News

Four firms contend for auditor contract as Palo Alto moves to outsource one of city's key functions

Council scheduled to review in August a contract that would save $250K annually

On July 28, Palo Alto's Council Appointed Officers Committee will interview four auditing firms to operate as the city's Auditor's Office. Embarcadero Media file photo by Veronica Weber.

Looking to save the city a considerable amount of money and bring consistency to a department that has experienced turnover and strife over the past decade, Palo Alto's Council Appointed Officers Committee on Tuesday, July 28, will take the next step toward hiring an independent contractor to operate as the Office of the City Auditor.

The committee plans to interview four auditing firms vying to replace the last city auditor, Harriet Richardson, who departed in February 2019, along with the staff in the auditor's office.

The full City Council will interview the candidate for auditor from each of the firms during a special closed session on Wednesday, Councilman Eric Filseth said. The council is scheduled to award the $750,000-per-year contract in mid-August.

Three of the candidate firms are large entities: Eide Bailly LLP is headquartered in Fargo, North Dakota, with an office in San Mateo, and has more than 2,500 employees; Moss Adams LLP, is headquartered in Seattle, Washington with an office in Campbell and has more than 3,200 employees; Baker Tilly Virchow Krause LLP, is the American branch of Baker Tilly International, headquartered in London, United Kingdom. The company's U.S. branch has an office in San Francisco. Baker Tilly has more than 3,350 employees. The fourth candidate, Sacramento-based Sjoberg Evashenk Consultants, is a small, 20-person firm. (Update: On Tuesday, the committee chose the three largest firms to move forward. Each firm's representative who would become the city auditor will face the entire council in a closed meeting on Wednesday afternoon.)

Outsourcing the entire auditor's office would save the city an estimated $250,000 per year in salaries and benefits. The contract would be in effect for two years with extensions of up to three years, according to a staff report.

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The decision to contract out the city's auditing operation came after considerable deliberation. The auditor position has had a high turnover rate in the past decade and costs more than similar services in other cities, the council found. On Feb. 10, the council unanimously approved issuing a request for proposals to be overseen by the Council Appointed Officers Committee.

"(We're) really looking to understand which would be the best fit for Palo Alto. Some of the main things we'd like to hear about are their ideas on how their strengths align with our needs, discuss how they'll manage the need to maintain independence, and their thoughts and experiences for us moving from an internal model to using an outside agency," Filseth, a CAO Committee member, said in an email on Monday.

The chosen firm would appoint one of its team members to serve as the internal chief auditor, and other staff would handle the city's audits. The position is responsible for conducting internal audits to provide the public with independent and objective analysis of whether city management is using its "financial, physical and informational resources effectively, efficiently, economically, ethically and equitably" and if the city is complying with laws, contract and grant requirements and city policies and procedures, according to the staff report. The firm and its staff would maintain independent-contractor status.

In a 2020 twist, applicants should also consider the ramifications of the COVID-19 pandemic and how economic and working conditions might affect the internal audit program and its costs, according to the staff report.

The Office of the City Auditor's $1 million operating budget in fiscal year 2019-20 paid for five full-time positions, including one city auditor, two senior performance auditors and two performance auditor II positions, according to the staff report.

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The council wants the contractor to focus on annual audit planning by looking at risk assessments and concentrating on the most efficient use of the city's increasingly scarce financial resources. The contracted firm would handle six core tasks: preparing an annual audit plan, performing a citywide risk assessment, selecting an external financial auditor and annually coordinating external audits; conducting a minimal number of internal audits of departments and operations; preparing quarterly and annual status reports and undergoing a peer evaluation following the guidelines of the Association of Local Government Auditors every two years.

Following the interviews, negotiations over the scope of services and fees will take place July 30 to Aug. 10. The City Council is scheduled to vote on the recommended contractor on Aug. 17. The chosen firm would begin work on Sept. 1, according to the report.

The community can view Tuesday's meeting starting at 9 a.m. by visiting Zoom or dialing 669-900-6833 and using Meeting ID: 950 2446 5768. The meeting will also be broadcast live on YouTube. Public-comment instructions can be found on the committee's agenda page.

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Four firms contend for auditor contract as Palo Alto moves to outsource one of city's key functions

Council scheduled to review in August a contract that would save $250K annually

by / Palo Alto Weekly

Uploaded: Mon, Jul 27, 2020, 4:01 pm
Updated: Tue, Jul 28, 2020, 4:13 pm

Looking to save the city a considerable amount of money and bring consistency to a department that has experienced turnover and strife over the past decade, Palo Alto's Council Appointed Officers Committee on Tuesday, July 28, will take the next step toward hiring an independent contractor to operate as the Office of the City Auditor.

The committee plans to interview four auditing firms vying to replace the last city auditor, Harriet Richardson, who departed in February 2019, along with the staff in the auditor's office.

The full City Council will interview the candidate for auditor from each of the firms during a special closed session on Wednesday, Councilman Eric Filseth said. The council is scheduled to award the $750,000-per-year contract in mid-August.

Three of the candidate firms are large entities: Eide Bailly LLP is headquartered in Fargo, North Dakota, with an office in San Mateo, and has more than 2,500 employees; Moss Adams LLP, is headquartered in Seattle, Washington with an office in Campbell and has more than 3,200 employees; Baker Tilly Virchow Krause LLP, is the American branch of Baker Tilly International, headquartered in London, United Kingdom. The company's U.S. branch has an office in San Francisco. Baker Tilly has more than 3,350 employees. The fourth candidate, Sacramento-based Sjoberg Evashenk Consultants, is a small, 20-person firm. (Update: On Tuesday, the committee chose the three largest firms to move forward. Each firm's representative who would become the city auditor will face the entire council in a closed meeting on Wednesday afternoon.)

Outsourcing the entire auditor's office would save the city an estimated $250,000 per year in salaries and benefits. The contract would be in effect for two years with extensions of up to three years, according to a staff report.

The decision to contract out the city's auditing operation came after considerable deliberation. The auditor position has had a high turnover rate in the past decade and costs more than similar services in other cities, the council found. On Feb. 10, the council unanimously approved issuing a request for proposals to be overseen by the Council Appointed Officers Committee.

"(We're) really looking to understand which would be the best fit for Palo Alto. Some of the main things we'd like to hear about are their ideas on how their strengths align with our needs, discuss how they'll manage the need to maintain independence, and their thoughts and experiences for us moving from an internal model to using an outside agency," Filseth, a CAO Committee member, said in an email on Monday.

The chosen firm would appoint one of its team members to serve as the internal chief auditor, and other staff would handle the city's audits. The position is responsible for conducting internal audits to provide the public with independent and objective analysis of whether city management is using its "financial, physical and informational resources effectively, efficiently, economically, ethically and equitably" and if the city is complying with laws, contract and grant requirements and city policies and procedures, according to the staff report. The firm and its staff would maintain independent-contractor status.

In a 2020 twist, applicants should also consider the ramifications of the COVID-19 pandemic and how economic and working conditions might affect the internal audit program and its costs, according to the staff report.

The Office of the City Auditor's $1 million operating budget in fiscal year 2019-20 paid for five full-time positions, including one city auditor, two senior performance auditors and two performance auditor II positions, according to the staff report.

The council wants the contractor to focus on annual audit planning by looking at risk assessments and concentrating on the most efficient use of the city's increasingly scarce financial resources. The contracted firm would handle six core tasks: preparing an annual audit plan, performing a citywide risk assessment, selecting an external financial auditor and annually coordinating external audits; conducting a minimal number of internal audits of departments and operations; preparing quarterly and annual status reports and undergoing a peer evaluation following the guidelines of the Association of Local Government Auditors every two years.

Following the interviews, negotiations over the scope of services and fees will take place July 30 to Aug. 10. The City Council is scheduled to vote on the recommended contractor on Aug. 17. The chosen firm would begin work on Sept. 1, according to the report.

The community can view Tuesday's meeting starting at 9 a.m. by visiting Zoom or dialing 669-900-6833 and using Meeting ID: 950 2446 5768. The meeting will also be broadcast live on YouTube. Public-comment instructions can be found on the committee's agenda page.

Comments

Kathy
Greater Miranda
on Jul 27, 2020 at 4:12 pm
Kathy, Greater Miranda
on Jul 27, 2020 at 4:12 pm
37 people like this

How interesting that the City auditor position is the one where the City chooses to try to save money. The one position that might examine bid rigging, and fraud, and wasteful spending and other bad behavior is the one the City staff and City Council choose to put at arms length and cut costs on. No, no proposals to cut labor costs or exorbitant pension benefits that are so underfunded, but save money on the position that might shine a light on excessive spending and any shenanigans going on at the City.


Online Name
Embarcadero Oaks/Leland
on Jul 28, 2020 at 10:50 am
Online Name, Embarcadero Oaks/Leland
on Jul 28, 2020 at 10:50 am
18 people like this

So the city's going to "save" $250,000 -- less than the price of one cop -- and lose how much to mismanagement, fraud, gravy-train consultants and stupid projects?


Mark Weiss
Downtown North

on Jul 28, 2020 at 11:05 am
Name hidden, Downtown North

on Jul 28, 2020 at 11:05 am

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senor blogger
Palo Verde
on Jul 28, 2020 at 2:56 pm
senor blogger, Palo Verde
on Jul 28, 2020 at 2:56 pm
18 people like this

What am I missing?
The outsourced auditor will save $250.,000 per year.
In order to do that the council, in its collective wisdom will award a $750,000 contract.??????????


Barrister
Old Palo Alto
on Jul 28, 2020 at 4:44 pm
Barrister, Old Palo Alto
on Jul 28, 2020 at 4:44 pm
14 people like this

The article doesn't mention that the City is outsourcing the entire office to cover up their mishandling of the previous Auditor's illegal activities. There is an active lawsuit in the Santa Clara Superior Court (20CV366568 -- Harriet Richardson vs City of Palo Alto) in which Richardson is suing the City to keep a lid on the City's investigatory reports and investigations by the Palo Alto Police Department of Richardson for illegal activities while she was Auditor. The City has already paid out a settlement to one employee of the Auditors Office due to illegal conduct by Richardson. Now the City wants to wash its hands of the entire office and start fresh under the cover of saving money. We'll see how much money is saved once the remaining employees are outsourced as this will easily lead to constructive termination lawsuits by those employees. Lead on fearless Council and do what you do best...... waste the taxpayers dollars with gross incompetence and negligence.


Resident 1-Adobe Meadows
Adobe-Meadow
on Jul 28, 2020 at 5:18 pm
Resident 1-Adobe Meadows, Adobe-Meadow
on Jul 28, 2020 at 5:18 pm
6 people like this

The above suggests that what are now "government" employees will morph into commercial employees which requires a different approach to the pension plans of both the government agency (us) and the Commercial auditor - assuming that they will have to absorb the existing plans of these people. The existing government employees could request a buy-out of their retirement plans which has undetermined value. This whole approach looks very messy.

No use in understanding how we got into this mess in the first place. How does someone who performed an illegal action against the city get to sue the city? And why is the city on the hook to protect the lady's reputation? I am sure that there is more to this story than we will ever find out. The only concern I have is that we may be repeating the same bad judgement here.

If the existing employees were not involved in the sorry event then why not leave them there? They know the history of city events and can best work those issues. The auditor then comes in to review their progress and approach. And direct them to a new approach if required. The auditor needs to be independent of what the city actions are - their role is to make sure that the T's ae crossed and I's dotted and we are compliant with all official directions from the government.


Who has been so burned?
another community
on Jul 29, 2020 at 8:00 pm
Who has been so burned?, another community
on Jul 29, 2020 at 8:00 pm
6 people like this

The Council is still misguided since it hired the prior city auditor, Harriet Richardson.

Where did they go wrong? 

Several staff filed complaints to raise concerns about her actions. Web Link 

Council tried to outsource the office in May 2018, stopping only due to public outcry. Web Link

Prior city auditor retires, and Council again goes down the path of outsourcing the office. 

Prior city auditor files a lawsuit to block the release of public information. Why? Web Link

At the 7/28 Council meeting to discuss the interviews of audit firms, Council member Liz Kniss said "We’ve been so burned by our auditor experience...it kind of left a lasting sizzle." 

The Palo Alto residents are the ones who have been and will continue to be so burned by the misguided efforts of Council. They turned a blind eye to the issues being raised, and now they would rather eliminate any source of accountability than face the consequences of their actions. A fair and impartial auditor's office is clearly in the best interest of Palo Alto residents. 


Resident 1-Adobe Meadows
Adobe-Meadow
on Jul 30, 2020 at 9:51 am
Resident 1-Adobe Meadows, Adobe-Meadow
on Jul 30, 2020 at 9:51 am
Like this comment

So that raises a new issue - we have a candidate for city council who is in the Legal Department of the city. This whole issue seems to revolve around bad legal decisions. And the resolution they are looking at is washing bad legal decision down the drain with new bad decisions. And the existing accounting staff who were trying to advise on this issue are out the door because they can tell no tales? I can see where this is all going. We are in big trouble here.


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