City Auditor presents Q2 FY25 status report; committee recommends council accept quarterly report

Kate Murdock, City Auditor, presented the Office of the City Auditor’s second‑quarter status report for FY25, reviewing audit activities, project status, hotline updates and the first‑year benchmarking assessment of outsourced audit services performed by Baker Tilly.

Murdock told the committee the FY25 audit plan followed a FY24 risk assessment and that several projects were moving into fieldwork. She said two audits (ADA compliance and recruitment and succession planning) were presented earlier and that additional audits were in reporting. On hotline activity, she said one investigation was closed with no issues and one remained in process.

The presentation included benchmarking results comparing Baker Tilly’s work for Palo Alto to available metrics from several Bay Area and California agencies and the Association of Local Government Auditors (ALGA). Murdock said Baker Tilly issued three audit reports in FY24 with an average cost per audit of about $122,000 and that roughly 14 Baker Tilly staff supported Palo Alto audits over the past year, including subject‑matter experts for IT and other specialized reviews.

Murdock said, "This is the first year that Baker Tilly has conducted a benchmarking survey of audit services," and she noted challenges in making direct cost comparisons because audits vary in scope and span fiscal years.

Committee members asked questions about potential audit subjects and contracting. Council Member Stone asked whether the office had examined code enforcement and Palo Alto 311 effectiveness; Murdock replied that 311 and code enforcement were not handled through the hotline but are audit risk areas considered in the audit plan. Stone also asked for clarification on the external financial auditor arrangement; Murdock explained the auditor role is performed by a separate firm (listed in the packet) while Baker Tilly provides oversight and coordination.

Members explored benchmarking methodology and comparators. Murdock acknowledged limits in comparators because many jurisdictions differ by population, whether the auditor is elected, and by whether the audit function is internal or outsourced. She told the committee she would refine the peer set in future quarters and include additional examples where the audit function is outsourced to better compare Baker Tilly’s performance.

After discussion, the committee voted unanimously to recommend that the full council accept the auditor’s quarterly report.

Votes at the committee: Vice Mayor Venker — yes; Council Member Liu — yes; Council Member Stone — yes. Motion carried.