City workers who sniff out fraud at Palo Alto's City Hall could soon have a new whistle-blowing tool at their disposal.
The city is preparing to revamp its ethics policies and is considering a new whistleblower hotline that employees could use to report workplace fraud, waste and abuse. City officials are undertaking these parallel efforts to comply with a 2008 ethics audit issued by then-City Auditor Sharon Erickson.
The city has already implemented four of the audit's seven recommendations, including provision of periodic ethics training for employees, devoting a section on the city's internal website to ethics policies, requiring supervisors to review workers' Form 700s (legally required statements of economic interest), and surveying the employees' ethical culture. City officials hope to complete the three remaining recommendations -- a formal policy on ethics training, an official "code of ethics" and a new fraud, waste and abuse hotline -- by the end of the year.
Assistant City Manager Pamela Antil said the city has already begun its effort to institute a clear ethics policy to guide employees' conduct. The policy, she told the Weekly, would be based on "values," rather than rules. The city's consultant, Tom Shanks of The Ethics Company, has been discussing the policy with senior City Hall staff.
"Rather than just adopting a code of ethics (from existing agencies and organizations), we have decided to create our own program that will be for all of our workforce to build an ethical culture and enhance public trust," Antil said.
Erickson had recommended a new ethics code and a formal ethics-training program to clarify what she characterized as the city's "scattered" policies. Codes of ethics, she wrote, "are commonly used to promote ethical values and help avoid problems.
"While Palo Alto has a plethora of rules and regulations, and offers some ethics training for employees, it does not have a formal employee code of ethics or employee ethics program," Erickson wrote.
She also recommended the new hotline, citing a study by the Association of Certified Examiners that found organizations with fraud hotlines had a median loss of $100,000 per fraud scheme, compared to $200,000 in organizations without such a hotline. The organizations with fraud hotlines also detected the fraud within 15 months of inception, compared to 24 months for those without the hotlines.
"These programs can be provided at minimal cost," she wrote. "Studies indicate that the City could minimize potential losses by establishing a hotline and whistleblower policy and procedures."
So far, Palo Alto officials have been cautious about the potential costs of the new hotline and the ways in which the tool would be used. In July 2010, the council's Policy and Services Committee recommended pursuing the hotline but specified the city should create policies and procedures before the hotline is implemented.
Under the pilot proposal currently on the table, the whistleblower hotline would be available to city workers but not to the general public -- the same model currently used in Stockton, San Bernardino County and Mesa, Ariz. Some cities, including San Francisco, Oakland and San Diego, also allow residents to use these hotlines to report fraud.
Members of the Policies and Services Committee and staff agreed the new line should not become a tool used by residents to make every kind of complaint against the city. Antil pointed out at the July meeting that Palo Alto is much smaller than the cities whose hotlines allow citizen complaints. The city, she said, does not have the resources to pursue every allegation or to hire new staff to chase down complaints about potholes or tree branches.
"We didn't want it to turn into something that people use as a catch-all for every complaint," Antil told the Weekly.
Palo Alto officials plan to have a third party oversee the hotline. The offices of the city auditor, the city manager and the city attorney will work together in the coming months to develop the general protocols and procedures for responding to complaints, according to a recent report from the auditor's office. They hope to complete this effort by December.
Ian Hagerman, a senior auditor at the City Auditor's Office, said his office is in the midst of developing protocols, evaluating vendors and studying examples from other jurisdictions. The goal, he said, is to make sure the new policies "fit Palo Alto." The effort was delayed by staff changes in both the city auditor's and the city manager's office, he said, citing the departures of Erickson and (former assistant city manager) Emily Harrison.
But "it's one of the things we'll focus on from our office's standpoint in getting these recommendations closed down," Hagerman said.