City Managers Intended to Ask for ‘Retroactive Approval’ of Millions in Contract Spending

City officials say they did not discipline staff who adjusted a contract by $6.7 million without Council approval. They said staff made those changes on orders from upper management who intended to ask the City Council to retroactively approve the millions in extra spending. 

In October, councilmembers expressed frustration after city auditors found the city spent millions on rental equipment without City Council’s approval in 2023. They demanded to know who made the adjustments. 

On Thursday, Voice of San Diego obtained the names of the individuals who made the contract adjustments, but the city requested we not publish them because they were acting on the directive of their superiors. 

“As was stated in the Council meeting on Oct. 6, the adjustments were made in Ariba (the city’s procurement system) in order to ensure the vendor was paid for services rendered and to avoid a breach of contract, which would have presented serious risks to the city,” said Nicole Darling, spokesperson for the city in an email statement, on Friday. 

“The services included rental equipment that was necessary for critical operations and to address emergency situations, including the 2024 floods during which crews cleared several miles of streets and storm channels. 

The adjustments were made in Ariba with management’s awareness and with the intent of obtaining retroactive approval from the City Council.” 

Management from the purchasing and contract department said they intended to get retroactive approval of more than $6 million used on a contract with Herc Rentals, for things like forklifts, trucks, and other equipment. 

The audit found city staff adjusted the contract twice in 2023 without Council approval. 

First in October by $4 million, and then again in December by $2.7 million. 

City law requires the Council  to approve new contracts over $3 million and all adjustments to contracts over $200,000.  The adjustments without Council approval frustrated elected leaders.  

“That’s against the law,” said Councilmember Marni von Wilpert at the Oct. 6 Council meeting. “The reason is we [the City Council] need to know where our money is going.” 

In a phone call on Friday, Darling said, “No discipline was issued.”  

The employees who made the adjustments were just following the chain of command, said Claudia Abarca, director of purchasing and contracting, during the Council meeting. 

“My staff did that, we own that,” Abarca said. “And again, it was because we owed the vendor several millions of dollars without having the appropriate purchase orders in place.” 

Von Wilpert demanded to know who called the shots on the making the adjustments.  

Abarca said at the time she didn’t know whether it went to the mayor himself but, “I know I did bring this up to the (deputy chief operating officer).” 

A memo to Councilmember von Wilpert on Oct. 28 shared with Voice details which departments spent the most dollars and where the money came from. 

These departments include transportation, stormwater, and public utilities. The city said each department used their non-personnel expenditures to spend on Herc Rentals and had discretion to do so “to effectively deliver services and programs.” 

But the city said no departments or services were impacted by the unapproved spending.  

Instead, Chief Financial Officer Rolando Charvel said overages by city departments were offset by savings in others.  

In the memo, Charvel said the Department of Finance closely monitored city budgets when the unapproved spending happened, and that they closed fiscal year 2024, which ended in June 2024, with a balanced budget. 

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