Is the city allowed to hire an internal auditor?
Different interpretations of the Municipal Government Act result in different answers
Wednesday, Feb 19, 2014 06:00 am
Whether or not the City of St. Albert could hire an internal auditor has been a matter of some debate.
The Municipal Government Act, in its section dealing with auditors, says “a council may not appoint a councillor, an employee of the municipality or an employee of one of its controlled corporations to be an auditor.” The next subsection says Edmonton and Calgary are an exception.
But a spokesperson for Municipal Affairs says his department’s interpretation of those sections pertain to an external auditor dealing with the financial statements submitted by the municipality to the provincial government.
“That role is for the financial statements,” said Jerry Ward, a public affairs officer with Municipal Affairs.
“A municipality can hire an internal auditor to basically address risk management, governance or value for money matters and that’s at the discretion of council,” he said. “If council wants to hire somebody to make sure their internal processes are getting value for money, they’re free to do that.”
City manager Patrick Draper says the legal advice he’s received suggests caution because the MGA doesn’t specify those sections apply to an external auditor.
“I’ve suggested in answering questions with members of council if you move away from the term internal auditor and want to do some work, the question becomes what work would you like to do?” Draper said. “I haven’t heard from anyone talking about internal auditing, specifically what is the interest.”
There is an upcoming service level benchmarking project that will include internal and external workers, he said.
Consultants could probably handle any project council would like undertaken, Draper added.
Mayor Nolan Crouse said it seems to him the Municipal Government Act is worded specifically, but if a motion was brought forward about an internal auditor they’d have to get expert legal advice on the matter.
“I think the spirit of what’s being suggested is for there to be a third-party internal reviewer,” Crouse said. “You could have a consultant, you could do that under contract.”
He estimated hiring an internal auditor could be an extra $100,000 to $150,000 business case.
Coun. Sheena Hughes recently had a failed motion on the floor to include hiring an internal auditor as part of council’s strategic priorities.
“There’s a lot of value the internal auditor could add to the city,” she said, pointing out the city’s external auditors, Deloitte, have previously recommended the city look at just such an auditor.
She questioned if an organization is capable of assessing itself in the same way an auditor would.
Coun. Cam MacKay campaigned on the idea and said he’s received a similar interpretation from Municipal Affairs: that an internal auditor would be allowed.
“If you don’t want an internal auditor, come up with a good reason why you don’t want it,’ he said. “Internal controls and financial efficiency is not against the law.”
MacKay doesn’t care what they call it, if the term internal auditor is problematic for some, but he’d like to have someone looking at the efficiency of the city.
“I don’t get why anybody would be against it,” MacKay said.
Coun. Cathy Heron said while her understanding has been that they can’t have an internal auditor, the MGA wording isn’t the only reason she’s not for hiring a permanent one.
For Heron, the issues are also ones of cost and trust with your administration and finance departments. If costs could be recovered on an ongoing basis, she’d be fine, but she suspects after the first year that cost recovery would diminish.
Instead, she’d be happy with an auditor hired every three to five years to do a deep probe of the city’s affairs on a contract basis.
“It would have to be a different firm than your external auditor,” she said. “They need to be accountable to council and council only.”