News

Palo Alto dismantles City Auditor's Office, shifts to national firm

City signs two-year contract with Baker Tilly US for auditing services

After years of complaining about internal strife and subpar performance in the Office of the City Auditor, the Palo Alto City Council moved on Monday to cut every position in the small office and to outsource its operations to the Chicago-based consulting firm Baker Tilly US.

Kyle O'Rourke, senior consulting manager at Baker Tilly US, will serve as Palo Alto's city auditor under a contract that the City Council approved on Sept. 28. Courtesy city of Palo Alto.

In a move that represents a dramatic shift for an office that voters created in 1983, the council voted unanimously Monday to sign a two-year contract with Baker Tilly for internal auditing services. The contract will cost the city $750,000 a year (prorated in the first year to $550,000) and the parties will have the option for renewing the deal for up to three additional years.

The council also moved to cut all four auditing positions at the Office of the City Auditor, effectively dismantling an office that had a budget of about $1.2 million. These include the three senior auditor positions as well as the position of the city auditor, which has been vacant since Palo Alto's last City Auditor Harriet Richardson resigned at the beginning of 2019 after a prolonged conflict with three of her employees.

The face of Baker Tilly in Palo Alto will be Kyle O'Rourke, a senior consulting manager who the council appointed Monday as the new city auditor. A certified internal auditor, O'Rourke has worked with more than two dozen state and local government clients over the past three years, according to the firm's proposal. O'Rourke's work includes reviewing policies at the Detroit Water and Sewerage Department, performing risk assessments for the city of Madison, Wisconsin, and auditing the public utility in the city of Riverside.

When the Santa Clara County's shelter-in-place order ends, O'Rourke will be expected to be in Palo Alto every other week, said Councilman Eric Filseth, who led the council's process in selecting the new auditor.

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The council kicked off its effort to outsource city auditing services in February, when the council directed its Council Appointed Officers Committee to craft a request for proposals. The committee received six bids and narrowed down its search to two firms, Filseth said. After the full council interviewed both finalists twice in a closed session, it chose Baker Tilly US, which is the American affiliate of Baker Tilly's international network.

The $1.3 million contract that the council approved is expected to generate at least six audits per year, which includes four major audits and two minor audits. The firm also will be charged with conducting a citywide risk assessment every year — a project that it plans to embark on as soon as it starts its new role on Thursday, Oct. 1.

In its proposal, Baker Tilly touted its large workforce of more than 300 audit professionals and a client list that includes more than 1,000 state and local government clients, among them the cities of Fargo, North Dakota; Plano, Texas; and Lincoln, Nebraska. Its California clients include Burbank, Modesto and Richmond.

The firm's proposal cites Baker Tilly's expertise in utilities and in areas such as cybersecurity, fraud and financial management. The document lists case studies in which the firm tested the security of a client's internal information technology systems and identified gaps in another client's virus protection program.

Filseth said both finalists were "superbly qualified and we were wishing we could hire both if we could."

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Not everyone shared his excitement. Sharon Erickson, who had served as Palo Alto's city auditor between 2001 and 2008 and then took on the same role in San Jose, called the move "a stunningly bad idea." For years, the city charter was interpreted to mean that that the city auditor is a city employee with an office at City Hall, she told the council.

"This is not the time to reduce accountability and transparency at any level of government," Erickson said.

The council, for its part, unanimously agreed that it's time to try the new approach. Over the past decade, the city has seen high turnover in the city auditor position, which was most recently held on an interim basis by consultant Don Rhoads.

The city's last permanent city auditor was Richardson, whose tumultuous five-year tenure featured audits on the city's animal services and code enforcement operations and internal conflicts inside her small office. Her stint was marred by an ongoing conflict with three employees, who accused her of mismanagement. Her predecessors in the positions, Mike Edmonds and Jim Pelletier, had also departed after short stints.

Employees of the office had opposed the city's move. In January, an attorney representing one of the auditors, Houman Boussina, criticized the report that the City Council commissioned last year as part of its process of exploring alternate service models for city auditing. The report from Kevin W. Harper CPA & Associates concluded that compared to other cities, Palo Alto has the lowest productivity (with 0.7 audits per year per full-time position) and the highest cost per audit ($417,000).

Boussina's attorney, Karl Olsen, argued that the Harper report had failed to acknowledge Richardson's mismanagement. As such, it "unfairly exposed the office staff, who have not had a supervisor since November 2018, to direct criticism and blame for the report's conclusions."

In approving the shift away from in-house staff to an outside consultant, council members expressed hope that the new arrangement would yield a superior product at a lower cost. Councilwoman Liz Kniss called the search for an auditor "one of the longest processes I've ever gone through."

"I'm looking forward to a wonderful new way to provide audits in the city of Palo Alto," Kniss said.

Mayor Adrian Fine agreed and welcomed the city's new partnership with Baker Tilly.

"I think that's a real opportunity for us to sync up what audits are being done, what the expectations are, what the costs should be, what the outcome should look like and how can we pass audits on to other city departments to make changes to make our cities better and safer," Fine said.

O'Rourke said the firm plans to get to work in Palo Alto in a few days when it begins the citywide risk assessment. He told the council that he is "very humbled and honored for the opportunity to serve in this position."

"There's a reason that I work exclusively with public sector entities, despite working at a private company," O'Rourke said, "It's what I love, what I very much enjoy doing, what I've done for a number of years."

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Palo Alto dismantles City Auditor's Office, shifts to national firm

City signs two-year contract with Baker Tilly US for auditing services

by / Palo Alto Weekly

Uploaded: Tue, Sep 29, 2020, 12:29 am

After years of complaining about internal strife and subpar performance in the Office of the City Auditor, the Palo Alto City Council moved on Monday to cut every position in the small office and to outsource its operations to the Chicago-based consulting firm Baker Tilly US.

In a move that represents a dramatic shift for an office that voters created in 1983, the council voted unanimously Monday to sign a two-year contract with Baker Tilly for internal auditing services. The contract will cost the city $750,000 a year (prorated in the first year to $550,000) and the parties will have the option for renewing the deal for up to three additional years.

The council also moved to cut all four auditing positions at the Office of the City Auditor, effectively dismantling an office that had a budget of about $1.2 million. These include the three senior auditor positions as well as the position of the city auditor, which has been vacant since Palo Alto's last City Auditor Harriet Richardson resigned at the beginning of 2019 after a prolonged conflict with three of her employees.

The face of Baker Tilly in Palo Alto will be Kyle O'Rourke, a senior consulting manager who the council appointed Monday as the new city auditor. A certified internal auditor, O'Rourke has worked with more than two dozen state and local government clients over the past three years, according to the firm's proposal. O'Rourke's work includes reviewing policies at the Detroit Water and Sewerage Department, performing risk assessments for the city of Madison, Wisconsin, and auditing the public utility in the city of Riverside.

When the Santa Clara County's shelter-in-place order ends, O'Rourke will be expected to be in Palo Alto every other week, said Councilman Eric Filseth, who led the council's process in selecting the new auditor.

The council kicked off its effort to outsource city auditing services in February, when the council directed its Council Appointed Officers Committee to craft a request for proposals. The committee received six bids and narrowed down its search to two firms, Filseth said. After the full council interviewed both finalists twice in a closed session, it chose Baker Tilly US, which is the American affiliate of Baker Tilly's international network.

The $1.3 million contract that the council approved is expected to generate at least six audits per year, which includes four major audits and two minor audits. The firm also will be charged with conducting a citywide risk assessment every year — a project that it plans to embark on as soon as it starts its new role on Thursday, Oct. 1.

In its proposal, Baker Tilly touted its large workforce of more than 300 audit professionals and a client list that includes more than 1,000 state and local government clients, among them the cities of Fargo, North Dakota; Plano, Texas; and Lincoln, Nebraska. Its California clients include Burbank, Modesto and Richmond.

The firm's proposal cites Baker Tilly's expertise in utilities and in areas such as cybersecurity, fraud and financial management. The document lists case studies in which the firm tested the security of a client's internal information technology systems and identified gaps in another client's virus protection program.

Filseth said both finalists were "superbly qualified and we were wishing we could hire both if we could."

Not everyone shared his excitement. Sharon Erickson, who had served as Palo Alto's city auditor between 2001 and 2008 and then took on the same role in San Jose, called the move "a stunningly bad idea." For years, the city charter was interpreted to mean that that the city auditor is a city employee with an office at City Hall, she told the council.

"This is not the time to reduce accountability and transparency at any level of government," Erickson said.

The council, for its part, unanimously agreed that it's time to try the new approach. Over the past decade, the city has seen high turnover in the city auditor position, which was most recently held on an interim basis by consultant Don Rhoads.

The city's last permanent city auditor was Richardson, whose tumultuous five-year tenure featured audits on the city's animal services and code enforcement operations and internal conflicts inside her small office. Her stint was marred by an ongoing conflict with three employees, who accused her of mismanagement. Her predecessors in the positions, Mike Edmonds and Jim Pelletier, had also departed after short stints.

Employees of the office had opposed the city's move. In January, an attorney representing one of the auditors, Houman Boussina, criticized the report that the City Council commissioned last year as part of its process of exploring alternate service models for city auditing. The report from Kevin W. Harper CPA & Associates concluded that compared to other cities, Palo Alto has the lowest productivity (with 0.7 audits per year per full-time position) and the highest cost per audit ($417,000).

Boussina's attorney, Karl Olsen, argued that the Harper report had failed to acknowledge Richardson's mismanagement. As such, it "unfairly exposed the office staff, who have not had a supervisor since November 2018, to direct criticism and blame for the report's conclusions."

In approving the shift away from in-house staff to an outside consultant, council members expressed hope that the new arrangement would yield a superior product at a lower cost. Councilwoman Liz Kniss called the search for an auditor "one of the longest processes I've ever gone through."

"I'm looking forward to a wonderful new way to provide audits in the city of Palo Alto," Kniss said.

Mayor Adrian Fine agreed and welcomed the city's new partnership with Baker Tilly.

"I think that's a real opportunity for us to sync up what audits are being done, what the expectations are, what the costs should be, what the outcome should look like and how can we pass audits on to other city departments to make changes to make our cities better and safer," Fine said.

O'Rourke said the firm plans to get to work in Palo Alto in a few days when it begins the citywide risk assessment. He told the council that he is "very humbled and honored for the opportunity to serve in this position."

"There's a reason that I work exclusively with public sector entities, despite working at a private company," O'Rourke said, "It's what I love, what I very much enjoy doing, what I've done for a number of years."

Comments

Jennifer Landesmann
Registered user
Crescent Park
on Sep 29, 2020 at 5:10 am
Jennifer Landesmann, Crescent Park
Registered user
on Sep 29, 2020 at 5:10 am
11 people like this

"The firm will also be charged with conducting a citywide risk assessment every year – a project that it plans to embark on as soon as it starts its new role on Oct. 1."


A foundation for risk management is transparency, intelligence sharing, and to have systems in place to track issues - to make appropriate interventions. Timeline matters. 

I urge Mr O'Rourke to take an immediate look at the processes in place for PACC to intervene (on several new Nextgen procedures under way) to prevent Palo Alto becoming a further dumpsite for SFO, SJC, and OAK airports because if he doesn't, his services will hardly be of use when the City has neighborhoods that are exponentially less livable than pre-Covid at the height of air traffic. Airspace changes imposed on communities are the kind that you snooze you lose. And there's no hiding the dump when it happens, especially now that more people will be working from home, how jets and airports behave will matter even more. 

In early May, the City staff person who was the airplane noise liaison left for another position in a different city. Despite appeals to the Policy & Services Committee, there has been zero follow up from the city about who will fill the position.

Why does this matter? There is a very specific process for PACC to defend the City which is to deliberate on all airport procedures affecting Palo Alto and to not miss the 60 day statute of limitations to challenge inadequate environmental assessments that are critical to give the public rightful opportunities to address alternatives (and say the right to know that SFO, SJC and OAK have plans to change the city's noise to levels that make unhappy statistics - imagine if doctors hid your cholesterol level to avoid talking interventions). 

The process that Council voted on to appropriately intervene is called the "Fast Track" process which now ..with the absence of a staff in charge..., and no City Attorney following up either it looks like it's "no track." Fast Track was voted on before PACC punted on PIRAT when instead of filing a petition for review on PIRAT as residents advised on what is a rock solid case for heightened review, PACC sent it for neighbors to work it out at the regional tables. 

PIRAT is as cold as can be at the regional  tables.PACC should know by now that regional tables are not how the FAA works on specific procedures and as the courts also advise, you only get one chance to speak up per procedure, within 60 days and even better if long before 60 days.

Relying on regional tables is speculation - the opposite of risk management.  
Unfortunately, what you hear from Council (and now candidates) is only about regional committees. Meantime....FAA, SFO, SJC have printed and near printed procedures which the regional committees are not helping with. It's not even clear who the regional bodies represent because they defer to airports in many ways. A submissive city and submissive regional tables who just let the clock run out are not helpful.  

Of course the FAA, SFO and SJC will not run to the public and admit what they are doing, and offer details about their plans or the NOISE MAPS (historical assessments and projections of noise) that the public has been asking for years. The tools to do this (that our tax dollars pay for) are readily available but not used to help the public. Nextgen 2.0, 3.0 is being laid out including SFO's new landing system GBAS and the cursory projections for GBAS already show noise will be worse (for Palo Alto).

And there's more.... about airports and the future that Palo Alto needs to think about. For more information go to www.skypossepaloalto.org. The most recent communication has a questionnaire for PACC candidates. 


Jennifer Landesmann
Registered user
Crescent Park
on Sep 29, 2020 at 5:52 am
Jennifer Landesmann, Crescent Park
Registered user
on Sep 29, 2020 at 5:52 am
6 people like this

I will add that there is a place for regional bodies, for example to raise the quality of environmental assessments - once analysis of planned procedures are on the table.

Isn't it curious that there have been no environmental assessments for the procedures affecting Palo Alto? There was one in 2014 for SERFR but besides being done very badly, it is not applicable now because that procedure has since changed with a waypoint moved into Palo Alto neighborhoods (the City passed on challenging those changes too).

The fact remains that fate of specific procedures (where and how planes fly) and any recourse is pinned to real expiration dates. The regional tables could help but only if their actions are timely. They meet only every few months so that alone impairs them.


Joel
Registered user
Barron Park
on Sep 29, 2020 at 11:32 am
Joel, Barron Park
Registered user
on Sep 29, 2020 at 11:32 am
17 people like this

Somehow I'm reminded of the Anderson Little debacle in the '90s. It seems to me that an auditor paid by the City desires to keep its job; so it gives the institution the figures that the city wants to hear. I have know idea how you audit independently when you are paid by the people you audit.


TP
Registered user
University South
on Sep 29, 2020 at 11:51 am
TP, University South
Registered user
on Sep 29, 2020 at 11:51 am
26 people like this

Can anyone say FRAUD!!!!! I watched the meeting last night and O'Rourke lied on his application about membership into ALGA and said it was an oversight that has since been "rectified" and that membership isn't needed, or could be done by proxy with a third party in order to be in good standing with ALGA. Let's start off in the new job where your primary functions are eliminating fraud, waste, and abuse by lying on your job application and fluffing over the question when council member Kou asked about your ALGA credentials and the impact on the city. Also disappointing to hear in the televised council meeting was council member Kiss' response that this process of 'outsourcing' the office began in 2016. If you started this "process" four years ago, why did you bother trying to outsource only the workers in the office in May 2018 finance committee meeting but keep Richardson on the job to "manage" outside contractors.......... only to have her quit at the end of 2018? What a bunch of incompetent frauds.

It was nice to see that nobody on the council gave any acknowledgment to retired/former city auditor Sharon Erickson's concerns of outsourcing during the public comment section and instead all we got was accolades from all council members giving each other a pat on the back for all of the "hard work" that went into this process. Let's just hope that council member Kniss doesn't open up her "Christmas" package too early, as she eluded to during the July 28th televised meeting where they interviewed four "competing" firms. To listen to Kniss' comments during this phony interview, she was in the bag for O'Rourke from the beginning; duplicity at its best.


Just Askin'
Registered user
Another Palo Alto neighborhood
on Sep 29, 2020 at 2:45 pm
Just Askin', Another Palo Alto neighborhood
Registered user
on Sep 29, 2020 at 2:45 pm
18 people like this

Right on, TP! And a suggestion to Mr. O'Rourke - I'd avoid any one-on-one meetings with Councilmember Liz Kniss without a chaperone.


S. Underwood
Registered user
Crescent Park
on Sep 29, 2020 at 8:22 pm
S. Underwood, Crescent Park
Registered user
on Sep 29, 2020 at 8:22 pm
16 people like this

Vote Vote Vote

Please remember that City Council is responsible for the primary debacle that the auditor's office became. [Council alone supervised and is/was at the helm of that office's prolonged, expensive, and directionless voyage.]

Vote. Vote. Vote.

No surprise Council's cluelessness would continue with clear problems / errors like false statement of ALGA membership or the fact that the last consultants report referenced the incorrect set of auditing standards. Council has been hopeless on this issue.

Vote. Vote. Vote.

We'll see if they "thank each other for the contributions" over and over ad nauseam on their way out, when they aren't self-congratulatorily grandstanding in public forums and trying to skate past problems created by their own mismanagement.

Vote. Vote. Vote.


Jennifer Landesmann
Registered user
Crescent Park
on Sep 30, 2020 at 9:44 am
Jennifer Landesmann, Crescent Park
Registered user
on Sep 30, 2020 at 9:44 am
8 people like this

I went to the replay of the meeting to hear more for myself.

I disagree that this is "fraud." Moreover this may be the single example that I recall of a unanimous vote on something which is of great importance to city management.

Having attended many Policy & Services Committee meetings since 2015 in the dead of the week - these committees often just float year in year out without a thread or ways to actually help in advocacy for city issues.

In the replay there is a comment about what will happen to the "typewritten statements" which I suppose refers to files in the auditor's office.

Well- prior to 2015 there was nothing available in City files on the topic of SFO noise problems despite there being a prior history. We got files from a resident cleaning out her attic who had old council packets. Some of that history has since been put on the city's airplane noise page as part of sky posse contributions.

Looking into a new and potentially a better way to assess the City's risks is not fraud.

My 2 cents to new auditor: I suggest that the City's core assets are our schools, parks, and people (all ages, current and future) - people who need to sleep, work, take care of their health and not be assailed by airports that send planes too low, too loud and too dirty.

Tracking any issue (but something as important as the air we breathe) should not be based on catching files from people's attics. The staff liaison position should not be vacant. And ways to better track issues in general is really important so that stuff that happens that can inform the future is not hidden in old files or even video replays.


Ardan Michael Blum
Registered user
Downtown North
on Oct 2, 2020 at 4:17 pm
Ardan Michael Blum, Downtown North
Registered user
on Oct 2, 2020 at 4:17 pm
17 people like this

Old lamps for new in a woke age with a city council bowing to neo-communist requests.


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