Tone at the very top

I've written before about tone at the top, here and here, and how important it is. No matter how many rules are written, the bottom line is people. The people that do the work, from top to bottom, must be committed to ethical behavior. I believe it is in the nature of people to act ethically, but if the leadership creates a climate that does not encourage that behavior, then actions tend to drift to the margins.

Our new president, Barack Obama, took actions in his first days that signaled the new tone at the top. If you look at his first ever, yes first, executive orders and memoranda you see how the tone has changed. On the Freedom of Information Act he issued this statement, "The Freedom of Information Act should be administered with a clear presumption: In the face of doubt, openness prevails. The Government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears." On transparency he states, "My Administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use." He also signed several order regarding interrogation and detention of terrorists that puts us back into ethical behavior.

Thank you!

Auditing process and ignoring science

I was led to this report after reading a post by Kari Chisholm on the BlueOregon blog. The post describes the political battle that occurred over a nomination to the Department of the Interior and a hold put on that nomination by Senator Ron Wyden who asked for a report by the Office of the Inspector General (OIG). A year later in mid-December 2008 the report was issued. While the politics were interesting; from an auditor's perspective I found the methodology used to complete the investigation just as interesting.

Many times in audits, we struggle with how to audit something that is less than concrete. This audit reminds me how that is done-through the elements of a finding. The objective of the investigation was to determine if endangered species decisions had been improperly influenced by the Deputy Assistant Secretary for Fish, Wildlife, and Parks.

Criteria: The methodology was to see if policies and procedures were followed. The OIG reviewed 20 Endangered Species Act decisions. The OIG conducted 89 interviews with employees and reviewed over 20,000 emails and other documents and sent out a standardized questionnaire to all of the US Fish and Wildlife Services regions.

Condition: The investigation found a policy void and lack of guidance. One interviewee stated that there was way too much "informal policy" and that he would wake up in the morning and think, "Okay, what's the agency doing today?" The investigation also noted that this intentional failure to clarify policy had been ongoing through several administrations in order to allow the policy du jour.

Effect: As a result, the Deputy Assistant Secretary in this current administration was able to influence decisions and steer the best available science to pre-ordained ends. She caused significant harm to the integrity of the decision-making process and and its reputation with state and local agencies. The report also stated that there will be considerable cost in undoing some of the decisions and that the actions also caused considerable expenditure in taxpayer dollars for litigation.

US 2008 Financial Statement

The GAO released the 2008 financial statement for the US in mid-December. Quoting from the press release - "For the 12th year in a row, the U.S. Government Accountability Office (GAO) was prevented from expressing an opinion on the consolidated financial statements of the U.S. government—other than the Statement of Social Insurance—because of numerous material internal control weaknesses and other limitations." I did a google search on news archives to see if there was any press coverage but came up with none. I did find this coverage on the Public Financial Management Blog. The Citizen's Guide to the Federal Government's Financial Health is only 11 pages and contains highlights. It would be good if this information was reported in the news.

The emotions behind words

There is an interesting post on Freakonomics with many comments. It reminds me how words can evoke emotions. Justin Wolfers is commenting on an Op-Ed piece that concludes that despite the economic crisis. people are still happy. Using daily survey data on life satisfaction based on the Gallup-Healthways Well-Being Index, Mr. Wolfers attempts to show factually that people are not happy. He bases his argument on the results of questions about thriving, struggling, and suffering. The comments are a very interesting read. At one point it devolves into a discussion about Communism.

Several years ago in my career I was part of a team that audited Multnomah County's adult foster care regulatory program. We designed a checklist and performed surprise visits on the foster care homes to determine the quality of the care. One of the criteria we measured was the "home-like" environment. One of the strongest responses I ever got to an audit was because of our finding that some of the homes were not "home-like." It was a very emotional discussion. The manager who objected to us trying to measure that quality felt that we were applying middle-class values and could not adequately understand or measure what home might be like for other cultures.

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.