Underfunded and understaffed, the city's four-year-old Board of Ethics may find itself unable to perform its job, according to an auditor's report released Wednesday by a fellow city watchdog, the City Controller's Office.

"Lack of resources could imperil the board's mission, particularly in the area of enforcement," the report stated.

With a budget cut of nearly 20 percent in the last two years - from $1 million to $810,000 - the board has relied on free legal services provided by local firms. But the board may find itself defenseless if those free services end and it is sued for enforcement, defamation, or other reasons, the report said.

Insufficient funding has also left the board short-staffed, with nine full-time employees in an office seemingly designed for 20.

A price has already been paid, with the board late in issuing its 2009 annual report because of a growing workload, executive director J. Shane Creamer said.

Moreover, administering a new lobbying registration law will be "an impossible task" without more funding, Creamer wrote in a response to the report.

The ethics board is responsible for enforcing rules regarding campaign-contribution limits, financial-disclosure reports, conflict-of-interest matters, and more.

Controller Alan Butkovitz, though, was equally critical of the board. A news release accompanying the report alleged that the board had violated the state's Sunshine Act and the Philadelphia Code for failing early on to make hiring decisions for four employees in a public fashion.

Specifically, the controller said the board had failed to announce publicly that it was going to discuss personnel matters during private executive sessions. He also said auditors had found no evidence that the board held such discussions.

Creamer and Board Chairman Richard Glazer dismissed the accusation as "silly," saying the fact that the board decided to hire all four employees - including Creamer - was announced during public meetings.

Meeting minutes that document the discussions and board votes are not public, however, because, Creamer said, they contain confidential matters. Consequently, the board did not share them with the Controller's Office.

That displeased Butkovitz.

"It is troubling enough when the Board of Ethics hires and sets employee salaries behind closed doors, but equally troubling was their refusal to provide meeting minutes to our auditors," he said in the news release.

The report also encouraged the board, which operates independent of city government, to develop a sick-leave policy and start doing background checks on new hires.

Contact staff writer Marcia Gelbart at 215-854-2338 or mgelbart@phillynews.com.