Questions linger about City Council donations, sponsorships

City Council members continue to give city funds to local organizations using a process that lacks clarity and accountability because of inconsistent terminology and unclear legal guidance involving donations, sponsorships, and grants, according to a new follow-up report from Denver Auditor Timothy M. O’Brien, CPA about City Council operations.

“I commend the City Council for doing a great job implementing most of our recommendations from our initial 2023 audit,” Auditor O’Brien said. “But the lack of clarity around the issues of appropriate spending will be scrutinized more than ever in this economic climate.”

The City Council implemented eight recommendations, partially implemented four recommendations, and did not implement two recommendations.

In a positive step, the City Council adopted two policies to mitigate information technology risks. A “Technical Services Policy” requires all City Council members and staff to sign a Technology Services agreement on responsible uses of computer equipment and networks to protect city assets and data. An “Assessment Management Policy” says an inventory of technology assets is to be performed annually.

The City Council’s Central Office also developed formal policies and procedures for collecting keys and badges from council members and its staff leaving their positions. It also improved its tracking of purchase card trainings for staff and improved processes for reviewing council members’ and staffs’ purchase card activity.

But the lack of clarity around donations, sponsorships, or grants was not resolved. City Council members’ offices receive taxpayer funding for their office budgets and use some of it to support local organizations. Our 2023 audit found council members’ offices inconsistently followed council policies and procedures as well as some city rules associated with this type of spending. We recommended the City Council get a legal opinion from the City Attorney’s Office around the limits of what qualifies as spending for “public purpose.”

Instead, we found a lack of clarity persists, including inconsistent definitions for “donations” and “sponsorships” in City Attorney’s Office presentations and City Council office documents. Because of this inconsistency in terminology, there is still no clear guidance regarding the appropriateness of council members providing city funds to local organizations.

Although the City Council’s Central Office staff said they received legal advice from the City Attorney’s Office and provided some documents to us about updates to rules, we were unable to find any evidence confirming the City Attorney’s Office supports all of the updates.

We had also recommended the City Council’s Central Office staff develop and provide training for council members and their staff on the distinction between donations, sponsorships, and grants. But we did not find any evidence this training occurred.

“Without consistent terminology and clear distinctions between different allowable spending, noncompliant donation transactions may occur,” Auditor O’Brien said. “I applaud the City Council for addressing many of the other issues we identified and hope the City Council and the City Attorney’s Office soon develop clearer definitions to support shared understanding.”