REPORT TO COUNCIL
SUBJECT
Title
Note and File the City Auditor’s Office Report on the Audit of Silicon Valley Power’s Power Purchase Agreement Process
Report
BACKGROUND
Per Section 909 of the City Charter, and SCCC Section 2.29.010, the City Auditor’s duties and responsibilities include conducting in-depth financial and performance audits, overseeing the City’s performance management system, auditing and approving all bills, invoices, payrolls, demands or charges against the City government before payment and, with the advice of the City Attorney, making reports to the City Council as to the regularity, legality and correctness of such claims, demands or charges. The City Auditor’s Office conducts its work under the auditing standards prescribed by the Institute of Internal Auditors (IIA). The IIA International Standards for the Professional Practice of Internal Auditing (Standards) require the City Auditor to present the results of any audits to the Audit Committee.
DISCUSSION
In 2022, the City Auditor’s Office engaged Baker Tilly US, LLP (Baker Tilly) to conduct an annual citywide risk assessment and prepare an annual audit work plan for the next five years. The risk assessment process involves identifying and measuring risks associated with the audit universe (a list of specific departments, functions, processes, programs, etc. that can be subject to an audit, i.e. auditable units). Risk is defined as “the possibility of an event or condition occurring that will have an impact on the ability of an organization to achieve its objectives.” The risk rating attributed to a particular department or function reflects the theoretical potential for loss, rather than any actual loss history.
As part of the ongoing risk assessment process, the Auditor’s Office and Baker Tilly rated the power purchase agreement process as high risk based on inherent risks and specific information gathered, including:
• Budget and high dollar financial commitment.
• Detailed federal and state regulatory environment with firm reporting deadlines.
• Evaluation and selection of agreements.
• Non-compliance with agreement requirements.
• Review process for potentially inaccurate supplier invoices.
Accordingly, the Auditor’s Office partnered with Baker Tilly to perform an internal audit of the power purchase agreement process. The objectives of this audit were to:
1) Evaluate the process of assessing and entering into power purchase agreements.
2) Evaluate the effectiveness of internal controls over management of power purchase agreements.
Attached is the City Auditor’s Office report containing the analysis, results and recommendations from the audit.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environment Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
FISCAL IMPACT
Costs associated with the preparation of this report are included in the City’s FY 2024/25 and 2025/26 Adopted Operating Budget.
COORDINATION
This report has been coordinated with the City Manager’s Office and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Accept the City Auditor’s Office Report on the Audit of Silicon Valley Power’s Power Purchase Agreement Process and recommend that this report be forwarded for note and file to the full Council at a future Joint Council and Authorities Concurrent and Stadium Authority Meeting.
Staff
Reviewed and Approved by: David Noce, Audit Manager
ATTACHMENTS
1. City Auditor’s Office - Audit of Power Purchase Agreement Process