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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: City Auditor
Meeting Date: March 24, 2025
Report #:2503-4318
TITLE
Approval of Audit Reports for Grant Management And Utility Billing as Reviewed by Policy and Services Committee; CEQA: Not A Project
RECOMMENDATION
The Policy & Services Committee and Office of the City Auditor recommend City Council approve the results of two audit reports:
1. Grant Management Audit (Attachment A, P&S Committee recommended approval on February 11, 2025), and
2. Utility Billing Audit (Attachment B, P&S Committee recommended approval on February 11, 2025).
BACKGROUND
Baker Tilly, in its capacity serving as the Office of the City Auditor (OCA), performed a citywide risk assessment that assessed a wide range of risk areas, including strategic, financial, operational, compliance, technological, and reputation risks. The purpose of the assessment was to identify and prioritize risks to develop the annual audit plan.
During the FY 2023 risk assessment, the OCA identified grant management processes and utility billing as potential areas of risk and included these audits in their FY 2024 Audit Plan. These audits were presented to, and approved by, the Policy and Services Committee on February 11, 2025 and are here transmitted to City Council for approval.
ANALYSIS
Grant Management Audit
The objective of this audit was to determine whether the City has adequate internal controls to manage the grant lifecycle efficiently and effectively.
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The City receives incoming grant funding from various sources to support its services, including federal, state, and local grants. Most of the City’s grant funding comes from federal agencies.
Audit findings and recommendations focused on three areas of improvement:
1) better coordinating oversight of grant management across departments; 2) improving recordkeeping and internal reporting of active grants in order to better monitor grant activities and increase visibility of grant performance; and 3) more consistently assess and track efforts in pursuit and management of grant opportunities to measure its return on investment.
OCA’s Grant Management Audit report, included as Attachment A, summarizes the analysis, audit findings, and recommendations. The Policy and Services Committee unanimously recommended City Council approval of this audit report on February 11, 2025.
Utility Billing Audit
The objectives of the Utility Billing Audit were to:
1) determine whether the internal controls over the utility billing process are adequate and working effectively to ensure billing is accurate and in compliance with the City's policies and regulations, and
2) determine whether billing adjustments are properly supported and approved.
The CPAU Department provides the City of Palo Alto with five municipal utility services:
electricity, natural gas, water, wastewater, and fiber optics. The City’s Public Works Department also provides refuse collection and processing for recycling, compost and garbage, wastewater treatment, and stormwater management services.
Palo Alto is the only city in California that owns and operates a full suite of municipal utility services, including electric, fiber optics, natural gas, water and wastewater.
The OCA found utility bills and adjustments are accurately calculated in compliance with City policies and regulations. Audit findings and recommendations focus on two areas of improvement:
1) improving documentation and approval for some billing processes; and 2) closing some internal controls gaps to improve overall process performance.
OCA’s Utility Billing Audit report, included as Attachment B, summarizes the analysis, audit findings, and recommendations. The Policy and Services Committee unanimously recommended City Council approval of this audit report on February 11, 2025. 6 7
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FISCAL/RESOURCE IMPACT
The timeline for implementation of corrective action plans and the necessary resources are identified within the attached reports.
STAKEHOLDER ENGAGEMENT
The Office of the City Auditor worked with and would like to thank several departments for their assistance in conducting the Grant Management d Utility Billing Audits including:
Administrative Services, City of Palo Alto Utilities, City Manager’s Office, Public Works, Planning & Development Services, Office of Transportation, Community Services, City of Palo Alto Utilities, Library, Police and Office of Emergency Services.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because the audit activities do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA Guidelines section 15378(b)(4).
ATTACHMENTS
Attachment A: Grant Management Audit, January 29, 2025
Attachment B: Utility Billing Audit, January 30, 2025
APPROVED BY:
Kate Murdock, City Auditor