By Jose Navarro, MBA | The Navarro Report
In June, the San Diego City Auditor’s office sent a letter to the City Council with a number worth stopping on. In earlier years, the Office of the City Auditor made up approximately $1.40 of every $1,000 the city spent. By FY2027, that figure had fallen to $0.94 per $1,000. The office formally described this decline as reducing its ability to provide sufficient audit and investigative coverage of city operations.
That letter arrived in the same budget cycle in which San Diego was closing a $118 million deficit by cutting library hours, slashing arts funding by 85 percent, and laying off 157 employees. The city found cuts everywhere. The audit office — the function responsible for catching the fraud, waste, and mismanagement that contribute to those deficits — was not exempted from the trend.
Times of San Diego covers city government accountability more consistently than any local outlet, and this is the accountability story behind the accountability story: a city whose own auditor is formally warning that it cannot keep pace with the scale of the government it is supposed to oversee.
The specifics are worth understanding. The Office of the City Auditor currently employs two fraud investigators. In FY2026, those two investigators managed a combined caseload of approximately 275 fraud hotline reports — 137.5 per investigator per year. The City Auditor’s own letter to the council compared that figure to Austin, Texas, where six fraud investigators handle approximately 400 reports total, or 67 per investigator. San Diego’s two investigators are managing more than twice the caseload of their Austin counterparts, in a city of 1.4 million people with a $6.4 billion budget.
The fraud hotline itself is active. In FY2026 alone, it received allegations involving fraud related to a city contract, wasteful software implementation at a city department, abuse of discretion regarding financial internal controls, high prices the city was paying for contracted goods, and questionable hiring practices. These are not routine administrative complaints. They are documented allegations of the kind of conduct that — when uninvestigated or slowly investigated — compounds the structural financial problems the city is simultaneously trying to close through service cuts.
The city auditor’s budget has declined relative to city spending not because of a single dramatic decision but because of a decade of incremental choices to prioritize other uses of general fund dollars over the oversight function. Each individual reduction looked small. The cumulative effect is that the city now has, by its own auditor’s admission, an oversight capacity that is no longer adequate to the size and complexity of the government it is reviewing.
This matters for a reason that extends beyond the audit office itself. San Diego’s $118 million deficit did not arrive without warning. The San Diego County Taxpayers Association noted that middle-management positions ballooned from 70 to 393 since 2011. Mayor Gloria himself acknowledged that the deficit was built over decades. An adequately staffed audit function, operating at a ratio closer to peer cities, might have identified some of the structural inefficiencies driving those costs while there was still time to address them proactively rather than through emergency cuts.
The city has made the difficult decisions this year. It has cut the arts, reduced library hours, and asked employees and residents to absorb a reckoning that was years in the making. What it has not done is make the equally important decision to invest in the function that helps ensure those kinds of reckonings happen less often. An audit office funded at $0.94 per $1,000 of city spending is an audit office that will miss things. Some of those things will eventually show up as deficits.
The City Auditor’s letter asked for additional staff. The council has not yet acted on it. The fraud hotline continues receiving reports at a rate two investigators cannot fully address. And the city is simultaneously asking residents to accept reduced services because of financial mismanagement it lacked the oversight capacity to prevent.
Jose E. Navarro, MBA, is a financial controller and founder of The Navarro Report, a public finance and government accountability publication based in San Diego, California.
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