Community Letter about City Audits
From the Office of the City Manager
Dear Santa Clara Community,
This letter corrects statements made and factual information that was omitted in the 2/28/19 column written by Miles Barber in the Santa Clara Weekly. The opinion asserts that there should be an independent fiscal audit of the City of Santa Clara, as if there had never been such audits, and then goes on to provide examples of current events for which suggests fiscal mismanagement and/or that the City will not make timely payments.
The opinion piece demonstrates Mr. Barber’s lack of understanding of the City’s current audit practices, recent efforts to expand audits within the City, as well as state law requirements. Indeed, annual financial audits already take place and the City’s bills are paid on time. Additionally, the City’s financial reports are issued monthly at a public City Council meeting, while Stadium Authority reports are issued quarterly at a public Stadium Authority meeting. Here are the omitted facts about City financial activities:
- Annual Financial Audits – By law, each year, the City undergoes a series of annual financial audits which are reviewed by Council and publicly presented at Council meetings. These annual financial audits are completed by an independent audit firm. The most recent independent financial audits were presented to Council on Jan. 15, 2019 and, for years, the City has received an “unmodified” opinion which is the highest level of designation determined during financial audits.
- Appointment of City and Stadium Authority Auditor – In 2018, at the City Manager’s request, a professionally qualified City Auditor was appointed, which the City did not have in prior years, and an audit work plan on City services was established. The Auditor has completed various audits and has identified areas within the organization where administrative practices can be improved.
- Performance Audits – In January 2019, the City Auditor presented the FY 2019/20 Audit Work Plan of planned audits for both the City and Stadium Authority which was publicly presented and approved by the City Council. A performance audit evaluates administrative practices to deliver public services and makes recommendations that yield higher levels of efficiency, reduced cost, compliance with laws/regulations, and/or streamlining service improvements. This function had been completely absent from the City’s services. Examples of completed audits that improved administration of services or required corrective action include: Measure J Compliance Audit, Santa Clara Convention Center and Convention-Visitors Bureau Audit, Political Action Committees’ compliance with laws and reporting, and Tourism Improvement District Audit. The City has used auditing to bring forth better governance and oversight, both internally and externally, with more welcomed audits to come.
- Regular Public Reports at City Council Meetings – The City continues to be fully transparent about its bills, claims and expenditures paid through nearly weekly public reports to the Council. It is a fact that these bills, claims and expenditures are audited by the City Auditor, as required by the City’s Charter, and the City’s bills are paid timely. Also, the City issues monthly public reports on its financial activities and conditions, with the next report being presented Tuesday, March 5, 2019 to the City Council. The City presented the Stadium Authority’s 2nd Quarter report on Dec. 11, 2018 to the Board.
The opinion piece also incorrectly references various topics that require correction, as to not misinform the community:
Assessment Appeals Board Decision regarding Stadium Property Taxes -- Mr. Barber wrongly asserts that the City of Santa Clara won’t pay a refund anytime soon as an example of poor fiscal practices on the part of the City and why an audit is needed. The Santa Clara County Assessment Appeals Board issued a preliminary ruling, in November 2018, that will reduce the San Francisco 49ers property tax obligation in half for Levi’s Stadium. The decision also meant the team would be refunded a total of $30.8 million that had been distributed to several public agencies including the City over the last several years. If the ruling stands, the City will suffer a one-time reduction of $2.86 million of the current year’s overall property taxes that it receives from the County Tax Collector. There is no payment that the City needs to issue and, contrary to Mr. Barber’s assertion that the City would not pay, this methodology is a standard practice and achieves full payment. Future ongoing property tax reductions will need to be resolved in the proposed Fiscal Year 2019/2020 budget - in the approximate amount of $600,000 annually.
Tourism Improvement District and Tourism/Visitor Services -- Mr. Barber wrongly asserts that the City is incorrectly withholding Tourism Improvement District (TID) funds that belong solely to the hotels (because they are the responsible party of these funds) and that these are not public funds. Under State law (Parking and Business Improvement Law of 1989, Sections 36500 et seq. of the California Streets and Highways Code), the City Council is the sole authority responsible for these designated public funds and has full oversight of them. The participating TID hotels serve as an Advisory Board to the City Council with respect to how to appropriate levied funds and which activities to support to promote hotel bookings and tourism. In fact, by law, only Council can: (1) approve a TID budget, (2) authorize the expenditure of these funds, (3) holds authority to appoint the TID Advisory Board, and (4) levy these funds for this specific public purpose. The funds collected through the hotels are legally designated public funds and the Council holds full responsibility and authority for them. More details about the TID’s formation are available from the August 28, 2018 Council meeting.
More background is available in the Nov. 26, 2018 news release about an independent audit of the former TID’s Fiscal Agent (Santa Clara Chamber of Commerce) that found weak internal controls, and absence of policies and sloppy record keeping. The financial audit and reconciliation of the TID funds is ongoing and the City has correctly withheld payments that cannot be supported by approval of the auditors, while approving payment of some bills. In April, City staff and the TID Advisory Board will present governance options to the Council to determine how to reform and improve management of TID activities, a decision that only the Council can make. The City and hotels that participate in the TID are working collaboratively to install proper governance and modernize the management and activities of these funds.
In summary, the community is fortunate that the City Council has embraced additional audits and reforms of City services/resources, while paying its bills on time. For questions about audit-related matters, contact the City Manager’s Office at 408-615-2210 or firstname.lastname@example.org.
Examples of Audits and Financial Reports
- City of Santa Clara Financial Reports http://santaclaraca.gov/government/departments/finance
- Comprehensive Annual Financial Report for 2018 (CAFR) http://santaclaraca.gov/home/showdocument?id=62415
- Santa Clara Stadium Authority Financial Reports http://santaclaraca.gov/government/stadium-authority/financial-reports
- Measure J Compliance Audit http://santaclaraca.gov/government/committees/city-committees/ad-hoc-stadium-audit-committee
- Monthly Financial Status and Investment Reports for December 2018 https://santaclara.legistar.com/LegislationDetail.aspx?ID=3875987&GUID=6E0278E7-A379-46DF-A8FC-56865BD4FE0F
- Bills and Claims Report for the period February 1-14, 2019 https://santaclara.legistar.com/LegislationDetail.aspx?ID=3875991&GUID=5EE4D5C4-3FB4-4AE6-82EA-B8B56FEA2703