TO: Mayor and City Council
THROUGH:
FROM: Finance Committee
SUBJECT:
title
Progress report on performance auditing program.
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): A All Neighborhoods
Result Area(s): Result Areas - Good Governance; Natural Environment Stewardship; Safe and Healthy Community; Safe, Reliable and Efficient Infrastructure; Strong and Diverse Economy; Welcoming and Livable Community.
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SUMMARY:
summary
As part of the City’s efforts to reduce cost and improve efficiency, the Finance Committee is overseeing a portfolio of performance auditing. This is a progress report on recent activities including the recently completed performance audit of the Enterprise Leadership Performance Audit and Urban Renewal Agency, and the ongoing work regarding the City’s risk management function.
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ISSUE:
Receive progress report on performance auditing program from the City Council’s Finance Committee.
RECOMMENDATION:
recommendation
Information only.
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FACTS AND FINDINGS:
The City Council’s Finance Committee meets regularly to consider priorities for the City’s performance auditing program and receive findings and recommendations for each area reviewed for improvement. The City Council’s Finance Committee is comprised of Mayor Julie Hoy and Councilors Gwyn, Nordyke, and Tigan, with Councilor Matthews serving as alternate.
Beginning in September 2024, the City Council’s Finance Committee began considering priorities for the City’s performance auditing program. The Finance Committee considered the City’s current risk conditions, and areas where a performance or internal audit could make the greatest impact such as opportunities for: a) savings in the General Fund by focusing on activities with that funding source; b) efficiencies and cost savings, as indicated by overall program budget and employee count; c) potential enterprise impact; d) strongest alignment with the City’s strategic goals and Council priorities; e) negative impact on other programs or services should disruption or degradation of service occur; and/or f) mandate by law. The Finance Committee also considered organizational readiness or capacity to support the performance auditing work and committed to an annual assessment of risk and priorities to establish the work program.
At their October 21 meeting, the Finance Committee prioritized Enterprise Leadership (through City Manager’s Office. Mayor and City Council support, and enterprise leadership) as the first area of focus. That work was completed and reported back to the Finance Committee at their February 11, 2025 meeting. The Committee also prioritized additional audits of the Information Technology and Urban Renewal Agency onto the FY 2025-2027 performance audit workplan. While recognized as an area of priority to examine, concerns about organizational capacity to support an audit of fire and emergency preparedness in the midst of the transition from a private EMS contractor to becoming a City line of business by July 1, 2025, delayed this work
At their February 18, 2025 meeting, the Finance Committee agreed with staff assessment of capacity concerns at IT in favor an audit of the City’s risk management function. The Risk Division was recommended for next internal audit as recommended by Moss Adams
Both the Risk management and urban renewal audits are underway. A progress report was presented to Finance Committee at their April 21, 2025 meeting, in advance of the City Council Work Session.
Work completed through the City’s program of performance auditing program is featured on the City’s website on the Efficiency and Effectiveness page <https://www.cityofsalem.net/government/efficiency-and-effectiveness-measures>.
BACKGROUND:
In 2023, the City Council held multiple work sessions on continuing General Fund services and forming a Revenue Task Force. The Task Force met seven times in 2024; considered feedback from eight focus groups, three town halls, and a statistically valid survey; and advanced recommendations to the City Council concerning revenue options to support City services funded by the General Fund. The Task Force recommendations to sustain vital City services were presented at the City Council Work Session on, July 15, 2024.
The Salem City Council continued the conversation at their August 19, 2024 Work Session, and on August 27, 2024, City Council approved a four-step work plan and budget to better understand our community’s priorities for City services. The group reached consensus around the priority for polling, interest in furthering community engagement on priorities for potential future funding, and about preparing a work plan to conduct a third-party validation of the financial forecast, examine performance and spending in priority program areas, and provide more visibility to the performance auditing work the City has done to-date.
The initial work plan included:
1. Poll community on priorities and preferences for future possible funding. Council authorized a poll of likely voters specific to the question of community priorities and preferences for possible future funding. The poll was conducted September 10 through September 16, 2024, administered in both Spanish and English, and captured responses from 400 residents via phone, both cell and land lines. Results of the poll were reviewed in detail at the City Council’s October 21, 2024 Work Session.
2. Update and share performance auditing portfolio. The City Council’s Finance Committee developed a prioritized set of services for performance auditing and assessment, internal auditing, efficiency and effectiveness assessment for as many as three additional City programs or functional areas before June 30, 2025. The first priority, an Enterprise Leadership Performance Audit was advanced by the Finance Committee at their September 15, 2024 meeting. Audits of the Urban Renewal Area function and the risk management function are underway.
3. Validate financial forecasting methodology. On January 15, 2025, the Budget Committee received an updated five-year forecast reflecting the work of the Forecast Review Team. This group reviewed revenue projections and cost assumptions for the City’s five-year financial forecast. In each of the next four years, the forecast shows the gap growing, largely due to inflationary pressures and cost increases across our economy, including employee salaries, retirement, benefits, and other ongoing expenses. The Team’s analysis led to updated expectations for property tax revenue, savings from salaries, and materials and services to align with recent trends. These changes reduced the projected shortfall from $17.7 million to $13.8 million.
4. Advance community engagement. City Council authorized up to $10,000 in funding for communication materials and information. With support of a communications and engagement consulting firm, staff developed materials for in-person presentations and community discussions, tabling and outreach materials, increased communications via the newsletter (Community Connect). Community priorities and perspectives are reflected in the City’s messaging.
Courtney Knox Busch
Chief Strategy Officer
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