Authority and Responsibility of the City Auditor
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:
- 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.
- 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,
- 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);
- Establish an organizational structure appropriate to carrying out the responsibilities and functions of this section; and
- Set and maintain a tone for ethical behavior, establish a positive ethical environment for the office of the city auditor, and conduct audit work in accordance with the principles of integrity, objectivity, confidentiality, and competency.
- The mission of the office of the city auditor is to promote honest, efficient, effective, economical, and fully accountable and transparent city government. To fulfill this mission, the office of the city auditor shall conduct performance audits and perform nonaudit services of any city department, program, service, or activity as approved by the city council. The purpose of these audits is to provide the city council, city management, the residents of Palo Alto, and other stakeholders with independent and objective analysis as to whether management is using its financial, physical, and informational resources effectively, efficiently, economically, ethically, and equitably, and in compliance with laws, regulations, contract and grant requirements, and city policies and procedures. Audits shall be conducted and nonaudit services provided in accordance with Government Auditing Standards, as established by the Comptroller General of the United States, Governmental Accountability Office.
- In addition to the aforementioned responsibilities, the office of the city auditor shall:
- Select and recommend to the city council for approval an independent certified public accounting firm to conduct the city’s annual external financial audit and coordinate the annual external financial audit with the approved firm.
- Perform other functions consistent with the provisions of this section.
- At the beginning of each fiscal year, the city auditor shall prepare an annual audit plan for city council approval. The plan will be issued on the office of the city auditor website, with written notification to the city council, and be placed on the appropriate committee agenda. 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 that may be addressed. The city auditor will review the plan and consult with the city manager prior to submitting it to the appropriate committee of the city council for approval. The city manager may identify areas where the city will benefit from performance audits or a nonaudit service. The city auditor may review the plan with and seek the advice of the city attorney prior to submitting it to the appropriate committee of the city council for approval. The annual audit plan may be amended during the fiscal year with approval of the city council.
- The office of the city auditor shall prepare quarterly reports describing the status and progress towards completing the audits. The reports will be issued on the office of the city auditor website, with written notification to the city council, and be placed on the appropriate committee agenda.
- 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. The reports shall meet the reporting requirements specified in the Government Auditing Standards and the views of the city manager.
- Within two weeks after receiving the final draft report, the city manager, or his or her designee, will prepare an official written response to the findings and recommendations contained within the report and provide the response to the office of the city auditor. The city auditor and city manager may agree to an extension of the two-week time frame if requested by the city manager. If a response is not received within the established time frame, the office of the city auditor will issue the audit report without management’s response.
- The office of the city auditor shall also provide a copy of the draft report 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.
- Audit reports and other work products of the office of the city auditor will be placed on the agenda of the city council or appropriate city council committee consistent with the following general guidelines:
- Information items and items that will be discussed in a study session will be placed on the council agenda.
- Audit reports and other audit work products will be placed on the finance committee agenda when the subject matter focuses primarily on enterprise fund departments, functions, or activities, or is concerned primarily with financial matters.
- All other audit reports and audit work products will be placed on the policy and services committee agenda.
- 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 his or her designee. The report will be issued on the office of the city auditor website, with written notification to the city council, in the first quarter of the fiscal year and be placed on the appropriate committee agenda. Further follow-up audits will be conducted as determined and recommended by the city auditor and approved by the city council.
- Unless prohibited by law, the office of the city auditor will have unrestricted access to all sources of information, property, and personnel relevant to 1) the performance of a council-approved audit or 2) the identification of potential risks when developing the annual audit plan. Department management and staff will not intentionally withhold, hide, or destroy any information or property that may be potential evidence in a planned or ongoing audit. Nothing in this section shall authorize the office of the city auditor to have access to documents, records, and information related to the office of any elected official.
- The office of the city auditor will handle documents and information received with the same prudence exercised by those normally accountable for them and consistent with appropriate policies and regulations and the ethical principles cited in the Government Auditing Standards.
- To the extent possible, the office of the city auditor will accommodate an area’s daily operations in scheduling and conducting audits.
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.