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The City Council today formally created the Audit Committee recommended by consultants to reform its financial reporting practices, naming Councilman Kevin Faulconer as chairman and Councilman Tony Young as a committee member.

Council President Scott Peters had also nominated Councilwoman Donna Frye to serve as vice chairwoman. However, Frye made it clear that she would not serve on the committee unless she was given the chairwomanship.

Young and Councilwoman Toni Atkins supported Frye. Councilman Jim Madaffer had supported Frye the first time the issue was broached, while Peters had supported Faulconer.

Peters postponed the issue when it was first discussed, citing the need to properly notice the discussion under state open meeting laws.

Peters later formally nominated Faulconer as chairman to serve alongside Frye and Young. Peters said he will have to drum up another council member to fill the third seat on the committee.

“This is one of those issues that I need to chair or I won’t serve on the committee. I’ve learned my lesson,” Frye said.

In a November, the Securities and Exchange Commission found the city committed securities fraud in not properly disclosing its pension and retiree health liabilities to investors.

As part of that settlement, the city agreed within 60 days to hire a monitor to oversee its financial-reporting reforms.

The Mayor’s Office today asked the City Council to postpone finalizing the three-year, $4 million contract with its choice for the position, Boston securities attorney Stanley Keller.

“We had hoped to have a response from the SEC as of today for our nominee. As of today we don’t have that response,” said Jeff Gaddis, an aide to Mayor Jerry Sanders.

ANDREW DONOHUE

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