What is an auditor?
An individual who inspects and verifies the accuracy of an organization’s operational and/or financial records, the effectiveness of its programs, its compliance with laws, and the success of its outcomes.

What does an auditor do?
Auditors provide unbiased, objective assessments of whether public resources are  managed responsibly, effectively, and ethically to achieve intended results, auditors help local governments achieve accountability and integrity, improve operations, save money, prevent fraud, waste, and mismanagement, and instill confidence among citizens and stakeholders.

Why does the auditor have to be elected to be independent?
The Charter Amendment grants the City Auditor the authority to perform audits and investigations objectively and without interference. The City Auditor will have the statutory authority to audit every aspect of city government and report objectively and directly to the taxpayers about all aspects of government regarding their stewardship of public funds.

With an elected Auditor, the audited entity (the city) is unable to interfere with auditor’s ability to perform their work or report audit conclusions publicly. An Auditor hired by the City Manager or the Council would be at risk of retaliation, in cases where an audit uncovers information that might cast city government in an unflattering light.

Why is an elected Auditor right for Eugene?

Given that Eugene has a form of government that allows the City Manager almost total control over the city organization. The City Manager is minimally overseen by a volunteer City Council which receives only a small stipend. We need a City Auditor who works for, and is accountable to, the people of Eugene

There are many different structures and models of audit functions in the U.S. and internationally, just like there are many different forms of government. The placement of the Audit Office within a government structure must guarantee the utmost freedom from interference by management and political agendas.

A truly Independent Auditor is free from interference and political agendas. They are unhampered in their ability to complete audits objectively. An Auditor hired by the City Council or City Manager is at risk of retaliation if an audit uncovers information that might cast City Government in an unflattering light. Independent means objective and free from undue influence or pressure.

Do other cities have elected auditors?

Yes, for example: Portland, Seattle, Berkeley, Multnomah County, Metro, Oakland CA, Los Angeles CA, Long Beach CA, Orange County CA, Denver CO, Albany NY, Denver CO, 24 states, most counties in Michigan, etc.

Comparing Eugene’s City Manager/City Council form of government to other cities’ organizational structures is not an apples to apples comparison.There are hundreds of cities with multiple variations of organizational structure. Most council/manager forms of government are not directly comparable to ours in Eugene. For instance most city councils or legislative boards have various appointees that are answerable to the council and not the manager. Many city councils can hire or appoint attorneys, department heads, clerks and recorders — and have much more direct decision making responsibility. Many councils have their own staff and resources.

Don’t the auditors need to work with management?
An effective and qualified audit director works hard to establish a respectful working relationship with management and staff. Auditors remain independent of operations but treat other employees with professionalism and respect. The Auditor’s Charter mandate is to improve city operations and save money. To accomplish that objective the City Auditor will cooperate with city officials to achieve the purpose of the Charter Amendment. All audits are designed to comply with professional standards and to satisfy the requirements of federal, state and local laws.

What kind of audits does the city do now?
The city is required to conduct an end of year audit called the Comprehensive Annual Financial Report (CAFR) which they contract with an external agency to conduct. That is a limited review of whether or not the city budget’s financial tables comply with accounting standards. That audit does not verify the accuracy of numbers, or analyze the cost/benefit of expenditures. It only verifies that the transactional reporting complies with accounting standards.
 The city also has a Police Auditor who reviews completed investigational reports that are conducted by Internal Affairs regarding complaints against sworn police employees. The 2017 budget for the Eugene Police Auditor’s Office totaled $529,762.
 In addition, the City Manager has the ability to contract for single audits of programs or operations of his choosing. In that case, the City Manager writes the contract, sets the compensation, and controls the data, access, and information available to the contracted auditor. Those audit reports are not available to the public unless the manager wants them to be.
 When the City Manager or the City Council are in charge of the Auditor, they define the objective and scope of the audit. In such cases the Auditor cannot verify the accuracy of the numbers, but must rely on financial reports and data provided by management.

What kind of oversight will the auditor have?
This Charter Amendment requires the City Auditor and the Office of the Auditor to abide by the Generally Accepted Government Auditing Standards that are published by the Comptroller General of the United States. The most professional and certified Audit shops document that they have conducted their audits in compliance with those guidelines.
In addition the City Auditor and the Office of the Auditor are required to be peer reviewed at least every third year: “The activities of the City Auditor’s office shall be subject to peer review in accordance with Generally Accepted Government Auditing Standards and by a professional, nonpartisan objective group utilizing generally recognized guidelines specific to local government auditing.” In addition, a copy of this independent review shall be furnished to the City Council and be made available to the public.
The City Auditor must be re-elected every four years, and is subject to recall by law. Therefore, the public retains ultimate oversight of the elected City Auditor.

Why do cities like Eugene need an Independent Elected Auditor?
Eugene is considered a medium sized city having a population of almost 170,000. There are many cities even smaller than us, like Albany NY which has 99,000 population, that have City Auditors and Auditor’s Offices. There are also cities like Los Angeles with 4 million people, and everything in between, that have City Auditors and Auditor’s Offices.

 Eugene’s is the second largest city in Oregon and has a discretionary budget larger than Lane County’s. Eugene’s 2018 total adopted budget is $677 million, but even that does not reflect all the money citizens are paying for “city services.” Some of those payments are accounted for in other budgets like; utility charges and fees that are collected through EWEB and SaniPac, Comcast, or transit funds that are handled through LTD.

How much will the Independent City Auditor cost?

One of the best ways to guarantee Auditor independence is to link the Auditor’s office budget and City Auditor’s salary to an objective metric so that the auditing function is not at risk of being diminished or restricted by the Manager or City Council, especially punitively if they don’t like the audit results. The Charter Amendment protects against retaliation by linking funding of the office and the auditor’s salary to an objective metric, as follows:

The budget for the Office of the Independent Auditor, including the City Auditor’s compensation, will be funded at a level not less than 0.1 % of the City’s total adopted annual budget.
Based on the 2018 adopted budget that would be a total Auditor’s office budget of approximately $677,000.00 That total includes the Auditor’s salary. From the Auditor’s office budget she/he is required to pay compensation for the deputy auditors and clerical staff, office equipment, furnishings, and the central services allocation. Also included in that budget are peer reviews, continuing education, and legal services etc.
The Auditor’s salary will also be based on an objective metric with a regional component. The elected City Auditor’s salary will be set at not less than 70% of the average of the salaries of the (a) Eugene City Manager, (b) Salem City Manager, and (c) the Eugene Water and Electric Board’s General Manager, with the same benefits as Eugene’s City Manager.Based on FY 17 salaries, the Auditor’s salary would be approximately $153,000. Which is slightly more than Eugene’s Department Heads, but less than the City Attorney and the City Manager. (Consider that the Auditor must stand for re-election every 4 years and is not entitled to regular salary increases during their term.)

How can having an Independent Auditor save us money?
Independent City Auditors have proven to reduce costs in many cities. The Association of Local Government Auditors cites these money saving audits from other cities and counties;
  • Multnomah County, Oregon auditors identified more than $300,000 in annual savings that the County could achieve by better managing cell phone use
  • A Tennessee city saved over a million dollars with an audit of employee health coverage.
  • Auditors in Atlanta identified about $1.8 million in improper payments to deceased pensioners.
  • Auditor offices in Austin and Toronto have conducted investigations that identified instances of city employees who violated city conflict of interest policies.
  • MGT America, which is a consulting firm that contracts with cities, produced an exhaustive report for the Oakland city attorney’s office regarding funding of Oakland’s elected City Auditor’s Office and concluded the following:

“We acknowledge that the City is faced with difficult budget decisions in the upcoming year. However, we believe the Council should consider, in addition to the minimum required activities of the City Auditor as documented in the report, the potential benefits and savings to the City through having a well-established audit function. We note that the City Auditor’s office has generated between $4 to $5 in savings and recommendations for each dollar spent on their office during the two most recent years. Reducing staff and budgets would also reduce the expected benefits to the City.”

Studies show that generally for every dollar spent on auditing services the audited entity saves 4 or 5 dollars.
The Auditor’s office will establish a hot line for reports of fraud, waste, abuse, and mismanagement. The International Association of Fraud Investigators say this about anonymous hot lines: “Even more alarming is that organizations’ cultures of silent complacency will often dissuade ethical employees who aren’t directly involved in misconduct to not report problems.” Hot lines have proven to be the best way to identify risks and problems.

Why not go through the Council and Mayor to create this proposal?
Two of the chief petitioners and some of the supporters, for this initiative petition are former and current City Councilors. This issue has been kicked around the city for decades, and multiple successive Councils, Mayors, and City Managers have made no effort to move it forward.
A Charter Review Committee in 2001 recommended an Auditor for Eugene. In 2004 the City Club invited Gary Blackmer, Portland’s 3-term elected City Auditor, to Eugene for a presentation. It is time for the voters of Eugene to have the opportunity to decide this issue. Article IV of the Oregon Constitution guarantees citizens the right to legislate by initiative. It provides a challenging but achievable vehicle for change initiated by citizens in circumstances where the legislators refuse to act. The City Accountability Petition Committee is exercising our constitutionally guaranteed rights by filing this initiative petition with the City of Eugene. It proposes a Charter Amendment to establish an Auditor’s Office headed by an elected Independent City Auditor.

Is there really that much fraud, waste, and abuse?
The vast majority of public servants are hardworking and trustworthy. Even so, the Association of Certified Fraud Examiners reports that a typical organization loses 5% of annual revenues to fraud. This Charter Amendment authorizes the City Auditor to establish a “Whistleblower Hotline” to invite anonymous (or non-anonymous) tips that will be investigated for validity by the Auditor’s Office. Tips have proven to be the best strategy to detect and prevent fraud.
Here are some conclusions and excerpted quotes from the Executive Summary findings of the 2012 Global Fraud Study by the Association of Certified Fraud Examiners.
  • Survey participants estimated that the typical organization loses 5% of its revenues to fraud each year.
  • The median loss caused by the occupational fraud cases in our study was $140,000. More than one-fifth of these cases caused losses of at least $1 million.
  • Occupational fraud is more likely to be detected by a tip than by any other method. The majority of tips reporting fraud come from employees of the victim organization.
  • As in our prior research, the industries most commonly victimized in our current study were the banking and financial services, government and public administration, and manufacturing sectors.
  • Perpetrators with higher levels of authority tend to cause much larger losses.
  • The longer a perpetrator has worked for an organization, the higher fraud losses tend to be.
  • In 81% of cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct.
  • Nearly half of victim organizations do not recover any losses that they suffer due to fraud.