The decision ends a four-year tenure for Attard, who has been an outspoken critic of the department, and who at times has clashed with city council members.
Attard will serve as the auditor through the end of this year.
The city council did not officially explain why it decided not to renew Attard's contract.
"Council action to terminate my employment undermines the independence of the IPA," Attard said in a written statement. "It sends a message to the office, to future IPAs, to the community, to the police department; that message is that if the IPA makes serious or controversial recommendations she does so at risk of losing her job."
The decision comes as the department is under scrutiny over a number of issues, including recent revelations of a high number of public intoxication arrests.
57% of the arrests involved Hispanics, something that led to allegations of racial profiling.
Attard publicly expressed concern over the arrests.
Earlier this year, she was involved in a fight with the city council to expand her office's powers in reviewing the police department's handling of complaints and in-custody deaths.