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About this blog: So much is right — and wrong — about what is happening in Palo Alto. In this blog I want to discuss all that with you. I know many residents care about this town, and I want to explore our collective interests to help ...  (More)

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Is it important to have an auditor in Palo Alto?

Uploaded: Apr 27, 2023
Why does Palo Alto, a city that seems so honest, even need an auditor? Why should we hire one when we could spend three-quarters of a million dollars yearly instead on parks, or bicycle paths, or even employee salary increases?

Palo Alto’s charter requires an auditor as one the four city-council-appointed officers. Most, if not all, cities have auditors, as does the state. The role of auditor in this town has changed over the years and now, in my estimation, the city, in choosing an auditor, has, in turn, diminished the role of that person.

I am talking about this because last Monday night, the Palo Alto City Council unanimously again chose the Baker Tilly US firm in Chicago and designate one of its consultants, Adriane McCoy, who had temporarily filled the spot since September, as permanent auditor until June 2025 when the firm’s contract expires. The firm’s previous auditor for this city resigned last August.

The switch to an outside firm began in 2020, so this is only the third year of this new way of auditing the city from outside. Baker Tilly has a $3.4 million five-year contract with the city, so the cost of an auditor is about $700,000 a year.

The choice to continue using an outside firm to monitor this city’s practices is disconcerting to me.

Palo Alto had its own permanent auditors who had a staff and offices at City Hall.

McCoy works out of Chicago from, I believe, her home office. Since McCoy took over last year, she visited the city two or three times, mostly to address the council and discuss her reports.

By law, audit reports are public. That’s because residents need to know the findings and read the reports (available to the press) on just how this city is working – or not working --as can be the case.

Baker Tilly has contracts with many cities. Part of its auditing philosophy is to compare and contrast different city practices and policies – like hiring principles, or budgetary controls, or personnel issues. Its primary focus is financial matters.

A former Palo Alto in-house auditor who I have much admired was Sharon Erickson, who left to become San Jose’s highly praised auditor. She wrote frequent reports for the public on problems in the city –like delays in building permits or airport issues or the effectiveness of a certain departments in the city.

She knew what was going on in town daily, read the local newspapers, followed council meetings, walked around city hall a lot, got to know employees, who trusted her confidence skills, and often they would privately tell her problem s that they saw in their departments. Erickson would investigate and find what was true and what was incorrect about what some employees told her. She reported to council routinely.

So why am I upset about Baker Tilly? Absolutely nothing personal and it is not that they are doing a bad job, but rather their focus seems to be money and budgeting issues, all well and good, but there’s more that residents (like me) may want.

This year they are working on the effect of employees working at home, a wonderful topic that many employers nationwide are wondering about, certainly not an issue unique to Palo ‘alto.

And McCoy us looking into automatic payment processes.

What kind of auditor do I want? Someone headquartered at City Hall, who would go beyond financial issues or comparisons with other cities. to investigate issues such as:
a) Why does it take Palo Alto so long to get things done – like solving the Embarcadero-El Camino intersection daily traffic tie-up problem that began in 2009?
b) Does this city manager need 12 highly paid assistants? Can he do with less?
c) Are our utility rates rising too fast each year, sometimes twice a year, as is now occurring?
d) Do we need so many employees for a city of 65,000?
e) Palo Alto has an every-other-Friday-off policy for the past decade, and about a dozen other paid holidays; another one was added this year. Are employees of other cities getting so much time off and so many benefits?

Of course, some of these questions the city manager and council may not want answered, but I know a lot of residents do.

I strongly believe we need an auditor of our own, who knows and understands this town rather than only visiting it two or three times a year. We need an auditor who will be able to make an independent examination and investigation of the practices in our fair city, and report back to residents all the warts, wrinkles, successes and accomplishments.

What is it worth to you?


Posted by Brian Steen, a resident of Greater Miranda,
on Apr 27, 2023 at 2:50 pm

Brian Steen is a registered user.

I agree with you on all points. Well written, Diana!?

Posted by Ardan Michael Blum, a resident of University South,
on Apr 27, 2023 at 5:28 pm

Ardan Michael Blum is a registered user.

Ms Adriane McCoy has a great professional background. The City of Palo Alto functions as if it were an extended part of Saudi Arabia. A good auditor can help us change this!

Posted by Anneke, a resident of Professorville,
on Apr 28, 2023 at 8:40 am

Anneke is a registered user.

Diane, I agree with Brian. A well-written and honest article.

I also believe an independent auditor located in Palo Alto gets a true flavor of what the PA citizens are concerned about.

I did read that PA's population decreased by 7.7% from 2020 and now stands at 63,210. In July of 2022, the City of Palo employed 12,561 employees, that is 1 city employee for five citizens. Plus the city uses consultants.

The city's salaries and life-long benefits are well known for being very, very high, so I cannot help but wonder how we can afford all these employees and their total compensation.

I would like to see an in-depth audit into all the salaries and benefits of our city employees and the risks it holds for the future of our city.

Posted by J Randall, a resident of Another Mountain View Neighborhood,
on Apr 29, 2023 at 8:53 am

J Randall is a registered user.

This is dry business and your wish list appears a bit saucy. An auditor's attestation on financial statements lets taxpayers know that the numbers, as they are presented, can be relied upon. Meeting this objective alone takes a lot of work and the cost of compliance for GASB/GAAP audit appears to be reasonable here.

The out-of-towner should be selected for objectivity's sake, just let them know ahead of time of certain regional challenges they may face while working here, such as being exposed to Bay Area snobbery without wherewithal, and the inflated sense of self worth that can distract otherwise fine souls in this regard. Also, you may want to mention to them the growing waywardness at local universities, should they go to lunch near campus, where open-minded thinking and objectivity can be met with intolerance and hostility. Advise them that it is better to just nod and smile like a dullard should they visit any of those places.

Also, why couldn't the city consult with the person having expertise on local operational matters in separate engagement? If you spend x amount to save y amount, you have z amount more for parks, etc.

Posted by Bernice Thompson, a resident of Duveneck/St. Francis,
on Apr 30, 2023 at 9:36 am

Bernice Thompson is a registered user.

This is a very costly outlay to ensure municipal fiscal compliances.

Couldn't a volunteer team of Palo Alto residents who are CPAs fulfill the same task as a community service?

On the other hand, a $700K annual expenditure is chump-change to members of the PACC because the money is not coming out of their pockets.

When will prudent Palo Alto residents (if any) finally decide to take it upon themselves to either run for PACC as responsible citizens OR as constituents vote the spendthrift council members out?

As residents, we are equally responsible for allowing the Tuesday Night clown show(s) at City Hall to even exist.

Posted by Bob Callahan, a resident of Leland Manor/Garland Drive,
on May 1, 2023 at 8:46 am

Bob Callahan is a registered user.

When I was in Boy Scouts, one of the requirements towards earning a Citizenship/Community merit badge involved attending a city council hearing to witness our local government at work.

We were told that the city council members were highly civic-minded individuals and community leaders popularly elected by the residents to reflect their best interests.

Flash forward > my 12 year-old son who is now in the Boy Scouts attended a Tuesday evening council session a few months ago and mentioned to me that it appeared (to him) that the City Manager actually makes the key municipal decisions and that the council merely acquiesces to the City Manager's proposals and recommendations.

If such is the case, then the 'Tuesday Night Clown Show' is is full swing with the City Manager as the exalted ringleader.

Posted by J Randall, a resident of Another Mountain View Neighborhood,
on May 1, 2023 at 10:29 am

J Randall is a registered user.

One thing that the new accountants will review is the City of Palo Alto's balance sheet. This financial statement presents the City's assets and liabilities. According to the last audited report, Palo Alto had $2.2 billion in assets and over $800 million in liabilities. Of its liabilities, there's public municipal debt offerings, which are issued and outstanding in the United States capital markets, having strict reporting requirements.

While Palo Alto authors like Malcom Harris take a dump on U.S. capital markets, those without access to such a thing will tell you how precious they are. China, for example, has recently met PCAOB review standards (which are safeguards to U.S. capital markets), and that is a very good thing for global commerce and innovation in general.

Palo Alto also receives federal and state grants. These programs also require independent audits of recipients, which can be time consuming and hard work.

All of this hard work has actually led to a nationwide CPA shortage, so doubtful that you could actually find such noble volunteers willingly to audit and assess the internal controls over a $2.3 billion balance sheet at this time. So in this I beg you not "Defund the Accountants" and dilute the importance of an objective independent audit.

Posted by Bruce Miller, a resident of Old Palo Alto,
on May 2, 2023 at 9:17 am

Bruce Miller is a registered user.

An auditor is an accounting watchdog of sorts and especially needed when there are questionable municipal expenditures.

The auditor should be unbiased, independent, and not hired directly by the PACC or city administrators.

It should be a CA State employee/auditor role like they do for the UC and State University campuses.

Posted by fred, a resident of University South,
on May 3, 2023 at 2:20 pm

fred is a registered user.

J Randal,

Don't confuse the Baker Tilley "internal auditors" with the external auditors who audit the city's financial statements. Very separate operations.

Posted by J Randall, a resident of Another Mountain View Neighborhood,
on May 3, 2023 at 8:45 pm

J Randall is a registered user.

Fred - very separate operations, but still a necessary cost of compliance in maintaining an effective internal controls environment.

Some examples of ineffective internal controls environments include those of failed cypto exchange FTX and also Silicon Valley Bank. Speaking of which, I hear Sam Bankman Fried is relaxing in Palo Alto now, feeling right at home I'm sure in a town that doesn't even need auditors.

Further, how much frivolous spending have municipal governments done lately in this state? It seems like just last month the excellent MV Voice did a write-up on the “unhoused" crises and how many millions had been spent, but with nothing to show but more “unhoused" people. Why don't we continue to fund basic social functions like police/accountants/teachers and abandon teenage style activism instead?

Also, why is that Flori-duh can have high speed rail up and running in May of this year, but CA's train projects can't get on track?

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