The City of Denver’s financial operations are due for an overhaul. No one is proposing doing away with the post of an elected auditor – an office unique to Denver in this state. But a task force of 11 business leaders is right to suggest reforming the current system in which the auditor’s office in effect audits itself.
Currently, under the 102-year-old city charter, the elected auditor is responsible for financial reporting, payroll functions and fiscal oversight. That means the auditor’s office now does much of the accounting for the city. But it’s also the auditor’s office that later audits the city’s accounting, basically its own handiwork.
That’s why the task force is exploring centralizing the financial structure, possibly by creating a chief financial officer, as suggested by the consulting firm KPMG.
Mayor John Hickenlooper’s chief of staff, Cole Finegan, says KPMG concluded existing financial responsibilities were spread over too many agencies, including the elected auditor, appointed treasurer, manager of revenue, manager of budget and finance and the controller.
We agree that it’s time to draw a clear line between accounting and auditing functions. If Denver is going to have an elected auditor, that official ought to be an auditor, not a bookkeeper. Freeing the office of routine bookkeeping would allow it to expand its auditing function beyond policing for fraud and waste to true performance auditing. The state auditor’s office excels in performance audits that often conclude: “Nobody stole any money and there was no blatant waste. But other cities or states have found much more efficient ways to perform these tasks.”
Such performance reviews can be of great value to taxpayers. But while the Denver auditor’s office should get out of the daily grind of bookkeeping, it is important to preserve the auditor’s power to do “pre-audits” to make sure legally mandated paperwork is in order before issuing a check to pay vendors or contractors.
The incumbent auditor, Dennis Gallagher, is wary of the proposed reforms, saying, “I will oppose ending or weakening any of the checks and balances in the city, particularly as they relate to the auditor’s office.”
Well, so will The Denver Post. But auditing one’s own work isn’t a “check and balance;” it’s a conflict of interest.
Denver should consolidate the city’s far-flung financial operations into a single office. That won’t undercut the effectiveness of the elected auditor’s office. It will free the office to do the jobs – financial auditing and performance auditing – that citizens want our auditor to focus on.
