Tag Archives: city auditor

The State of Oakland’s Finances

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The COVID-19 pandemic is creating financial challenges for all levels of government, and the City of Oakland is no exception. Numerous revenues will decrease, if they haven’t already, as the need for municipal services continues. This downturn occurs at a time when the city was facing very significant financial challenges due to underfunded long-term obligations and the emergence of new challenges such as homelessness.

(Read Berkeleyside’s recent coverage: Looming budget crisis ‘like nothing Oakland has ever before experienced’)

Two important reports outlining the state of Oakland’s finances were recently published. We’ll discuss both reports and what they suggest for our city finances. This post summarizes the two reports and provides more details on the City Auditor’s report. The second post will provide more detail on the Finance Director’s report and the Council reaction at its hearing on April 21st.

These two reports are:

1. City Auditor’s report
City of Oakland Financial Condition For Fiscal Years 2012-13 to 2018-19” was prepared  by the City Auditor before the advent of COVID-19. (Its original objective was “to examine the City’s financial well-being by calculating financial ratios, analyzing trends in the City’s financial data over the past seven-year period, and comparing the results to other cities of similar size.”) But the letter of transmittal does note that the current COVID-19 pandemic will likely dramatically compound the issues raised in this report.  It reaches a series of conclusions about the fraught condition of Oakland city finances and recommends corrective actions.

2. Oakland Finance Director’s report
The Finance Director’s new report “FY 2019-20 Third Quarter Revenue & Expenditure Report (Preliminary)” concludes with this stark projection:

In sum, we project that, absent rapid adjustments by the City Council, the COVID- 19 pandemic will result in a GPF budget shortfall over the next fourteen months of approximately $80 million ($26.17 million + $53.78 million).

The report contains a list of a number of actions already taken by the administration and recommends a number of policy considerations for the Council. It states: ‘The point is that – absent an unexpected State or Federal bailout – this problem will not be easily resolved, and it will not be fixed by tinkering at the margins. It will require significant action by City leaders.”

So first, let’s take a deeper look at the City Auditor’s report. Here are some notable excerpts:

  • “Oakland does not rank favorably in most financial indicators, when compared to similar-sized California cities.” This is illustrated by 9 Charts that compare Oakland to 7 other similar California Cities.
  • “This report does not include information on the condition of the City’s infrastructure, the citywide asset replacement value, or the funding gap for infrastructure needs because the City does not produce an annual citywide capital asset report.”
  • “This report prepared prior to COVID-19, however, illustrates the City needs to do more to address its increasing pension and OPEB liabilities, quantify its unmet infrastructure needs, and prepare for the future in which, according to the City’s five-year forecast issued in March 2019, expenses are expected to outpace revenues.”

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The report concludes with the following recommendations to City Council to address the City’s unfunded pension and OPEB liabilities:

  1. Convene a retirement advisory group to gather, evaluate, and organize information for a comprehensive solution to address Oakland’s unfunded pension and OPEB liabilities. This Advisory Group will be tasked with designing a plan to impact retirement liabilities on three levels:

    • State/Federal — what legislative changes, if any, are needed to be proposed so that the municipalities may be in better control of their financial future as it relates to pensions.

    • CalPERS — does CalPERS serve the needs of all its member agencies and how can Oakland and other municipalities have a greater impact on CalPERS policies.

    • Oakland — what changes may be made now within the restrictions of CalPERS and State Law, and which of these changes can be agreed to by all stakeholders.

    This process should be convened publicly and have clearly defined processes for stakeholder input, including citizens, unions and employees. The Advisory Group should be comprised of a broad cross section of stakeholders, for example, the City should strongly consider including:

    • Academia and pension/OPEB experts.

    • An independent financial consultant with no ties to the City to perform
    analysis on potential reforms as they are recommended by the Advisory Group.

    • An independent law firm with no ties to the City to evaluate the legality of potential reforms as they are recommended by the Advisory Group.

  2. Form a coalition of cities to find common ground to support comprehensive solutions at the State level and CalPERS.
  3. The City’s Finance Department should provide the City Council with an annual analysis of how the City’s long-term financial position could be strengthened.
  4. The City should develop a reserve policy that is consistent with the GFOA recommendations to maintain unrestricted budgetary general fund balance of no less than two months of general fund operating expenditures.
  5. The City should have a centralized report of fixed assets to be able to monitor changes in the condition of the assets and evaluate cost associated with maintaining and repairing them.

 

We welcome your thoughts. What do you think the City should do to respond to the immediate and long-term challenges facing Oakland City finances?

3 Takeaways from Our Meeting with City Auditor Brenda Roberts

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Make Oakland Better Now!’s board recently met with City Auditor Brenda Roberts to talk about how her office can make a greater impact on Oakland’s ethics, integrity, and productivity. We wanted to share three big takeaways from our meeting and look at how Roberts plans to run a “world class audit shop.”

1. More Transparency, Less Arm-Twisting

At her inauguration in January, Roberts promised to be an “auditor for all of Oakland,” for renters and homeowners, taxpayers and small businesses. To reach this goal, her office is not just following the money, but promoting collaboration and transparency citywide.

Roberts is more process than outcome focused when it comes to promoting strong finances. Basically, she says, it doesn’t help to find out at the end of a project that it’s gone over-budget, to do a postmortem for the city. “When it’s already in the headlines, what do you want me to report?”

But Roberts sees more and more departments reaching out first, opening lines of communication, and opening their books for review. This a good sign. It shows the auditor’s office is starting to build trust and inspire teamwork. “When someone says, ‘Can you come and look at my department?’ – that’s exactly what I want to hear.”

This allows her office to do more consulting and less arm-twisting. They’re able to set milestones, track change orders, run user-acceptance tests, and overall make the evaluation process much more rigorous.

2. A Risk-Focused Oakland

As City Auditor, Roberts says she is focusing on Oakland’s greatest risks – risks to the city’s budget and image, to health and safety. Part of this approach is about raising awareness in the community about fraud, waste and abuse, and managing a hotline for new reports.

It’s also about being the best watchdog and breaking up Oakland’s “culture of interference.” This is a wide-ranging effort: The City Auditor’s office is looking at noncompliances, creating business continuity plans, examining hiring and retention practices – including on the job training, talent acquisition, vacancies, technology or skillset deficiencies – and much more.

From all this, Roberts is trying to create a “heat map” of risk. Her office has especially focused on getting resources to decentralized departments, what she calls a “further from the mothership” approach.

She’s also focused on who the city partners with – contractors, service providers, and nonprofits – groups she feels are more likely for budget burnout or fraud.  It’s necessary to keep these partners on a “short, tight rein,” she said.

Roberts is pushing for smarter, stronger internal controls where her office is seeing a general lack of procedures and policy. In this year’s police overtime audit, for example, they exposed a need for more effective overtime and comp time management and more realistic OPD budgets.

3. Oakland Needs a Time Audit

The City Auditor’s risk-based approach is almost a necessity, brought on by her office’s lack of resources. “Right now, there’s no time to say ‘nice job,’” Roberts said.

Roberts heads a 10-person staff with about a $1.5 million budget–that’s a few people and thousands of dollars too short. There are some short-term solutions to make up the difference like getting grants for interns and fellows. There are also policy changes to consider like setting a portion of every department’s budget aside for the auditor’s office.

Right now, they’re preparing a handful of mandatory audits including audits for Measure M and N, an audit of 911 services,  and an audit of the Oakland Fire Department’s wildfire prevention measures.

Roberts notes that these rolling audits sometimes feel “unfocused,” tying up her office, and at their worst risk becoming a waste of energy. She would rather see audit policy more in line with her process-based approach, more open than after-the-fact. (Of course removing a ballot-measure approved mandate requires another ballot measure.)


MOBN would like to thank City Auditor Brenda Roberts for her time and her work at City Hall. We look forward to following her progress.

Oakland City Auditor’s Report: “A Culture of Interference”

The city auditor’s report on Non-Interference in Administrative Affairs Performance Audit found that five council members or their aides interfered in administrative affairs and violated section 218 of the Oakland City Charter, which states that council members 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.” City Auditor Courtney Ruby called this provision “the underpinning of an ethical structure” that was created to protect citizens and businesses of Oakland alike. According to the report this ethical structure is being threatened, something that is troubling at a time when Oakland is working to earn the trust of its citizens.

The audit, conducted from 2009 through 2012, analyzed 27 anonymous reports, 67 hotline tips, 40 individual interviews, tens of thousands of emails and all applicable phone calls. The audit found that the administrative interferences originated from two council members’ offices and that those two council members “violated the law by exerting inappropriate influence in City contracting and operations.” The council members will remain on the Oakland City Council, but if they are found guilty of a misdemeanor crime for administrative interference they will be removed.
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