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By Diana Diamond

Palo Alto needs a new auditor NOW

Uploaded: Jan 27, 2020

Palo Alto has been without a permanent auditor for 11 months. Why should we care? Why even bother with an auditor?

Our city is doing a reasonably good job, many say, so why should we pay anyone and provide a staff of three or four to investigate the city’s operations and to report to the public what’s working, and more importantly, where the city is failing in its responsibilities?

Why bother? Because a good auditor is like a good detective, and police departments and city councils need good detectives to keep things in shape.

We had an auditor, Harriet Richardson, until last Feb. 20, when she resigned under some clouds. We still don’t have a new one.

Why has it taken so long to hire a new auditor? “It’s complicated,” former Mayor Eric Filseth told me in November. I know there was disharmony between Richardson and her staff, and two of her employees filed official complaints against her. Those remained unresolved when Richardson quit. The city hired a consulting firm to advise them what to do, Kevin W. Harper CPA & Associates came up with recommendations that have encountered some static. Late last year, the city appointed a consultant, Don Rhoads, to oversee the auditor’s office. The city is still trying to decide what to do next. A council discussion slated for Jan. 21 was postponed.

But an outsider is not the answer. As former city auditor Sharon Erickson has said, a city needs to have an inside auditor who know the people on staff, know their attitudes, and as a auditor, can hear all the gossip and rumors in the halls of city hall that will help decide where there are real problems. A consulting auditor cannot have such intimate knowledge.

The most egregious recommendation from Harper, in my opinion, was to have the council decide on a dual-reporting arrangement for an auditor –the auditor would be hired and fired by the council, as now exists, and also the auditor would continue to report to it.

But – and that’s a big but – the auditor would also report to the city manager who would provide administrative oversight such as "review of time sheets and expense reports, consultation about timing of audits based on operational considerations, and involvement in discussion of cost versus benefit decisions of audit recommendations," according to the Harper report.

That’s a terrible idea. Not only does the city charter state that the auditor should report only to the council, but having the auditor also report to the city manager is akin to that proverbial fox guarding the henhouse.

How can the auditor independently criticize wrongdoings at city hall when the manager is in charge of all departments? Anyone reporting in part to a city manager will be well aware of the CMs status, and may downplay some of the auditor’s findings so the manager will not get upset.

And what if there is a dispute between the city manager about what to audit or how much a certain audit costs? Who’s going to win that dispute – the manager or the auditor? Will the council override the city manager because of a one dispute from the auditor? I doubt it. The council members know they need someone to run the city more than they need an auditor to investigate the matter.

The Harper recommendations drew a negative response from the Institute of Internal Auditors, a national organization that develops guidelines for auditors, which caused it purports to comply with the standards of the Institute of Internal Auditors. The institute itself was quick to distance itself from the recommendation to have the auditor report to the city manager for administrative oversight, according to a Weekly story.

The Association of Local Government Auditors, a national auditing group, made a similar point in its Dec. 19 letter, which argued that Harper relied on internal standards that are oriented toward the private sector rather than governing auditing.

Sounds like the city hired the wrong consultant (Harper) to solve its auditor problems. But finding a solution is not rocket science. Squabbles need to be settled and a new chief auditor can get his or her team to function better.

We residents need to have an auditor as soon as possible – like this February. Or, the city council has to tell us why there has been such a long delay, so we can better understand a year’s wait to hire someone. We need an auditor and his/her team to guard the operations of our city. Period.