Boundaries and cultures

You may be able to rearrange the lines or move the boxes around; but philosophies, cultures, and approaches to problem solving cannot necessary be changed. This discussion on another blog is about election results and long-standing cultural divides that are not necessarily affected by redrawing the map. It made me reflect on the government environment in which I work. Over my career I have audited city, county, and now regional government. Some of the organizational problems that are identified during the audit might be attributable to historical antecedents that were not affected when boundaries were changed.

Many county services were previously managed by the state or city. The library was a non-profit organization that was brought back into the county. Police services are now primarily provided by cities; but the county operates the jails and the state operates the judicial system. At the regional level, many of the services were transferred from the city or county. Some of the services meet state-wide objectives and attempt to organize the region to meet those objectives. Finding effectiveness and efficiency in systems that operate according to different cultural norms is a challenge. Understanding the antecedents can be helpful when conducting an audit and crafting meaningful recommendations.

Web 2.0 Update 2.0

Since making a presentation last spring on the potential for Web 2.0 for government I've posted updates. What I find most exciting about Web 2.0 is the potential for increasing communication and reaching out to more of the public. As I've written before here and here, those who are able or willing to attend public hearings are limited and new possibilities are opening up.

Here are some more examples. The mayor San Francisco is addressing citizens on YouTube. And here's an article about tourism departments marketing through blogs, podcasts, and vlogs. Still pondering ways for an auditor to use Web 2.0. Hmmmm.

The value of a peer review

Several years ago now auditing standards began to require peer reviews. It answers the question of "Who audits the auditor?" Over the course of my career I've had 3-4 peer reviews of my office's operation. I have found them valuable. You always learn from a peer review. It allows you to see your audit operation through different eyes. It also adds credibility to your office. The public and your elected decision-makers can gain confidence from the fact that every three years auditors, with no stake in your office, review your procedures to determine that they follow audit standards and examine audits to ensure that auditors followed procedures.

It is with interest that I've been following the largest financial fraud in history. The S.E.C. is now investigating why years of regulation did not uncover the fraud. On Freakonomics they're recommending a career option for Bernie Madoff, the perpetrator of the fraud. And it's been discovered that Mr. Madoff's auditor doesn't audit. According to this report, the auditing firm that conducted audits has been telling the AICPA for years that they don't conduct audits in order to avoid having a peer review conducted. Here's another story about why a three person auditing firm would be conducting audits of multibillion dollar operation.

Time for reflection

It's been a crazy week! Snow, ice and cold in Portland. Who would have thought? And, trying to tie up loose ends this week before I take a week off for the holidays increased the pressure. My sister was in town and my daughter returning from college. So, I had no time for reflection. But, the ideas were piling up. In the next two days I'll add some posts. Hopefully they're not too dated.

Auditing market shrinking

Looks like the big auditing firms might be affected by the financial crisis. Although, while markets are shrinking in the developed companies, the demand in emerging markets, like China and India, remains strong. So far in the posts below it has seemed, at least at the federal level, that the demand for government auditors is strong. Wonder what will happen at the local government level.

Inequality among dogs

I don't know why reading this article made me sad. But it is also a demonstration of the power of criteria. One scientist disputes the findings and only interprets it as a dog reacting to negative circumstances, rather than inequality. But if the one dog hadn't had the knowledge of how the other was being treated better, how would he/she know that these were negative circumstances?

Another watchdog

The U.S. Senate has confirmed a special investigator within the Treasury to audit and investigate the Troubled Asset Relieve Program (bailout). A discussion of the GAO audit is posted below.

So many tails

Did the watchdog lie down on the job? We rely on watchdogs, auditors among them, to remain objective and provide facts and reliable assessments of the risks involved in decision-making. As I've written before here and here, independence is key. Here is an article about Moody's, a company that ranks the credit-worthiness of borrowers using a standardized ratings scale. Moody's and other investment rating entities are supposed to help investors evaluate risk. But evidently Moody's was paid more for its evaluations of more complicated debt potentially compromising independence.

According to the report, "Moody’s current woes, former executives say, were set in motion a decade or so ago when top management started pushing the company to be more profit-oriented and friendly to issuers of debt. Along the way, the firm, whose objectivity once derived from the fact that its revenue came from investors who bought Moody’s research and analysis, ended up working closely with the companies it rated, and being paid by them." This also relates to another theme that I've written about - tone at the top. The leaders of an organization actually do lead. And if pressure exists, perceived or in reality, employees will follow.

Moving quickly and internal controls

I'm reading the GAO report released yesterday about the bailout. Several things jump out. "However, the rapid pace of implementation and evolving nature of the program have hampered efforts to put a comprehensive system of internal control in place." and "While OFS and PricewaterhouseCoopers are working to implement a comprehensive system of internal control, until such a system is fully developed and implemented, there is heightened risk that the interests of the government and taxpayers may not be adequately protected and that the program objectives may not be achieved in an efficient and effective manner." I know in a crisis you can't wait to act but protecting assets is also important, particularly when they are public assets at risk.

So far there is no system in place to monitor compliance of the financial institutions that receive aid. Institutions told the auditors that they intended to use the funds consistent with the goals of the bailout but stated that they would view this capital as no different from their other capital. Most institution officials noted that money is "fungible" and that they did not intend to track the funds received separately. The audit further notes that strong organization of the Office of Financial Stability will be critical. The OFS is relying on contractors and financial agents in the private sector which the audit notes will enhance flexibility but also requires oversight and protection against the risk of conflict of interest. Acknowledging that less than 60 days have passed since the bailout was created, the audit strongly urges the quick implementation of internal controls.

This echoes many local audits that I have been part of over the years. Certainly not of the magnitude and significance of this program, still they included the lack of planning about ensuring how goals will be accomplished. It is not enough to have a plan to address a problem. Government must also have a plan to ensure that the plan is implemented efficiently and effectively. That plan is one of internal controls. It's like planning a trip with a map but driving with your eyes closed.

Audit of the Bailout

I look forward to reading this. I'm impressed that we'll get this information so quickly.

Auditors on the Sports Page!

The Indian Audit and Accounts agency is on the sports page of The Hindu for capturing both the men’s and women’s titles in the 10th National inter-institutional carrom championship. What is carrom? And? The Indian Audit and Accounts? The Indian Audit and Accounts has a history of over 140 years. In 1860 the Government Accounting and Auditing functions were amalgamated and placed under the Auditor General of India. That made me curious about the U.S Government Accountability Office (GAO). Here is a history of the GAO. Excerpts from that history are below.

"The first Congress passed the Treasury Act of 1789, creating the Treasury Department with a Secretary, a Comptroller, an Auditor, a Treasurer, and a Register. The Comptroller of the Treasury was the predecessor of the modern Comptroller General."

"After debating in 1919 and 1920 whether accounting and auditing functions should remain in the executive branch, the Congress eventually decided to create GAO “independent of the executive departments.” And, "Title III of the Budget and Accounting Act of 1921 abolished the Office of Comptroller of the Treasury and established the positions of Comptroller General and Assistant Comptroller General..."

Painting the audit report

Although I like the puzzle of analysis, I think the report writing phase of an audit is my favorite. It's when the puzzle falls into place and you begin to see the picture. Layer upon layer of facts hide some findings and bring others to the forefront. Although you have an objective, a foundation, to begin with, the successful audit, or painting, presents it so that the viewer sees the complete picture and can take away a learning.

Telling it like it is

Embedded in this Freakonomics blog post is information about the French government's refusal to allow collecting statistics based on race or ethnicity either by the government or private bodies. I had never thought about it, but the census is an act that provides transparency to the citizenry to know who we are and what our circumstances are.

The job of inspector general

Learning about the audit function and role in other countries is always interesting. However, this story about Iraq was alarming. In the U.S. inspector generals are appointed either by the president or by the federal agency head. There were protections written into the U.S. Code to ensure independence. Just recently the Inspector General Reform Act was passed to further enhance independence. According to the N.Y Times article about Iraq "But Stuart W. Bowen Jr., who leads an independent oversight office in Washington, the Office of the Special Inspector General for Iraq Reconstruction, and who is currently working in Iraq, said he knew of six of the dismissals. He said the inspectors general were vulnerable because once their offices were created, the United States provided little support and training for what was a startling concept for the bureaucracy, which was shaped by the secrecy and corruption of the Saddam Hussein era." While inspector generals have had problems with independence in the U.S, it has been nothing in comparison to this.

Citizen's point of view II

Citizen's are very sensitive about how tax dollars are used. Travel to attend conferences, training, and meetings related to government business are necessary expenses. But it is important to always reflect on appearances. Here is a story about an audit of travel expenses. I was impressed that the reporter clarified the findings and put them in context. The reporter notes that the expenses were a "tiny fraction" of the total spent during the time period studied and also describes the methodology to arrive at the estimate of potential savings.

Timing

Good audit timing can be defined in several ways. It is impossible to audit everything frequently or at the same time. So making a decision about timing of the audit can be related to risk - all signs suggest that if action is not taken, significant harm could occur. Timing can also be defined in terms of relevance. The audit's value is diminished if the data or analysis used to make conclusions is old. But the timing that I most enjoy is when management is ready to change and an audit helps them make that change. In those cases an auditor almost becomes a partner with the organization. The mood is receptive and management appreciates the additional information. But, sometimes an audit is about a service that management and leaders had not even thought about and assumed was working effectively. Good timing in that case is raising a red flag that the service needs attention because it is not performing well. The response to these types of audits is usually less receptive as management is taken aback.

OMG - Exotic Fantisies - GAO Reports

David Brooks, Op-Ed columnist to the NY Times and also commentator with Newshour with Jim Lehrer, began a column yesterday with this, "I have dreams. I may seem like a boring pundit whose most exotic fantasies involve G.A.O. reports, but deep down, I have dreams." Yes!

Missing

I've not had as many ideas lately to post about. I think it is because I am preparing for a show of my paintings at the end of November. Seems like all my thoughts are taken up with finishing the work I want to show. Not that I've left auditing musings behind, just that the musings are now more in a visual mode. I have been thinking a lot more about data visualization, perhaps because of my show and I'll probably write about that next.

Interesting statistics web sites

Here is a web site that compiles information for comparison of state data. One statistic is called the "penny pincher" index or the ability to build and preserve savings. Oregon is 25th, right in the middle. Another online source is via Governing.com called the state and local sourcebook. Unfortunately the Portland region isn't reported separately from Oregon unlike many other metropolitan areas.

Trying to find out if it is an audit

It has always bothered me when the word audit is used to describe a process that is similar but not the same. At least in the public sector, audits have maintained their credibility. This is because of audit standards for evidence and objectivity.

In the news was this, "Auditor cites Afghanistan rebuilding challenges." The report states that Special Inspector General for Afghanistan Reconstruction Arnie Fields presented his first report to Congress. Here is a link to testimony before the Congress announcing the appointment of the special inspector general.

I tried to investigate to see if audit standards were followed. To do so required considerable tenacity. A link provided in by the AP led me to the website of the Department of Defense. However, finding any information about the Inspector General's Office is difficult. I went to a page of "most important and most popular" websites but the Inspector General was not listed. I attempted to access the alphabetical listing for "I" with difficulty. (As I write this post, I am still stuck trying to access it.) My computer took too long to access it so I gave up. I then used a Google search of the web site to find information about this specific report without success. Finally, I Googled "inspector general" and was able to find that page. I tried to find the audit itself, to see if standards were followed, but didn't see it listed. It may be, however, that the report is not public for security reasons. I'm assuming it was an audit following standards because Inspector Generals also have similar standards. (Final note: The page finally came up and there is a link to the Inspector General. It took about 10 minutes.)

All -in - all, an unsatisfactory transparency experience.

Improving Audit Reports

I have been thinking for quite a while on how to take advantage of Web 2.0 and develop a new audit report format that is more transparent and helpful. I've considered developing a wiki format where the results are posted with links to related information and allow others to add and potentially improve on the information. I've also considered posting any data that we analyzed and allowing others to build on the data set, replicate it or assess our methodology. I was interested to see a post on Freakonomics where Ian Ayres writes about the results of a study of the LAPD and racially disparate outcomes. The LAPD and the police chief disagree with the analysis. Mr. Ayres has posted his data on his Yale University website. (Scroll down to Other Writing)

Most admired institutions

Over at the Freakonomics blog Stephen Dubner asked readers "What's an institution you admire?" So far there are 143 comments and many contain more than one institution. It's an interesting read. I added my comment and voted for government auditors. :>)

No Surprises?

One thing I always strive for is not surprising the auditee. So I try to keep the communication as open as possible. But, because of standards, it is hard to be specific in talking about results prior to completion of the quality control process. During fieldwork many potential findings are explored but it would be premature to discuss them until we had sufficient supporting evidence. As a result the report is more often than not a surprise. What we have talked about generally up until now can seem very harsh when seen in black and white. That is why the discussion about the draft report is so important. Important for the auditors in order to affirm the evidence and recommendations and important to the auditees to work through evidence and understand the recommendations.

Safety Audit in Pakistan

This is interesting. A story from Pakistan about a safety audit. I went to the story from a google alert because I was curious what kind of "safety" would be audited. I have to admit I'm very ignorant about Pakistan and my only frame of reference was with the "war against terrorism." But this audit is looking at road safety in a very traditional way. The study will allow the department of transportation to improve future road projects. It reminds of my experience many years ago as a student at the Hebrew University in Jerusalem. The only news that my parents ever read or heard was about bombings in the city and they assumed that was the enviroment I lived in. Yes, there was violence, but there was so much more of life going on.

Soul and Passion

It might seem incongruous that an auditor would think about soul and passion, but an interesting juxtaposition has occurred for me. Working through an audit, facing challenges from the auditee who many times may be in disagreement, reporting to the governing body in a public session, and answering questions by the press can be intimidating. But what sustains me is a belief in the audit process, factual evidence that cannot be denied, and a passion for improving government. Auditing standards and procedures offer a framework and an objectivity that can distance you from emotions and taking things personally.

But in another part of my life I am an artist. And this is very scary for me. Why? There is a process and techniques, but ultimately what you put on canvas and expose to others is your soul. There is no way to distance yourself from the work or not be emotional. You have created something that has meaning and is beautiful to you. It is like giving a gift and not knowing if the other person will appreciate it.

I have found however there are some connections in these two parts of my life. As an auditor and an artist you look for patterns, movement, and placement. You are interested in conflict and power. And you are looking for effect.

Another reason to blog. LOL

There is an article today in the Oregonian (If I can ever find it on their website I will add a link - but that's another story in of itself.) about as you get older, brain exercise is needed as well as physical exercise. Especially recommended are word or math puzzles, but keeping a journal is on the list also. So...blogging can help exercise your mind and keep your brain healthy.

UPDATE: More exercise for the aging brain. I am on the right track. Here is an article about how internet use is good for the brain.

Judgement - Can it be learned?

No matter how complete the audit plan, judgment is always needed in an audit. Can it be learned? I think so, but it requires time and patience. Judgment is developed by learning from our previous attempts. For example, perhaps not enough time was spent gathering evidence and a finding falls apart under scrutiny. (Hopefully that scrutiny occurred during the quality control process and not in management's review of the draft report.) If an auditor can take the time to reflect and receive feedback on how the work might have been stronger or more complete, then his/her ability to be more effective next time is increased. Supporting a finding does not require 100% surety. Judgment allows you to decide when the preponderance of the evidence has been reached.

Auditors' Part in the Financial Crisis

Here's an article in a newspaper in Scotland about what part auditors had in the current financial crisis.

Wow! Citizen Satisfaction

I went to DEQ this morning to renew my vehicle registration and to take the vehicle emission test. I couldn't have spent more than 10 minutes. I drove in immediately with no wait. The employee was courteous and clear in her instructions. I went inside, completed my registration form, and a few minutes later, the employee took my fee. I had many methods of payment available. After I paid she gave me my tags for the license plate and I was done. I hadn't done this in years. My husband usually takes the car in. But in the past, I can remember lines and waiting to get the vehicle emission test completed. Then I had to submit the registration and test results by mail to DMV and wait for my tags to put on the license plates. You can even renew your registration online! This is one of those moments of truth where government looks good. And, from an auditor's perspective, the whole process looked efficient.

Storytelling

There's a blog post that I just have to tap into. It's from one of my favorite blogs, Community Indicators. So thanks for pulling together these thoughts. The post references other bloggers and writers who are discussing how statistics do not always evoke a response as strongly as emotions might and also that a good story is more memorable than data. When I followed the link and read about the finding that when statistics were part of an appeal for donations the amount given dropped, I wondered - is an audit report not as effective as it could be because we lay out the factual, statistical evidence? But the second reference to A Case for Web Storytelling reminded me of the work that we put into a report so that it has a cogent message. Yes, we rely on statistics and fact, but we also try to put it into a story that management and the public can relate to.

Interesting graphics

Audits can be very dense. It is difficult to simply describe complex ideas and findings. I am always on the look out for new ways to visually communicate ideas and reduce the reliance on writing. In a GAO audit that was issued recently I found some very interesting examples of visual communication of complex ideas. See the audit, pages 3, 11, 14, and 18. The graphics show the U.S. Department of Transportation's efforts over time to reduce traffic fatalities, illustrate the consequences of falling behind a damaging trend that with early action could have been reduced, and the evolution and spread of portable electronic devices in the United States to illustrate how this trend may need to be addressed for accident prevention. All very dense concepts but effectively communicated in visual diagrams.

Ethics in Auditing

Auditing principles almost require that an auditor maintain a permanent out-of-body experience. In order to meet the ethical standards of integrity, objectivity, serving the public interest, professionalism, and not misusing their government position, auditors constantly weigh possible actions against these standards. Not only must we in fact meet these standards, but also must guard against the perception that we are not. In order to do this, auditors first think about a course of action and then pause and reflect on the effect of that action to consider whether it meets the ethical test. It is a very high standard, but necessary. The credibility of our work, audits, depends upon it.

Government Transparency

I keep seeing the potential for the web to bring government closer to citizens. Here's an article in Wired magazine about one person's attempt to do that. (Hat tip to KidFurbo)

How do you turn things around?

I was at a conference last week that included auditors from federal, state, and local governments. As I listened to presentations and participated in discussions, it became clear to me that many times local government is far ahead of the federal level. I think that it is because government at the local level is so immediate and near. It doesn't take long to hear the echo from your constituency when they are upset.

Even comparing the federal and state audit organizations to local auditor shops, I could see the difference. There are very few levels, if any, of hierarchy at the local level. The audit director knows almost immediately what direction an audit is taking and has a close eye on audit quality and standards. At the state and local level there are levels of review and supervision before an audit is issued. This takes time and money.

So how do you turn things around in a large organization or how do you ensure that what you want the direction to be is what is occurring on the ground? It takes a concerted and dedicated effort. There are many analogies that I could think of. Imagine grabbing a 20 foot long rope and twirling around so that all of the rope was eventually off the ground. Just think how fast you would have to twirl before that final foot of rope was elevated. In large bureaucracies it may take years before the direction that you envisioned actually is reached.

Auditors can have a role in making the vision happen. Audits look at weaknesses in design and direction. As management twirls to lift that rope up, auditors can find places where weights drag the rope down.

Just a note. I am not saying that local efforts are more important. Many times those barriers to success at a local level occur because of state or federal action. So it takes us all to improve government.

Where were the auditors?

As I watched the economic crisis unfold and then read yesterday that over 100 economists had come out with a united statement about the government bailout I wondered, where were the auditors? This blogger is wondering which big 4 firms will be auditing the failing banks and noting that they were also involved in creating this crisis. But I also wondered if government auditors had been warning about this risk or not.

I did a quick search on the Government Accountability Office (GAO) website and found two reports that are interesting to say the least. In 2000 the GAO issued an audit about the roles of Freddie Mac and Fannie Mae. At that time the GAO said, "Federal sponsorship creates significant risks and costs because taxpayers might end up paying part of that more than $2 trillion debt."

An audit released on March 6, 2008 and titled, HOUSING GOVERNMENT-SPONSORED ENTERPRISES: A Single Regulator Will Better Ensure Safety and Soundness and Mission Achievement, contained these statements. "While the GSEs (government sponsored enterprises) provide certain public benefits, they also pose potential risks." and "While not obligated to do so, the federal government could provide financial assistance to the GSEs, if one or more experienced financial difficulties, that could result in significant costs to taxpayers." The GAO recommended "that Congress establish a single regulator that is equipped with adequate authorities to fully oversee GSE activities and governed by a board or hybrid board structure."

And, in 2007, a report was issued on default and foreclosure trends. That report stated "According to mortgage industry researchers and participants, the number and percentage of loans in default and foreclosure are likely to worsen through the end of 2007 and into 2008, due partly to scheduled payment increases for many ARMs." So the auditors were not silent.

Citizen's point of view

This blog about The Big Look Task Force's visit to Tillamook reminded me of a presentation I gave last fall on auditing from the citizen's point of view. The blog describes a citizen who went to this meeting with hopes of interacting. He had thought there might be a 15 minute introduction or summary then two hours available for testimony and observations. Instead, the event was managed to keep the participants "on task" according to him. He also described a survey where he felt the choices were not comprehensive enough to include what would have really been his choices. Overall, his impression was that the event was "window dressing."

Getting public input on potential policy choices is not a easy task. The timing of gathering input and the methods are an art. This blog represents one person's experience from his perspective. Sometimes audits can help improve a citizen's experience in the future. I have conducted several audits that try to improve this experience from how easy it is to access public records, find a building or service, or get help over the phone if you are homeless to whether an adult foster care home is homelike. Each of these started from a simple concept. Instead of auditing the process, experience the process to add validity to the information available. Government workers may have the best of intentions. But in their focus on how best to manage input and be productive, they forget how it feels from the citizen's perspective.

Oregon doing a good job; citizen's paying their share of federal taxes more accurately

According to a recent GAO audit Oregon is a potential model in the area of regulating tax preparers. There are no federal regulations or requirements that tax preparers must meet prior to preparing taxes. In California and Oregon there is. The GAO compared returns from both states and found that Oregon was more accurate. On average Oregon's 2001 federal returns were $250 more accurate than returns in the rest of the country which equates to $390 million in taxes paid by Oregon residents over what would have been paid if the accuracy rates were at the level of returns in the rest of the country. Seems like an equity issue. Oregon is doing a good job and its citizens are paying their share but citizens in other states aren't.

They also compared each program's costs and found that Oregon's costs were higher because the program includes testing and they are spread across fewer preparers.. The GAO estimated that Oregon's regulatory program cost in 2007 was about $6 million. They conclude "If only a small portion of the increased revenue that we found in Oregon is attributable to the Oregon regulatory regime, the regime would compare favorably to IRS's overall efforts to increase reporting accuracy."

Update to Sex, Drug Use and Graft

Update to a recent post. The Oregonian now has an editorial relating to the audit report that was issued last week.

Meeting auditing standards and audit quality

In every audit report there should be a statement that the audit was conducted following standards. Few outside of the accountability community understand what that statement means. Not that it is infallible, but following standards helps ensure the quality and integrity of auditing.

Recently auditing standards have become more rigorous. With the implementation of the new government auditing standards for audits initiated after January 1, 2008 there is a new requirement for annual monitoring of the quality control system. I recently designed a monitoring process to comply with this standard. Surprisingly, I found that our own office procedures were not being followed as intended. As an audit director I had been lax in providing guidance and supervision. This was a great learning experience. It also strengthened my belief that it is not just good enough to develop standards but also just as important to check that they are being met. A message we constantly give to auditees.

Sex, Drug Use and Graft! and Tone at the Top

The importance of the auditing function has been in the news several times this week, at least at the federal level. The inspector general of the Interior Department testified before the House on September 10th. He accused high-level officials of tolerating ethical failure and allowing such things as cronyism to cover-ups of incompetence. The NY Times ran an editorial on September 11th titled "Anything goes, apparently."

One of the important things that has evolved in auditing, especially after many of the large ethical failures, is the interest in an audit to address tone at the top. Nothing is more critical to an organization than to have explicit ethical standards that are publicized, reinforced, and followed by all from the top to the bottom. Without that an organization runs the risk of having a situation where "anything goes."

More about Olympic Medals

I have blogged here and here about the quandary on how to measure success at the Olympic games. I have now found an interesting blog site and here is a map that shows Olympic success on a world scale at the 2004 games in Athens. It'll be interesting to compare to the updated 2008 games.

GSA and Judges in a deadlock

How do you resolve conflicting objectives in an expensive government construction project? In 2002 at Multnomah County an audit was issued that grappled with this problem. The audit found that many times elected officials drove the design of projects and that this increased the scope and cost. The recommendation was to put in place an extended design and approval process so that all costs were known, including costs that might be incurred for scope creep.

The GAO released an audit yesterday that noted construction costs had tripled for a new courthouse in Los Angeles and that there was no consensus on how to proceed. After Congress had approved a design and funded a 41-courtroom, of 1,016,300-square-foot, the General Services Administration (GSA) designed a 1,279,650-square-foot courthouse that contained 54-courtrooms. There is disagreement as to why that occurred. The GSA stated it was because of the judiciary and the judiciary stated that it was a joint decision and driven in part by planning criteria, which the GSA denies.

There are now three proposals on how to proceed, but no agreement on which to choose. Any of the choices will require additional funding. The judiciary supports the most expensive option and opposes the other two more "modest" options. Construction was originally to be completed by 2006. If a decision can be made, the end date is now projected for 2013 and costs have tripled to $1.1 billion. At least the audit puts the full story in the open so that the public can see that the reasons for the cost increases are more complex than ineptitude. Here's a newspaper story covering the audit.

Department of Defense auditors muzzled

Several weeks ago I wrote about how government auditors had been intimidated and didn't follow standards. On the same topic, the Government Accountability Office released an audit today titled "Allegations That Certain Audits at Three Locations Did Not Meet Professional Standards Were Substantiated." That doesn't sound very newsworthy - didn't meet standards - ho-hum. Note: the DCAA is the Defense Contract Audit Agency (DCAA) under the Department of Defense and provides oversight for defense contracts.

But read this "Moreover, during our investigation, DCAA managers took actions against their staff at two locations that served to intimidate auditors and create an abusive work environment."

Further, "We found that enough evidence had been collected by the original supervisory auditor and senior auditor to support this opinion. However, after the contractor objected to draft findings and conclusions presented at the audit exit conference, the DCAA resident auditor replaced the original supervisory auditor assigned to this audit and threatened the senior auditor with personnel action if he did not change the summary workpaper and draft audit opinion. The second supervisory auditor issued the final report with an “adequate” opinion without documenting adequate support for the changes."

That is why following standards is so important.

Multnomah County Library & Web 2.0

Here is an example in my own backyard. The Multnomah County Library is on myspace, has a couple of videos on YouTube, also a pod cast from Parkrose High School on how to use the Library Media Center and is also in Wikipedia. Pretty interesting. Take a moment to look through the myspace page. Seems like lots of potential and also makes one think about how to audit these activities.

Walkability Audit

This sounds interesting. I tried to find out if an actual audit had been published but my search turned up nothing on the Department of Transportation's website. It reminds me of unique audits I have been part of in the past such as the Wayfinding Audit, an audit about how easy it was for citizens to find service locations (no longer available online), and the Public Records Audit, an audit about accessing public records from the public's point of view.

Why it's important to create good measures

Great guest post on NYTimes Feakonomics blog. Not only does it talk about performance measures that cause public policy to misdirect resources and efforts, but also touches on how systems can be just as important as building infrastructure.

Auditing is like going back to school

It took me a long time to not want to go back to school in the fall. Every time the season changed and the air became crisp, I used to think about new classes, new challenges, and new books. I was reminded of this when my daughter started college a week ago.

One reason auditing is fun is because each audit requires that you go back to school. At the beginning of an audit, we are never experts in the particular field we are studying. So at first, audit work involves becoming a mini-expert in the subject area. We review literature, find books to read, and go out and visit the program to see how it works on the ground. It's an exciting time as a picture starts to emerge.

Auditor who ran for office

Previously I said if I were running for office I would talk to the auditor. In Kansas City the auditor ran for mayor. I guess he got tired of no one taking the office's advice or asking. His campaign focused on financial stability and transparency. Here is a recent story with a great quote at the bottom. The office of the Kansas City Auditor has audited tax incentives many times in 1998, 2002, 2003, and in 2007 released after he retired and announced his campaign for mayor. So I think he has a good understanding of the problems. He has not been without controversy.

Audit idea

Here is an idea for an audit that I hadn't thought about. Seems like it would be relatively easy and might have benefit.

If I were running for president

If I were running for president, or for any other office, I would talk to the auditor. Past audits provide a wealth of information about government's weaknesses and how to make improvements. The GAO has a High Risk Series that I've always admired and wished I had time to duplicate at the local level. The Office states that addressing these high risk areas will:

• dramatically improve service to the American public,
• continue to yield significant financial and non-financial benefits,
• ensure that the government can deliver on its promises, and
• strengthen public confidence in the performance and accountability of the federal government.

I know that talking about audits to the public and expecting to be elected might be far-fetched. But the four bullets above sound like good sound bites to me.

Web 2.0 Update

In May, at the Association of Local Government Auditors annual conference, my office made a presentation about the potential for Web 2.0 for government and auditors. We noted that we found two instances of government using "Second Life" to have virtual communication with citizens, one in the Netherlands and the other by our own Congress.

Government continues to experiment with this media. Here is a story from New Jersey about the Attorney General's Office using Facebook for citizens to register complaints about unwanted advances on the Internet. Also, the State of Missouri did virtual recruiting on Second Life for IT jobs. Auditors need to be thinking about how to audit these new efforts for effectiveness and efficiency. Also, these new methods potentially might become recommendations in future audits.

The challenge

One of the reasons I enjoy auditing is that it allows you to challenge perceptions. Most organizations have a story that has become reality. Management often doesn't have time to step back and review landscape changes. What may have been true in the past may no longer be true. One prime example I remember from an audit long ago was library circulation. Library book circulation was reported to be steadily increasing and seemed to support management's request for increased funding. However, when auditors reviewed the statistics we found two things. Part of the increase was due to an increased ability to renew books. So the statistics didn't reflect just new books checked out but also books that were kept longer through renewal. Also, when we looked at circulation trends by branch library, we found significant differences. Both of these findings didn't necessarily suggest that the library shouldn't receive increased funding, but did suggest that the current level of funding could be managed better. It also didn't necessarily mean that management was deceptive or inept. Auditors have more time to dig into the data and find subtleties.

Just as an aside, I was reading another blog today and was directed to the Vote Studies Workbook that looks at voting history and how congressmen and women votes are aligned with their party. One of the things you can do is sort the data by various categories. I sorted by the "Member Since" column which shows the year they came to office. The oldest is from 1955, so 53 years in office. Can that be right? It would have been cool to examine the data to see how many had been in office since 2000 or to aggregate by 10 year periods. Makes you wonder how the voting history looks based upon time in office.

I did have random thoughts

In a previous post I cited a GAO article on transparency. In it, the Chinese auditor general was mentioned. Here is a story where the Chinese auditor increases transparency in China.

Out of the office

I'm not sure I'll be posting for the next few days. As I take my daughter to college and leave tearfully, I may not have many random thoughts about auditing.

What is transparency?

Now commonly used, what does the word transparency mean and why is it important to auditors? I think one of the best discussions was a paper from the GAO in 2007. Transparency is the public's access to information. With transparency the public can understand and trust government decisions. But without access to information, decisions will be misunderstood and misconstrued. Transparency also shines a light and puts heat on decision makers to grapple with the bigger problems. So the auditor can help provide the public with clear objective information. But, an auditor can also make recommendations that the information always be available, after the audit is completed. And, an auditor can also provide the bigger picture and focus attention on the long term effort needed.

Data normalization

Now it's not just a discussion on how to count Olympic medals, either total of all types or total of gold only, to determine which country was the leader. On Freakanomics there is a discussion about making the data comparable or data normalization. If you divide the number of medals by million inhabitants of the country, then Jamaica is the winner with Bahrain second. The US becomes 33rd and China 47th. The discussion goes on. If sheep are added to the denominator then Australia zooms ahead. Scroll down to the comments and you'll find other suggestions. LOL.

Visualizing audit findings

At the end of audit analysis, the task is to put the findings into a cohesive framework. The report needs to be clear and concise but comprehensive enough that the auditee understands the problem and how it can be resolved. Sometimes what I like to do is to put the findings in a drawing. Should the findings all spin off of one large overarching problem or should the findings culminate one-after-one into a final effect like a fish bone diagram. When I researched blogs a weekend ago I came across this blog. The writer also posts on the Freakonomics blog at the New York Times. In the future I think I'll see if I can apply her methods to bring sense to an audit.

What is the goal?

Many times in performance auditing you try to analyze whether a program has accomplished what it set out to do. Defining the goal that a program is trying to achieve is very important because the measure used to determine success depends on the goal. Here's an interesting story about how the number of Olympic medals that a country wins is reported differently. Is the goal to win more medals overall no matter their color (gold, silver, or bronze) or is the goal to be first?

Good advice for auditors

...there is always more than meets the camera's eye. Subject everything to a reality check. (From Bill Moyers Journal, hat tip to kidfurbo)

Government auditors and independence

Here's an another good example of why auditor independence is so critical. The NY Times evidently broke the story after a report by the Inspector General at the U.S. Department of Health and Human Services was leaked. You can also read about it in the Miami Herald. In a report to be released next week, the Inspector General found that AdvanceMed, a company hired to audit claims payments by the Medicare program and calculate the rate of improper payments, was pressured to not follow written procedures. They were told to only verify payments with the vendors and not check medical or patient records to ensure that the item was prescribed and received. As a result, the Inspector General found that the rate of improper payments was much higher than reported by AdvanceMed.

According to one report this firm is a subsidiary of a larger company that is a major government contractor and that this made them susceptible to the pressure applied by the Medicare program. According to another report, the Government Accountability Office is in the early stages of auditing the same company for another project.

How reading blogs can lead to results

As a postscript to an earlier blog explaining why I decided to blog, here's an interesting post that led to a report that I wouldn't have found without monitoring this blog.

The importance of the conversation

Audits happen in three phases. The first is the initial information gathering. The second is the analysis. And the third is report writing. Part of the report writing phase is reviewing the draft with the auditee. Sometimes I think this is the most important part of the audit. And,the most difficult. The analysis and discovery of the problem are the heart of the audit. Convincing the program that there is a problem, so that change will happen, is critical.

The audit report establishes accountability and enhances public confidence. It provides oversight of government services. But for the long term, getting improvements is just as valuable. Most employees are sincerely trying to do a good job. Audits focus on problems and, although we try to balance the report with an acknowledgement of accomplishments, the majority of the writing is about what needs corrected. So that conversation, the reviewing of the draft findings, can be difficult. But it has to occur.

Auditor Independence

The story continues out of Los Angeles of the battle between the City Controller and City Attorney as reported in an earlier post. The language is getting quite strong out of the City Attorney’s Office. A spokesman is quoted as saying that the city attorney is willing to have his workers' compensation unit reviewed by an independent auditor, but he objects to having a "politician" conduct the audit.

I have always thought that being elected gives auditors a “leg up” on independence. Government Auditing Standards which guide us all, state that auditors must maintain independence “so that their opinions, findings, conclusions, judgments, and recommendations will be impartial and viewed as impartial…” The standards then go on to define what organizational independence is. Audit organizations where the head is directly elected by voters of the jurisdiction being audited are presumed to be independent. Auditors though are cautioned to avoid even the appearance of impairments to independence.

Beach magic

What is beach magic? It is a termed coined by my son to describe photos he took at the beach. It was nearing sunset and a storm had just passed by. The light was magical.

Auditing is sometimes like that. You work intensely analyzing a program or service and come to the end and your team brainstorms what does it all mean. And suddenly the picture of the problem and how it can be improved becomes clear. Now the task is to communicate it effectively so that others can understand.

Interesting blogs

I did some web searching this morning and found these interesting blogs.

• Community Indicators
• Reporting Statistics

Why blog?

I am a fan of blogs and read them regularly for information and points of view. We get insulated from different opinions and blogging is one way to expand the scope of information you would normally receive in conversations with co-workers, friends, and family or via standard news media. I have discovered many things from blogs that I wouldn't have seen without them - photos, You Tube videos, documents, and news stories.

I thought about blogging in the context of performance auditing because it is such an interesting profession. Audits are reported on in newspapers occasionally but the process, why and how conclusions were reached, rarely is. What is it that we do? I thought perhaps I could add to the information available. So goal #1 was to increase understanding.

But Goal #2 is the more risky and scary one. I wanted to start a dialogue, to share my thoughts and have others respond. As I have learned from email conversations, writing can easily be misinterpreted when you are unable to see how someone responds to what you are saying. But I decided to take the plunge and keep this online journal, recording thoughts as I have them about auditing.

More about putting the personal aside and control

I earlier noted in a post that sometimes auditors can add facts and reason to a politically charged environment. But this week in the news is a story about an elected auditor whose authority to audit is challenged by another elected official, the City Attorney. The Los Angeles City Controller was scheduled to begin a performance audit of the worker’s compensation program which is in the office of the City Attorney. The City Attorney has gone to court to block the audit. When I was at Multnomah County, my office audited the Sheriff’s Office and the District Attorney’s Office, both led by elected officials. There was never any resistance to the audits or questioning of the office's authority to audit a department led by an elected official. In fact, when you think about it, almost every audit ultimately lands at the feet of an elected official. But the City Attorney is claiming that the City Controller is politically motivated. She is term-limited and may be seeking office as a City Councilor. The City Attorney is claiming that the Controller is not independent and that the City Charter only allows her office to do financial not performance audits.

At Metro, the Charter is pretty clear. “The functions of the Auditor include financial as well as performance audits of all departments, offices, commissions, activities and operations of Metro and reports regarding compliance with adopted laws, policies and sound fiscal practices.” Also, the Metro Auditor for four years after the last term is ineligible to hold the office of Metro Councilor.

Funny thing, here are similar charges of a politically motivated audit from Pakistan.

It's all about control

When I first started auditing I was put off by the auditing standards because they talked about internal controls and how auditors were to assess their effectiveness. The terminology was alien to me and I had trouble grasping the concept. Coming from a research/evaluation perspective, it just didn't make sense. But after a few years I realized that when an evaluator assesses the processes that a program uses to deliver the service, she is actually looking at the controls.

Government services are designed to resolve a problem or generally improve the quality of life for its citizens. Officials can't just spend money and hope for the best. They are accountable to the citizens who entrusted them with public dollars. Controls could be information, evaluation, feedback - anything that tells a manager or leadership that something is wrong and needs to be corrected. Controls are also the processes that ensure resources and assets are protected, such as software security or limiting access to financial resources.

But auditors deal with an additional type of control. Audits shine a light on a program and provide information. For many managers, that is giving up "control." Over the course of my career, I have encountered many responses to audits from fearless openness to closed obstructionism. Working through that is also part of the auditor's job. You have to keep your eye on the prize - improving government.

Taking your work home with you

This cracked me up. I thought I was the only one that did that.

Operating in a political arena

Auditors for the most part tend to be cautious and reticent to be in the public eye. But here is an audit that brings facts to a politically charged arena. It resulted in an editorial in the NY Times.

Putting the personal aside

When you're auditing you have to separate your personal beliefs from your work. There are many programs and services at Metro that I get excited about because they help to shape the future of our region. I value planning and preserving what is unique about this area. But as an auditor I also value action and efficiency. So it is with a critical eye and skepticism we approach any program or service. Without that an auditor can't be objective or provide the accountability that the job requires.

I was right

Front page of the Oregonian today is a second story about Social Security. Yesterday I wrote about this story and speculated that the cause of the incredibly slow system could be lack of funding or over-proceduralization. The headline of the story - "Social Security backlog grows from lack of cash." Another difference between journalists and auditors - auditors get to write their complete findings in one report. Journalists have to write a series over several days to tell the complete story.

Journalists and Auditors

I've always thought that the work of journalists and auditors is similar in many ways. Reading the Sunday Oregonian confirmed that today. Both write public reports that shine a light on a situation that needs changed. Both seek facts and have standards to ensure quality of the report. The auditor is looking for the elements of a finding - condition, criteria, effect, cause, and recommendations. What is happening, what should happen, what is the result, why did it happen, and what should be changed.

First case in point - "Getting disability payments can be a fight to the death" on the front page. The reporters describe the struggle of several individuals over many years to received social security disability payments. A few die before payments are received (condition). Several individuals talk about how they paid into the system and believed that the government would support them when they legitimately needed help (criteria). The length of time of the struggle results in some going on welfare, becoming homeless, and dying (effect). What the story lacks is the cause and recommendations, something an audit would provide. It alludes to one cause - the baby boomer generation and its demand on the system. But perhaps it is also cutbacks in funding or a system over-proceduralized because of concerns about abuse.

Second case in point - "State parole board finds itself up for review" again on the front page of the Oregonian. This has been an ongoing story at the Oregonian and began with a decision by the Parole Board to release an offender who had been convicted of one rape but had admitted several others. In September the Board voted to release the offender and cut his 30 year sentence in half (condition). Because of a mix-up they failed to notify the victim so that she could attend the hearing (criteria). The Board conducted another hearing but again voted for release. The victim sued and another hearing was conducted. Since then several other victims have come forward and there has been a public outcry. The fear is the possibility of future victims. (effect). The series of stories have highlighted what may be some causes - poor notification of victims, hearings that were conducted inside the prison, and a closed-door policy. An audit might take on more systemic causes such as overall lack of transparency and whether the Board should be appointed.

Between the work of the journalist and the auditor, which is more likely to effect real change in government? Both. The work of journalists can put incredible pressure on government to change and have significant results. I think the difference though is time. Journalists face a deadline. Auditors can spend time in the audit process to craft realistic recommendations and to work with the auditee and encourage change. The difference is that found between a surgeon and your physician. One removes a diseased part of your body and the other works to improve habits and prevent or delay disease.

Accountability Costs

Citizens demand accountability of their government. They want assurances that their tax dollars are spent wisely. Unfortunately accountability costs. A lot of what we address in audits is making government more accountable. Here is an auditor in San Diego who tells his Council how much it will cost to complete an audit.

It is fairly common that when a government plans to place a fundraising initiative before its electorate it includes in the package a promise to audit or have oversight. Why? Because polling shows that when this is included, the likelihood of the measure passing increases.

A few years ago Multnomah County and the City of Portland leaders were contemplating a measure to raise support for area school districts. As we observed the deliberations on the side, the City Auditor and I, then the County Auditor, intervened. We proposed that a small portion of the revenues be directed towards funding two auditors for schools. The tax passed and auditors were funded. For three years audits were completed about schools.

In preparing this post, I attempted to find links that used to be available to point the reader to these audits. Unfortunately, the audits, and any discussion of them, seem to have disappeared. This was a valiant effort, but I'm not sure how successful it was. One positive outcome was that performance auditing became institutionalized at Portland Public Schools. Reflecting on what happened, I don't think I would propose something similar in the future. Auditing needs to be integral to the government it is auditing. An auditor that specifically has jurisdiction over its particular government can speak directly to its leadership and also have the advantage of thoroughly understanding its dynamics.

One of the things that I consider when I prepare our annual audit schedule is cost. Audits are expensive. I estimate they take between six to eight months to complete. One of the benefits of an audit is that we have time to thoroughly review a service or operation. But that is expensive. So I try to schedule audits that are worth the cost and audit areas that management does not have the time to review or that represent a risk to the government's operations.

Which is it?

In an earlier post I talk about how auditors are interested in procedures and how it is important to have procedures. But in the most recent post I talk about auditors who can't see the forest for the trees and get hung up on details. Which is it? There is a balance between too much and too little. If there is too little disclosure and structure then a government lacks transparency and cannot be accountable. If there is too much structure, detailed procedures, and adherence to procedures is strictly enforced, then the government can get bogged down. Again, why I like performance auditing is because you focus on results. In either case you would see poor results. And, the cause would be, in part, procedures. In the first case it would be a lack of procedures to the point that the government is indiscernible. In the latter example, it would be too much attention to detailed procedures so that the service provided becomes inefficient and is probably not as effective as it could be.

Forest and Trees

It's interesting to see how people's personalities and experiences shape how they approach their job. Prior to being an auditor I was a probation & parole officer for many years. There was a diachotomy within this profession similar to what you see with police and many other professions. Some probation/parole officers were distrustful and punitive. Their expectations of offenders was very high and they had little sympathy for those who didn't meet those expectations. Other officers were not necessarily sympathetic but they recognized the humanity in offenders and tried to work on improving the skills that were needed to survive free of new arrest.

There is some of this in the auditing profession. Some auditors are very focused on detail and ensuring that everything is procedurally correct. The smallest detail, if not followed, deserves to be exposed in an audit report and is as important as any other finding. In effect, they lose sight of the forest for the trees.

One reason I like performance auditing is because you look at the detail but you also consider the totality. Over the years I have found that most employees, probably 99%, are trying to do a good job. They may know how they could do the job better and may be prevented from doing so because management doesn't hear their concerns or there isn't the time and resources.

As a performance auditor you look at what is trying to be accomplished. You examine how the program is trying to achieve it and what is in their way. Sure they may not be following their procedures exactly but there may be a legitimate reason why.

An auditor by the nature of their work has the time to contemplate the alternative. In government, managers and employees have little time to reflect on or redesign services. The craft of the auditor is to observe, study, analyze, and reflect back. I believe that to be effective, an auditor must be able to communicate what we see and how it could be changed. Our job is not to be punitive and shame employees. Our job is to get government to improve.

A Pattern

On a personal note, it's been quite a 24 hours for me. When we were out to dinner last night with my son and his girlfriend, they announced they were engaged. Now that's a pattern as you watch your children go through the life stages that you have passed through. My daughter is off to college this fall and now the engagement. Then this morning I took my husband to the airport to head out to Beijing. That's an outlier.

Tone at the Top

Regarding the audit by the Government Accountability Office I mentioned in an earlier post, it is disappointing to note that lawmakers are only criticizing the DOD audit agency for not following standards. Of course they should have. Audit management made many mistakes, including not assigning adequately trained staff, not providing supervision, and placing too much emphasis on meeting timelines. But what is not being discussed is the climate that exists that allows this kind of pressure to be put on auditors. When an auditor is not fully independent from the agency it audits, relationships develop and subtle, or not so subtle, pressures can occur to be "part of the team." Unfortunately, an auditor can't be part of the team. The auditor is part of the bigger team, the one that works for good government.

Patterns

Auditors can come from all types of disciplines. What you bring from one organizational experience can help you understand another organization or service. One of my most "ah-ha" moments was when I was being interviewed for my first auditor position. I was given a chart that showed information about a parking structure. It illustrated parking patterns of long term versus short term parkers. I was asked what kind of questions I would ask if I was going to study the usage. I looked at the pattern of the data and realized it was the same kind of pattern and dilemma that I had studied from my current organizational experience. I was working as an analyst for a public safety coordinating body. A question the criminal justice system always faces is how to manage jail population effectively when some offenders come in for short periods and others stay for months. I don't know if that is why I was hired, but my first response in that interview was "This is just like jails!"

Procedures

Auditors are interested in process and procedures. Not that every action must be extremely detailed in writing. But that the process used was thoughtful and careful. Government should be held to a higher standard. After all, the resources we use belong to the citizens who trust us to use them wisely.

When I first started auditing I heard a lot about "pass-through" dollars. This was funding that was received from the state or federal government and was contracted out to non-profit services. There seemed to be little understanding that even though these were not dollars derived locally, they were public dollars, and that there was still a responsibility to manage their use well.

Negotiating and signing a contract for services is not all that must be done. Steps must be taken to ensure that the money was well spent. In a recent audit my office completed, we found that the scope of services was described very well and that the competitive process was strong. But the program neglected to plan for how to ensure that the agency received what was paid for.

It seems that when government responds to a crisis or takes on large projects, process breaks down. Here is a audit by Louisiana State Auditors of the emergency response to Katrina. The audit found that Louisiana could have saved millions of dollars if it had directly contracted with staff needed to monitor debris removal and manage grants from FEMA. Instead a consultant was hired who then subcontracted out these services at a 100% mark-up. Granted this was an extraordinary event and there was probably little experience or planning for something of this magnitude. But if the recommendations are followed, it will improve the reponse in the future.

Auditors speak out.

If the auditors won't say it who will. Sometimes everyone knows what the problem is but no one can say it and it is only the auditor who can bring things to light. This recent audit by the Government Accountability Office shows how auditors may be the only ones able to call out when there is a suppression of facts. GAO auditors found that Department of Defense auditors were prevented from acting independently in a review of contracts. Independence is the cornerstone of auditing. Only bad things can happen when independent review is constricted.