Overtime at office

"Staff ultimately learned the best practice would be to have an internal audit function or program."

As the city budget gets closer to final approval, one of the items being finalized is the elimination of the internal city auditor position on administrative issues.

While council appears to fully support the elimination of the position, it would not eliminate the review of city audits. City Manager Kevin Phelps said the city would use outside contractors to perform these duties.

Phelps said this new proposal would instead create an independent process which would allow audits to be more complete. His suggestion is to add a new, independent audit committee to decide what audits should be completed, all while keeping an internal audit program manager to oversee discussions.

The new plan would eliminate current auditor Candace MacLeod, who has been in the position since 2001, and make assistant city auditor Joseph Wagner-Corona the new audit program manager.

Interim Assistant City Manager Rob Sweeney said the best practices for the new program would be conducted through internal audits by each department.

“When we first bought this up, council asked for how other districts and jurisdictions do this,” Sweeney said. “We looked out to other organizations as to how they have internal audit functions.”

Some of the groups researched included Mesa, Surprise and Phoenix as well as the Institute of Internal Auditors and Government Finance Officers Association.

Staff ultimately learned the best practice would be to have an internal audit function or program. And it would be enacted in whichever way best suits the jurisdiction, or to have an outside group or firm run audits for the city.

“You have to create a structure that will ensure the independence of the organization,” Sweeney said. “Whether that is through internal or external, you must have a legal basis through an ordinance that creates an independent audit program.”

He added that the program must ensure independence, strengthen internal controls, reduce city risk, maximize efficiency, enhance government transparency, adhere to audit standards and perform periodic quality control and peer reviews.

Sweeney said staff found that seven jurisdictions have formal internal audit programs, with three formed through the cities’ charters and four formed by council ordinances. Of the seven with audit programs, five have internal personnel jurisdictions.

“Among the reporting relationships, there is no one best practice on how reporting relationships should occur in the city,” Sweeney said. “A couple of jurisdictions have it come right through council, but there are other ways Glendale can ensure reporting of the audits.”

Councilmembers asked Phelps several questions as to how the program would occur, and if fewer audits would be performed. Phelps added that the new program manager position would maintain independence and determine which audits were performed.

The plan would amend the current city code, which would create an independent internal audit program giving council flexibility on how to finalize the program. Then they would adopt the new ordinance, and staff would work to ratify the independent audit committee.

One of the few dissenting voices on the subject, Councilman Bart Turner, said the new proposal would lead to fewer audits and would make citizens question the city’s transparency.

“The current process has worked quite well since 2014,” Turner said. “Moving this program would be a major step backward. The auditor in other Valley cities is an officially hired or appointed position by council, and I prefer that.”

He said up until 2012 the city auditor reported to the city manager. But then, an external audit discovered a multimillion dollar issue with risk management trust funds.

“It was a very intense audit conducted by a respected outside firm at that time that gave council complete clarity to the issue at hand, and their recommendation at that time was that council create an independent city auditor,” Turner said.

City council passed the ordinance in 2014. It had the city auditor report to the city manager and then to council.

“I don’t want us to lose ground, and I do support creating an audit committee to provide council the expertise we don’t have and to provide additional transparency in having citizens involved,” Turner said.

The office has performed 17 of the past 18 city audits over the past five years, including audits that looked at such issues as cash handling, travel and procurement, following rules, misuse of funds, investigating complaints about city issues that were called into the city’s anonymous ethics hotline, credit card purchases and pavement management, among others.

While a majority of council seemed to be in favor of the change to an auditor program manager, some questioned the chain of command.

“Is it possible to codify in the ordinance that the audit program manager reports to the audit committee and administratively to management?” Clark asked. “To keep the audit program as far away from management as possible, I think that is our goal. If you could figure out a way to do this, that would be great. That is the only thing that concerns me.”

Phelps added that it is up to council to direct the city manager, and it is incumbent on council on the lengths of independence for any potential auditor position.

“I chose to put this position in there, recognizing that the audit program manager would have lots of interaction with the committee,” Phelps said. “Just from a reporting standpoint on performance, but making it clear on how their position would function, we would put in our administrative policy on how it would function based on council recommendations.”

Cholla Councilwoman Lauren Tolmachoff questioned the organization of the committee.

“Because the city manager would be a semiofficial member of the audit committee, they would have direct interaction with the audit program manager. You would be able to see the performance and other issues with employees that need to be evaluated,” Tolmachoff said. “If the person is going to be conducting and producing internal audits, then the person needs to be independent from a director. That would make me more comfortable with this.”

Phelps said the audit plan would all be determined by the audit committee, but it should have a relationship between management and the auditor.

“It is not uncommon for management to offer up good suggestive areas an audit could come in and look at,” Phelps said. “This could be a good tool for management to improve what we do.”

As of print, council was scheduled to vote on the final proposal at the May 14 meeting.