Berkeley Municipal Code Ch. 2.24 City Auditor’s Office

*For Charter provisions regarding the duties of the Auditor, see Charter § 61; for provisions regarding City finance and taxation generally, see Charter Art. X §§ 50--64; for provisions relating to election, term and salary of the Auditor, see Charter §§ 8--10, 12.1, 14.1 and 19; for provisions authorizing the council to create City departments, see Charter § 31.

The Berkeley City Council finds and declares as follows:

A. Public officials, government managers, and private citizens want and need to know not only whether government funds are handled properly and in compliance with laws and regulations, but also whether public programs are achieving the purposes for which they were authorized and funded, and whether they are doing so efficiently, effectively and equitably.

B. The activity of government auditing independently reviews, evaluates and reports on the financial condition of the audited entity, the accuracy of financial record keeping, compliance with applicable laws, policies, guidelines and procedures, and the efficiency, effectiveness, and equity of operations.

C. An independent auditing function can provide objective information, like audits, on the operations of government programs, assist managers in carrying out their responsibilities, and help ensure full accountability to the public.

D. An effective auditing function requires that audit results be accepted and used by public officials. Such acceptance in turn requires that the audit function be understood and recognized as valid, and that it be established on a firm foundation of professional competence.

E. The independence and public accountability of the Auditor can be assured by provision for an elected Auditor as provided for in the City of Berkeley Charter.

F. The effectiveness of the audit function is enhanced when the Auditor is required to adhere to government auditing standards, and that these standards require that the Auditor has an unrestricted right to audit and sufficient resources to audit.

G. Standards for the conduct and practice of governmental auditing have been developed by the Comptroller General of the United States.

H. The audit function in the City of Berkeley is required, based on a Charter amendment approved by the voters in 1998, to adhere to government auditing standards. This helps to ensure that public officials and employees understand the role and function of auditing, to lend consistency and credibility to ongoing audit work, and to provide a basis for monitoring and evaluating the work of audit staff.

I. It was the City’s intent in placing a requirement that resources be provided for performance of audits in the Charter to constrain Councils from limiting the Auditor’s ability to audit.

J. This funding requirement is subject to available resources and recognizes that the substantial elimination of departments, programs, and services in the City could affect the extent of auditable entities for the Auditor’s office.

K. Sufficiency in audit resources is related to the extent of auditable entities and audit opportunities, the degree of risk, the complexity of operations, and the opportunities for identifying control weaknesses, areas for improvement, or areas for revenue enhancements.

L. Audit services are especially needed in difficult economic times, in order to ensure that the City Council and the public are provided independent and objective information.

M. It is vital to the independence of the Auditor that decisions made about audit resources are made after public discussion, to avoid any appearance that resource decisions may be made so as to influence the Auditor’s choice of audit subjects or findings and recommendations.

N. It is vital to the effectiveness of audit work that it be performed by staff who collectively possess sufficient professional proficiency, qualifications and skills, which may be demonstrated by obtaining relevant certifications such as a CIA (Certified Internal Auditor), CPA (Certified Public Accountant), CFE (Certified Fraud Examiner), degrees in relevant fields such as public policy, public administration, accounting, business administration, political science or related fields, or years of auditing experience, and the City Council may wish to consider taking such competencies and certifications into account in setting the salary for the Auditor and other audit staff.

O. Charter requirements to follow government auditing standards should be codified as to the structuring and expectations of the Auditor’ s office.

P. The government auditing standards in use in 2006 are Government Auditing Standards (also known as "yellow book" standards) issued by the Comptroller General of the United States in 2003, published by the General Accountability Office (GAO) and available in 2006 at: http://www.gao.gov. (Ord. 7922-NS §§ 1--3, 2024; Ord. 6910-NS § 2 (part), 2006)

A City Auditor’s Office is created under the direction of the Auditor, which shall consist of such employees as are budgeted and approved by the City Council. (Ord. 6910-NS § 2 (part), 2006)

A. As required by Government Auditing Standards, the Auditor shall ensure that: (1) independence and objectivity are maintained; (2) professional judgment is used in planning and performing the work and in reporting the results; (3) the work is performed by personnel who are professionally competent and collectively have the necessary skills and knowledge; and (4) an independent peer review is periodically performed, resulting in an opinion issued as to whether an audit organization’s system of quality control is designed and being complied with to provide reasonable assurance of conforming with professional standards. These reports shall be provided to the City Council.

B. In order to offer audit services that are valuable to management and to the City Council while meeting Government Auditing Standards regarding freedom from external impairments to independence regarding restriction of or interference with audit work, the Charter specifies that the Auditor shall consult with the Mayor, City Council and City Manager regarding the selection of audit entities, but the final decision of what to audit shall remain with the Auditor.

C. Auditor employee classifications (such as Auditor I, Senior Auditor, and Audit Manager) shall be unique to the Auditor’s Office. The City Council shall strive to ensure that the independence of staff auditors is maintained to the extent consistent with the Charter.

D. If the Auditor conducts an audit of an activity for which the elected Auditor is or was responsible, the audit scope will state that the auditors are not organizationally independent with regard to the entity being audited, as required by Government Auditing Standards.

E. The Auditor shall have the right to place items on the City Council agenda for discussion without interference. (Ord. 6910-NS § 2 (part), 2006)

A. In order to meet Government Auditing Standards regarding impairment to independence caused by restrictions on funds or other resources provided to the audit organization that adversely affect the audit organization’s ability to carry out its responsibilities, the Charter states that sufficient funds shall be provided to carry out the responsibilities of the Audit function, subject to available resources.

B. The Auditor’s Office shall be exempt from any City Manager or City Council policy to require City departments to save a portion of their budget as targeted savings, except where Council determines otherwise. The Auditor shall be authorized to transfer budgeted funds between personnel and non-personnel line items, to the extent that those resources are needed to complete the audit plan that has been presented to the City Council, and provided that the Auditor’s Office remains within the budget adopted by the City Council. (Ord. 6910-NS § 2 (part), 2006)

A. The Auditor may conduct financial, performance, and other audits of all agencies, offices, boards, activities, and functions of the City of Berkeley to include but not be limited to the objectives of independently determining whether:

1. Activities and programs being implemented have been authorized by government charter or code, state law or applicable federal law or regulations;

2. Activities and programs are being conducted as prescribed by management/governing body to accomplish the objectives intended by government charter or code, state law or applicable federal law or regulations;

3. Activities or programs efficiently, effectively, and equitably serve the purpose intended by government charter, code, state law or applicable federal law or regulations;

4. Activities and programs are being conducted and funds expended in compliance with applicable laws;

5. Payers of City taxes and fees are submitting accurate information and correct amounts; revenues are being properly collected, deposited and accounted for;

6. City contractors are providing services efficiently, effectively, and equitably to the City in compliance with the terms of their contracts;

7. City resources, including funds, property and personnel, are adequately safeguarded, controlled and used in a faithful, effective and efficient manner;

8. City financial and other reports are being provided that disclose fairly and fully all information that is required by law, that is necessary to ascertain the nature and scope of programs and activities and that is necessary to establish a proper basis for evaluating City programs and activities;

9. The City has adequate operating and administrative procedures and practices, systems of accounting, internal control systems, and internal management controls;

10. There are indications of fraud, abuse or illegal acts which need further investigation.

B. The Auditor shall conduct their work in accordance with government auditing standards applicable to financial, performance, attestation, or other activities of an audit organization.

C. Non-audit and Similar Services, Charter mandated non-audit services:

Government Auditing Standards make a distinction between audit services and non-audit services that auditors may perform. These are generally services that auditors are typically well qualified to perform, but which often do not result in a written audit report. Non-audit services work may be initiated by the Auditor or performed by the Auditor at the request of the City Manager and shall be performed to the extent mandated by the City Charter and consistent with the professional standards applicable to such non-audit work by auditors except where such work is expressly required by the City Charter. In order to continue to maintain independence, and in particular to avoid a situation in which auditors may in appearance or in fact be auditing their own work or making management decisions, Government Auditing Standards currently include requirements for careful consideration regarding when and how to conduct non audit services.

The Auditor shall perform any other non audit services required by the City Charter under Sections 61 and 65. The Auditor is authorized to examine or review all City payments and payrolls before issuance and no payment may be made against any City contract until that contract is registered by the Auditor; the Auditor and the City Manager are co-signers on all City checks. Responsibility for reviewing, countersigning, numbering, and registering all city agreements (contracts) as well as performing municipal accounting and non-payroll payment (accounts payable) functions have been delegated to the Finance Department; however, the Auditor may review selected items before payment is approved. The Auditor also directs a Payroll Audit division, responsible for certain centralized payroll functions of the City’s decentralized payroll system.

D. Whistleblower Program. The Auditor shall administer a whistleblower program for the reporting of fraud, waste, or abuse of City resources. Subject to subsection (D)(3) of this section, the Auditor may investigate and otherwise attempt to resolve reports submitted to the whistleblower program.

1. Definitions

(a) For purposes of this section, "fraud, waste, or abuse" means any activity by a local agency or employee that is undertaken in the performance of the employee's official duties, including activities deemed to be outside the scope of their employment, that is in violation of any local, state, or federal law or regulation relating to corruption, malfeasance, bribery, theft of government property, fraudulent claims, fraud, coercion, conversion, malicious prosecution, misuse of government property, or willful omission to perform duty, is economically wasteful, or involves gross misconduct.

(b) "Whistleblower" is defined as an officer or employee who reports or otherwise brings to the attention of the City Auditor any information which, if true, would constitute fraud, waste, or abuse of City resources.

(c) "Retaliation" is any adverse employment action, including discharge, discipline, or demotion.

(d) "Adverse employment action" is defined as any employment action that has a detrimental and substantial effect on the terms, conditions, or privileges of a complainant's employment or requires the complainant to work in a discriminatorily hostile or abusive work environment. A change that is merely contrary to a complainant's interests or liking is insufficient.

(e) "City" is defined as the City of Berkeley, its agencies, departments, boards, and commissions.

2. Reports. Any person may file a report for investigation with the City Auditor’s whistleblower program alleging that a City officer or employee has engaged in fraud, waste, or abuse. Any City officer or employee who has received a report of fraud, waste, or abuse of city resources shall refer the report to the City Auditor’s Office.

3. Referral of Certain Reports. The Auditor shall refer the following reports to the appropriate government agency for review and possible investigation, including without limitation:

(a) Those which another government agency is required by federal, state, or local law to adjudicate: To that agency;

(b) Those which may be resolved through a grievance mechanism established by collective bargaining agreement or contract: To the official or agency designated in the agreement or contract;

(c) Those which involve allegations of conduct which may constitute a violation of criminal law: To the District Attorney or other appropriate law enforcement agency;

(d) Those which allege misconduct by a Berkeley police officer: The reporter will be provided information about how to file a complaint with the Office of the Director of Police Accountability and Berkeley Police Department;

(e) Those which are subject to an existing, ongoing investigation by the District Attorney or City Attorney, where the applicable official or Commission states in writing that investigation by the Auditor would substantially impede or delay its own investigation of the matter: To the investigating office; and

(f) Those which allege conduct that may constitute a violation of local campaign finance laws: To the Fair Campaign Practices Commission.

4. Contracting Out Investigations. The City Auditor has the authority to enter into contracts for investigative services when appropriate due to conflicts of interest or need for specialized expertise, as determined by the City Auditor. In such cases, the City Auditor may refer investigation work in whole or in part to a contractor under the management of the City Auditor.

5. Tracking and Investigating. The Auditor shall receive, track, and review reports made or referred to the whistleblower program. An investigation may include all steps that the Auditor deems appropriate, including the review of the report and any documentary or other evidence provided with it, the gathering of any other relevant documents from any City department or other source, and interviews of the complainant and other persons with relevant information.

6. Furnishing False Or Misleading Information; Duty To Cooperate. When making or filing a report pursuant to this Chapter or participating in an investigation conducted by the City Auditor, or an agent of the Auditor, as authorized under this Chapter, City officers and employees may not knowingly and intentionally furnish false or fraudulent evidence, documents, or information, misrepresent any material facts, or conceal any evidence, documents, or information for the purpose of misleading any officer or employees or any of their agents. In conducting investigations pursuant to this Chapter, pursuant to the Auditor’s authority under Charter Section 61, the Auditor shall have unrestricted access to employees, officials, records, and reports, and as necessary, require all branches, departments, and officials of government to produce documents, files, and other records and information. Information Provided Under Penalty Of Perjury. In those instances, in which the Auditor deems it appropriate, the Auditor may require that persons making reports or providing information swear to the truth of their statements by taking an oath administered by the Auditor, or an agent of the Auditor, or through written declarations made under penalty of perjury under the laws of the State of California.

7. Referral And Recommendation By Auditor. The Auditor may refer the fraud, waste, or abuse report to a City department for investigation, either before conducting an initial investigation or after doing so and may recommend that a City department take specific action based on the Auditor’s initial investigation. Within such time as the Auditor shall specify, the City department shall report to the Auditor in writing the results of the department’s investigation and any action that the department has taken in response to a recommendation by the Auditor that the department take specific action.

8. Retaliation. Any officer or employee who believes that they have been subject to an adverse employment action as a result of being a whistleblower or participating in a whistleblower investigation may file a complaint of retaliation with the City Auditor within one hundred and eighty (180) days of the alleged retaliation. The City Auditor shall thereupon investigate the complaint. If the Office of the City Auditor is named in the complaint, the complaint shall be directed to the City Attorney for investigation. Any officer or employee who receive a complaint alleging retaliation under this chapter must keep the complaint confidential and immediately assist the complainant by referring the complainant to the City Auditor and documenting the referral in writing. Documentation must include the date and time of the referral and that the report was about retaliation. Any reports regarding retaliation are confidential and not subject to disclosure.

9. Confidentiality.

(a) Any investigative audit conducted pursuant to this section shall be kept confidential, except to issue any report of an investigation that has been substantiated, or to release any findings resulting from a completed investigation that are deemed necessary to serve the interests of the public. In any event, the identity of the individual or individuals reporting the improper government activity, and the subject employee or employees shall be kept confidential, unless the disclosure is to a law enforcement agency that is conducting a criminal investigation.

(b) Notwithstanding subsection (D)(9)(a) of this section, the Auditor may provide a copy of a substantiated report that includes the identities of the subject employee or employees and other pertinent information concerning the investigation to the appropriate appointing authority for disciplinary purposes. The substantiated report, any subsequent investigatory materials or information, and the disposition of any resulting disciplinary proceedings are subject to the confidentiality provisions of applicable local, state, and federal statutes, rules, and regulations. (Ord. 7922-NS §§ 4--6, 2024; Ord. 6910-NS § 2 (part), 2006)

A. As required by Charter, before the beginning of each fiscal year, the Auditor shall consult with the Mayor, City Council, and City Manager regarding the selection of audit entities, and shall prepare a one to five year audit schedule for presentation to the Council. The schedule shall include the proposed plan for audits of departments, offices, boards, activities, subcontractors and agencies for the period. This schedule may be amended during the period as the Auditor may initiate and conduct any other audit deemed necessary. The City Manager and the Auditor are strongly urged to coordinate and communicate in cases where both may be required to or have authority to audit, in order to maximize audit coverage and eliminate duplication of effort, as required by Government Auditing Standards.

B. Since, by Charter, the Mayor is charged with the employment and oversight of the certified public accountants who conduct the City’s annual financial statement attest function audit, the Mayor and Auditor are also urged to coordinate regarding this audit. Under current law, the financial statement auditors and certain other external auditors are also required to follow Government Auditing Standards, and required to coordinate with the independent City Auditor. (Ord. 6910-NS § 2 (part), 2006)

A. All officers and employees of the City of Berkeley, including those of the Berkeley Rent Board and the Berkeley Public Library, shall furnish the Auditor with unrestricted access to employees, information and records (including automated data) within their custody regarding powers, duties, activities, organization, property, financial transactions and methods of business required by the Auditor to conduct an audit or otherwise perform audit duties and non audit services. In addition, they shall provide access for the Auditor to inspect all property, equipment, and facilities within their custody. The aforementioned shall also apply to the Berkeley Housing Authority and the Berkeley Redevelopment Agency, so long as those agencies received City funding or in-kind services and the requests for information are related to the City funding or services provided.

B. All agreements with outside contractors and subcontractors shall, in addition to access provided to the City generally, provide for Auditor access to all financial and performance related records, property, and equipment purchased in whole or in part with governmental funds and facilities or to records relevant to the performance of the contract. Any agreements which, by their nature, would not require audit services, may delete such right to audit clause only upon approval of the Auditor or vote of the City Council.

C. All references in the Berkeley Municipal Code to the rights of the City Manager and designees in audit, investigation, and inspection related to the collection of revenues such as fees and taxes shall also be construed to include the rights and authorities of the Auditor to perform such audits and inspections.

D. As required by Government Auditing Standards, the Auditor shall not publicly disclose any information received during an audit that is considered proprietary in nature (confidential) by any local, state or federal law or regulation.

E. All auditor job classifications are designated as enforcement authorities for violations of City ordinances and are authorized to issue administrative citations. Auditors will typically issue administrative citations when businesses and individuals conducting business with the City of Berkeley, or conducting business in the City of Berkeley, do not provide the Auditor’ s Office with requested information or documentation for an audit, when they are required to do so in City ordinances. (Ord. 6952-NS § 1, 2006; Ord. 6910-NS § 2 (part), 2006)

A final draft of each audit report will be forwarded to the audited agency for review and comment before it is released. The Auditor will take these comments into account in finalizing the report, and will include the views provided by the City Manager (or agency director) in the final report to the City Council. (Ord. 6910-NS § 2 (part), 2006)

Each audit will result in a written report containing relevant background information, findings, and recommendations and shall communicate results to the appropriate officials. The Auditor shall include in the audit reports:

A. A statement that the audit was performed in accordance with Government Auditing Standards;

B. A statement of the significant audit findings, including a statement of the underlying cause, evaluative criteria used, and the current and prospective significance of the findings;

C. A statement of response submitted by the audited agency, board or agency relevant to the audit findings including, if possible, a concise statement of the corrective actions previously taken or contemplated as a result of the audit findings and a time table for their accomplishment; and

D. Recommendations for additional necessary or desirable action. (Ord. 6910-NS § 2 (part), 2006)

The Auditor may: a) follow-up on audit recommendations as practical to determine if the City Manager is implementing corrective action; and b) request periodic status reports from audited entities regarding actions taken to address reported deficiencies and audit recommendations. (Ord. 6910-NS § 2 (part), 2006)

A. The Auditor may obtain the services of Certified Public Accountants, qualified management consultants, investigators, or other professional experts necessary to perform the Auditor’s duties within the Auditor’s budget approved by the City Council. These expenses may be included in the Auditor’s annual budget as part of the published annual audit plan, or may be substituted in case of position vacancies if needed to complete the audit plan on schedule. An audit that is performed by contract must be conducted by persons who have no financial interests in the affairs of the governmental unit or its officers. The use of such contracts will follow the City’s normal contracting procedures.

B. The City Manager shall provide the Auditor with timely information about contemplated and ongoing audits, investigations, or similar consulting engagements to be performed by other external auditors or investigators, so that all auditors may comply with Government Auditing Standards concerning the coordination of audit work, and sharing of information regarding internal control concerns, and to avoid duplication of effort and ensure effective audit coverage. The Mayor is urged to provide such information and opportunities for coordination with the public accounting firm selected for the City’s annual financial statement audits. The Auditor may assist with the selection or oversight of this audit if requested to do so. (Ord. 7922-NS § 7, 2024; Ord. 6910-NS § 2 (part), 2006)

A. As required by Government Auditing Standards, the audit activities of the Auditor’s office shall be subject to a quality review in accordance with applicable government auditing standards by a professional, nonpartisan objective group utilizing guidelines endorsed by recognized local standard setting bodies such as the national Association of Local Government Auditors or the federal Government Accountability Office (GAO). A copy of the written report of this independent review shall be placed on the City Council agenda for information.

B. The quality review will use applicable government auditing standards to evaluate the quality of audit effort and reporting. Specific quality review areas shall include staff qualifications, adequacy of planning and supervision, sufficiency of work paper preparation and evidence, and the adequacy of systems for reviewing internal controls, fraud and abuse, program compliance, and automated systems. The government shall reimburse costs of the quality review from funds budgeted in the Auditor’s budget or other in-kind support. (Ord. 6910-NS § 2 (part), 2006)