Mayor John Hickenlooper and City Auditor Dennis Gallagher – who have been publicly bickering since midmonth – are headed for a showdown over a possible overhaul of the city’s financial structure that would take away some of Gallagher’s power.
Gallagher is scheduled to meet today with a panel of financial experts appointed by the mayor to examine what could be one of the most significant changes in Denver’s financial structure since the city charter was written in 1904.
The Task Force on Financial Management has not made any recommendations, but minutes and notes of its meetings show it is talking about creating a chief financial officer for the city to centralize the structure. That would cut back on the auditor’s role in accounting, payroll and contracts but make his auditing role more robust.
“Coming from the business world, I could not believe that the city does not have” a chief financial officer, said Daniel Yohannes, a task-force member and vice chairman of U.S. Bancorp.
Gallagher, who is elected, is resistant to any curtailing of his powers, saying his office is a major check on Denver’s “strong-mayor” system of government.
“When we took office, we met early on with the mayor and he assured me he would not go after that as long as he was mayor,” Gallagher said. “So we are holding him at his word on that.”
Hickenlooper’s chief of staff, Cole Finegan, said changing the city’s structure is not an attack on the auditor but a response to external audits by financial institutions such as KPMG.
“They have basically told us, ‘You guys have some real issues you need to look at,”‘ he said. “The mayor said, ‘Let’s get the top business people in the state to take a look at this and make recommendations.”
Meanwhile, tensions have been escalating between the two camps.
Since June 14, Gallagher has publicly criticized Hickenlooper’s administration five times on issues from the Budget and Management Office to the Denver Election Commission.
A June 15 letter from Gallagher ripped the administration’s “laissez faire” attitude and said problems at the election commission “warranted a much more pro-active response particularly from the city attorney.”
Gallagher said the city was on a “fiscally imprudent” path on June 14 in a letter accompanying an audit of the Budget and Management Office. And on Tuesday, he released an audit criticizing the administration for a lack of control in accounting for vehicle use.
Hickenlooper has answered with his own letters. A June 20 letter said he was “disappointed” Gallagher had canceled a meeting with the mayor given that problems at the election commission were “weighing heavily on your mind.”
A Hickenlooper letter Tuesday about the auditor’s criticism of the Budget and Management Office said, “I know you will be relieved to learn that many of your concerns and criticisms were based on faulty or outdated information.”
Gallagher dismissed the timing of his criticisms and the task force as coincidental. For instance, he said, Tuesday’s audit had been in the works for two years. He said outside of the “naturally adversarial” relationship auditors have with those they audit, he has a good relationship with the mayor. The two are longtime friends, Gallagher said, noting that the former brewer once named a beer “Gallagher’s Cream Stout.”
Meanwhile, administration officials have assembled the task force to overhaul how the city organizes its finances in response to critical reviews.
Citing “obsolete” structure in the city’s 102-year-old charter, the task force is looking to at least scale back the auditor’s role in payroll, accounting and contract approval.
The solution gaining momentum among task-force members is to run Denver more like a company: Create a chief financial officer for the city that would take on many of the responsibilities that are currently scattered about the city’s bureaucracy – including the auditor’s office.
Task-force member and CollegeInvest director Debra DeMuth said the city’s charter is problematic.
“The auditor is really the general accountant of the city,” she said. “That is what is leading to the fundamental concern of: Can he really go then and audit what he has responsibility for accounting for?”
Gallagher’s office worries that with finances centralized under the mayor, there will not be a check on the system – contracts under $500,000 do not have to be approved by City Council, Gallagher’s spokesman Denis Berckefeldt pointed out.
Task-force member Tim O’Brien, who was nominated to the panel by Gallagher, said he is wary of the direction the group is heading.
“This might be the financial structure used by some of the best companies in America, but it is also the financial structure used by some of the worst companies in America,” he said.
O’Brien noted that he is “the minority of one, at this point” but said he would not vote for the “CFO” model.
Any recommendations from the task force would ultimately have to be approved by voters.
Staff writer George Merritt can be reached at 303-820-1657 or gmerritt@denverpost.com.
