Fresno

Esparza eyes expanding audit committee’s role in City financial reviews

Nelson Esparza says he wants to make the Fresno City Council’s seldom-used Finance and Audit Committee more relevant in City Hall affairs.

I wouldn’t be surprised if the Brand Administration is now thinking: “Uh-oh!” If so, that would be ironic – as we shall see.

Esparza is the new District 7 council member. He also is chairman of the three-person Finance and Audit Committee. Garry Bredefeld is on the committee. The committee’s third seat has been vacant since Steve Brandau (the previous chairman) recently resigned to take his seat on the Fresno County Board of Supervisors.

The Council concluded its May 2 meeting with a review of committee and board appointments. This generally is a “housecleaning” task. Council members give short summaries of their work in progress. Vacancies are filled.

Council President Paul Caprioglio asked Esparza if he had anybody in mind to succeed Brandau.

Esparza replied: “I’m going to continue this item to a future meeting. I’ll bring that back with some reforms to the committee.”

Esparza gave no hint as to what kind of reforms or which council member he would like to succeed Brandau.

I called Esparza on May 9 and left a message. He was kind enough to return my call.

Esparza said he wants the committee “to play a larger role in the accountability of the auditing process” at City Hall. Such a role can give “taxpayers the biggest bang for their buck.”

Esparza said his proposed reforms would consist of “more than one or two adjustments.” But, again, he gave no details.

To an old City Hall reporter, this suggests the possibility of exciting stuff.

An audit is an official inspection. Thus, the Finance and Audit Committee can be an investigative body. The question has always been: If it is to be an investigative body rather than simply a sounding board or a watchdog group, to what degree?

We have before us two contrasting examples of the committee’s potential. One example is of recent vintage; the other is in the distant past (as measured by City Hall time).

First, the recent example.

The Council at its March 14 meeting reviewed an audit of the Parking Division. The audit was initiated and conducted by the Administration. The audit had been vetted several days prior to the March 14 council meeting by the Finance and Audit Committee in a public hearing.

The parking audit revived age-old policy paradoxes. How do you charge for Downtown parking, enforce those regulations with fines, generate high-intensity use of Downtown space, and keep everyone happy?

Brandau was still on the Council when the March 14 Council meeting was convened. He also was Council President at the time. Brandau noted that the Finance and Audit Committee had met a few days earlier to review the parking audit. He said that it was only the second meeting of the committee that he could recall in his six-plus years on the Council.

Then it was Bredefeld’s turn to speak.

Bredefeld said the report “is not a good report in the sense that it highlights lots of problems within the parking division. I want to commend the City Manager for initiating the report…. I know there are more audits taking place in the City of Fresno, which I think is a very wise use of taxpayer money. When you’re auditing and seeing what our weaknesses are, where there are ways we need to improve, to be better stewards of the public money and all the tax money that people send to City Hall, that is a wise thing. That’s a good use of our tax resources. I commend the auditors and the fine work that they’ve done on this and other audits.”

Council Member Paul Caprioglio asked City Manager Wilma Quan if she wanted to make a comment.

Quan said she was both proud of the report and a bit surprised at the auditors’ findings.

Quan said: “I think it’s a great opportunity now for us to move forward (and) clean up whatever system issue that we may have.”

The parking audit was prepared by the city’s Internal Audit Unit. It was not prepared by the Council’s Finance and Audit Committee or a staff of financial experts reporting exclusively to the committee.

To a significant degree, the Finance and Audit Committee was a passive player in this job. The committee simply reviewed complex information and recommendations generated by others, then delivered “big picture” comments in a public setting.

But that hasn’t always been the case with the Finance and Audit Committee. That brings us to the second example of the committee’s potential, one that has probably been forgotten by many Fresnans.

I’m talking about the Southeast Growth Area (SEGA) hearings conducted some eight years ago by the Finance and Audit Committee.

The driving force behind the hearings was then-Council Members Lee Brand and Andreas Borgeas. Brand currently is Fresno’s mayor. Borgeas is now a state senator.

SEGA is 14 square miles of largely undeveloped land in Southeast Fresno. The land is in the city’s sphere of influence.

The administrations of Alan Autry and Ashley Swearengin had high hopes of turning SEGA into an awe-inspiring planned development that would be home to more than 100,000 people.

City Hall gave a contract without competitive bid to a noted planning consultant. The consultant’s charge: Deliver a blueprint for turning the SEGA dream into reality. The cost of this contract had reached nearly $3 million by 2011. The blueprint was idealistic, to say the least.

Brand and Borgeas wanted to explore if the money had been misspent. They wanted to explore if Fresno’s growth trends were elsewhere. The committee held several hearings, with Swearengin Administration officials testifying in a seat that got very hot at times. As I wrote for The Bee, the hearings “crackled with tension.”

After a committee meeting on SEGA in March 2011, Brand told me: “We spent a lot of time and a lot of money on a plan that we think has significant flaws.”

The Finance and Audit Committee produced its own report on SEGA spending. The report filled a three-ring binder. The report was delivered to the Swearengin Administration and the Council.

The Finance and Audit Committee under Lee Brand, at least in this instance, was far from passive. It saw an opportunity and grabbed the policy initiative. But the hard work of deciphering SEGA’s complexities and coming up with recommendations was done by the committee itself, in particular Brand.

With this in mind, I reached out to Brand for comment on Esparza’s vow to reform the Finance and Audit Committee. With the help of Communications Director Mark Standriff, the Mayor very generously gave me some of his time by phone on Saturday.

Brand reminded me that under his direction the Finance and Audit Committee also dug into a proposed redevelopment deal for the vacant Hotel Fresno and the city’s contract with SMG to operate the Convention Center.

The Mayor’s prodding rekindled my memory of a long-ago evening hearing on the proposed Hotel Fresno contract. Brand, who has decades of high-level experience in the private and public sectors when it comes to crunching numbers and reading complex contracts, was convinced that the proposed deal was built on unrealistic but politically expedient assumptions.

He was convinced that the public treasury, and therefore the public interest, was being exposed to unreasonable risk. Brand’s precise questions to the developers and city staffers about arcane (to me) deal points led to a revised deal that essentially sidelined it for good. The Hotel Fresno now has different ownership. Another redevelopment deal with public-private participation is the new hope.

Which operational model does the hard-charging Nelson Esparza have in mind for the 2019 Finance and Audit Committee?

Is it to be the passive “watchdog” role, one in which committee members simply ask general questions to the auditors who do the kind of hard work that takes years of training? Or is the committee’s role under Esparza to be something along the lines of a fully operational forensic accounting body working without the benefit of Finance Department’s experts, which is what Lee Brand as a council member made of the committee?

Esparza told me only that he wants the committee to have “a larger role.”

The Mayor over Mother’s Day weekend told me that the latter model is challenging. He also was generous in his views of an Esparza-led Finance and Audit Committee.

His Administration, Brand said, “will be looking for areas where we can make improvements together.”

All eyes are now on District 7’s representative.

George Hostetter
George Hostetter is a contributor to The San Joaquin Valley Sun.