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Wednesday, Dec. 6, 2006 | The city of San Diego paid the firm Kroll Inc. $20.3 million to serve as its “audit committee” and provide recommendations on how to clean up the city’s sloppy internal controls.
One of its main recommendations was that the city create a permanent audit committee — presumably one that was more economical than the temporary version. Kroll claimed that the idea was justified because the Government Finance Officers Association, or GFOA, had been urging local agencies to create such a committee for some time. The Kroll report quoted that association at length.
But then Kroll, inexplicably, took a major detour from what the GFOA recommends. And although many in this city, without hesitation, began championing Kroll’s so-called remediation measures — including the mayor and the editorial board of the major daily newspaper — a more measured review of Kroll’s recommendations reveals reasons why the City Council and others should modify the plan handsomely before implementing it.
No recommendations are more important than those related to the city’s auditor and audit committee.
The GFOA had long asked cities to put together an audit committee — one that was made up of at least five members. Now the association recommends that the members of a government’s audit committee be appointed by the legislative body of an organization — in other words, its city council.
Although it created the appearance that it relied on the GFOA construct, Kroll inexplicably recommended that the mayor appoint the majority of a smaller, three-person committee.
What’s more, and what’s potentially worse, Kroll recommended that the mayor appoint the city’s auditor, a position that in the future would be known as the auditor general.
Mayor Jerry Sanders has long maintained that he needs to hold onto authority over the city’s auditor. Some assert that an “internal” auditor as imagined by the mayor should merely ensure that the city is performing its duties according to the mayor’s policies and direction. The internal auditor, and the audit committee to which he or she reports, would make certain that the numbers on the city’s financial disclosures are accurate.
Watchdog duties, they say, can be performed by “outside” auditors — those from the seemingly endless line of consultants and lawyers who are all too happy to take lucrative government contracts.
This is not ideal. If this city’s past problems don’t confirm the necessity of a fiercely independent auditor, it’s hard to imagine what would. Several times over the course of a year in any city, allegations or questions arise about the potential for waste, fraud or misuse of public funds. Not all of these require major investigations, and not all of them would require the contracting of an outside auditor. But the city’s auditor should feel obligated to coordinate the response to concerns like this.
In Los Angeles, the city’s controller is elected and has provided an exciting new model of the kind of auditor San Diego could desperately use.
Before we implement Kroll’s plan, the City Council would be wise to explore whether the city should have an elected controller as well.
It’s hard to imagine how a city can ensure the independence of an auditor without electing him. But Mayor Sanders’ proposal certainly does not provide that needed independence and it isn’t intended to.
If the auditor owes his very employment to the mayor, and he or she is overseen by a committee dominated by the mayor’s own allies, what happens when the auditor would like to proceed with an investigation into something the mayor doesn’t want investigated?
It may sound far-fetched to those who know and respect the mayor. Sanders has assured us repeatedly that he would not seek to curtail the independence of the current city auditor. And he points to the outspokenness of said auditor as proof.
But Sanders will not always be the mayor. San Diegans deserve more assurance than simply his word that the auditor will be free to explore and spotlight potential waste.