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National groups criticize Palo Alto plan to curb city auditor's independence

Original post made on Jan 8, 2020

As Palo Alto considers significant changes to the City Auditor's Office, a national auditing organization on Wednesday issued a letter to the City Council, urging the city to preserve the office's independence.

Read the full story here Web Link posted Wednesday, January 8, 2020, 3:39 PM

Comments (15)

Posted by Sally
a resident of Downtown North
on Jan 8, 2020 at 9:06 pm

Jeez Louise Harry Christopherson... this is so easy and clear.

The function of an INTERNAL City Auditor (not contracted, although the charter allows and encourages external help for certain financials) is MANDATED by our city charter. It is MANDATED to be fully independent of the City Manager's Office.

This is very, very easy, for those who are willing to read.

Solution is simple. Council needs to staff the charter-MANDATED role. Every moment we don't, we risk lawsuit from anyone who can claim harm directly caused by an audit docket that is not currently staffed. Make it minimal, and hire a guy/gal who is willing to clean house on less-than-stellar staff.

Listen, do, and let's move on.

Posted by Susan
a resident of another community
on Jan 8, 2020 at 10:04 pm

Like Sally, I've been following this issue and it keeps me wondering what is going on in that office and why the council doesn't just get rid of the underperforming staff. The Auditor's Office website shows that they have gotten even worse - only two audits in the past year, and the business registry one looks like it is just an update of on that was issued before Richardson left the office. What do those staff do all day? A previous article said that the annual citizen survey and performance report are being done in the City Manager's office now, which means the auditors should have been able to get MORE audits done, not less. Clearly, these staff need to go. Council, do your job and fire them. It may cost the city money to do so, but it's costing us taxpayers money to have them sitting there and doing nothing.

Posted by Joe
a resident of Another Palo Alto neighborhood
on Jan 8, 2020 at 11:02 pm

The language of the Charter where the Auditor is concerned:

Sec. 9. Officers appointed by council- Boards, committees,
and commissions.

The council shall appoint a city manager,
clerk, attorney, and auditor, and, except as
otherwise provided, may by ordinance or
otherwise create or abolish offices, boards,
committees, or commissions, and provide
for their manner of appointment, their tenure,
and the duties which they shall perform.

(Amended by Stats. 1965, Ch. 25, 2:-19-65
and by Stats. 1968, Ch. 163, 7-8-68 and by
Stats. 1972, Ch. 71, 7-7-72 and by amendment filed with the

The language does not appear to mandate the Auditor be an employee--seemingly leaving the door open for a contractor to fill the position.

The Charter does have language requiring the City to hire a contractor to perform the yearly financial audit.

If parsing this language became a federal case -- then the Charter could be amended to all for contractors to fill this role.

Posted by Sally
a resident of Downtown North
on Jan 9, 2020 at 6:15 am

@Joe, I see what you are saying, but I feel you are wrong on there being any question if one reads the City Charter.

In addition to the one chunk of charter you reference, the charter has other sections relevant to the City Auditor. It mandates the City Auditor conduct "internal" audits. The internal/external distinction is further clarified in the mandate for external financial audits.

It's not a question of "parsing the language." It's a question of careful reading.

You are correct that one could potentially amend the City Charter to outsource audit function. But I don't think any council member will want to have their name behind that... and for good reason...

The City Charter mandates a City Auditor.

Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 9, 2020 at 8:33 am

Posted by Sally, a resident of Downtown North

>> The City Charter mandates a City Auditor.

[auditor] that is independent of the city manager. That is the key. If the auditor is under the direction of the city manager, then, might as well not have the auditor.

Posted by Joe
a resident of Another Palo Alto neighborhood
on Jan 9, 2020 at 10:32 am

> The City Charter mandates a City Auditor.

There is no question about that, unless the Charter is amended to remove the position.

We will have to disagree over the reading/parsing of the Charter language regarding the position of the Auditor, however.

The value of the Office of the Auditor certainly is worth review. With the exception of Sharon Erickson, there have been no good auditors in this position. And even Ms. Erickson became "long in the tooth" towards the end of her tenure.

It's very difficult to see a lot of value in this Office, based on its unwillingness to take on difficult audits, like the major operating departments: Police, Fire and Utilities. It's clear that the union-run Departments have provided too much obstruction to auditors to allow for decent audits.

Prior to her leaving, Ms. Erickson commented on/objected to the lack of compliance with her suggestions based on her audits. It became clear at that time that auditors are not experienced in the details of field operation in order to make recommendations that would actually decrease the costs of operations, or the effectiveness of the department under audit. Ms. Erickson did not seem to fully appreciate that point.

Clearly, Palo Alto politics came into play where the Office of the Auditor is concerned.

Having an outside entity that has been involved with other municipal audits would open the door to expertise that is not "home grown". An outside auditor could provide work plans and audit plans from previous audits of other municipalities to help create better audit plans for Palo Alto. Moreover, having this Office filled by contract would allow the city to change the providers over the years, so that expertise needed to investigate different city operations could effectively be purchased.

While it makes sense to have a city Auditor -- it makes more sense to start over with new players who have a track record of effective auditing practices.

Posted by Sally
a resident of Downtown North
on Jan 9, 2020 at 4:44 pm

Thank you for your civil disagreement Joe. It's an appointed position in Palo Alto, and I've never heard of any city appointing a corporate-citizen. :)

The role needs to be filled without further delay and be (this part is 100% clear in the charter) fully independent from City Managers Office, as "Anon" rightly added.

I do fully agree with your assertion that "it makes more sense to start over with new players who have a track record of effective auditing practices." Let's appoint the charter mandated auditor, and let him/her manage contractors and clean house.

Our disagreement aside, I think we should be both be livid at COUNCIL for allowing this to happen. The auditor role reports directly to them. The prolonged debacle of that office's performance is a failure of council to do a crucial part to their job. Currently, they are sitting around reporting to ??? to ??? to whom?? Susan is dead-on, we currently have staff with no department head likely reporting to no one. It's crazy to imagine current audit staff is reporting to council, and it would be a clear violation of the charter if they were reporting to someone with a role in, say, the City Manager's Office.

Please step up council. You've swept this under the rug long enough. Hire someone to work with you to clean this up!

Posted by Joe
a resident of Another Palo Alto neighborhood
on Jan 9, 2020 at 5:35 pm

> I’ve never heard of a city hiring a contractor as an Auditor:

Google is a great source of information --

City of Scappoose Seeing Contract Auditor:
Web Link

The City of Scappoose, Columbia County, Oregon invites proposals from qualified independent licensed municipal auditors (hereinafter called “auditor”) having sufficient governmental and auditing experience in performing an audit in accordance with the specifications outlined in this Request for Proposal (RFP).
It is the intent of the City to negotiate a three year contract, with the second and third year contingent on the successful, timely completion of the first year of the contract. A full RFP packet is available on the City of Scappoose website at Submissions must be received by 4:00 p.m. January 27, 2017.

Choosing An Auditor:
Web Link

The City of Palo Alto Charter mandates a contractor to perform financial audits. Why would they do that?
BTW—the City has not moved to fill the Auditor’s position quickly in the past. The very first auditor (Bill Vinson) departed his position under a cloud in 1999. The Council claimed that he left of his own volition, but the (old) Palo Alto Daily News investigated and found that he actually had been paid to leave. Councilperson Kniss was on the council at the time. She was the primary source of the misinformation about Vinson’s departure (if memory serves).

Vinson Leaves Because of “Lack of Support”:
Web Link

Bill Vinson Leaves Post:
Web Link

Notice that in 2000, the Council was considering a “temporary” auditor. The City has a large number of “temporary” employees on the payroll. Some of these people are eventually hired, and some are really just temporary. The Auditor’s position was open until 2001, when Sharon Erickson was hired.

Posted by independent auditor
a resident of College Terrace
on Jan 9, 2020 at 6:11 pm

Could it be that the prior city manager did not want to have anyone doing a deep dive into the functions he oversaw and therefore withheld or did not give the city auditor's office the support it needed? Perhaps his end goal was to replace the city auditor with an outside consultant who will not have the knowledge to ask the right questions and do a deep dive? My impressions is, that like the business register, he was very effective at torpedoing that which did not align with his interests,

Posted by Old Timer
a resident of Downtown North
on Jan 9, 2020 at 8:42 pm

@Joe - The links you have for contract auditors are for financial auditors. Palo Alto also uses a contractor for its financial audit because both the Charter and Municipal Code require that. The Auditors Office oversees that audit. The Charter requires the Auditors Office to conduct INTERNAL audits and the Municipal Code says they do performance audits, which are basically the same thing.
I worked in City Hall for a long time and thought that Richardson was an effective auditor, even more so than Erickson. But it was common knowledge that most of Richardson's staff were inept and were not willing to change. Richardson had a more collaborative approach when it came to making recommendations that would work for us but her staff didn't like that. They wanted to dictate to us how to change things regardless of the lack of reasonableness in their approach. I agree with the other comments that the staff need to go. The city benefited from Richardson as our auditor. I think the real reason she left was that she got fed up with working with staff who always wanted to do things their way and only their way. She could lead them to the water but she couldn't make them drink it.

Posted by Joe
a resident of Another Palo Alto neighborhood
on Jan 9, 2020 at 10:22 pm

> Charter, Internal Audits

Here’s the charter language that provide some details about the auditor’s role:

Sec. 12.

The duties of the city clerk and attorney shall be those normally exercised by such officers as provided in this charter and in the administrative code. It shall be the duty of the city auditor to ensure that the city departments and officers responsible for accounting and financial management activities comply with statutory requirements and accounting standards. It shall·be the duty of the auditor to conduct internal audits of all the fiscal transactions of the city including, but not limited to, the examination and analysis of fiscal procedures and the examination, checking, and verification of accounts and expenditures; and the city auditor shall provide other analyses of financial and operating data as directed by the city council. The city auditor shall conduct internal audits in accordance with a schedule approved by the city council and may conduct unscheduled audits from time. to time. The results of these audits shall be reported in writing to the city council and the city manager. In addition, the auditor shall have such other duties as the council may by ordinance direct. (Amended by Stats. 1968, Ch. 163, 7-8-68 and by amendment filed with the Secretary of State, December 9, 1983)
The use of the word “internal” seems to be associated with financial audits”:
“It shall· be the duty of the auditor to conduct internal audits of all the fiscal transactions of the city ..”

> Performance and internal audits

These are probably not the same thing. But the difference is not worth discussing at the moment.

So far, there seems to be nothing in the charter, or municipal code, that requires that the Office of the Auditor be an employee. The whole point of a manager is to direct the employees to fulfill the mission of the Department. An Auditor under contract can perform this management just as an employee.

The Police Auditor is a contractor. The Financial Auditor is a contractor and most of the difficult design work of all of the departments is performed by contractors. There is no reason that the Office of the Auditor could not be on contract also. As long as the person chosen for the job is qualified—the employment status should not be an issue.

> They wanted to dictate to us how to change things regardless of the
> lack of reasonableness in their approach.

Comments in an earlier post agree with this point somewhat. But at the same time, the it’s clear that much of Palo Alto City Gov’t has been a mess. Assuming your comment is true, the question becomes—what makes the status quo right and not subject to evolution through audits?

Your comments about Richardson being more effective than Erickson are interesting. Not clear that any Auditor will ever be popular with the departments that come under audit. Erickson probably had more support from the public than Richardson. However, these are personal observations and opinions. Erickson has done a bang-up job in San Jose. She has not been popular with the labor unions since she has been promoting more prudent pension management, though.

The issue of independence is really not getting the attention it should in this discussion. The Auditor is supposed to report to the Council, but the Council doesn’t have the authority to direct the Auditor—which creates a management problem over time. At the moment, the shape of the Audit function is entrusted to the Auditor. If the Auditor does not have the ability to understand the effectiveness (or lack thereof) of the Operating Departments, then it’s not clear that much will come from the Department. Comments about Richardson being "more collaborative" demonstrates that Richardson's independence was constrained by the Operating Departments in order to achieve some tangible results.

Having the CAO’s on contracts gives the Council the wiggle room it needs to terminate a CAO when it becomes clear that things are “not working out”. Having a for-life employee in those roles makes it more difficult for the Council to effect corrective action if necessary. We’ve seen that problem with a previous Police Chief, City Attorney and Assistant City Manager. Terminating their employment was less than straightforward. Having the CAOs on contract would have made the Council’s job a lot easier to consider changes when the contracts are over.

All organizations need constant monitoring and auditing. Sadly, the Operating Departments have had no oversight by the Council due to the constraints of the Charter. Without a kick-ass City Manager and City Auditor .. things are not likely to ever get better. Sadly, Palo Alto City Gov’t has become an organization that seems to be more concerned with the employees rather than fulfilling its mission of serving the property owners, taxpayers, businesses and residents.

BTW—kind of interesting that some group that no one has ever heard of has gotten involved with a Council decision which doesn’t involve them in any direct way. There probably is a backstory in there somewhere.

Posted by Independent
a resident of Esther Clark Park
on Jan 10, 2020 at 8:49 am

To the City Council : want your constituents to have more trust and faith in your city government? Appoint an auditor now.

Want to have someone help keep the public employee unions in line, without your having to do it all yourself? Appoint an auditor now.

Taxpayers demand a city auditor, to keep a watch on how our tax dollars are spent - and to help you with that difficult job. Appoint an auditor now.

Stop listening to staff - say the taxpayers demand it and appoint an auditor now, an appointment that conforms to the city charter and reports to the council.

It's simple. Appoint an auditor now.

Thank you.

Posted by Old Timer
a resident of Downtown North
on Jan 10, 2020 at 9:24 am

@Joe - Many professions have professional organizations they belong to. My guess is that the auditors belong to the groups that sent letters, even if the rest of us have never heard of them, and that the staff in the Auditors Office reached out to those organizations and asked for the letters to save their jobs. As for Richardson's audits vs. Erickson's audits, Richardson's were more impactful and much easier to read. I don't think Richardson hurt her independence by collaborating on the recommendations because she stuck with her findings and was looking for recommendations that would realistically be implemented. Her recommendations did get implemented much quicker than Erickson's did.

@Independent - I agree that they need to hire an auditor now, but question who is going to want the job with all the publicity, drama, and negativity that the office has had. I'm sure that once national organizations became involved, it means a lot more people in the profession have become aware of the problems in the office. The council needs to get rid of the problem staff so a new auditor can come in and hire competent staff who are willing to do the work in a timely manner.

Posted by Friendly Neighbor
a resident of Downtown North
on Jan 10, 2020 at 3:54 pm

As a former city employee (not in the auditor’s office) I can tell you that the city manager and department heads are uncooperative with the auditors and work to purposefully undermine their work for fear of embarrassment of what may be found during an audit. Please consider that when the consultant found that the costs of audits is very high, they didn’t investigate further to understand the root cause. An audit that would normally take a few weeks can take months when management refuses or delays providing the necessary information, refuses to attend meetings with the auditors, and/or provides purposefully misleading documentation or answers. Time is money. All of these are normal tactics and were especially bad under former CM Keene. At the same time, the CM and his team meet regularly with council members and find opportunities to undermine the auditor’s work directly with them causing further delays when the council questions the validity of audits unnecessarily, raising the per audit cost even more. The audit department needs a strong leader (not the case with Richardson who aligned herself with Keene), but also consider that the bigger issue might be the culture of the organization. Only the council can ultimately change that. I say give the auditors a chance. With the right leader and the right support from the council, they may be a lot better than people think.

Posted by Puzzel
a resident of another community
on Jan 16, 2020 at 11:59 am

"And the city was tied for last with Oakland for lowest output, with an average of 0.7 audits per full-time-equivalent position annually."

I truly wish my audit team can do that little of work each year. 1 Audit every 15 to 18 months. Must be the Mueller Report.

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