Voters on May 6 will decide whether to remove the city manager’s authority over the internal auditor – instead putting the City Council mostly in charge of the position that ensures taxpayer dollars and other funds are being used appropriately and processes are being followed.
The City Charter now stipulates a dual-reporting structure where the chief internal auditor may be appointed and removed by the city manager subject to the approval of the City Council. If approved in the charter election, Proposition J would limit the city manager’s role to implementing any internal audit recommendations requested by the council.
The amendment would also give the chair of the Financial Oversight and Audit Committee operational oversight of the auditor’s working audits, results and recommendations – a function now under the city manager. The FOAC is made up of the chief internal auditor, the city manager and four members of the City Council approved by the council itself.
“The dual reporting role of an internal auditor is, in fact, what is a best practice, keeps the community safe and keeps the interest of the taxpayer as a focal point – and I think that’s really important,” said city Rep. Cassandra Hernandez, who was the sole member of council to vote against putting the proposition on the ballot.
The proposed amendment to the City Charter was put forward by District 1 city Rep. Brian Kennedy on Jan. 24, just weeks after he was sworn into office to serve his first term. On Feb. 8, the majority of council approved putting the amendment on the ballot, although it had not been vetted by the Ad Hoc Charter Advisory Committee. The charter committee spent about a year discussing and meeting with the public to refine the proposed amendments it recommended be put on the ballot, though the council had the final say.
Kennedy was appointed chair of the Financial Oversight and Audit Committee on March 6 by the committee itself.
The FOAC maintains legislative oversight over the internal audit function – a provision that would not change if Proposition J is approved by voters. Legislative oversight includes helping decide which audits will be conducted and reviewing audit reports to determine what corrective actions, if any, need to be made.
Auditor’s role & structure over time
The internal auditor’s role is to provide independent and objective analysis of the city’s operations, including reviewing financial statements to ensure taxpayer dollars, government funds and other money are not being misused and that processes are being followed in compliance with laws and regulations. The auditor inspects records to review things such as the usage of grants, overtime in city departments, the use of City Council discretionary funds and more.
Edmundo Calderon has long served in that role, having been hired in 2005 by former City Manager Joyce Wilson. The auditor reported directly to the city manager until the dual-reporting structure was added to the City Charter after being approved by voters in 2013.
Kennedy said he recommended the charter amendment to ensure the internal auditor has more independence in conducting investigations and audits of city departments the city manager oversees.
Kennedy, along with city Rep. Joe Molinar, led the effort to have the city manager’s contract terminated on Feb. 28.
“Currently, if there’s an investigation of the city manager or any department that works for him, he is in control of the operational end of that examination,” Kennedy said. “The new way it’s going to work is anybody from the operation side of the building would fall under the reporting to the chairman who then reports to FOAC.”
If the proposition is approved by voters, the operational side would be overseen by Kennedy while he serves as committee chair. Committee members, including the chair, serve one-year terms and have to be either reappointed or removed by council each year.
To change the reporting structure of the auditor in the future, voters would again have to approve a charter amendment. Charter elections can only be held every two years.
Some large Texas cities operate the same reporting structure as El Paso does now, including Dallas and Fort Worth. In Austin, the auditor reports solely to the City Council. In San Antonio, the chief auditor is recommended by the city manager but reports to and is appointed and removed by the mayor and council.
Professional auditor standards
Dual-reporting relationships between the governing body and administration are recommended
so that the chief auditor has direct and unrestricted access to senior management and the board, according to the International Standards for the Professional Practice of Internal Auditing. The standards are set by the Institute of Internal Auditors, which also provides practice guidance and certification programs for the industry.
However, Pam Stroebel Powers, the institute’s director of professional guidance for the public sector, said the organization is in the process of updating its standards for municipalities. The updates would likely include that local governments’ city councils would have direct oversight of the internal audit function.
The same structure applies to the U.S. Government Accountability Office under generally accepted government auditing standards where, in order to remain independent, the audit organization reports to a legislative body or other independent governing body.
Powers said it’s typical for municipalities to establish an administrative reporting relationship for things like the auditor’s vacation or leave, but should not have direct oversight over other functions of the audit office.
“The idea is to give management insight into their operations, what’s going on within their organization, but we need to have the independence that allows us that full look at the organization without being hindered towards our audit objectives,” Powers said.
Monday is the first day of early voting, which runs through May 2.