published Monday, July 30th, 2012

Audit scheme stinks

There are very few government functions more important than auditing services. A good auditing system is independent. It hold politicians, bureaucrats and government contractors accountable for spending tax dollars well, and ensures the government is compliant with financial requirements. It serves as the first and last line of defense against waste, fraud and corruption.

The City of Chattanooga's auditing system is flawed.

Currently, the city's Division of Internal Audit is not independent. The director of internal audit, Stan Sewell, was hired — and can be fired — by the mayor. Of course, the mayor, the mayor's office, and appointees and cronies of the mayor are among the primary concerns of a city auditor.

Unfortunately, since Sewell reports to the mayor, he can't audit anything related to the mayor independently. As a result, large portions of government — and millions and millions of tax dollars — go without proper scrutiny.

Aware of the shortcomings of the current audit structure, the city council devised a different, more independent, system auditing system. The new plan features a five-person independent, unelected audit board of certified professional accountants appointed by accounting-related special interest groups who oversee the new position of city auditor and the revamped Division of Internal Audit. That new plan appears on city residents' Aug. 2 ballots as Ordinance No. 12556.

Shockingly, the auditing system on the ballot actually is worse than the city's outrageously awful current scheme.

Wondering how that's possible?

Well, for starters, the city council and the council's hand-selected audit commission that oversaw the creation of the new system allowed Sewell to write much of the ordinance that create the city's proposed audit structure.

The first thing Sewell did was write himself into the new "city auditor" position. According to the ordinance, "the current Director of Internal Audit on August 11, 2011 shall serve as City Auditor ..." Sewell then lined up a hefty pay increase for himself by throwing out his current salary and allowing the new audit committee (made up of fellow CPAs) to set the city auditor's salary based on "established market data."

Then Sewell and the council made it nearly impossible to fire the city auditor. Replacing the city auditor requires a vote of four of the five members of the audit committee. There are no terms, no term limits and no set regular revue or evaluation for the position. The 4/5th majority requirement means that even if Sewell is doing a bad job, he may well keep his gig. It would likely take a serious breach of conduct in order for four out of five fellow CPAs to kick Sewell to the curb.

To recap, the new independent city auditing system turns Mayor Littlefield's hire for audit director into an auditor for life, gives him a raise and makes him accountable, not to voters or taxpayers, but to a board of unelected fellow CPA's.

It's no wonder, then, that Sewell admits to funding campaign efforts in support of passing the audit ordinance. He refused to say whether he is the leader of the pro-audit campaign and would not specify other sources of funding for the efforts beyond his family.

It is interesting to note — and troubling to us — that the primary website supporting the efforts to pass the audit, www.informedcity.com, uses a proxy domain registering company that hides the name and other information of the individuals behind that website from public view. Why would the creators of the "informed city" website go to such trouble unless they had something to hide?

The "informed city" campaign efforts also maintain a Twitter handle, and Sewell is one of only six followers of the account. Sewell's own Twitter account features only two tweets — one of which is a link to an article that encourages voters to "vote in favor of [the] new city audit setup."

This isn't a referendum on Sewell. We believe that he's done an adequate job running the city's auditing division. This is, however, a referendum on making a flawed system even more defective.

If this terrible new audit structure is defeated, the city council should go back to the drawing board and create a new system that is both independent and accountable.

We could not more strongly oppose Ordinance No. 12566.

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aae1049 said...

I am so happy that the TFP has shed light on this scam. A local citizen watch group has been writing letters of opposition to no avail. The Internal Audit ordinance is a scam that is glossed under a color of good for the people, when nothing could be further from the truth. The ordinance language was crafted to removed all public accountability and place it in the hands of an appointed board.

July 30, 2012 at 12:22 a.m.
raygunz said...

Thanks for the information TFP. This is the type of information which a responsible editorial board should deliver to the reading public!

July 30, 2012 at 1:38 a.m.
fairmon said...

I did not support the audit scheme before and certainly not the proposal. The appropriate audit would be to hire a national reputal firm to audit all city finances and require the mayor and council to sign off that all revenue has been accounted for. This is rejected for the same reason an independent compensation survey of like work in the labor supply area is not undertaken. It would not be politically popular to do that and adjust government employee compensation accordingly.

July 30, 2012 at 7:26 p.m.
distefanodj said...

Incredible. This paper is the only place where the actions of five independent members of the community and six members of City Council are completely ignored and it is assumed that one city employee was able to completely dictate how this action was to occur and what would be included. YOU INSULT MY INTELLIGENCE when you say that Stan Sewell did this or that. NOTHING COULD BE FARTHER FROM THE TRUTH - and for you to write this tells me that the TRUTH is not what you are after, but some little score you are trying to settle.

You accused a sitting Senator of being on the take in a recent vote. Now I am accusing you of the same thing. I challenge you to defend yourself publicly in debate with me to see where you get your TRUTH from. How hypocritical is the paper now!

July 31, 2012 at 9:38 a.m.
aae1049 said...

Blah Blah Blah David. Your Audit Committee chases missing potato chip money and ignores pervasive bid corruption.

Vote no to the Independent Audit Ordinance on August 2nd. Here is why. The proposed ordinance actually worsens an already flawed condition.

For over a month, citizens and local organizations have been voicing opposition to the ordinance that appears on the August 2nd ballot to create an Independent Internal Audit group. We wish to again strongly urge citizens to vote against or no to the City of Chattanooga ordinance for Independent Audit.

The ordinance has been crafted to serve the interests of an individual, rather than the best interest of the public as intended.

We oppose the ordinance for the creation of an Independent Internal Audit for the following reasons.

1) Under the new ordinance, the voice of citizens and watch groups to request inquiry is completely removed. In the past, our watch group has formally requested inquiry to City Council, and two members, Peter Murphy and Deborah Scott have directed Internal Audit inquires in their role of representation of the people. If the ordinance for Independent Audit passes, our elected officials or City Council members will be rendered powerless in directing inquiry.

2) The ordinance grants very broad and concentrated authority to one individual, and a small appointed board that are professionally cozy. We believe that Internal Audit will be more politicized with their own agenda.

3) The ordinance as written prohibits the City Council from reducing the budget of the proposed Independent Internal Audit, unless the Council reduces the overall city budget. Yet, the salaries are set by the appointed board. This simply ties the hands of our elected representatives to determine financial priorities in budgeting.

4) The Internal Audit group that exists has chronically failed to examine known and pervasive bid corruption that amateur citizens and watch groups have reported with ample data. We fail to see how the existing Internal Audit will benefit from less direction from City Council members and the public in general.

5) The Internal Audit’s lack of transparency in their own political campaign is very troubling. Stan Sewell refuses to disclose the amount and source of funds that have been expended in lobbying the public for a yes vote for this ordinance. If this is what we can expect, it is time to be very concerned about granting this group broad authorities that are not subject to inquiry by elected officials. We believe the pro Internal Audit folks are indeed acting as a group, and are subject to state financial disclosure requirements. Stan Sewell’s refusal to disclose speaks volumes.

Please vote no on the City of Chattanooga ordinance for Independent Audit on August 2nd.

April Eidson Little Chicago Watch

July 31, 2012 at 4:11 p.m.
distefanodj said...

April,

Your words are approaching a libel. If you have any proof whatsover that members of the Audit Committee have ignored evidence you or others have brought forward - LAY IT OUT. Rather I think you like to see you name in these posts, as all of our meetings are open to the public and you have NEVER graced them with your presence. Nor have you ever called me or another member of the Committee, or even submitted questions by mail. Just to let the rest of the public know how "active" you are. Keep writing your words, but I hope others never confuse typing with telling the truth.

August 2, 2012 at 9:51 a.m.
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