No performance audit for Salem

SALEM – The state Auditor’s office pulled the plug on loan funding for a proposed performance audit for Salem, but Mayor John Berlin said he’s still in favor of getting the audit done.

“I’m disappointed, but we just go down a different path,” he said Wednesday.

He notified city council members and city officials in an email Dec. 21 and said he stressed that a performance audit could still be done, they just wouldn’t have the loan to do it.

Berlin received a letter dated Dec. 20 from Danny Cecil, director of the Ohio Performance Team of the Auditor’s office, advising the state would be unable to proceed with the Leverage for Efficiency, Accountability and Performance Fund loan at this time.

“One of the objectives of LEAP is to ensure the funds go where they are needed and that they have the greatest possible impact for taxpayers. During the past 18 months, interest in LEAP loans and performance audits generally has been increasing,” the letter said.

The state’s decision came after the state reviewed a letter the city sent dated Nov. 29 to tighten up the language for the terms of the proposed performance audit outlined in a revised letter of arrangement the state had sent. The language revisions related to the cost savings and the audit cost were hashed out during a Committee of the Whole meeting of city council on Nov. 27.

The state had estimated the audit would cost up to $71,700, but under the arrangement, the city would only pay the amount of expected savings identified through audit recommendations up to $71,700. If less savings were found, the city would pay less. The LEAP Fund loan would have deferred the cost of the audit for up to a year.

Berlin said he didn’t feel the state would be able to find savings totaling $71,700. He hasn’t talked to anyone from the auditor’s office, but said when they started to investigate “maybe they felt they couldn’t justify having auditors come and do the audit and not get paid.”

He also said that maybe there were some changes the city requested that the state felt would limit the savings, but he noted that those changes were discussed with the representative of the auditor’s office and he indicated to go ahead.

“I don’t think anybody thought that would cause them to rescind (the loan offer),” Berlin said.

The Finance Committee of city council had recommended in June to apply for the LEAP funding. The scope of the audit included looking at administration operations, public safety, public works and parks and recreation. The idea was to have an independent eye look at how the city operates and make recommendations for ways to save money if any could be found. The agreement noted that any savings identified would exclude negotiated compensation. The city has contracts with four unions covering firefighters, police, utility workers and service department workers.

City council had not voted yet on whether to accept the LEAP funding and go forward with the audit since the language for the arrangement with the state had not been finalized.

Councilman Dave Nestic, who serves as chairman of the Committee of the Whole and serves on the Finance Committee, said council has a decision to make on whether to go forward with a performance audit without the benefit of the loan. He also said there are other options, noting there are other people who can do the same type of work or they could talk to the auditor’s office about their options.

He said it’s something council will need to discuss. He’ll likely talk with the mayor and they’ll explore options to be brought up and have a Committee of the Whole meeting to discuss them.

“An outside audit is just good practice. Benchmarking against operations that are known to be good is a common business practice that would benefit the city,” he said.

Nestic found it interesting that the state decided to rescind the funding after getting the city’s letter, saying “we offered just a tightening up of the language.” He said they wanted to clarify that the city couldn’t be held accountable for savings the city can’t control.

He said it was his understanding that the auditor’s office indicated other cities were in greater need. He said Salem isn’t in dire shape, but they wanted to take advantage of a program to have another party audit the operation to see if there could be any savings. He said the purpose of the state program as he understood it was to help cities.

“It’s their decision. I’m personally not happy with it, also not surprised,” Nestic said.

Council has been talking about a performance audit for a couple of years and in the fall of 2011, voted 4-3 against accepting LEAP funding and going forward with the audit. With some of those council members gone, council in 2012 raised the issue again.

In the recent rejection letter, the state auditor’s office encouraged the city to reapply for LEAP funding if it would be of benefit.