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.