The Office of the City Auditor was established in 1983 by an amendment to the Palo Alto City Charter. Our roles and responsibilities are detailed in the Palo Alto Municipal Code. The City Auditor is appointed by and reports to the City Council.
Authority and Responsibility - Palo Alto City Charter
The Office of the City Auditor was established by a charter amendment approved by a majority vote of Palo Alto citizens in 1983. The Palo Alto City Charter specifies that,
A. It shall be the duty of the City Auditor to:
- Ensure that city departments and officers, responsible for accounting and financial management activities, comply with statutory requirements and accounting standards;
- Conduct internal audits of all the fiscal transactions of the city including, but not limited to, the examination and analysis of fiscal procedures and examination, checking, and verification of accounts and expenditures;
- Provide other analyses of financial and operating data as directed by the city council; and
- Other such duties as the council may by ordinance direct.
B. The Auditor shall conduct internal audits in accordance with a schedule approved by the city council and may conduct unscheduled audits from time to time. The results of these audits shall be reported in writing to the city council and the city manager. C. In addition to the audits conducted by the city auditor, the city council shall engage an independent certified public accounting firm to conduct an annual external audit and report the results of this audit in writing to the city council. The city auditor shall coordinate the annual external audit.
Authority and Responsibility - Palo Alto Municipal Code
The duties of the Office of the City Auditor are further described in the Palo Alto Municipal Code, Section 2.08.130. According to the Municipal Code,
A. The office of the city auditor shall be under the direction of the city auditor who shall be accountable to the city council. The city auditor shall:
- Be knowledgeable in operational and financial auditing, public administration, and public financial and fiscal practices;
- Be a licensed certified public accountant (CPA) or certified internal auditor (CIA); and
- Establish an organizational structure appropriate to carrying out the responsibilities and functions of this section.
B. The mission of the office of the city auditor is to promote honest, efficient, effective, and fully accountable city government. To fulfill this mission, the office of the city auditor shall conduct audits and examinations of any city department, program, service or activity. The purpose of these audits and examinations is to provide the city council and city management with information and evaluations regarding the effectiveness and efficiency with which city resources are employed, the adequacy of the system of internal controls, and compliance with city policies and procedures and regulatory requirements. Specifically:
- The city auditor shall conduct operational and financial audits and other audit work as requested by the city council. This will include independently determining and evaluating:
- The soundness, adequacy, and application of accounting, financial, and other operating controls towards promoting effective control at a reasonable cost.
- The extent of compliance with applicable laws and regulations and with established policies and procedures.
- The extent to which city assets are accounted for and safeguarded from losses of any kind.
- The sufficiency, validity and reliability of accounting and statistical data developed within the organization.
- The economy, efficiency, and effectiveness of city departments, programs, services, and activities.
- Audits shall be conducted in accordance with Government Audit Standards, as established by the United States General Accounting Office and the Standards for the Professional Practice of Internal Auditing, established by the Institute of Internal Auditors.
C. In addition to the aforementioned responsibilities, the city auditor shall:
- Coordinate an annual external financial audit for the city with an independent certified public accounting firm selected by the city council.
- Provide consulting services to city operating departments as requested by the city council or city manager in their efforts to re-engineer their operating practices and processes.
- Provide consulting services to the city council, as requested, regarding the accuracy and financial impact of information provided to the city council.
- Perform other auditing functions consistent with the provisions of this section.
D. At the beginning of each fiscal year, the city auditor shall submit an annual audit plan to the city council for approval. The plan shall identify the preliminary objectives of each audit to be performed, reflecting the purpose of the engagement and a preliminary description of the areas which may be addressed. The city auditor will review the plan and consult with the city manager prior to submitting it to the city council for approval. The city manager shall identify areas where the city will benefit from operational and financial audits. The city auditor will review the plan with and seek the advice of the city attorney prior to submitting it to the city council for approval. The city auditor will issue quarterly reports to the city council describing the status and progress towards completing the audits. The annual audit plan may be amended during the year with the approval of the city council.
E. The city auditor shall prepare a written report of the results of each audit conducted and will be responsible for retaining a copy as a permanent record. Each audit report shall include:
- A statement of audit objectives and a description of the audit scope and methodology.
- A full discussion of audit findings and conclusions.
- Recommendations for necessary or desirable action.
- A response from the city manager or the highest official of the audited entity, except as described below.
F. Upon completion of the final draft of an audit report, and prior to submission of the report to the city council, the city auditor shall transmit a copy of the report to the city manager or the highest official of the audited entity, to the city attorney for review and comment, including legal advice relating to disclosure of information contained in the report, and to other appropriate officials as determined by the city auditor.
- Within five weeks after receiving the report, the city manager or the highest official of the audited entity will prepare an official written response to the findings and recommendations contained within the report and transmit the response to the city auditor. The report will be issued to the city council within four weeks of receipt of the response.
- The official written response will be included verbatim in the audit report issued to the city council by the city auditor.
- If a response is not received within the established five weeks, as described above, the audit report will be issued to the city council without management response.
- The audit report will be placed on the agenda of the appropriate city council committee within forty-five calendar days after the audit report is issued to the city council.
G. The city auditor will prepare and issue an annual report on the status of recommendations made in completed audits. The report will reflect the status as reported by the city manager or the highest official of the audited entity. The report will be issued to the city council in the first quarter of the fiscal year for review by the finance committee. Further follow-up audits will be conducted as determined and recommended by the city auditor and approved by the city council.
H. The city auditor will have unrestricted access to all sources of information, property, and personnel relevant to the performance of a council-approved audit, unless prohibited by law. Documents and information will be handled with the same prudence exercised by those normally accountable for them and consistent with the standards established by the Institute of Internal Auditors. To the extent possible, the city auditor will accommodate an area's daily operations in scheduling and conducting such audits. Nothing in this section shall authorize access to documents, records, and information related in any way to the office of any elected official.
City Council Relations
The City Auditor is appointed by and reports to the City Council. The City Council approves the annual audit workplan, reviews audit report findings and recommendations, and monitors the implementation of recommendations.