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Quarterly: Winter 2019 - Mike Edmonds and Dena Shupe

The Risks and rewards of auditing elected officials


By Mike Edmonds and Dena Shupe

In 2013, Oakland’s City Auditor, Courtney Ruby, issued an audit report entitled “Non-Interference in Administrative Affairs” Performance Audit for FY 2009-10-FY 2011-12” (Click here to read the report).  The audit was extremely controversial, but significantly changed how the City conducts its business.  

The audit assessed whether Oakland’s City Councilmembers tried to influence and interfere in the administrative operations of the City. The report identified 14 instances in which Councilmembers and their aides violated Oakland’s City Charter. The audit found that one Councilmember was involved in three instances of selecting contractors to provide services at a recreation center.  In two of the three instances, the Councilmember also negotiated the contracts and established the contract terms.  On another project, two Councilmembers were involved in the procurement process for a demolition contract worth approximately two million dollars. The Councilmembers involved seemed to show favoritism to one company and interfered by either coercing or influencing staff regarding the contract.

WHAT TRIGGERED THE AUDIT

Over the years the City Auditor’s Office received numerous complaints through the City Auditor’s Fraud, Waste, and Abuse Hotline (Hotline) alleging Councilmembers were interfering in administrative matters and coercing staff. In addition, the City Auditor’s Ethical Climate Surveys for the previous two years (2010 and 2011) indicated Councilmembers were interfering in administrative matters. In 2012 the City Administrator specifically identified a Councilmember interfering in the administrative operations of the City and requested the City Auditor to conduct the audit. Due to the perception that interference was widespread, the City Auditor expanded the scope to include all Councilmembers and three fiscal years.

 

OUTCOME OF THE AUDIT

Besides identifying 14 instances of Councilmembers violating the City Charter, the audit report included 22 recommendations to address the issues raised in the report. The City Administrator strongly supported the report and its findings and the Council President, who was also supportive of the audit, agreed to discuss ways for the City Council to enforce its Code of Conduct.

While it was one of the most challenging experiences for the Office, the audit report delivered a clear message to the City’s elected officials, reinforcing that interference in administrative affairs is a serious violation of the City Charter and such matters can result in a conviction and forfeiture from office. Additionally, the audit aided the City Auditor’s Office in gaining the trust of the City’s employees and Oakland residents, due to its willingness to confront unethical behavior. In the end, the City Auditor’s staff were extremely proud of their work and viewed it as one of the Office’s most successful audits.  As an aside, the report also won the Knighton Award in the Medium Shop category.

  

FACTORS THAT LED TO THE SUCCESS OF THE AUDIT

The following factors contributed to the success of the audit.

 A Strong City Charter That Defined the Role of the City Council and City Staff

Section 218 of the Oakland City Charter provided strong criteria for evaluating the Councilmembers’ actions.  This Charter section ensures the appropriate separation of duties and functions and shields staff from Council interference and demands for special treatment. It states that Councilmembers or their aides cannot interfere with daily activities such as contracting, hiring, appointing or firing City employees, or giving orders to City employees who are under the City Administrator’s supervision. It is designed to afford every citizen, employee, and business the opportunity to live, work, and transact business with confidence that no inappropriate influence will be exerted. Violating Section 218 is a misdemeanor, with conviction resulting in the immediate forfeiture of the office.

 Independence of the Elected City Auditor

The elected City Auditor, Courtney Ruby, reports to the people of Oakland and is independent of the Mayor, the City Council, and the City Administration, which ultimately keeps the Office free from of political pressure, intimidation, and advocacy. This audit would probably not have been undertaken if the City Auditor reported to the City Council or the City Administrator.

 The City Auditor Created a Safe Environment for Reporting Wrongdoing

  • The City of Oakland’s Whistleblower Program. In 2008, the City Auditor co-authored the Municipal Whistleblower Protection Act (Act) with a local Assembly member. The Act, which is now California State Law, specifically protects the identity of employees and residents who report violations and mandates the confidentiality of the process.

    The City of Oakland’s Whistleblower Ordinance, which was enacted after the passage of the Act, prohibits retaliation against employees who act in good faith as whistleblowers. It also codified a complaint process for whistleblowers to report suspected illegal or improper activities. The Oakland City Auditor’s Whistleblower Program (Program), which was implemented in January 2009 after the passage of Oakland’s Whistleblower Ordinance, has continued to foster the highest standards of ethical behavior. The Program is focused on cases of fraud, waste, and abuse committed by City of Oakland officials or employees, and/or directly affecting City of Oakland employees, property, resources, or services.

    The Whistleblower Hotline provided an opportunity for City staff to directly report instances of wrongdoing on the part of Councilmembers interfering in administrative affairs. At the onset of the audit, the Office encouraged employees to submit complaints of Council interference and influence. During the audit, the Office evaluated more than 67 tips received through the hotline.

  • The Ethical Climate Survey. This survey, developed by the Institute for Local Government, was also helpful in ferreting out unethical behavior on the part of the Councilmembers. The purpose of the survey is to indicate the degree to which ethical standards influence organization and individual decision-making and helps identify ethical blind spots.

    First administered citywide in 2010, the Survey indicated that employees desired to feel more at ease in surfacing ethical concerns to City officials and management. Employees also raised concerns about the City Council interfering in administrative affairs - the act of receiving an order, directive, demand, or pressure from a Councilmember or council staff. City staff also questioned the effectiveness of management in ensuring elected officials stay within their policy role and out of day-to-day management of the City.

 

A Strong Access to Records Provision, As Well As the Support of the City Attorney

The City Auditor’s Charter allows full access to all records of the City.  The City Attorney has consistently supported the City Auditor’s access to all records to perform audits.  With the support of the City Attorney, the City Auditor’s Office obtained emails, and in some cases telephone records, which indicated that certain Councilmembers were involved in administrative activities and were trying to influence staff.

 The Office Was Careful With the Language of the Report

As auditors, we strive to write our reports in plain, easy to understand language; but when writing a report about elected officials, the tone of the report is paramount. For this audit, the Office staff was extremely careful with its language and avoided using words that would inflame emotions. Staff focused on creating a neutral tone throughout the report by using precise terms to help guide the audience through the issues. Keeping the tone neutral also helped reinforce the integrity of the findings, the report, and ultimately, the Office.1



 

 The Office Took a Number of Precautions to Keep the Report Confidential Until It Was Released

The Office was concerned about maintaining the confidentiality of the report, especially in the final stages of the report writing.  The audit team was purposefully small and limited the information provided to the rest of the Office. The auditors were diligent about shredding report drafts daily and took precautions to lock their computers and reduce emails between staff.

 Courage to Undertake This Audit

The 2008 ALGA Quarterly discusses auditors and their need for courage when conducting controversial audits. This audit, understandably, produced some anxious moments for the City Auditor and audit staff, given its high profile and the controversy that ensued both during and after the audit was released.  The City Auditor, Courtney Ruby, and the audit team should be commended for their courage in undertaking this assignment.

 

IMPACT OF THE AUDIT

 Although this was a stressful experience for the City Auditor’s Office, the audit resulted in significant changes in the City:

  • The Council President notified Councilmembers in writing that they are prohibited from directing staff or interfering in the administrative affairs of the City;

  • The City Council adopted a censure policy, providing a mechanism for the City Council to publicly address Councilmembers or Council aides;

  • The Council strengthened the role of the Public Ethics Commission (Commission), providing the Commission with greater independence and enforcement authority, including over Oakland’s elected officials; and 

  • The City Administration also developed an administrative policy to guide staff in its interactions with Councilmembers and their aides.

 

NOTES

1 https://misti.com/internal-audit-insights/audit-writer-s-hub-tone-and-the-chicken-little-dilemma

 

ABOUT THE AUTHORS

Mike Edmonds has over 25 years of local government auditing experience with the cities of Oakland, San Jose, and Palo Alto, as well as the Contra Costa Water District. He has also worked for the California State Auditor General, the Territorial Audit Office in American Samoa, and several private consulting firms. Mike has been an active ALGA member since 1991 and has served on the Board of Directors as Treasurer and as an At-Large member. He has also served on the Peer Review, Strategic Plan, and Membership committees. Mike graduated from Fresno State University with a degree in Political Science and is a Certified Internal Auditor.

Dena Shupe is Director of Communications and Special Assistant to the City Auditor. In these dual roles she effectively manages all communications, community engagement, administrative, financial, and operational activities on behalf of the City Auditor, including managing staff, overseeing projects, editing reports and maintaining critical intergovernmental and key stakeholder relationships. Dena brings years of management experience, policy skills, and a passion for equity, collaboration, and inclusion to the City of Oakland. She has a Master of Public Policy degree from Mills College with an academic focus on increasing community participation in policy-making, and a BA in Peace and Conflict Studies from the U.C. Berkeley.