I have always harbored this comic book image of federal, state, and local auditors banding together to fight against mismanagement and entropy, like DC Comics’ League of Justice or Marvel’s Avengers. After all these years, despite watching a few of those fantasy movies, that performance audit scenario has faded.
We may all follow the same Standards but we are too different in our performance audit methods, purview, and priorities to join forces on an audit topic. None of us are against adaptation, but we cannot abandon the priorities of our different offices for an uncertain outcome.
When I was county auditor, one of the finance managers approached me one day and mentioned that they had federal auditors for several weeks in their office. She said they were looking at the sheriff’s overtime spending. Federal agencies had been renting beds in the county’s downtown jail for their prisoners and were questioning the charges, I suspect. We had issued an audit of sheriff’s overtime just a few months earlier, yet they never contacted us. When they got off the elevators to go into the finance office, they couldn’t miss the placard for the auditor’s office right next door. They never introduced themselves, let alone asked us any questions about overtime. I wasn’t angry enough to confront them, but I was frustrated enough to ignore them in return.
In twenty years, I was only contacted one time by federal auditors while they were auditing in my county or city. I asked another esteemed colleague and he had nearly the same experience, except that it covered more years, and he had never been contacted at all. I would be happy to spend time explaining our knowledge of the organization we audit, its control environment, key contacts, data sources, and other information.
I think coordinated audits can be done successfully if their scope is compliance testing, however, the local auditors doing the testing are simply field staff for the state or federal agencies. They conduct their reviews and pass the information up to the requesting agency for compilation into a report, and perhaps issue their own report if they find problems.
The Single Audit is a fine example, and its history exemplifies that field staff model. Federal auditors used to travel to the states and localities to ensure that federal dollars were appropriately spent. That method was replaced with about a dozen compliance requirements that state, local, and private practice auditors needed to test and report on.
These are not performance audits, though. Before I get too far into this, I’ll be using terms defined by a collaboration consultant, Arthur T. Himmelman, for the range of relationships we auditors could have:
- Networking is defined as exchanging information for mutual benefit.
- Coordinating is defined as exchanging information and altering activities for mutual benefit and to achieve a common purpose.
- Cooperating is defined as exchanging information, altering activities, and sharing resources for mutual benefit and to achieve a common purpose.
- Collaborating is defined as exchanging information, altering activities, sharing resources, and enhancing the capacity of another for mutual benefit and to achieve a common purpose.
The Single Audit is a transaction, rewarding federal dollars to other governments on condition of compliance and proper compliance-testing. A generous-minded person could call it collaboration, if that person ignored how it was imposed on other governments.
ALGA is a great networking effort, as are the Intergovernmental Audit Forums. During the course of audits, we may network with other organizations that have produced work in the area we are auditing, which can be a great benefit. Only limited resources are committed by auditors who help with the organizational and other activities.
In all my years, I can recall only one instance when audit coordination occurred. The county auditor brought us specific evidence about the Portland Development Commission tax abatements when I was city auditor, and we added the topic to our audit schedule. It’s rare that an auditor would contact another with information, suggestions to change their schedule or scope or methods, and I have never suggested such actions to others. Okay, yes, maybe once. One time, I complained to the Comptroller General about my frustrations with the laws and rules around the use of Social Security numbers and later saw an audit issued on that topic.
There was another time that might count as coordination. I complained to an Inspector General about a lack of interest in a list of stores that we suspected of welfare fraud. We found clear, suspicious patterns of cash transactions but couldn’t get any action from the state welfare agency, the state police, the federal welfare agency, or the FBI. When I called the Inspector General’s Office I only heard back from an attorney who lectured me on how we were exceeding our authority and improperly using the welfare data. I called again, asking specifically for the Inspector General , someone I had met at the Domestic Working Group. She coached me through the problems and ultimately came up with a solution. Representatives of the necessary agencies all gathered in our conference room to walk through the procedure. We state auditors would sign on as contractors to the state welfare agency, give them our analysis, then they would hand the analysis to the federal welfare investigators, and they would then work with the FBI. The FBI fellow asked, “What if we have a question?” and I said, “Just call us.” Does cooperation need to be that complicated?
I still can’t explain why that data bucket brigade was necessary. With our analysis, the investigators arrested and convicted the offenders at the first location. After that, we were regularly contacted for more suspicious locations as they proceeded to arrest and prosecute more offenders, some even suspected of involvement in a drug cartel. They wanted us to keep quiet about the work and we did. A couple years later the office reported on its efforts. Maybe that turned out to be collaboration because our ability to analyze millions of transactions seemed to amaze the investigators, who lacked our skills, and could not have discovered these patterns. Yet this wasn’t an audit, though we performed our work with the usual professional care.
My offices have undertaken several collaborating audits with uneven success. The most successful was a city-county audit of response times of ambulances. At this point, I had moved from being the elected county auditor to the elected Portland auditor, and I coordinated (or collaborated) with Multnomah County Auditor Suzanne Flynn, who had worked for me before her election to the office. The county is responsible for managing ambulance contracts, but they are dispatched by the regional 911 center, operated by Portland. The ambulance contract had measurable response time requirements, which the team of a city and county auditor analyzed for compliance. They did great work in good time to produce a worthwhile audit.
This is in contrast to a city-county audit of housing a few years prior that got mired. Both Portland and Multnomah county had departments that received state and federal funding, worked with non-profit partners, and covered the full range of housing issues, from shelters to subsidized homeownership. The team could not encompass a scope and objective around the financial and policy issues related to housing. The territory was big and complex with uncertain measures, competing priorities, and convoluted funding. Because it was a joint audit, we wanted to understand the system of housing and see what we could recommend for improvement. In the end, we recommended a more coordinated approach and suggested the local housing authority would best serve that central role. Our recommendations were considered and dismissed.
At the state we tackled housing again, this time in collaboration with federal and local auditors. Our office had produced an audit of fragmentation, overlap, and duplication of housing services, using the framework developed by the GAO. GAO leadership was interested in applying the model through the levels of government and we agreed to the effort, focusing more narrowly on affordable housing for low-income families. In the end, we found some duplication which we discussed with the agencies, but it wasn’t significant enough to warrant our own audit report.
The effort turned a bit frustrating when we learned that our plans and findings were going to GAO, but it was against GAO policy to share its methods and results with us. Our interactions were always courteous but this confidentiality eroded any feelings of being collaborators, peers, or even team members on the effort. It simply felt like we were gathering data at the request of GAO. Areas where we thought productive recommendations could be made were not a part of discussions. For example, two federal housing programs had different definitions of poverty, which complicated state and local agency efforts and seemed like a simple thing to fix.
I understand that the scope and objectives of many GAO audits are not compatible with state and local priorities. GAO does not usually focus audits on individual state or local agencies, but scans across them for broader, policy-oriented recommendations. In contrast, I found that audits examining operations and management of a specific state or local agency produce more benefit for the publics I served. What most mattered was what hit the ground, and policy evaluation within a single entity was difficult. As a result, that Venn Diagram of common purposes doesn’t have much overlap.
When I was state auditor, I saw the Venn diagram from a new perspective. Only about five of Oregon’s thirty-six counties had auditors, so partnering had limited coverage across the state. The thirty-six counties were extremely diverse in population size and other characteristics, so generalizations weren’t possible either. Only Portland had a city auditor. If we wanted a statewide audit about county service delivery, collaboration covered only a small number of the counties, and imposing an audit that was our priority rather than theirs would be presumptuous.
I have some preliminary ideas of possible approaches. First, though, I would avoid joint audits because of the logistics of different priorities, pace, communications, methods, and resources. Those problems need to be resolved before you even begin thinking about the subject of the audit. (Some time ago, I vaguely remember reading an article about audit coordination that raised these kinds of cautions, which I obviously didn’t heed.)
Avoiding joint audits means we look at coordinated audits that push at the problems and solutions for each of our levels of government, and also point to better connections of activities among the levels of government. Our audits would also look for and pass on ideas and issues to the other levels of auditors.
That’s a possible start, but I think coordination comes down to something that is talked about in our auditing Standards but is seldom taken up in a proactive way. Here are a few sentences from 6.36:
“When planning the audit, auditors should ask management of the audited entity to identify previous audits, attestation engagements, performance audits, or other studies that directly relate to the objectives of the audit, including whether related recommendations have been implemented. Auditors should use this information in assessing risk and determining the nature, timing, and extent of current audit work, including determining the extent to which testing the implementation of the corrective actions is applicable to the current audit objectives.”
I’m thinking most about Federal auditors who seem cavalier about contacting local or state auditors when they cross those thresholds. Further, auditors shouldn’t have to ask agencies whether other auditors have been there, and what they recommended. Professionals communicate and coordinate with other professionals when they undertake an audit. The Standards should state:
When planning the audit, auditors should2018 Government Auditing Standards 6.11ask managementcontact any auditors of the audited entity to identify previous audits, attestation engagements, performance audits, conducted according to these Standards. Auditors should ask management to identify other studies that directly relate to the objectives of the audit, including whether related recommendations have been implemented."
Here’s another proposal: create incentives for local governments to create audit shops where they currently don’t exist. Many cities and counties have no auditors, or they lack an audit shop capable of passing a peer review. It would be interesting to know what percentage of the hundreds of billions of dollars goes to governments with Standards auditors. I think if we could do that math, it would show that our greatest impact would be felt where audits don’t occur.
Effective performance auditing improves management throughout the organization which provides greater assurance that all dollars—local, state, and federal—are better spent. Every day, the threat of an audit can also inspire greater efforts, and act as a deterrent for fraud, waste, and abuse. My offices audited the management of federal money with as much concern as our local or state dollars, because we want to ensure the best value for our community. I think that’s what is expected of me by the citizens, the GAO, and audit Standards.
Over the past thirty years the GAO has worked to raise the professionalism of government auditing, at all levels, in many ways. Foremost by establishing and updating the Standards, which are relevant at the local and state level. Another example is the National Governmental Audit Forum, raising audit issues among its professionals at all levels. (The forum also subsidized the founding of ALGA in the interest of better local government auditing, and I think it was a wise investment.) And we have the Association of Local Government Auditors (ALGA), which offers training, peer reviews, and promotes performance auditing to local jurisdictions.
All these professional improvement and networking efforts have produced real progress in the accountability over public funds. A simple change in federal grants and funding could help. Recipient governments with auditors who meet Standards could receive a dividend, and those without would receive a surcharge to their funding. It is a simple recognition that professional auditors are there to provide oversight and accountability at an entity level, which raises the quality of management. The amounts can be small, but it would represent federal respect for our efforts.
