Last week I attended the KPMG Roundtable sponsored. The roundtable brought to mind some interesting civic memories. The title of the discussion was “Going Forward: Reform and Recovery.”
KPMG, Denver’s former outside auditors of a few years back, picked up on risk assessment issues with Mayor and Council on what the Denver Auditor’s Office should audit. And for a brief time, the Mayor’s so-called Financial Experts Committee, given the charge of suggesting how our city charter should be changed to reform our city’s audit committee, came up with some very poor ideas for reform.
It started when KPMG picked up on comments from Mayor and Council that the administrative and the legislative branches wanted more input on what audits were to be done in Denver. Remember the Auditor’s Office hosts a nesting ground for future mayors. “More input” meant limiting the independence of the auditor to select which audits should be done. They were worried about audit politics. Many a Denver Auditor has lusted to be mayor. And many an auditor running for mayor has made the life of many a mayor miserable in the pursuit of unbridled vaulting ambition. Thank you, Macbeth.
I look back with humor now, but at one point in the negotiations with Mayor and Council concerning Auditor’s Office reform which eventually made it to a charter vote, the Financial Experts Committee would have mandated that the Auditor make an appointment with Mayor and Council and bring a little tin cup and beg leave to do an audit. Most discussion centered on the membership of the city’s fledgling, motley, and not independent audit committee. At that time the Mayor made all the appointments to the audit committee, including two members of his cabinet who could cushion issues for the press where lack of internal controls were found in various departments. Thankfully, the mayor appointed the Auditor to the audit committee, good judgment on his part. I vigorously and clearly informed the mayor, council and the financial experts, that the Auditor has to be free to exercise independent judgment free from administrative or legislative influence. And we needed a fully independent audit committee, and if we did not achieve these to important principles, I would see them all in the precincts of Denver campaigning against them and these Enron-like attitudes. I am happy to report they did not want to see me in the precincts working against any charter change eating away at auditor’s and audit committee’s independence. I just kept repeating: “Does anyone here remember Enron?” And that strategy worked.
But the negotiations hinged on another important point. In my view good politics is often about good relationships. Because of a long-term collegial relationship, keeping it civil and agreeing to disagree, the mayor and I worked out the reforms for the independent auditor’s office. For the city’s audit committee, the mayor and council each make two appointments, and I make two appointments and serve as Committee Chair. The mayor gave up power, appointing all the committee members and the auditor’s office gave up payroll and accounting, which we should never have had in the first place. But in 1906, who knew? We now audit payroll and accounting. This has worked out just fine.
On risk assessment and how the auditor’s office determines which audits to do, the charter asks the auditor to seek from Mayor and Council, for information purposes only, which areas and departments need audit help. So each year, while not mandated in charter language, Kip Memmott, the director of Internal Audit, take the extra step to reach out and get feedback. We interview each appointed department head, the mayor, and council to get input and feedback of risks which might be raising their heads across the city. This enables us to get firsthand feedback as to problems in the departments. Mayor and council can suggest audits, but cannot dictate which audits should be done. The auditor’s office is totally independent of administrative and legislative influence as to audits in the lineup. This is working out just fine.
The 2010 Audit plan can be see on our website. I hope you will look at it and let us know what you would like to see audited for next year.