The Prospect of a Petition Audit

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This article was updated at 3:10 pm with additional information from the office of the state auditor.

Last night, council had their first of several budget meetings. We’ll provide comprehensive coverage of the meetings later. But one item jumped out at us, for both inaccuracy and attitude, warranting your immediate attention. Toward the end of the meeting, the budget of the finance office was presented, by the finance director herself. After discussing several minor items in her budget, while making no mention of the more than $40,000 increase in salaries, council member Toni Burrow inquired about the prospect of a state audit, in an exchange which starts in the video at 1:57:00 –

I understand there’s some folks that want to see some auditing on some of our other entities that have not been audited in years, so you wouldn’t show this even in a ten year spell … but I hear that people are wanting to see audits on different things. If there should come to pass – and petitions are being sought for audits – what will you do in order to make that happen?

To this, finance director Alexis Miller responded:

We will need to budget a significant increase. I would say at least another $30,000 and probably two more staff in order to handle the performance audit. When they do a performance audit from the state auditor, they will come in and they will look at every single thing, and the amount of work and time you would have to have dedicated at least two staff just to pull the documentation together that they would look for, as well as, usually what you want to do is have your auditors basically do a performance audit themselves ahead of time which would help to try to maybe get all of your documentation together before you bring in all of the other staff, before the state auditor gets there, so there aren’t any surprises. So it is a very expensive endeavor for the city. And you have to pay the state auditors as well, because they don’t pay themselves, we pay them to come in and audit us.

After further discussion, Miller concludes:

The issue is, even if you said you just want to do a performance audit, or we want to do an audit on xyz, once you invite the state auditors to come in and audit, they can audit and go back twenty, thirty years. They then have full purview to do whatever they want to do. So if the concern is having an audit over a certain thing, and having a different firm do that, that’s a completely different item than having a state auditor have a performance audit. You can actually have just another auditing firm, a different firm than the one we’ve been using, if that’s really what is the big concern. It’ll be another $36,000, maybe a little bit more because you’re going to pay them to do the same work that you’re paying these people, but they could do a separate audit. That way, if there was any concern … once you invite the state in, they can stay for a long time.

The inaccuracies here are glaring. We don’t know whether Miller has never seen the clear information provided online by the state auditor, failed to understand what it says, or is misrepresenting it to frighten council members and the public, so let’s set a few things straight in that regard:

  1. The audit doesn’t “go back twenty, thirty years.” Per the auditor, “Petition audits cover the current period and most recently completed fiscal year when the petition becomes active and the audit is scheduled, with any revision in scope to be determined by the State Auditor’s Office.” So unless they find glaring issues, it’s the current year and most recent year. Honestly, we wish they would go back and review the years under previous city managers and finance directors, but it is very unlikely.
  2. Our annual financial audit is not the same as the state audit. In fact, “When conducting a performance audit of an entity that has already had a financial audit, the State Auditor’s Office will review the independent audit in order to avoid duplication of effort.” If the city’s financial audit is accurate, the state audit will focus on things outside the scope of the city’s financial audit. The auditor has found big problems in cities where the annual audit, which is required by state law, found nothing wrong.
  3. Another audit, by another auditor, is not a substitute. The point of a state audit is that an independent entity, neither chosen by nor under the control of the city, performs the audit. Hiring another friendly auditor to give the city a second clean bill of health is a waste of money.

We are particularly concerned by Miller’s suggestion that should a petition audit effort succeed, the city needs to have their own auditor do a performance audit in advance of the state’s arrival, “so there aren’t any surprises.” The very fact that Miller wants to spend $30,000 on a private audit to avoid “surprises” in the state audit suggests that a state audit is urgently needed.

According to Steph Deidrick, press secretary for the state auditor, “petition audits cover the current period and most recently completed fiscal year when the petition becomes active and the audit is scheduled.” And while the cost and time involved with an audit varies with “the size of the entity, the scope of the audit, and the number and severity of the finding,” the auditor makes every effort to minimize the impact on the city. For the payment, the auditor “frequently works with local governments to ensure reasonable payment arrangements.” And with regard to the impact on staff, “Our audit teams frequently work with entities to ensure audit work does not significantly impact city operations and is as efficient as possible.”

To be sure, we do not believe that a state audit will be the magic wand that fixes every problem in Ferguson. But after years of opaque government, which has continued to this day, it is time that our city obtained the outside scrutiny which only a state audit can provide. Residents deserve to know why, in a time when revenue has been relatively stable, city services have plummeted, and the city continues the push for yet another large tax increase on its residents.

We are aware that the audit will not be free. In fact, the audit petition, which the state auditor will provide, includes an estimate of the state’s charges. Nobody is trying to hide that. The big question isn’t what it will cost to get an audit, it’s what it will cost not to get an audit. I have suggested, on several occasions, to a variety of city officials, that the city should form a citizen’s commission of business minded people, and give them complete access to the city’s financial records, the authority to review and summarize those records, and to present their findings to the public. That level of access and transparency might have reduced the need for a state audit. But this suggestion has never been met by anything but immediate rejection. So the authority of the state auditor is needed to pry open the file cabinets which at this moment remain under lock and key. We enthusiastically endorse this effort, and hope many of you will join in the coming effort to gather signatures.