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Interview with City Auditor Ann-Marie Hogan

Toni Mester
Friday September 26, 2014 - 11:05:00 AM
Ann-Marie Hogan Selfie
Ann-Marie Hogan Selfie

What exactly is the job of City Auditor?

I manage a team of professional performance auditors who collectively have expertise in public policy analysis, accounting, economics, business, and computer systems. Through our performance audits, we provide guidance to Council and management about how to fix problems and deliver better service. We follow up to make sure the City implements our recommendations. I also manage the Payroll Audit division.

How do you decide on what to audit?

We look for audits that can result in streamlined services, improved service delivery, cost savings, or the avoidance of risks. We ask the public, the commissions, Council, the City Manager and City staff for ideas and we use our knowledge of the City’s priorities and risks, as well as reports from other cities, to put together an audit plan every spring. 


What were the most significant audits in your last term? 


Underfunded Mandate: Resources, Strategic Plan, and Communication Needed to Continue Progress toward the Year 2020 Zero Waste Goal is a road map for achieving Berkeley's Zero Waste goals. 

Employee Benefits: Tough Decisions Ahead recommended practical steps to address underfunded pensions and benefits. 

Our Streets performance audit showed that investing in street maintenance today would prevent future liability for much more expensive street reconstruction, avoiding costs of over $38 million. 

Our Permit Center audit pointed the way for more effective, efficient and equitable customer service and increased efforts to fight fraud and increase revenue. 

Our Business License Tax Performance Audit identified nearly $600,000 in revenue recovery over five years. 


Do you have plans for upcoming audits?  

We’ll be issuing a police injury prevention audit and an Animal Services overtime audit in October, and then audits of contracts and refuse billing. Because of community concerns about equity in city hiring and promotions, we included a requested audit of Human Resources’ application of the merit system hiring process and an evaluation of adherence to equal employment opportunity policies. 


What are the most common misconceptions about the City budget?  

I often hear people thinking that the city can “find the money somewhere” to fix one particular thing that they want fixed. That’s one reason that most cities use some version of “across the board cuts”, especially for the general fund; it seems intuitively “fair” to Council and the public. See my July 8, 2014 Council Information item and follow the link to the Berkeley Based Budgeting report from Goldman Public Policy grad students for the dangers in the business-as-usual approach. 


What pages in the budget are easiest to understand? 

Some people are going to like the pie charts and the graphs, some will like the verbal explanations, and some will like the statistics. The budget impact summaries, which start on p. 131 of the 2014/2015 Adopted budget, give some hints about the service impacts of recent budget cuts. Read the city’s Comprehensive Annual Financial Report (CAFR) especially the introductory memo from the Finance Director; it explains what is going on in the City. For a long term look at our liabilities that I hope is written in a very user-friendly way, read my audit Employee Benefits: Tough Decisions Ahead


Why is Measure F, the Parks tax, called a “special tax”

Special Revenue/Grant Funds are revenue sources legally restricted to a specific purpose, service, or program. 


What other taxes are “special?” 

The Parks Tax Fund, Library Tax Fund, and Paramedic Tax Fund are Special Revenue Funds. There are also Special Assessment Funds: Clean Storm Water, Streetlight Assessment, and Measure B Funds. Enterprise funds include the Permit Service Center, Sanitary Sewer, Refuse, Parking Meter, and Marina Enterprise Funds. 


Why doesn’t the general fund cover these services that citizens want? 

Since the passage of Proposition 13, cities have been constrained from increasing general fund revenues enough to keep up with the demand for services that residents want, and the costs of providing them. Special funds such as parks, library, and paramedic allow taxpayers to vote for specific increased services. 


How do you uncover mismanagement? 

Auditors speak through our audits. To preserve the credibility of our audits, we avoid making subjective statements, so that a future audit of budget management is not weakened by a public perception of preconceived ideas. We find weaknesses in city practices by diligent, careful, and thorough analysis of the facts, and we ensure quality control and reliability by rigorous adherence to Generally Accepted Government Auditing Standards. 


Does Berkeley have a financial plan to deal with the PERS bump and future pension liabilities? 

Recent changes enacted by the statewide retirement system will cause the long term pension liabilities to decrease, but will cause the immediate pension costs to increase, beginning in fiscal year 2016. Some combination of reduction of services, increased risk, reduction of compensation, and increased revenues will be needed to fund this mandatory liability reduction. 


How much will it cost? 

If you mean the increase in pension cash outflows effective FY 2016, using numbers from PERS, the statewide pension organization, the City’s most recent estimate is that 2016 pension payments could increase by as much as $2 million from the 2015 budgeted amount, in 2017 by an additional $ 4 million plus and so on, such that FY 2020 annual payments could be more than $15 million higher than in the current year. The numbers keep changing and will change depending on PERS investment results. These rates will allow the City to pay down their future liabilities, but it means less money in the budget every year until at least 2020. It’s a prudent step, but painful. See the May 06, 2014 Special Meeting


What can the City do to prepare for this expense? 

Council needs to more fully assess the risks of further cuts to oversight and support departments and oversight and monitoring functions within the operating departments to avoid increased risk to service delivery and increased risk of fraud. General direction can be seen in Council budget policies in the Work session Presentation 2/25/14. Labor contracts with all of the city’s bargaining units are expiring this year, and the results of negotiations, as well as property, business, and sales taxes trends, will also determine how much the City will have to reduce services or increase risk. 


Will City services suffer? 

That seems very likely. 


Can the parks and other special funds be diverted to pay for pension liabilities? 

Parks funds can only be spent on Parks expenses; Parks expenses include employee salaries and benefits and can’t be used to fund benefits for non-Parks work. 


Does Berkeley have a plan to deal with infrastructure repairs?  

See the Facility Condition Assessments July 1, 2014 5:30 Council presentation. 


Is there a reliable figure on just how much infrastructure repairs will cost? 

As you probably know from working with contractors yourself, when it comes to remodeling, the figures are estimates. See the Facility Condition Assessments presentation for more. 


Does investment in infrastructure pay for itself over time? 

It should, if it’s done in an evidence-based way, as recommended in our Streets audit and included in the Public Works plan going forward. 


Does investment in infrastructure such as roads, flood control, storm drains, sewers, etc. generate value to offset cost? 

Yes, in the sense that the investment avoids future costs, ranging from the high cost of replacing, rather than repairing, a street to the fines the City would have to pay if it hadn’t decreased its sewer flows to the Bay. 


Do the Council and staff act on your advice? 

On average, 99% of our recommendations to improve the effectiveness, efficiency and equity of service delivery are agreed to by management, and all are supported by unanimous vote of the City Council. 


Toni Mester is a resident of West Berkeley,. This interview was conducted by email and telephone