After months of recruiting, Palo Alto is preparing to pull the trigger on hiring a new city auditor, with the City Council picking the international firm Baker Tilly to fulfill a function that has historically been overseen by a City Hall employee.
The city announced on Wednesday that it is preparing to approve a contract with Baker Tilly for 21 months (or one year and nine months), with an option to renew for three additional years. Under the new agreement, the city would pay the firm up to $750,000 per year, with the first year pro-rated at $550,000.
Kyle O'Rourke, senior consulting manager at Baker Tilly, would function as Palo Alto's city auditor once the council votes to finalize the deal on Sept. 28.
The hiring of Baker Tilly represents a major shift for Palo Alto's city auditor role, which was created by city voters in 1983 and which hasn't had a permanent occupant since the last auditor, Harriet Richardson, left in February 2019. Earlier this year, the council responded to the recent history of staff conflicts and rapid leadership turnover in the office by voting to shift operations to an external firm.
In July, a council committee narrowed down its options for the new auditing firm to four finalists: Eide Bailly LLC, Moss Adams LLP, Sjoberg Evashenk Consultants and Baker Tilly. With a workforce of 3,350 employees, the Chicago-based Baker Tilly was the largest of the contenders. Baker Tilly’s California office locations include Los Angeles, Orange County, San Diego, San Francisco and San Diego.
In its announcement, the city touted Baker Tilly's experience in the public sector with clients such as the cities of Carlsbad, Riverside, Burbank, Modesto and Richmond. It has also worked with municipal utilities such as Sacramento Municipal Utility District, San Diego Gas & Electric and the California Public Utilities Commission.
Mayor Adrian Fine said in a statement that the council sees "tremendous community value" in selecting firm, which is part of the Baker Tilly International network, to perform the city's audit function, which he said provides "vital risk monitoring transparency and accountability for the Palo Alto community."
"Kyle O'Rourke's experience and leadership managing public sector audit consulting for Baker Tilly will serve our community well as we focus on ensuring annual audits, risk management reviews, and other important work," Fine said.
O'Rourke, who has 10 years of experience in internal auditing and consulting in the public sector, is a certified internal auditor and a certified government auditing professional, according to the announcement. He also serves as senior vice president of the Chicago chapter of the Institute of Internal Auditors.
O'Rourke said in the statement that he is honored to be selected as Palo Alto's next city auditor and that he recognizes the "unique opportunity for our firm and myself to play this important role."
"Our team brings together extensive public sector and internal audit experience and we will work diligently to achieve the mission the City Council has set for Palo Alto's City Auditor focus, keeping residents' best interests at the forefront."
The proposed contract gives the council the option of terminating the agreement within 10 days. If the council votes to approve the contract, Baker Tilly will begin its new role in Palo Alto on Oct. 1, according to the announcement.
Comments
Registered user
Another Palo Alto neighborhood
on Sep 17, 2020 at 12:10 am
Registered user
on Sep 17, 2020 at 12:10 am
More deception from this City Council. This article states, "Earlier this year, the council responded to the recent history of staff conflicts and rapid leadership turnover in the office by voting to shift operations to an external firm." No! As I recall, the Council was seeking to merely outsource the "City Auditor" position (which I don't even think is legal), not the whole staff/office. Now, the whole operation is being outsourced? These staff members will be losing their jobs all due to the incompetence and poor management of the last carpet-bagging-City Auditor, who maintained residence in Washington State the whole time? Further, a quick check of this Kyle O'Rourke - how can he have ten years' experience in internal auditing, when he just received his college degree in 2013, per Linkedin.com (although this information will doubt be altered by the time you read this)? This City Council continues to demonstrate that it lacks any skill whatsoever in selecting a City Auditor. Really pathetic!
Registered user
Crescent Park
on Sep 17, 2020 at 6:56 am
Registered user
on Sep 17, 2020 at 6:56 am
What a crazy work-around this has been, just because the City Council lacked the courage and honesty to deal with an HR problem head on.
The auditor and that office reported (and reports) only to them. Council has been asleep at the wheel, and allowed the Auditor’s Office to be so as well.
After all the kabuki theatre pretending it is anything else going on, we will now be paying an international firm that will have to google what the Ross Building is, what the history and difficulties with Cubberley are, etc. Very disappointing.
Registered user
Crescent Park
on Sep 17, 2020 at 7:03 am
Registered user
on Sep 17, 2020 at 7:03 am
Roth Building... darn you, auto-correct!
Registered user
Another Palo Alto neighborhood
on Sep 17, 2020 at 10:41 am
Registered user
on Sep 17, 2020 at 10:41 am
City Council and 7th floor staff, please come down from your ivory tower and talk with the community. You are out of touch on this matter.
Registered user
Downtown North
on Sep 17, 2020 at 11:40 am
Registered user
on Sep 17, 2020 at 11:40 am
This is a totally appropriate move. Asking a few people employed by the city to audit such different areas as parks, animal control, libraries, and property and utilities owned by the city (to name a few) seems like a stretch. What do a few individuals know about these areas?
By hiring an outside auditor the city has the benefit of a large company, that employs experts in various fields, who will really understand what various departments are doing or what they are suppose to be doing. Plus this firm can look at what is happening in other cities and perhaps bring ideas for better ways for our departments to be run.
I see this as a good move for the city and for bringing expertise in analyzing how various areas of the city are reviewed.
Registered user
Embarcadero Oaks/Leland
on Sep 17, 2020 at 12:12 pm
Registered user
on Sep 17, 2020 at 12:12 pm
And this is supposed to save the city money and detect waste and mismanagement?? Who'd think a big accounting firm would give clients the answers the client wants so the client keeps renewing their contract.
Registered user
Embarcadero Oaks/Leland
on Sep 17, 2020 at 12:29 pm
Registered user
on Sep 17, 2020 at 12:29 pm
What do individuals know about areas like the libraries, animal control, utilities, etc., those of us who follow the news know PA Utilities has been over-charging us $20,000,000 each and every year for the last several years and funneling it into the General Fund. They're spending big bucks to preach conservation and then when we do conserve, they tell us they have to raise rates because we conserved too much. There's a citizen lawsuit slowly working its way through the courts on these $20M yearly "over-charges" to use a polite term.
Re animal control, thanks to the city's move to reduce funding for yet another resident-serving service where spaying/neutering at PA Animal Services used to cost $100 plus voluntary donations, we're now looking at paying 7 or 8 times that amount to private vets.
Registered user
Another Palo Alto neighborhood
on Sep 17, 2020 at 2:09 pm
Registered user
on Sep 17, 2020 at 2:09 pm
To "Great Move": What would Palo Alto employees know about parks, animal control, libraries, and property and utilities owned by the city? Ummmm, a heck of a lot more than some corporate bean-counter CPA firm.
Registered user
University South
on Sep 17, 2020 at 2:51 pm
Registered user
on Sep 17, 2020 at 2:51 pm
An outsider will be willing and able to speak truth to City Council. The Council creates tremendous inefficiencies with their hare-brained schemes. An outsider can bring his firm's experience with other cities to bear and reduce the mistakes Palo Alto makes by reinventing the wheel for straight-forward assignments.
Registered user
Another Palo Alto neighborhood
on Sep 17, 2020 at 5:03 pm
Registered user
on Sep 17, 2020 at 5:03 pm
To "Chris": Good one! LOL! "Online name" has it right, "big accounting firm would give clients the answers the client wants so the client keeps renewing their contract." The Palo Alto City Council obviously doesn't want to hear about corruption, mismanagement, unethical behavior, etc. Just look at what they did to the staff of the Auditor's Office. Staff reported their boss to the Council, thinking the Council would give a damn about her atrocious behavior, and THEY get fired. No, this new accounting firm would do very well to play nice, uncover nothing, and tell this spineless Council what they want to hear: everything is hunky-dory and perfect. This should also serve as a warning to other in-house "whistleblowers": DON'T DO IT! This Council "shoots the messenger". Shameful! They all need to be voted out of office as soon as possible.
Registered user
Downtown North
on Sep 17, 2020 at 5:22 pm
Registered user
on Sep 17, 2020 at 5:22 pm
The full Council Packet for the 9/28 meeting was released this afternoon. This item is #11 and the full Council Memo for it is posted at Web Link It contains the proposed Resolution and more information on the contract and the evaluation process.
We had six qualified applicants, and as one step in the evaluation, each applicant submits a formal written response to the City’s request-for-proposals. The written RFP response for the final chosen applicant normally becomes public, and for Baker Tilly this document can be found at Web Link
Since the press release and even the Council Memo are quite thin on Baker Tilly detail, I encourage anybody interested in more information to look at this document. It contains further information about the firm, its practices, core competencies, descriptions of relevant auditing engagements, people, and a full resume for Kyle O’Rourke. Only warning is the document is 117 pages long.
Some key elements of the engagement itself are:
- $750K/yr, pro-rated for the first year
- Projected 6 audits /yr (actually an increase over previous years)
- Reporting and oversight directly to City Council
- Kyle O’Rourke on site every other week, post-Covid
- Citywide Risk Assessment, followed by Audit Plan, followed by Audits
- Council can terminate contract for any reason on 10 days’ notice
Registered user
Embarcadero Oaks/Leland
on Sep 17, 2020 at 6:21 pm
Registered user
on Sep 17, 2020 at 6:21 pm
Eric, thanks but maybe you could address 1) why the position's being outsourced, particularly to a foreign firm unfamiliar with PA, its history, customs, concerns, etv. and 2) What's being done to audit and prevent waste and mismanagement?
It seems residents are getting stuck bearing the costs of cutbacks in real dollar terms as well as loss of services to say nothing about those nebulous quality of life issues.
Registered user
Embarcadero Oaks/Leland
on Sep 17, 2020 at 6:28 pm
Registered user
on Sep 17, 2020 at 6:28 pm
Just one example from this week: We're told on NextDoor by a private citizen -- not the City -- that it's our last chance to take the RR survey. Ok.
But the survey doesn't work. Where was the outreach? Why wasn't the survey sent to all Palo Altans? The city certainly has our emails and physical addresses. Most of us are stuck at home so it's a perfect time to poll us.
Why are we spending $5,000,000 for the city's pr and outreach. Where's the outreach and accountability? Will the outside auditor track that and all the rest?
Registered user
Another Palo Alto neighborhood
on Sep 17, 2020 at 6:39 pm
Registered user
on Sep 17, 2020 at 6:39 pm
I was viewing the Council Appointed Officers Committee Special Meeting of July 28, 2020, where they were discussing the various firms who were contending for the contract and heard this stunning quote from Liz Kniss:
"Baker Tilly (NOTE: they won the contract) is that 'Christmas package' that's so beautifully wrapped and presented in such a way that you can not wait to open it. And Kyle (NOTE: O'Rourke - he'll be the "lead auditor") is very persuasive, and he's the guy that I knew in the fraternity that everyone wanted to date. He's very personable, very outgoing, and I predict he's not going to last too long in Palo Alto. Umm, Chicago - that's a LONG way to be going back and forth, and I'm concerned about that." Lest you think this a made up quote, you can view it for yourself at 03:22:45 at:
Web Link
Now, please note that Ms. Liz was speaking "figuratively" about knowing Kyle from the fraternity. I won't be mean by explaining that further.
So, one of the Council's complaints has been that their last string of City Auditors haven't stayed long on the job, so they hire a firm with a lead auditor that's "not going to last too long in Palo Alto." BRAVO, Eric Filseth and team!
The more I look into this, the most disgusted I become.
Registered user
Adobe-Meadow
on Sep 17, 2020 at 6:48 pm
Registered user
on Sep 17, 2020 at 6:48 pm
Why an international firm? This is a security issues. And when they visit they will be billing their foreign travel to the account. If you do this then we will have to auditing them to make sure they are not offloading US dollars to a foreign account.
We live in Silicon Valley and we have the best companies right here?
This is totally WRONG.
Registered user
another community
on Sep 17, 2020 at 6:59 pm
Registered user
on Sep 17, 2020 at 6:59 pm
Thanks for that quote from Liz Kniss, Just Askin'. That's priceless! What are we hiring - an auditor or a masseur? LMAO!
Registered user
Downtown North
on Sep 17, 2020 at 7:56 pm
Registered user
on Sep 17, 2020 at 7:56 pm
@Online Name
I kind of don’t want to wade through the deliberations on this again. There were some questions, and Council decided in Feb 2020 to try a different service model, believing there was an excellent chance to outperform the existing model.
Fraud, waste and mismanagement are exactly the kinds of things an independent auditor is intended help protect residents against, although a nuance is that normally the biggest defense against these things is just having good work processes and controls to start with. A key role of Auditing, the “Risk” side, looks at those control mechanisms themselves -- not just checking to see if something bad happened last year.
Government is about service to residents, and while the Audit function is different from other government departments in really important ways, it also has some commonalities. For me the test is going to be, can we materially improve audit coverage -- service to residents -- over the previous model, without blowing up costs (in this case, actually slightly lowering them)? If you look at where we’ve arrived here, I think there’s an excellent chance; but like anything else we’ll have to monitor it over time.
Registered user
Another Palo Alto neighborhood
on Sep 17, 2020 at 8:41 pm
Registered user
on Sep 17, 2020 at 8:41 pm
So, Eric Filseth says, "A key role of Auditing, the “Risk” side, looks at those control mechanisms themselves -- not just checking to see if something bad happened last year."
So, if "risk assessment" is so important, why did the Council allow the former City Auditor to eliminate that as a function of the Office? Oh, yeah, the former City Auditor probably didn't know how to conduct one.
Registered user
University South
on Sep 17, 2020 at 9:43 pm
Registered user
on Sep 17, 2020 at 9:43 pm
Resident,
You are making wild claims that are not believable. Baker Tilley has a HQ in Chicago. There is nothing international going on in this engagement.
Many medium-size cities make this arrangement well. Why do you think you and other residents are so special that this well-established won't work in the city that you live?
Registered user
Adobe-Meadow
on Sep 17, 2020 at 10:45 pm
Registered user
on Sep 17, 2020 at 10:45 pm
Chris - the state of CA is the "5th biggest economy in the world". Are you and everyone else trying to say that there is no audit firm within the state? The state actually has one who is very good - she undoes UC all of the time for what they cook up. The government institutions are the worse when it comes to creativity in the books.
The state of CA has a lot of specific rules and regulations concerning taxation - we need an expert on CA taxation and specific rules and regulations that are unique to this state - new legislation. So the HQ is in Chicago? The state of Illinois has different rules and regulations concerning taxation at the state level. That is what you are auditing - how we conduct business to make the most advantage of the specific CA rules and regulations - legislation and taxation.
In the previous auditor you ran into problems because evidently the "city" did not understand what the point of the audit is, what they are looking for, and how they are doing their job. The "city" still does not understand what the point of this all is.
Registered user
Adobe-Meadow
on Sep 18, 2020 at 9:36 am
Registered user
on Sep 18, 2020 at 9:36 am
Within the County we have the Alum Rock School District that got caught in a money laundering scheme that the board fiercely defended. That law suite is currently being handled by the SC County law department. Bond money was legislated for the upgrade of the schools and those upgrades have not happened. That is an example of a scheme regarding bond funds which I think translates to a number of schemes ventured that we - the city - would get caught up in.
1. Cubbereley is a potential scheme that is waiting to happen unless that PAUSD turns it back into a school. Good place for the special needs students.
2. Foothill Park - that law suit is a scheme. No - you can not dress it up as anything but.
3. HSR - how much money spent and land confiscated by eminent domain? The state now owns that land.
4. Butte County - money was allocated for the clean-up of the land but they could not get their hands on it because of red tape minutiae. The state has that money now. How is it being used?
Schemes abound and as we start up schools and work a lot will be surfaced. And our friends from Chicago are in the major center for Schemes. One is noted for a tv star that arranged his own mugging. By his friends. A lot of money was spent on that scheme.
The State of CA is rolling at a fast pace with new laws and new sources of funding. As a city we will be dragged into a number of those issues. As a member of the county we will be dragged into a number of county and state issues. We have to be very knowledgeable about how and where our resources are going that we institute - and others that are instituted against us.
Registered user
Embarcadero Oaks/Leland
on Sep 19, 2020 at 6:48 pm
Registered user
on Sep 19, 2020 at 6:48 pm
@Eric, thanks for your response and for noting the auditor's job is to detect fraud, waste etc. while serving the residents. Let's take a specific example ad see if it's in the mew auditor's charter.
Traffic calming spending and projects have long been contentious where the 2 previous traffic czars were accused of not listening, failing to do outreach and failing to fix major problems for 8+ years because they asked for project bids 2 weeks before the Xmas holidays and surprise, no one bid. Residents complained about specifics that were rare;y fixed. 3,000+ signed petitions AGAINST specific projects like the Ross Rd roundabouts because of a myriad of issues. The city then hired and paid a polling firm to conduct a survey which -- surprise surprise -- found the city was right in its implementation of the project and that the residents were really satisfied.
Traffic surveys were conducted at the lightest possible times, forcing residents to PAY for accurate surveys that the city itself should have done. (At the packed meeting following Ms. Kniss's claim "no traffic problem here, take an alternate route," when asked where the resident survey was, she snarled, "That's not OUR survey." The city then offered a PowerPoint presentation that was laughable with no action ever taken. Would the outside auditor catch the time and money wasted for NO TANGIBLE results.
Would this outside auditor from Chicao even be aware of these issues and their long sorry history? Is the city likely to brief them on the declining city satisfaction ratings re transportation?
Registered user
Crescent Park
on Sep 19, 2020 at 11:44 pm
Registered user
on Sep 19, 2020 at 11:44 pm
"The hiring of Baker Tilly represents a major shift for Palo Alto's city auditor role "
I for one think think that the this is a good thing. Anything to change those PACC annual priority setting exercises when the internal city auditor and staff present one thing, PACC chatters about whatever politics of the day they care about and citizens are there to advocate about things they care about. The disconnect between all is sometimes jarring.
Mr. O Rourke's first deliverables should in itself be an important report for us to look at. Shouldn't we all be looking at the City's risk areas the same way (or close) and not have to reinvent the wheel about stuff every year without any benchmarks? City business always seems reactive, the opposite of a risk management culture where you have defense mechanisms for the smallest jobs and the biggest jobs. Be it traffic issues, or managing the quality of the air.
thanks @ Eric filseth for posting the packet. Web Link
What is unclear is that the RFP includes the task Task 3 for selecting an external financial auditor which the prior office of the auditor also did "The OCA contracts with an independent certified public accountant for the City’s annual external financial audit. The OCA also conducts and coordinates revenue monitoring in areas such as sales and use tax, property tax, transient occupancy tax and utility user’s tax." Web Link
But this doesn't seem to be on the list of deliverables per description of scope of services.
Registered user
Crescent Park
on Sep 20, 2020 at 12:05 am
Registered user
on Sep 20, 2020 at 12:05 am
oops I now see that the task to select the Financial Auditor is listed
"• Step 1: Selection of the Financial Auditor
Step 1 – Selection of the Financial Auditor
In FY20, the project team will assist in the selection of the Financial Auditor. In order to accomplish this task, the project team will:....."
the deliverable I was referring to earlier was the risk matrix grid