Santa Monica City Hall (File photo)

City Council will form a committee to review the annual audit of City Hall.

City officials had recommended that council stick to its current practice of reviewing the audit publicly as full body, calling the process as effective as, or more effective than, an independent audit committee.

Council disagreed, directing city officials to create a committee, starting with up to three council members and expanding, later, to include knowledgeable members of the public. Five was the suggested limit for total number of members.

Moss Adams, a public accounting firm, presented a report to council on best practices for auditing.

They recommended changes to City Hall’s cash handling, policy and procedure development, and fraud internal controls training, among other things, noting that they were simply reviewing practices, not checking to see if any fraud had occurred in these areas.

Mark Steranka, of Moss Adams, said that Santa Monica is the only city that he works with as an external auditor that does not have an audit committee.

Councilmember Sue Himmelrich, who brought this idea to council in January, cited a 2013 Moss Adams report that, citing another study, said that the average U.S. organization loses 5 percent of its revenues to fraud. In Santa Monica, she noted, 5 percent of the annual revenue would be about $30 million.

“It’s an average so that means that there are some places, like hopefully Santa Monica, where that percentage is very low and other percentages, like Pasadena, where that percentage may be much higher than 5 percent,” Councilmember Gleam Davis said.

Davis supported the idea of an audit committee but warned against it becoming a soapbox.

“It needs to be apolitical,” she said. “That is really important. It cannot be a mechanism where people with an agenda come to say, ‘Ahah, I’m going to prove that city employees are paid too much,’ or ‘I’m going to show that there’s this, that, or the other thing that I don’t like.’ Those are things that certainly need to be addressed by the council.”

Councilmember Pam O’Connor echoed Davis’ sentiment, stating the audit committee’s aim should be to make progress and not become a “gotcha organization.”

Himmelrich asked Steranka if there were any disadvantages to an audit committee.

“You don’t want the audit committee, just like you wouldn’t want any committee, to be a filter to the whole committee,” he responded. “The committee structure is to help distribute workload. Things that are important, as the deliverer of information, you would want the whole council to hear.”

City Attorney Marsha Moutrie suggested — in order to get the committee up and running as soon as possible, and recognizing that appointments often take a while — that they start with the council member-only committee and add members of the public at a later date. Council agreed.

Councilmember Ted Winterer was especially interest in recruiting knowledgeable members of the public to the group.

“When I look at some of this stuff, I think I have better chance of building a particle accelerator out of Legos than I do of understanding some of this stuff,” he said, “so I think it’d be very useful to have some members of the public with background and expertise.”

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