Inquiry reveals SANDAG management knew about toll road woes

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An ongoing investigation into overcharging on San Diego’s state route 125 toll road found implementation of the back-office system encountered problems from the onset, and San Diego Association of Governments’ executive management failed to address the situation in a timely manner, including informing the board of directors.

SANDAG’s independent performance auditor released two investigations Monday that concluded the agency lacked the internal controls needed to make sure the SR-125 toll road, formerly known as the South Bay Expressway, financial records were accurately recorded and reported.

“We cooperated fully with the Office of the Independent Performance Auditor on these investigations and the latest findings are consistent with what we have been implementing and telling the board,” SANDAG CEO Mario Orso said in a statement.

Orso was named CEO in April after a nationwide search. She replaced Hasan Ikhrata, who stepped down in December.

ETAN Tolling Technology was “headed for trouble since the very beginning,” according to the auditor. An early internal report worried about the potential loss of $50 million in revenue and the potential for jeopardizing the bonds issued by SANDAG to buy the toll road.

“As Chair of the SANDAG Board, transparency and accountability are my top priorities,” SANDAG Chairwoman Vargas said in a statement. “The recent Office of the Independent Performance Auditor report on SR125 is crucial in shaping our future decisions.

Supervisor Nora Vargas’ office

The tollway was built by a private concessionaire that went bankrupt in 2010, a little more than two years after it opened. SANDAG purchased the toll road at a discount from the private operator in 2011.

The investigation follows a lawsuit filed late last year that claimed tens of thousands of drivers were charged incorrectly for the toll.

In December 2023, SANDAG’s Independent Performance Auditor, audit committee, board chair and several board members determined the publicly disclosed allegations regarding the SR 125 toll operations warranted an independent investigation.

In March, the Office of the Independent Performance Auditor investigated and published findings that found critical systemic issues with the operation system.

The toll road operation system was found in March to be unreliable and led thousands of people to be mischarged; and also that SANDAG lacked the internal controls needed to make sure the toll roads’ financial records were accurately recorded and reported.

The results of the two investigations will be presented to SANDAG’s audit committee on Friday and to the board of directors on Oct. 25.

“As chair of the SANDAG Board, transparency and accountability are my top priorities,” SANDAG Chair Nora Vargas said in a statement. “The recent Office of the Independent Performance Auditor report on SR125 is crucial in shaping our future decisions.”

She is committed to ensuring public funds are used effectively and efficiently and the community will be kept informed throughout every stage of the process.

“We have an update scheduled for our board this week to share a realistic schedule and the actions we are taking to make sure we have the appropriate system requirements, due diligence, and oversight in place going forward — many of which mirror the recommendations made by the auditor,” Orso said.

Last fall, Lauren Warrem, a former SANDAG finance director, sued the agency, claiming she was fired as retaliation for raising concerns about toll system errors, which brought the issue into the public eye.

The report also found that senior managers at the regional planning agency knew about these issues before the board of directors were alerted.

“SANDAG has suffered significant revenue losses due to a lack of adequate and timely monitoring,” the report says. “At least $1 million in revenue has been lost due to a function in (software) not being turned on.”

In March, the board unanimously approved the audit committee’s recommendation to implement the 10 recommendations identified in the SR-125 Toll Operations Investigation Report, and continue to work to confirm customer accounts are accurate; validate with management that no similar issues will occur in future contracts; and development of a policy for timely reporting on all multi-million dollar projects. The board also requested the OIPA conduct an investigation to determine whether the SANDAG legal team, executive team, and/or board members were made aware of the issues prior to the board.

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