The URL can be used to link to this page

Home My WebLink About _ 9.1(e)--Establishment of Finance Advisory Committee GI �" Y C� F � � �- ' � ° � � i � CITY OF REDDING �� REPORT TO THE CITY COUNCIL MEETING DATE: December 2, 2025 FROM: Steve Bade, Interim City ITEM NO. 9.1(e) Manager ***APPROVED BY*** sbade@cityofredding.org t��,re a �, 7�t l if2{i/242+ sbade@cityofredding.org SUBJECT: 9.1(e)--Consider establishment of Financial Oversight Committee Recommendation Authorize and approve the following: (1) Authorize staff to draft a resolution formalizing the Audit Committee structure establishing the composition of inembers, term of inembers, purpose(s) of the committee (include existing delegation under Council Policy 425), and meeting schedule; and (2) Authorize staff to draft a resol�ution establishing the Financial Oversight Committee structure, specifying the composition of inembers, term of inembers, purposes of committee, and meeting schedule. Fiscal Impact There is no impact to the General Fund with this action. AZteNnative Action City Council (Council) could provide staff with alternate direction. Background/Analysis On October 22, 2025, the Council directed staff to return with an item considering the creation of a Financial Oversight Committee. Council specified that the committee would be forward- looking but has not yet indicated the specific scope or function of that committee. Staff has reviewed models from other cities as well as articles published on this topic and are bringing those forward for Council's consideration. Staff is requesting further direction as to the scope, composition, terms, and meeting sehedule. Additionally, staff has reviewed the documentation regarding the existing Audit Committee structure and is recommending that Council consider formalizing that committee's role to provide greater clarity going forward. Report to Redding City Council November26,2025 Re: 9.1(e)--Establishment of Finance Advisory Committee Page 2 Models from Other Cities Staff has reviewed how other cities have formed and maintained Financial Oversight Committees and have identified two major categories of committees. First, similar to the City of Redding (City), many jurisdictions have audit committees responsible for reviewing audits of past expenditures. These committees may review both internal and external audit results in addition to setting audit priorities and identifying areas for future audits. In larger jurisdictions, the internal and external audit functions may be given to separate committees, which work in conjunction with a dedicated City Auditor or City Controller position. Examples of this structure include Las Vegas, San Francisco, and San Jose. Presently, the City combines both the internal and external audit functions into a single Audit Colnmittee, which is a standing committee of the Council. The City does not have an internal auditor or controller position, these types of duties have been delegated to the Financial Services Department through Council Policy 425. Second, several jurisdictions employ a different kind of committee that participate in the budgeting process by reviewing projections on future revenues and/or expenses. The purpose of these committees is to provide additional technical expertise that can assist in budgetary accuracy and transparency. For example, the City of Las Vegas engages a "Financial Advisory Committee" that includes local stakeholders such as economists, hoteliers, and representatives from the homebuilders' association. Per that city's budget summary, these members provide "perspectives into the city's revenue projections and sometimes, expenditure assumptions." By including representatives from key local industries, this type of committee can provide insight into local economic trends that will impact projections in revenue. This may present advantages over the City's current practice, which is to rely on projections from a consulting �rm and executive staff, as reviewed, adjusted and approved by Council. These two different types of committees are not mutually exclusive. In the Las Vegas example, that city utilizes both a Financial Advisory Committee looking at revenue assumptions in upcoming budgets and an Audit Oversight Committee to review audits of past expenditures. Each function prospective and retrospective—provides a different benefit. As such, the committees have different needs in terms of inember expertise, meeting schedule, and structure. In deciding whether to modify the existing Audit Committee and/or create a committee to assist in the budget process, the Council may want to consider how the specific objectives of each type of committee meet the needs and resources of the City. As the staff was researching information for this report, a very informative article, printed in Weste�n City, a monthly magazine provided by The League of California Cities, was located and is attached for reference. The article states, "These committees, composed of community members, aim to increase city government transparency and build accountability". It goes on to warn of the potential pitfalls, highlighting that clear direction is needed to avoid duplicating staff work, creating competing priorities and workload �or staff, and/or challenging the governance and authority of the Council. The article recommends establishing clear steps to avoid the pitfalls, these step include; articulating clear direction from Council on the mission and role of the committee; setting clear roles and responsibilities, adopt a standing committee resolution or code of conduct for the committee, provide training and/or orientation to all involved, appoint a city council member and/or staff liaison; clearly delineate the 1eve1 of committee staff support to be provided; consider sunset provisions; and regularly review the purpose and mission of the committee. Report to Redding City Council November26,2025 Re: 9.1(e)--Establishment of Finance Advisory Committee Page 3 Audit Committee The City currently has an Audit Committee, which is comprised of the Mayor and Vice-Mayor. As a standing committee of the Council, the Audit Committee is a Brown Act body with publicly noticed meetings. Staff did not locate any original organizing documents, but based on the review of agendas, the Audit Committee meets regularly to consider the results of the City's annual external audit. The Audit Committee then advances the results of the annual external audit for consideration by the CounciL The committee also meets and considers modifications to audit contracts, including extensions, and the selection of new auditors. Additionally, the City currently tasks the Audit Committee with reviewing all internal audits and setting the priorities for future internal audits. Staff is recommending a resolution formalizing the structure and scope of the existing Audit Committee. Council Policy 425 provides the delegation of the authority for Internal Audits to Finance and reporting of the results of the internal audits to the Audit Committee. There is no clear definition or documented role of the Audit Committee besides this mention in Council Policy 425 and this includes the external audits aspect. This is most likely the result of functions being delegated to the Committee at different times, but it would be helpful to maintain a single document outlining a11 of the Committee's functions and structure. Moreover, as a Brown Act Body, the Audit Committee is required to have a regular meeting schedule, and including that schedule in the resolution would be helpful for organizational purposes. Prior to bringing forward a resolution, staff will need to confirm whether the Council chooses to retain the current Audit Committee structure or wishes to revisit that issue as part of the larger fiscal oversight discussion. Financial Oversight Committee The City does not currently have a committee that provides forward-looking recommendations on revenue and expense projections to assist in the City's budget process. If the Council is interested in creating a committee similar to what is used in other cities, staff can draw from those examples to bring a proposed resol�ution for the Council to consider. These would likely involve some customization for the City. Once again, using the City of Las Vegas as our example, representatives from specific industries that drive revenue in their jurisdiction are appointed to serve. A similar committee in the City may or may not look to the same industries as a driver of local revenue and economic activity. Similar issues would be meeting schedule and appointment process. Each city typically uses its own appointment structure. In the City of Redding, this involves appointments made by the Mayor, subject to approval of the full Council, with terms staggered in order to allow for a diversity of appointments. Staff would prepare any draft resolution with this same model unless otherwise directed by the Council. Additionally, the Council wi11 need to decide on a regular meeting schedule for the committee, but that may be best decided after the Council determines how it may change the budget workshop process. Other Options The options presented represent the models that staff has identified from other jurisdictions, but other structures are possible. If these options do not meet the Council's needs, it may be prudent to start by identifying the policy goals that the Council wants to address so that structure or alternative proposals can be derived from there. Report to Redding City Council November26,2025 Re: 9.1(e)--Establishment of Finance Advisory Committee Page 4 Environmental Review This item is not a project as defined under the California Environmental Quality Act, and no further action is required. Council PNio�^ity/City Manager Goals � Communication and Transparency — "Improve the quality of communication with the public and City employees to enhance knowledge and increase transparency to improve public trust." • Government of the 21st Century — `Be relevant and proactive to the opportunities and challenges of today's residents and workforce. Anticipate the future to make better decisions today." Attachments ^City Council Policy 425 - Internal Audit Function ^Finance Advisory Committees_Tips and Traps - Western City Magazine CITY OF REDTIING, CALIFORNIA Cl�T.1NCIL POLICY SUBJECT RESOLUTION POLICY EFFECTIVE pAGE NUMBER NUMBER DATE INTERNAL AUDIT FLTNCTION 2006-40 425 3-21-06 1 of 1 BACKGROUND City management is re��`'�'o ��ty Council for its performance. Whi1e management is primarily responsible for the C��erformance a��S internal controls,the City Council is ultimately responsible for ensuring that mana��nt fulfills that res��sibility. The quality of the City's control environment can be improved by estab��ng an internal audit�`��tion. The internal audit function would help in monitoring the effectiveness of t�,�x,�ity's policies and �'��edures. Implementing an internal audit function should also enhance the City's��'�ctiveness in accomplishing its goals and objectives. The internal audit function can be provided by Financ�P��vision personneL The Finance Division has qualified staff who have supervised, planned and/or perfo�� d�� the �� '�'� �ssist the City Council in its responsibility to oversee management's performan��{��u�arl��'��g tt�`��rnal controls,the Finance Division will not only report ��, to the City Manager, but also direc�ly��e Audlt Ct��lttee regarding its internal control procedures. , PURPOSE � It is City Council's desire to establish ��;��idlt �� t�� mternal audit function would help in monitoring the effectiveness of the City's policies�and��ures. Qu��"iedpersonnel exist within the Finance Division to perform some of the internal audit fun��'�'To improve�� City's internal control struct�ure the Finance Division is assigned the responsibility o��ming the in��1 auc��function as workload permits. To help enhance the Division's independence��i��n will re��orm�,;��o the City Manager and Audit Committee at least on an annual basis. �� . � �.� „ „ POLICY s �� u, It is the policy of the City Council of the City of Redding tha�the Fin��`��'t��n will be responsible for the internal audit function of the City. Due to the limited sta��'��e�to work on internal audit items, priorities will be set by the Finance Division as to the work�t��"eYformed. However, at least annually the Finance Division will report their internal audit priorities to the Audit Committee and the Audit Committee may approve or change those priorities. Annually,the Finance Division will also report the results of their internal audit work to the City Manager and ti�e Audit Committee. ��\��5>� ,....:... ��,n �_ �' r�� }ti �ir � '�„��,'rt �� ' � . ; � � � ,� � �� t �� t��s� � � � �� \�4 tsy � fi � •y��r „ . , � �ts+v , :_;..„ � .. . . . . . ,� '_ „_..�h � � r �4{ r��ti�� . . ti zst n: z '� ' .'° ' � 7 �izr��a�i >. :::: �.d�t;tat�, „'ss,s.ti .�.� ..,..,.,,,.:.��. .�;t . .. . :�,.,, ":'.:� .;:: '. ,. '� .��:-'.. . ,<„t 3,�s�t h��.�� , . ..,�<r ,,�;� ;, _; _ , r � .< , . . .,.�.:... .... . � ��, �, � `�` � �� ,t,�, ,��?�' °�, �� .,�°�\1`z�``�`^�� .�� itr��'ti i��";��Z��`4~,�.a3�, �� < I1`\��`�`. \� � �4,�4� ..�„��, �� , .� n,;,�F.�,��,�...}:.��`�,�ti t � '�.;��,�, .£p,1,��,�� ,. .�a, ,Jc s��=l.� ,Pn„ >>7,�, 11r ,tF. 4,� i12,. .l'�,u},>u\��5 .1 { .,3 �„R,� ft 7 � .S 4 e u.�?nt i�am 't,.}as:,�}>v,n..,l,ceatl 2 �� 1 l� ,(i�`dr.:}�C.s�i?�z�� 1�.U�'� �, ,4 ± 4�� t� ,�i}� :� '�'�.. f .�..sr r�.�...x i.,t z. �i, � l � £ �,s.. �ps�� .i .�. f3� .1�. 3tr 4,,,, }< },,..:�,ar s .i� 3 �� 'ti st 3 �.`s z ��s ,�t �tn: �t r. � 7. 17� 4�. I }5' 1£ }1 r (l ( .1 � c$}t .':i.� Y .I �V f. {�: 4 �t ,t ttt �.:��s:�,. .,::s�,} e t. .i s c s.�t �} � }� .�i .t �� { t 1i ��: t �j�. S).t t..a .C� '^t ✓:. t ss4t.r. .J t i �.�}lt i). t 3'3t1Y ts '.s :t t Yfl'��. ;�i � � 5 � � r i js � � 5 � a s i.� T1 y t �St y y � "� �..;' .,+ ,, y r ,1 . . 'Y i � :� � r, „ :, s. �'��,��,,� , , ' ; � IQI i �II�� 1 1 �� , .., ,„„.: :. ::' . d. .. ;t ;, „ .� .:.: :'. � .;:,„,,..i„ �,,,,. .,,1,� v , . :: .. , . , „�: ,.,,.,.,. ? Oetob�r 22, 2018 ; F��t�a�� < by Melissa Kuehne �i�.�.r�� .A.d.�i��ry- ��stt�� T"i�� nc� �"ra�a� Melissa Kuehne is communications and development manager for the Institute for Local Government; she can be reached at ��:�a�°�-�rzc�c��c,�-�l�;ac��°�:�. In today's environment of the 24-hour news cycle, social media and "fake news," cities throughout California are working hard to engage their communities and strengthen trust in local government. Residents increasingly question decisions made at all levels of government — part.icularly those related to use of taxpayer dollars and financial decisions. To help address such concerns, many cities are turning to finance advisory committees. These committees, composed of community members, aim to increase city government transparency and build accountability. Including the community in the decisionmaking process beyond participating in elections and city council meetings helps people better understand the types of decisions made at the local level, the trade-offs to consider and how city councils arrive at final decisions. "Involving residents in meaningful, inclusive and responsive ways benefits the city and the community alike," says Tony Dahlerbruch, city manager of Palos Verdes Estates. "Advisory committees can serve as a conduit between the city and community, which leads to increased transparency and trust." Avoiding Unintended Consequences: Issues to Consider Finance advisory committees can yield many benefits, but they can also generate unintended consequences if not carefully designed and managed. Without clear direction and strict oversight, a city runs the risk of the finance advisory committee duplicating staff work and challenging the governance and authority of the city council. Such comrnittees are rnost effective when they are a conduit for residents serving in an advisory capacity to the city council to share opinions and offer recommendations — and least effective when they duplicate the efforts of the city's finance director and Finance Department. Committees that duplicate efforts can also create competing priorities for staff. When the committee's purpose and tasks are not clearly articulated, cities run the risk of committee members attempting to direct staff and drive projects. This potentially puts staff in an awkward situation where the committee issues directions that conflict with council-adopted goals and priorities and/or the directions of executive staff. The amount of staff time needed to manage the committee is another consideration. It's likely that staff will need to respond to questions and requests from committee members and provide support for additional public hearings and meetings. Depending on the number of ineetings and the committee's needs, this can significantly strain already stretched city staff. Another problem can arise if the committee is given the authority to develop or recommend a budget because the committee may reach a conclusion that differs — perhaps radically — from the direction that the council deems to be the best option. This creates conflict between the council and the committee and, by extension, the residents of the community. In such a situation, if the council opts not to follow the committee's direction, it can undermine the chances of achieving the primary goal of increasing trust between the city and community. �'i�� Best Practices �� ' '�� ,{ To avoid these potential pitfalls, cities can take the following steps. Articulate a clear mandate from the city council about the committee's mission and role in the decisionmaking process. This can avoid "mission creep" � �� : � ; and support the efforts of staff and the council to keep the � ' committee — as a whole and its individual mernbers — focused and on task. Set clear roles and responsibilities. Providing clarity to committee members on their charge and the decisionmaking process is critically important. Committees are not in place to direct staff, duplicate staff efforts or make final policy or operational decisions. Their purpose is to serve in an advisory capacity to the city council, which in turn makes final policy decisions. If a committee crosses the line into the operations, activities and recommendations that are the responsibility of the council or staff, the council risks unintentionally abdicating its role, losing control and creating unnecessary controversy. Adopt a standing committee resolution or code of conduct for the committee. This helps formalize the committee's role and responsibilities and provides a mechanism for staff and the city council to keep the committee on track. Provide training and/or orientation for new committee members. Standing committees are subject to the Ralph M. Brown Act. Thus, it may be wise to provide training to committee members on the laws governing open meetings, AB 1234 ethics education and/or conflicts of interest. City officials may also want to consider conducting an orientation for new committee members that covers: • The role and responsibilities of the committee; • Applicable city ordinances and ethics laws; • Adopted codes of conduct; and • Staff or council contacts. It may also be helpful to consider any unique qualifications and subject-matter knowledge or expertise that may be needed on the committee and to seek those skills in the recruitment process. When recruiting members for a finance advisory committee, the city may require applicants to have finance, investment or banking experience; however, such private-sector experience differs significantly from public-sector finance, and committee members will still require training and oversight. "The City of Los Altos Hills provides training and orientation for all new committee members and has adopted a code of conduct for all appointed commissioners and committee members," says Carl Cahill, city manager for Los Altos Hills. "This allows us to manage expecta�ions and work more collaboratively with our advisory committees." Appoint a city council and/or staff liaison. This individual can report back to the city council and/or executive staff, answer questions for the committee and help keep the committee focused on its mission. Clearly delineate the level of committee staff support to be provided. Make certain that adequate staff support will be provided for the advisory committee and be specific about the limits of such support. Have a sunset provision or regularly review the committee's purpose and mission. If the committee has a narrow scope of duties, it may be appropriate to limit how long the committee exists. Periodically reviewing the purpose or mission of a standing committee is also advisable. Has its charge been accomplished? Is its purpose still relevant or does it need to be re-examined? ��,��, ,... . � ��sl �t } {$�,k s �� 1, 5 , �r � � I I' il, 4 ( � � I � � � , '� PI ; IV, � ,I� �t. � � ; � � � �� ; '' � : � 't � ,: �� _<. , �, ,; � � � � �.,:�,.,.. �,,,. ..: <�: _.... v., �: ,,�...,, .,t l�s , , ........... � �.:�. �,,3.� ,.. ....... ,. ...,....�,,,�r Taking the Long View "In general, it's good to have more community participation in local government through advisory committees and other means," says Rod Gou1d, retired city manager of Santa Monica. "However, problems arise when the committees aren't provided the necessary training, clarity of direction, support and oversight to complete their mission or goals." When carefully executed and properly functioning, finance advisory committees can build trust in local government, help a city understand the community's values and priorities and foster leadership development. Cities also employ other means of engaging residents on fiscal matters. The Institute for Local Government offers a number of resources to help local governments successfully involve their communities in budgeting and finance issues and plan productive public meetings. See "Tools to Engage Your Community in the Budgeting Process" on page 9 for tips and approaches to that engagement. Photo Credit: Erhui1979. �t �� November 1, 2Q17 : October 1, 2017 ; � � "�� , ,t � � Se �� 0°�W,.s M V+.% f k V 8 6 9 �1 6 4r � ��' �.�"b.C.✓4.v�W 4.�VC 4r �,�M��l✓'4r�6.M i f wF � i� , a �Q 2+.�v�.. ..� � Ir��it��a�� r �� Il�r��,�� C�er��€� ; Carolyn � by � , °�� ;� ,.v 4.t.��, �� ,_� �� Da �c�u�r��e��t� . �� Coleman ��'� �,�� ,�� Madeline Henry �to��iri� the � e � Q ° w . Increasing pension costs could push Public involvement in city budgeting cities already in financial distress increases financial transparency and closer to the brink of bankruptcy. promotes greater trust. A look at how comr for an earthquake � resilience.