HomeMy WebLinkAboutStaff Report 2412-3842CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, December 16, 2024
Council Chambers & Hybrid
5:30 PM
Agenda Item
27.Approval of CAO Committee Recommendation to direct the City Manager, or their
designee, and Council Appointed Officers Committee Chair Lauing to negotiate renewal
of the contract with Baker Tilly US, LLC for Internal Audit Services through June 30 2026
with an option to renew for two years; and align the review of the City Auditor
performance with other CAO reviews. Staff Presentation
COUNCIL APPOINTED OFFICERS COMMITTEE
Staff Report
Report Type: ACTION ITEMS
From: Human Resources
Meeting Date: December 16, 2024
Report #:2412-3842
TITLE
Approval of CAO Committee Recommendation to direct the City Manager, or their designee,
and Council Appointed Officers Committee Chair Lauing to negotiate renewal of the contract
with Baker Tilly US, LLC for Internal Audit Services through June 30 2026 with an option to
renew for two years; and align the review of the City Auditor performance with other CAO
reviews.
RECOMMENDATION
The Council Appointed Officers Committee unanimously recommends that the City Council give
direction to the City Manager or their designee and the Council Appointed Officers Committee
Chair Lauing to renew and refine the terms of a contract amendment with Baker Tilly US, LLC
through June 30, 2026 plus negotiate terms for an option to renew for two years, and to align
the review of the City Auditor performance with other CAO reviews.
BACKGROUND AND DISCUSSION
The CAO Committee met on November 13, 20241 to review and discuss the options available
for the internal audit services contract and make a recommendation to Council on next steps
for the future direction for these services.
The City Auditor is a City Council appointed position. The City Charter defines the City Auditor’s
important role and furthers the City Council’s commitment to internal auditing, transparency,
and accountability in government.
Per City Council direction on February 10, 2020 to consider outsourcing the Auditor function,
the Council Appointed Officers (CAO) Committee, completed a request for proposals (RFP)
process for outsourced internal auditing services, led a procurement process aligned with
Council direction, and engaged in a transparent review of scope of work services, RFP
1 City Council, November 13, 2024, Staff Report #2410-3733
evaluation, and a public interview process as part of the overall effort. Through the
procurement process, the Council selected Baker Tilly to lead the City’s internal audit services.
On September 28, 20202, the Council approved a contract with Baker Tilly US, LLP for internal
auditor services in an amount not to exceed $1.3 million for a term beginning October 1, 2020
through June 30, 2022. The contract provided the option to extend the term for a period or
periods of up to three additional years, through June 30, 2025, by mutual agreement with
compensation to be determined in such years by terms outlined in the contract. Council has
extended the contract through approval of two amendments with the current contract ending
June 30, 20253.
Baker Tilly, US, LLC provides auditing services for the City of Palo Alto and the City’s contract
with Baker Tilly US, LLC specifies the designation of a City Auditor. On May 6, 2024, the City
Council formally appointed Kate Murdock as City Auditor.
The CAO Committee met on November 13, 2024 and the following motion passed 3-0
recommending that the Council authorize the following:
Council Member Burt moved, seconded by Vice Mayor Lauing to recommend to City Council to
recommend that staff and the Council Appointed Officers Committee Chair refine terms of a
contract renewal with Baker Tilly through June 30, 2026 plus negotiate terms for an option to
renew for two years, and to align the review of the City Auditor performance with other CAO
reviews.
FISCAL/RESOURCE IMPACT
Funding for annual internal audit services is budgeted in the Office of the City Auditor in the
operating budget. Funding for this contract extension will be included in the FY 2026 Proposed
Budget and funding for future years of the contract is subject to the annual appropriation of
funds.
STAKEHOLDER IMPACT
The CAO Committee engaged in a public discussion of this item on November 13, 2024.
2 City Council, September 28, 2020, Staff Report #11624
https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports-
cmrs/year-archive/2020-2/id-11624.pdf?t=64761.15
3 City Council, June 17, 2023, Staff Report #2406-3129
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82925
December 16, 2024 www.cityofpaloalto.org
Council Appointed Officers Committee City Auditor Recommendation
Presenter:
Sandra Blanch, HR Director
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Subtitle 32 font
DATE 28 FONT www.cityofpaloalto.org
•The City Auditor is a City Council Appointed position
•On May 6, 2024, the City Council formally appointed Kate Murdock with Baker
Tilly US, LLC as City Auditor
•On November 13, 2024, the CAO Committee reviewed and discussed options
available for the internal audit services (contract extension, renegotiation, request
for proposals).
•Baker Tilly US, LLC provides auditing services; current contract term ends June
30, 2025
Council Appointed Officers (CAO) Committee
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Subtitle 32 font
December 16, 2024 www.cityofpaloalto.org
The CAO Committee unanimously proposed for Council to give direction to the City
Manager or designee and the CAO Committee Chair Ed Lauing to:
•Renew and Refine the terms for a contract amendment with Baker Tilly US, LLC;
•The duration of the contract amendment should be one-year, ending June 30, 2026
•Negotiate an option to renew for two years; and
•Align City Auditor performance review with other CAO evaluation process.
CAO Committee Recommendation