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Question arises over chain-of-command for certain auditors

Wednesday, August 27, 2008 by Mark Richardson

A battle could be brewing over who has control over the city’s two – and sometimes competing – teams of auditors after the issue came up during the Council’s Audit and Finance Committee Tuesday.


In 1991, voters approved a City Charter Amendment making the City Auditor’s Office responsible to the City Council. According to figures presented to the committee Tuesday, 28 auditors reported to the City Auditor in 2001, with only four auditors reporting to city management.


As the economy declined, however, the number of auditors in the City Auditor’s Office also dropped, although the number in the rest of the system has grown.


City Auditor Steve Morgan is backing an ordinance that would transfer seven auditors in other parts of the city staff to his office. Four of those positions are currently on the Corporate Internal Audit staff, and one each is from Telecommunications and Regulatory Affairs, Public Works and the Convention Center.


Part of the debate seemed to focus on semantics: are those individuals who perform audit functions outside of the City Auditors office really auditors, or are they simply mis-titled?


Morgan brought the item to the committee, seeking to have seven positions from the Corporate Internal Auditors office reassigned to the City Auditor’s office effective Oct. 1. Assistant City Manager Rudy Garza said his office opposes the move, which he said would dilute the City Manager’s power to manage the city’s finances.


“This is basically a governance issue,” Morgan said. “It deals with the transparency of how our city government operates. We are moving in the direction of possibly having more auditors outside of the Auditor’s office than in the office. The Auditor’s office needs to be strengthened.”


However, Garza said the problem stems from the City Manager’s ability – or lack of it – to ensure that major projects in the city are being run properly.


“The Corporate Audit office was established when it was discovered that certain functions were not being performed,” Garza said. “We were not getting work done on areas such as contractor compliance, vendor audits, payroll audits. Also, we need to act when special projects such as the Convention Center situation  turn up.”


After reviewing the proposed ordinance, David Douglas with the city Law Department, avoided commenting on whether the current situation is legal under the city charter but said the he saw no problem in putting the proposed ordinance before the City Council.


Council Member Lee Leffingwell, a member of the committee, openly questioned whether having auditors outside the control of the City Auditor’s office was legal under the City Charter.


“Citizens voted to make the City Auditor a City Council employee instead of a City Manager employee,” he said. “But it seems that preference has been eroded over the years.”  


Leffingwell said he wanted to hear a justification for having two sets of auditors.


“I think we need to get a report from the staff indicating what these positions actually are — audit or financial control functions,” he said. “I know the City Manager has the need to manage expenditures in various departments, but I want to make sure this trend—an increasing trend in auditor like positions in staff and a decreasing number in the Auditor’s office – to make sure we are not acting contrary to the Charter amendment to place the functions under the City Council. I don’t want to act precipitously or take any action that would have unintended consequences.”


Council Member Mike Martinez, another committee member, said he is concerned that the current setup may violate the City Charter.


What’s been pointed out to us is that trending over time, going back to 2000, the Auditor’s office has lost resources and personnel while the internal audit structure that reports to the City Manager has dramatically increased until its almost the same level of employees in each role,” he said  “And I think that’s an imbalance to what the citizens directed under the charter—that the audit function is under the City Auditor.”


Martinez took as wait-and-see attitude about which direction to go.


“I would also like to look at the internal auditors and if they are really, truly doing an audit function, we need to make sure they’re under the city auditor as well,” he said. “If they’re doing checks and balances as stated by Rudy Garza today, then I think some of them need to stay in those departments. But if they’re truly doing an audit function then they need to report to the city auditor so he can have that information and bring that back to us.”


Mayor Pro Tem Brewster McCracken said he wants to maintain both sets of offices.


“I think we need to begin correcting these issues, but I don’t believe we should act in this budget cycle,” he said. “We don’t want to inadvertently hurt the city’s financial controls by acting too quickly to fix what may not be a problem. I think we need both offices. We need to make sure both offices are fully staffed,” McCracken said.


Committee Chair Sheryl Cole agreed, saying “If the city auditor needs more staff we need to increase his budget to allow him more staff. I think the internal auditors that serve under city management are performing crucial duties and we should not remove them.”


The committee took no action, but promised to continue the discussion at future meetings.

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