By Niki Cervantes
Staff Writer

July 16, 2015 -- Criticized for the way the City handles its governance and finances, the Santa Monica City Council on Tuesday delayed a vote to approve the creation of a subcommittee to oversee auditing of the budget.

A motion by Council member Sue Himmelrich, tabled until the next meeting, will give City staff time to firm up recommendations that include developing a process for including two volunteer community members on the subcommittee.

Under the motion now being considered, two members of the new committee would serve for four-year terms, and one for a two-year term, with staggered terms ensuring continuity.   Committee members would elect a chairperson annually, according to a City staff report.

“It will be the watchdog,” said City Manager Rick Cole. “Not only is it best practice, but it’s the only way to ensure there is someone outside the chain of staff command to be the checks and balances.”

Officials said that the council subcommittee would serve in an oversight capacity, and not engage in auditing itself.

Council members Pam O’Connor, Tony Vazquez and Himmelrich volunteered at Tuesday’s meeting to sit on the new subcommittee, which will scrutinize the wealthy seaside city’s biennial budget of more than $1 billion.

Himmelrich said the community members should be certified public accountants, or the equivalent. Those members should also have auditing experience, the council said.

A Los Angeles County Civil Grand Jury Report released in June 2013 found Santa Monica’s governance and financial management practices were among the worst in the county. It criticized the City for, among other things, failing to develop healthy rainy day reserves.

The report ranked Santa Monica 65 out of 88 in terms of “Governance and Financial Management.” Among the recommendations was that the City Council set up a formal internal auditing function and that it establish an audit committee. (“Santa Monica to Hire Outside Firm for Internal Auditing,” August 28, 2014).

City officials have said the Grand Jury’s report contained errors. For example, the City was criticized for not adopting revenue and expenditure planning policies needed for balanced budgets. However, a report by City Finance Director Gigi Decavalles-Hughes said the “staff repeatedly supplied” a number of such policies.

Additionally, the city was criticized for using one-time revenues to fund ongoing expenses, among other findings. The City has said it submitted documents that proved all those criticisms wrong.

The new subcommittee is slated to meet three times a year, according to a City staff report.