City Officials at Odds Over Need to Hire an Auditor

GLENDALE — After losing $1.1 million to fraud in recent years, the City Council has moved to tighten control over municipal finances.

But faced with a sharp disagreement among key city officials, the council stopped short of what many critics contend would be the only effective move: hiring a full-time auditor.

While at least two council members and City Manager David Ramsay urged hiring a permanent auditor at a meeting last week, Finance Director Brian Butler and Councilman David Weaver opposed the idea. The council unanimously voted to study the matter for 90 days.

“I don’t want to get involved in finger-pointing,” said Mayor Larry Zarian. “All I want to do is create the best solution. We should consider the money [for the auditor position] a safeguard and not be penny-wise and pound-foolish. But I have not yet made up my mind.”

In the most recent embezzlement case, a clerk in the city’s permit services department was charged late last year with stealing at least $107,000. The clerk was fired when the discrepancy was discovered after a two-month investigation.

In 1993, an agency hired by the city to collect overdue utility bills bilked Glendale of more than $1 million. Some $600,000 was recovered through a settlement.

The city employs a finance director, treasurer and city manager, positions that some officials believe already encompass the duties of an auditor without enlarging the bureaucracy. The city could stand to increase its auditing capabilities, critics of the new position argue, but this can be done without creating a new office.

About $200,000 of the current budget has been allocated for an auditor’s office. But the city is waiting for completion of the state budget before making final spending plans.

“It may be sad, but it’s essential to hire an auditor,” said Councilman Sheldon Baker during the council’s discussion last week. “It’s not a matter of mistrusting someone. . . . It’s done because we feel it’s a check and balance that’s necessary.”

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Most California cities the size of Glendale, which has a population of almost 180,000, do not have an auditor position, according to city officials and the U.S. Conference of Mayors. That fact was cited by Butler.

“We already have an audit committee and our charter requires an external audit every year,” Butler said. “The city auditor is going to, by definition, add to city bureaucracy and will be redundant.”

The city’s population has grown nearly 25% since just 10 years ago. With this growth has come big-city concerns, according to Ramsay, the city manager.

“The city now has a budget in excess of $330 million. It’s a large-scale business,” Ramsay said. “Our business practices should be consistent with that magnitude. An auditor, I think, would be appropriate.”

At Tuesday’s meeting, the council created an audit committee composed of private citizens and city officials, which will select outside firms to conduct a yearly audit and review the auditor’s work. The committee replaces the audit board, which functioned in much the same way but reported to the city manager instead of the City Council, as the audit committee will.

Proponents of the auditor position argued that the embezzlement cases likely would have been discovered earlier, or forestalled, with periodic in-house financial and procedural audits.

“There was a certain lack of auditing,” said Assistant City Atty. Vivian Ide. “There was a certain lack of internal control with those cases.”

Ramsay described the issue as one of checks and balances. “To me, you need to separate the two--internal controls and finances--or else it’s the fox guarding the chicken coop.”

Butler disagreed, claiming the city could stand to beef up auditing resources without creating a new municipal office.

“We already have in this city an elected treasurer and a city manager and me,” Butler said. “Now you’re going to add a fourth head to that beast, under the auspices of checks and balances?”

If the internal controls are failing, the city manager should be able to deal with the problem, he said. If fiscal audits are not catching discrepancies, it is “my job,” Butler added.

“If I’m not doing a good job, fire me,” Butler said. “If the city manager is not doing a good job, fire him. But don’t have a third head for government.”

While it is possible that an auditor would have caught the two known instances of embezzlement, “hindsight is 20-20,” Zarian said. “I was extremely disturbed it happened. It was over $1 million; that’s a lot. If you have checks and balances, it shouldn’t happen.

“But I have not yet made up my mind. I still have a lot of questions. The 90 days should help answer them.”