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PUC audit flags lease management problems, cites possible underpayments by Hanson/Hansen Aggregates
Summary
PUC staff reported Controller's Office audits finding inadequate lease administration for several properties, including a Mission Valley Quarry audit that identified up to $643,000 in questioned amounts and recommended review; staff said no fraud was found but pledged reorganizing real estate oversight.
San Francisco — The San Francisco Public Utilities Commission told commissioners Tuesday that recent Controller's Office audits found weaknesses in the agency's administration of real-estate leases and identified potential underpayments and record-keeping shortfalls.
The General Manager reported that two audits have been issued and a third is being released. The Mission Valley Quarry audit (Hansen/Hanson Aggregates Mid Pacific Inc.) covered 2004 through February 2008 and "did not make all required lease payments resulting in up to $635,000 in underpayments, potential underpayments, and other recoveries," the report said, according to the General Manager.
Staff explained some of the questioned amounts reflect poor documentation rather than deliberate fraud. The General Manager said the audits "have not uncovered any fraud, but in today's audit of the Mission Valley Quarry ... there are potentially about $155,000 of real issues" out of roughly $6.8 million received during the audit period. The Controller's audit also calculated a $260,000 issue tied to royalty methodology and cited $200,000 in audit costs that the lease could require the lessee to pay if the questioned amounts exceed a contractual 2% threshold.
Commissioners were told staff will reorganize real-estate management and consider whether to pursue recovery, and staff described plans to hire or reassign personnel and possibly hire outside mining expertise to reconstruct historical records if a cost-benefit analysis supports it. "We asked to have these audits done as soon as I got there because we were very concerned about our administration of the leases," the General Manager said.
The commission received the report as information and did not vote on enforcement or recovery at Tuesday's meeting; staff said they would return with recommendations and budget implications once follow-up work is completed.
