Auditors slam plan to reform their office | News | Palo Alto Online |


Auditors slam plan to reform their office

Senior auditor accuses former boss of 'mismanagement,' hints at lawsuit against city if council moves ahead with changes

A proposal to reform Palo Alto's Office of the City Auditor is facing pushback — and a threat of a lawsuit — from employees of the small department, which has been hobbled in recent years by leadership turnover and internal bickering.

The City Council will be considering in the coming weeks a report from Kevin W. Harper CPA & Associates, a firm that was commissioned to survey other cities and make recommendations about best practices for internal auditing operations. The most controversial recommendation in the report calls for shifting the reporting structure so that the auditor's office, which is now independent, would fall under the city manager's "administrative oversight."

The report recommends a dual-reporting relationship, wherein an independent committee (in this case, the City Council) would make decisions about audits that need to be conducted, audit timing, city auditor appointment, termination, evaluation and compensation. The city manager, meanwhile, would provide administrative oversight such as "review of time sheets and expense reports, consultation about timing of audits based on operational considerations, and involvement in discussion of cost versus benefit decisions of audit recommendations."

While the Harper report purports to comply with the standards of the Institute of Internal Auditors, a national organization that develops guidelines for auditors, the institute itself was quick to distance itself from the recommendation to have the auditor report to the city manager for administrative oversight.

Richard Chambers, CEO of the Institute of Internal Auditors, wrote in a letter to the council that the proposed shift would "undermine the independence and critically important role of internal audit in Palo Alto, negatively."

"To achieve the degree of independence necessary to effectively carry out these responsibilities, the chief audit executive must have direct and unrestricted access to both city management and the City Council," Chambers wrote. "The city auditor must also be free from any undue influence of city management."

"This influence can appear in many forms, including inappropriate administrative or functional reporting relationships, budgetary constraints, and decision-making around personnel issues (e.g. hiring/firing and compensation)," the letter states.

Today, the city auditor is one of four positions that report directly to the council (the city manager, the city attorney and the city clerk are the other three). The office, however, has been without a leader since February 2019, when the last city auditor resigned following a prolonged conflict with a group of three auditors on her staff. The council last year appointed a consultant, Don Rhoads, to oversee the office on a temporary basis. His contract expired in November, and the office, now down to three employees, remains without a leader.

While the council has not discussed the personnel conflicts publicly, the Weekly has learned that employees in the city auditor's office had filed at least two complaints against Richardson, prompting investigations that did not uncover any wrongdoing on her part. Three employees had also briefly considered suing the city in 2018, after the council discussed eliminating all of the positions in the office except the city auditor and contracting out auditing services. (After voting to do so, the council's Finance Committee changed its mind and decided against the outsourcing.)

Now, one of these auditors, Senior Performance Auditor Houman Boussina, is fighting back against the Harper report and taking shots at his former boss. Boussina's attorney, Karl Olson of the firm Cannata, O'Toole, Fickes & Olson, submitted a letter to the council last week that calls the Harper report "fundamentally flawed" and that blames Richardson for damaging the office's productivity. The Harper report concluded that compared to other cities, Palo Alto's auditing operation has the lowest productivity (with a rate of 0.7 audits per year per full-time position) and the highest costs per audit ($417,000).

Olson argued in the letter that the report "fails to identify or acknowledge years of mismanagement under Richardson, as reported by staff auditors and whistleblowers, and does not identify who was accountable or responsible for the negative outcome it alleges, including low office productivity and high cost."

"This has unfairly exposed the office staff, who have not had a supervisor since November 2018, to direct criticism and blame for the report's conclusions," Olson's letter states.

The letter alludes to a complaint that Boussina and others provided to the council in August 2018, alleging that Richardson had publicly issued audit reports that were inaccurate and misleading and that she had engaged in "retaliation against the office staff who had in good faith met their ethical obligations to report the issues to city management."

"Unfortunately, to our knowledge, the city has not acknowledged or taken corrective action to address the wrongdoing," Olson wrote. "Instead, the city made working conditions extremely difficult for the entire office starting in 2018 by denying supervision, performance evaluations, and the opportunity for merit-based pay increases that are provided to other city employees," Olson wrote.

While council members do not comment on personnel issues, some of them have told the Weekly in the past that they don't believe Richardson has done anything wrong and have pointed to the investigations that vindicated her. Their account was corroborated by a former employee of the office.

Olson's letter on behalf of Boussina noted that two staff auditors had terminated their employment with the city since October 2018. Olson wrote that Boussina is recommending that the council recruit and appoint a permanent city auditor who can "restore leadership and supervision and work with the City Council to restore operations at this office."

"We hope the City Council will take this letter in the constructive spirit in which it is intended and will not take any actions which undermine the important role of the City Auditor's Office and/or lead to employment litigation exposure for the city," Olson wrote.

Boussina isn't the only employee who is critical of the Harper report. Mimi Nguyen, lead senior performance auditor, submitted her own letter that argued that the report is "flawed in many areas." This includes its failure to "acknowledge the complexity of the performance auditing process" as dictated by the city's currently adopted industry standard. The Harper report, she wrote, also "does not reflect decisions made at the City Auditor and City Manager level, which directly affects the scope, cost and duration of audits, and the completion of audit recommendations." She also argued that Harper used a flawed benchmark comparison and that the report "draws conclusions pre-emptively rather than offering an understanding of root causes to inform and assist council in designing an effective office structure and plan moving forward."

"Based upon the lack of and incomplete information in the report, I believe that the conclusions are significantly skewed and misleading," Nguyen’s letter states.

Today, the Office of the City Auditor follows the Government Auditing Standards, which are geared toward government auditing. Nguyen noted that the Harper report fails to acknowledge the complexity of the auditing standards under these rules, which she calls "the gold standard."

The Association of Local Government Auditors, a national auditing group, made a similar point in its Dec. 19 letter, which argued that Harper relied on internal standards that are oriented toward the private sector rather than governing auditing. Given that Government Auditing Standards require auditors to be independent, having the city auditor report to the city manager in an administrative manner is "a significant structural threat to the independence of the City Auditor's Office and not appropriate for an external government audit function," Douglas Jones, chairman of the group's Advocacy Committee wrote to the council.

"Some of the administrative reporting examples outlined by the consultant could result in management inappropriately exerting control over audit work," Jones wrote. "The council can exercise functional and administrative oversight of the city auditor and City Auditor's Office as a body and/or through an Audit Committee that does not include anyone from management."

The City Council was scheduled to discuss the Harper report and its recommendations on Tuesday night, Jan. 21, but members agreed to postpone the hearing to a later date.


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What is it worth to you?


46 people like this
Posted by Mark Weiss
a resident of Downtown North
on Jan 24, 2020 at 11:20 am

I’m kind of old-school about democracy and striving towards self governance so I get upset anytime leadership tries to farm out some of its duties, or our duties.
I’m saying keep the auditor in house.

53 people like this
Posted by Independent
a resident of Esther Clark Park
on Jan 24, 2020 at 11:50 am

Please increase the public's trust and faith in City government by following the City Charter, appointing a City auditor and keeping the Auditor independent of the City Manager's office.

48 people like this
Posted by Green Gables
a resident of Duveneck/St. Francis
on Jan 24, 2020 at 1:49 pm

Having the City Auditor report to the City Manager is like having a fox watch over the chickens in the henhouse. How ridiculous.

5 people like this
Posted by Old Timer
a resident of Downtown North
on Jan 24, 2020 at 9:11 pm

So this saga/drama continues. Boussina's letter makes several references to his "ethical responsibilities" to highlight former auditor Richardson's mismanagement but this article and previous ones have said that investigations did not find her guilty of any wrongdoing. Now he says he has an ethical responsibility to point out the flaws in the Harper report. [Portion removed.] Please end this drama and fire the problem staff and hire a city auditor. But please don't put the Auditors Office under the city manager.

23 people like this
Posted by HereWeGoAgain
a resident of another community
on Jan 25, 2020 at 12:12 am

Actually, Boussina is a very ethical guy. Ask anybody who's worked with him either at the San Francisco Auditor's Office or at Palo Alto. He's got a great reputation (both for honesty and auditing skill), and has produced many award-winning audits. He doesn't lie, and is meticulous in documenting things, so I'd love to see what he has on this whole debacle! If the investigations of Richardson showed no evidence of wrongdoing, they were probably consultants who were paid to hear what the City Council wanted to hear. Or, were investigations under the City Manager's Office, who were probably delighted with Ms. Richardson's mismanagement, and would never have wanted any "black marks" against her, since a competent City Auditor would be making the CM Office's life Hell, as it should be.

And, yes, Boussina had an ethical obligation to point out the flaws in the Harper report (what does that have to do with ego?). And he isn't the only one who has done so. He's in the company of many who have questioned this report.

My money's on Boussina.

42 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 25, 2020 at 8:08 am

The last thing we need is an auditor's office that reports to the city manager. What a waste of money.

We need an independent auditor. That is the whole point.

Also, the report from Harper and Assoc. sounds mostly worthless. Government financials work differently from private industry-- and should. Government funds from different sources that are legally required to be spent on certain programs have to be clearly sequestered in ways that are foreign to private industry. There is no single quarterly bottom line, and taxpayers demand that appropriated program funds not be mixed or redirected at the discretion of managers.

Let's appoint a new city auditor and move on with the auditing.

33 people like this
Posted by legal-beagle
a resident of Another Palo Alto neighborhood
on Jan 25, 2020 at 10:44 am

It's obvious City management is trying to obfuscate the public and find a path whereby there is no proper checks and balances over City management and how it conducts business with taxpayer funds. If the City continues down a pathway whereby it is seeking every possible means to dissolve and/or impede the auditors from doing their job, then the City is subjecting the taxpayers to a system ripe for abuse by City management, as well as possible lawsuits due to their constructive termination of the auditor's office. City Council, do your job and hire an auditor.... you've sat on this for over a year and look at the result from your inaction and undue influence by the City Manager.

31 people like this
Posted by CT
a resident of Old Palo Alto
on Jan 25, 2020 at 11:07 am

The City Managers office is known for not filling in positions. As far as I know, the last CIO resigned In late 2018 after an investigation was opened. No idea what is happening to that position. Has it been filled? What about the library? Why does the city have so many interim positions? Does the city manager not realize that interim positions don’t achieve much. They just keep the lights on because they are not in a position to make big decisions. Oh well, ED is showing his true colors now.

27 people like this
Posted by More to the Story?
a resident of another community
on Jan 25, 2020 at 4:31 pm

Boussina’s letter was courageous.

Why is there so much attention on this small office that according to its website exists to promote honest, efficient, effective, and fully accountable city government? Could it be that the City Council and City Manager’s Office don’t want the public to know its problems and be fully accountable?

According to Boussina’s letter, staff suffered mismanagement, misconduct, and retaliation under Richardson. If this is true, does this go beyond her tenure in Palo Alto? How many people have been affected?

What about the City and how it handles complaints from employees? The City hired a consultant to assist with grievances and complaints. A City Council Staff Report indicated that since July 2016, 90 employment related cases had been received and of which 50 have been resolved and with 40 cases currently being worked through.

Have others had complaints about City management? Is there a similar pattern of behavior with staff in other departments? Would be interesting to hear the experience of present and past City staff.

Web Link

So many unanswered questions. My guess is there is so much more to the story.

25 people like this
Posted by Taxpayer
a resident of Another Palo Alto neighborhood
on Jan 26, 2020 at 8:22 am

It appears that city management has already exposed the taxpayers to litigation settlements by their failing and mismanagement in not hiring an auditor. In the December 16, 2019 council board packet that is available on the city's website, it notes litigation by an auditor employee against the city regarding California Labor Standards. The city cites government code 54956.9(d)(2) in the board packet which states: A point has been reached where, in the opinion of the legislative body of the local agency on the advice of its legal counsel, based on existing facts and circumstances, there is a significant exposure to litigation against the local agency.

Both city management and council members have failed miserably on this by not hiring an auditor. With no captain at the helm, the office has not met the expectations of city management nor the council. Simple solution: Hire an Auditor!!! Your mismanagement of this situation has already cost the taxpayers $$$$$ and your continued impudence only exposes taxpayers to further liability.

23 people like this
Posted by Independent
a resident of Esther Clark Park
on Jan 26, 2020 at 9:02 am

City council - please hire a City Auditor.

22 people like this
Posted by Captain Obvious
a resident of Midtown
on Jan 26, 2020 at 9:55 am

Only two reasons for the City Manager to want the Audit Dep’t administration task: 1. It’s efficient and the CM’s motives are pure, so they believe nothing bad will come of it. 2. The motives aren’t pure.
The problem with #1 is that it presumes the CM’s motives will always be pure going forward, forever. That’s unrealistic. Don’t put the auditors under the CM.

11 people like this
Posted by Balloter
a resident of Old Palo Alto
on Jan 26, 2020 at 5:42 pm

If the City does decide to try and hire an auditor, will they even be able to recruit a professional willing to take on an office that has stalled out with a City Manager who is gunning to have total control and oversight of an office that is supposed to be independent from his power and authority? Most likely only second or third-tier candidates for the Auditor’s position would be willing to subject themselves to such an environment.

The City is at a crossroads and now that the public knows what’s going on, they either need to fill the Auditor’s position or get rid of the Auditor’s position. You can’t keep hiring consultants and interim substitutes to “keep the lights on.” This method has not worked and you’ve wasted a year’s worth of auditing of the City’s business practices simply by sitting on your hands. As the old saying goes, “go” or get off the pot! The City Manager and Council need to be held accountable for their incompetence and mishandling of this matter. Good luck with finding positive verbiage to include in your recruitment advertisement for the Auditor's position.

4 people like this
Posted by fishy
a resident of Another Palo Alto neighborhood
on Jan 26, 2020 at 9:46 pm

a resident of another community

"Actually, Boussina is a very ethical guy. Ask anybody who's worked with him either at the San Francisco Auditor's Office or at Palo Alto."

San Francisco Auditor's Office? That doesn't necessarily give me any confidence

Or that someone from another community is so quick to post on this thread which is not exactly breaking news.

Something strange is going on here if only with the messy story and hard to keep track of the cast of characters.

6 people like this
Posted by Resident
a resident of Midtown
on Jan 27, 2020 at 11:00 pm

@Balloter - I think you are completely correct about only getting a second or third-tier candidate. With national audit organizations weighing in on this, I can't help but think that a lot of auditors around the country know what's going on here and would not be willing to take a chance on it. That is even more true if they contract out the audits and just have a city auditor there to do what - manage contracts?

I also agree with @fishy that there is something strange going on here, obviously much more than what we know, but my guess is the "prolonged conflict" is at least part of the issue. For the heck of it, I Googled both Boussina and Richardson to see what information is out there about them. One of the first things that comes up for Boussina is that he was appointed as the acting city auditor in September 2013 while the city conducted a national search for a new city auditor. An article comes up about Richardson saying she was appointed city auditor in April 2014. So he would have had several months to show the council that he was deserving of the permanent appointment, but I'm assuming he applied for the position and Richardson got it over him. If so, I have to wonder if some of the issue between Boussina and Richardson was jealously on Boussina's part because he didn't get a job that he coveted and felt he deserved and then decided to make life rough on Richardson so she would leave and he would have another shot at the position. He likely has a very different management style than Richardson and seems to have made that the focus of his complaints. I also saw very little about Boussina's career as an auditor (but I did learn that he plays the violin!), but there is a lot out there about Richardson's, including several awards, that she was past president of the Association of Local Government Auditors (one of the organizations that wrote a letter to the council on this issue), that she gives a lot of presentations on audit topics, and she was appointed by the Comptroller General of the United States to his Advisory Council on the Government Auditing Standards. I realize that those things don't address her management style, but I also don't think someone could have accomplished what she has without being at least a decent manager. And when I looked up the Advisory Council, I saw that there are only 17 people on it from around the country and they are labeled as "experts." All of this makes me question the legitimacy of the accusations in Boussina's letter.

11 people like this
Posted by HereWeGoAgain
a resident of another community
on Jan 28, 2020 at 5:48 pm

[Post removed.]

15 people like this
Posted by An auditor
a resident of another community
on Jan 28, 2020 at 11:25 pm

I can’t speak about Richardson, having never worked with her, but I worked with Houman for several years. His integrity, hard work and auditing skills were all of the highest standard.

2 people like this
Posted by HereWeGoAgain
a resident of another community
on Feb 19, 2020 at 11:58 am

[Post removed.]

2 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Feb 19, 2020 at 12:41 pm

I'm not sure what the latest on this is (someone revived a slightly dated thread), but, I still haven't seen any reason why they can't just appoint a new auditor and move on.

4 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Feb 19, 2020 at 1:04 pm

Why? Because they might not want the oversight of the waste. The latest example is the $7,000,000 spent on planning, constructing and defending unsafe roundabouts, 2 of which will mow be removed and several which will be stopped. Web Link

Another example is the City Manager's compensation package that gives him an extra year of salary, benefits and vesting if he's FIRED from his job. Remember how we was the ONLY candidate considered yet the CC felt that it was critical to give him the highest possible compensation including a $4,000,000 house.

There's the $20,000,000 "surplus" PA Utilities has run for the last several years by over-charging us so it can keep spending. Funny how fiscal management and cost-effectiveness never show up as city priorities.

Like this comment
Posted by A City Employer
a resident of Downtown North
on Feb 19, 2020 at 3:08 pm

@Here We Go Again - I've worked here since before Richardson came on board and know that she was in the office on a regular schedule, just like the other employees in the office, so no need to bash her with false statements.

@Anon - I think this thread was revived by Here We Go Again after that same or very similar post by him/her was previously removed.

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