The Denver agency in charge of developing personnel policies and improving performance evaluations for city workers is doing a poor job of evaluating its own workers, an audit released Thursday reported.

Denver Auditor Dennis Gallagher, in a letter accompanying the audit, rapped the Career Service Authority for having a 37 percent failure rate last year on executing performance evaluations for its workers. That rate is nearly twice as bad as the rate for the rest of the city's agencies.

"The agency should be leading the city by example instead of lagging behind," Gallagher said.

The city's compensation system requires an employee to be given a "successful" rating and an automatic salary increase if a performance evaluation isn't done within 30 days of the their employment anniversary date. Budget concerns in 2009 and 2010, though, meant employee salaries were frozen and merit increases weren't given.

Still, the evaluations are an important part of the personnel process, said Denis Berckefeldt, the spokesman for Gallagher.

"If I'm doing my job and the guy next to me is falling down on his job and gets an automatic 'meets or exceeds' rating when you know he hasn't done as well, that creates a morale problem," Berckefeldt said.

And if merit increases return as the budget recovers, those employees who continue to not receive evaluations will get automatic merit raises, he said.

The audit recommended that the authority's board start reviewing every three months the rate of performance evaluations for CSA and other city agencies.

CSA officials said they would start providing the board such data within 90 days.

The authority is creating a new performance evaluation process and is training all agency supervisors on the system.

Jeff Dolan, the authority's executive director, was not available for comment Thursday.

Implementing the new system citywide contributed to the problem, said Ryan Nisogi, the authority's acting communications director.

"We clearly took our eye off the ball internally," he said. "We recognize the need and importance for our agency to lead by example and have already taken steps to address this in our agency."

The CSA is responsible for creating and amending personnel rules for non-safety city workers. It also makes recommendations to the City Council on non-safety city employee compensation and benefits.

The audit found that last year, the authority failed to provide evaluations for 37 percent of its 83 workers, up from a 28 percent failure rate in 2007.

Overall, nearly one in five city workers didn't receive performance evaluations last year.

It's an ongoing issue. More than a year ago, Dolan promised City Council members he would make sure city workers started getting the evaluations. At that time, he predicted that streamlining a 12-page evaluation document down to two pages would yield improvements.

Instead, 19 percent of employees went without evaluations compared with 18 percent in 2008.

Christopher N. Osher: 303-954-1747 or cosher@denverpost.com