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Santa Rosa staff weigh outside firm or restructured in-house unit to resume internal audits
Summary
Staff reviewed a 2016 Moss Adams internal-controls review, described why the city's single-person internal audit approach proved unsustainable, and proposed soliciting proposals from outside firms to refresh and retest prior findings.
Santa Rosa City staff say they plan to solicit proposals from outside firms to refresh a 2016 internal-controls audit and to retest controls after an earlier in-house effort faltered.
The update, presented to the Santa Rosa City Long-Term Financial Policy Subcommittee by staff member Alan Alden, reviewed the city's 02/2016 engagement with Moss Adams and the subsequent attempt to create an internal audit function. Alden said the city hired a single internal auditor in 02/2016 after Moss Adams identified internal-control weaknesses; that auditor later left in 2020 and the position has not been refilled.
Alden said the Moss Adams review produced 68 comments, seven of which were labeled critical and became the initial priorities for the internal audit work. "So, back in around 02/2016, we had Moss Adams come in and do an internal control audit," Alden said. He added that the critical items largely involved cash handling and missing policies.
The presentation explained why the single-person model proved unsustainable: the auditor was expected not only to test controls but to draft policies and perform accounting duties, and lacked administrative backup. "We created this unit, and the unit consisted of 1 individual. That is not a sustainable model," Alden said. He also told the committee that housing the function inside the finance department reduced independence and suggested a better placement could be under the city manager's office or in an independent department.
Staff presented a two-track proposal: 1) invite firms to propose a refreshed risk assessment that would update the Moss Adams critical-action plan and cost out follow-on testing and policy writing; and 2) consider whether to rebuild an in-house team (with more staff and independent placement) or retain a consultant for recurring work. "We are in the process of reaching out to firms under our professional services policy," Alden said.
Committee members asked about alternatives used elsewhere. Alden pointed to San Bernardino as an example where an independent audit committee with accounting professionals reviewed reports; several committee members favored a model that would allow financially experienced community volunteers to participate in oversight.
The presentation did not include final contract amounts; staff said they will return with proposals and cost estimates. Alden said the city can ask firms for a management-level risk assessment and for options on how to perform testing and policy updates.
The subcommittee did not take a formal vote. Staff said they will provide updates when proposals are received and recommended next steps are discussed with the full council.
