Independent audit finds SDG&E largely compliant; review committee recommends conditional renewal

The council received the Crowe LLP independent audit and the Franchise Compliance Review Committee (FCRC) report on SDG&E's compliance with franchise agreements covering July 2023 through July 2025. Crowe reported SDG&E met the audit objectives "in all significant respects" but documented two non‑significant findings related to undergrounding project scheduling, inspector availability and project classification for pre‑construction meetings. Crowe recommended strengthened project management controls, clearer invoicing supporting 90% completion estimates, and expanded joint review meetings.

The FCRC, a citizen panel convened under the franchise, told council its review found overall compliance but urged improved transparency and outcome‑focused oversight. Committee chair Cody Hoopin recommended a conditional renewal emphasizing: clearer, itemized cost breakdowns for undergrounding projects; alignment of renegotiation timelines so the committee's input informs contract revisions; plain‑language summaries for public review; and more public engagement earlier in the process. "These were isolated and tactical issues with no evidence of systemic problems or financial harm," the committee said, but it called for continued monitoring of prior audit themes and better public reporting on cost drivers.

Council context: staff and the committee framed conditional renewal as a policy decision for the council to balance compliance against long‑term community objectives like affordability and climate commitments. No motion to reject franchise renewal was made during this informational presentation; council members thanked volunteers and staff and emphasized continued oversight.

Key clarifying detail: Crowe's audit sample work included 13 administrative MOU projects and 8 active utility undergrounding projects; the two findings centered on missed internal processes and classification errors that delayed pre‑construction reviews and inspections. The FCRC asked to be given draft audit findings earlier in future cycles to improve committee impact on renegotiations.

Next steps: staff said the committee's recommendations would be folded into continuing oversight, and that renegotiation windows and monitoring metrics would be examined before any future renewal decisions.