Audits and Oregon’s Integrity Ranking

The Center for Public Integrity recently issued a report that assessed the systems in place to deter corruption in state government. The report offers a different perspective on some of the issues in the sphere of an auditor’s work. Oregon didn’t fare well this year, 44th among the 50 states, and the allegations against former governor Kitzhaber were a key element in the scoring. Oregon’s F grade was not unique, with thirteen other states flunking, and only three earning better than a D+.

Oregon_rank

Considerable effort goes into the evaluation. Each state undergoes an in-depth analysis by a reporter or researcher familiar with that state. I was interviewed by Lee van der Voo about our auditing responsibilities and activities and she also obtained other viewpoints.

One gauge of integrity is the presence of laws related to the 13 evaluated categories. While I think that laws can be an important element of clean government, the absence of a law should not be equated with a lack of ‘integrity’.

As we all know, the law and a structure of enforcement are not always a sufficient deterrent to criminal behavior.  Government ethics laws are common, and commonly broken. Some ethicists argue that it is more effective to characterize good behaviors than to try to define all prohibited activities.

Ms. van der Voo seems to recognize Oregon’s values in her title “Land of ethics, manners hurt by rare scandal.” When I looked at our Washington neighbor’s rankings, the reporter stated that, “A 2012 report by the University of Illinois at Chicago, for instance, concluded that only Oregon had a lower per-capita rate for federal corruption convictions.”

I think public officials should examine the deficiencies identified in this review, but I would also caution that additional laws may not necessarily improve Oregon’s integrity if there exists a higher expectation among its citizens, government employees, and elected officials.

Auditing grade

I hated whiners in school who appealed a grade, so instead I’ll look at why we didn’t get an “A” and figure out what would improve the grade next time.

Foremost, it is gratifying to see that the C+ for the auditing section was the best grade, from these very tough graders, for Oregon. (Electoral Oversight and State Budgeting got Cs.)

I continue to cringe though when I see the category name ‘Internal audit’ for us. I actually had several conversations and emails with the director and reporter, trying to educate them about the categories of auditing. I explained that an internal auditor often answers to the executive of an agency, which can affect what topic is selected and whether the results will ever be released. I urged them to consider using the Government Auditing Standards term ‘independent’ for auditors who are elected, or answer to a legislature. It is obvious I was not persuasive. (Even ‘Audit Oversight’ would be an improvement.)

Below is a breakdown of the factors and scores that comprise the C+ grade. The factors have links on the website with some discussion and sources of information.

internal_auditing

“In law, the leadership of the audit entity is protected from political interference”: I understand the group’s intent and I don’t think there is much we could do to raise this score. We follow the national Government Audit Standards which assures objectivity and independence. The Secretary of State is the state auditor as set out in the Oregon Constitution and is protected from political interference. I wonder whether there might be some inconsistencies between scorers. The score for Washington’s elected state auditor is ‘yes’ and describes a structure very much like ours. I don’t know what protections are afforded Washington’s Audits Director but it may be different the position in Oregon, which is ‘at will.’

Washington’s overall internal auditor score is B+. While we did worse on the leadership issue above, we got 100s in the next two, better than Washington’s 75s, regarding the practical aspects of independence and sufficient funding.

Oregon got a 75 on government action of audit findings. We get about 80% implementation of our recommendations so this coincidentally aligns with the score. Incidentally, I think it is tricky to place a big value on this statistic because the content of recommendations can vary drastically. Some may be simple adjustments for an agency, others may require substantial resources and time to accomplish. We can get 100% action on trivial recommendations that are easily implemented. The most important dimension is difficult to measure: the benefit of the audit recommendations for Oregonians.

“In law, the audit agency is required to report on its investigations, activities, and advisory opinions.” I think I may have misunderstood the question and we could raise this score next time. In fact, we are required by law (ORS 197.180) to produce an annual Hotline report on our investigations, which is on our website. I’m not sure what ‘activities’ or ‘advisory opinions’ mean, but we if we do them, we would report on them. (If ‘activities’ and ‘advisory opinions’ refer to consulting-type services, we don’t do those, because that would violate our audit standards.)

“In law, citizens can access audit reports.” Again, perhaps more discussion of the reporting requirements imposed upon us by our audit standards could raise the score next time. We are required by state law to follow those standards and they require we widely distribute our audit reports. All our reports are on our website, accessible to everyone, and we make our workpapers public once the audit is complete.

Lastly, the ‘open data format’ is a category that puzzles me. Wikipedia identifies a number of formats that meet those standards and the pdf format of our audits is listed as acceptable. We ensure that our pdf reports are ADA compliant, and no one has ever complained about difficulties accessing our audits. As technologies advance we will continue to examine ways to publish our audit reports, and keep this criterion in mind.

So, next time we’re contacted, we’ll compare our structure to Washington’s to see if that will bring our score up. We’ll cite ORS 177.180 which requires that we report our Hotline investigations annually to the Legislature.  We’ll also point to our audit standards on audit reporting requirements to see if that might improve the score.

Gary Blackmer OAD Director

Gary Blackmer
OAD Director

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Oregon’s history of auditing parallels the growth of the profession

Frequency of word occurrence in scanned books

The field of auditing is taking on a larger role in government, and a growing subject of authors.  Google has scanned many published books and you can use their ‘Ngram Viewer‘ to chart the frequency of a term. Here is the mention of ‘audit’ and ‘accountability’ in English language books since 1800. Auditing was written about much earlier than the broader term of accountability, though the two are running nearly parallel since the 1970s.

The topic of auditing is also reflected in the history of auditing in Oregon. Oregon’s Secretary of State is the ‘auditor of public accounts” as set forth in the 1857 State Constitution. The responsibilities of the auditor of public accounts had already been outlined in Oregon’s Territorial statutes of 1854.

Starting in the territorial days, the auditor was the general accountant of the territory and was also responsible for reporting to the legislature those recommendations deemed “expedient for the support of public credit; for lessening the public expenses; for using public money to the best advantage; for promoting frugality and economy in public offices; and generally, for the better management and more perfect understanding of the fiscal affairs’ of the state.”

Here is an interesting example of a performance audit by Secretary of State Kincaid in 1897. The state purchased paper by weight in those days. Thousands of dollars worth of paper were bought every year but had never been weighed to verify correctness. Secretary Kincaid bought a pair of scales and, in the very first shipment, found it was several hundred pounds less than its claimed weight, resulting in a $19 overcharge. The current value of that overcharge would be $540.

On the national scene, the GAO was created in 1921, which coincides with the first jump in ‘audit’ mentions among the writings. ‘Accountability’ was not a commonly used term during this entire time period.

Then, starting in the early 1970s, both ‘audit’ and ‘accountability’ started their steep increases. GAO developed and issued the first version of Government Auditing Standards, also known as the Yellow Book, in 1972. Correlation doesn’t mean cause because other factors or events could have triggered this growing dialogue about accountability and auditing. For example, the Watergate investigation  leading to President Nixon’s resignation could have sparked increasing use of these terms.

In the early 1980s the Oregon Secretary of State started assigning staff to conduct these performance audits and promoting their value. Secretaries of State Paulus, Roberts, and Keisling all grew the performance audit capacity in the office, during the period that ‘audit’ and ‘accountability’ usage continued their steep climbs. New technologies and analytical tools have allowed the profession to grow in sophistication in the past decades, and information technology audits are now a common genre of performance audits.

One note of interest: the seeds of the Division’s performance audits were planted in Oregon’s Territorial Statutes, and subsequently grew into the Constitution’s current office of Secretary of State.

Compare the previous blue, territorial auditor responsibilities with the definition of performance auditing in the latest Government Auditing Standards:

Performance audits provide objective analysis to assist management and those charged with governance and oversight in using the information to improve program performance and operations, reduce costs, facilitate decision making by parties with responsibility to oversee or initiate corrective action, and contribute to public accountability. [2.10]

There is a remarkable overlap in responsibilities between the Oregon territorial auditor and the modern Secretary of State Audits Division, which complies with these standards.

Auditing has 160 years of history in Oregon and growing more important, as the profession’s trend continues its path here and nationally.

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Trust and Trustworthiness

As auditors, we strive to ensure that government functions fairly, efficiently, and effectively.  Auditing has long been one of the methods used to ensure that government is performing to expectations, and is part of a broader system of accountability that minimizes incidences of corruption and the misuse of public funds.

Despite these measures, it is frequently reported that trust in government has dropped to historic lows. State and local governments have retained higher levels of public trust than the federal government, but they have also seen declines in reported public trust since hitting a peak in 2001.

But is reported public trust a true indicator that something has gone wrong, or right? Is it something that we as auditors need to keep in mind as we go about our work?

In the following video, Onora O’Neill discusses trust, and it’s often ignored cousin, trustworthiness.

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