to-Be nearly $32 million over the next seven years, although it will take months to implement.
Numerous members of the public and some SANDAG board members have urged the panel to do away with the tolls altogether, but officials said they need the $50 million or so in annual tolls to pay off the bonds used to finance the 2011 purchase of the 10-mile stretch of SR-125.
In her audit response, Clementson said she agreed with virtually all of Ruby’s findings.
She noted that some of the suggestions already have been implemented and the rest would be addressed in coming weeks and months.
