Oregon Office of Economic Analysis Reblog: Poverty and progress, Oregon update edition

In order to not bury the lede regarding the 2016 ACS data, Oregon’s household income and poverty numbers look very good. I don’t want to oversell the data, but they are among the best readings in Oregon’s modern history. The underlying, or internal dynamics behind the topline data are even better. This does not mean the economy is perfect, or without issues. We know there remain substantial problems and challenges. It does mean, however, that considerable progress has been made during the current economic expansion following the financial crisis.

Josh Lehner shares his analysis of the 2016 American Community Survey data recently released by the U.S. Census. The data from last year are predominantly good, and indicative of positive economic trends in the state since the depth of the recession. Read more here.

If you’d like to take a peek at the survey data for yourself, you’ll find downloadable data files here and here.

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Secretary of State’s 2017-2018 Audit Plan

Overview of the Audit Plan

The Audits Division of the Secretary of State’s Office adheres to an overall audit strategy that a high-quality and transparent annual audit plan is critical for meeting our mission.

The Division follows professional standards and guidelines for the development of the Annual Audit Plan.

These guidelines recognize that an annual audit plan and work schedule benefit the organization by establishing which agencies, programs, contracts, or other areas will be prioritized for audits on an annual basis.

Including performance, IT, and financial topics, the Oregon Audits Division will tackle 30 audits in the upcoming year, with several more possibilities lined up on the 2018-2019 horizon.

Read the Plan here.

 

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Internal Auditor ReBlog: The root of the matter

Complex, serious, or pervasive problems are rarely the result of a singular event or failure. Frequently, a “perfect storm” of several causes forms to create an ideal environment for the failure to occur. Moreover, simply getting to the root cause to prevent it from happening again may not be enough — the consequences have to ​be addressed.

To better understand root cause analysis, two general myths need to be dispelled — the myth of the single root cause, and the myth that fixing the root cause alone fixes the problem. Upon recognizing these false notions, internal auditors can use several methods to perform root cause analysis more effectively on their engagements.

Jimmy Parker, a senior manager for internal audits at Verizon, shares his take on how auditors can perform multiple root cause analyses on agency problems. Identification of the problem, measurement, prioritization, and developing audit recommendations that address both conditions and cause are covered. He also recommends considering how the effects of root problems drive how they should be addressed.

Internal auditors should consider that the level of the effect will drive the nature of the root cause analysis and the type of recommendation and action plan:

  • Direct, one-time effect on the process (condition-based recommendation and action plan).
  • Cumulative effect on the process (cause-based recommendation and action plan).
  • Cumulative effect on the organization (recovery-focused recommendation and action plan).
  • High-level, systemic effect (recovery-focused recommendation and action plan).

Read more here.

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Oregon Smoke Information: Info Share

Hurricane Harvey’s dramatic rain event over the city of Houston has (justifiably) consumed much of the national and local media attention this last week. However, Oregonians may also be noticing the side effects of an event much closer to home; fire season. It’s been a hot, dry summer across Oregon, with little rainfall, and as the summer extends into a possibly hot and dry fall, several large fires have erupted across the state. This not only poses imminent danger to lives and livelihoods for those individuals in the path of the fire, it poses a risk to wildlife and forest ecosystems, shuts down roads and forest trails, worsens air quality, costs millions of dollars to combat every year, and prompts mass evacuations. Here in the Willamette Valley, the air quality has been pretty awful.

City, county, tribal, state and federal agencies have aggregated their data on a blog devoted to keeping Oregonians informed about potential fire and smoke effects to their communities. The blog includes links to all kinds of handy fire-related info generated by separate agencies, as well as tips on how to keep yourself safe and breathing easy during fire season. Check it out here.

Wildfire smoke in Oregon on the last day of August

Additionally, last August we released an audit of the Oregon Department of Forestry that examined the strain of several consecutive severe fire seasons on staffing and fire prevention efforts for the state agency. One of the audit’s findings was the need for more focus on mitigating forest fire risks. Ideally, one of the positive effects of a severe fire season could be a renewed focus by states, counties, cities, and individuals on steps that can be taken to prevent  fire related devastation in the future.

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Office of Economic Analysis ReBlog: Oregon government size, an update

Yes, the public sector here in Oregon continues to grow. We have never had more public employees or more tax revenue than we do today. However the regional economy and the number of total Oregonians has never been larger either. Once you make the adjustment of comparing the public sector to the size of the population, or tax revenues as a share of personal income, Oregon’s public sector hasn’t increased in size for decades. And make no mistake, adjustments like these are the correct way to examine the size of government over time. Reasonable people, and unreasonable ones too I suppose, can debate the proper role and scope of the public sector. However a larger population means there are more residents in need of services, from schools to roads to law enforcement and so forth. And a stronger economy generating jobs and income does translate into more tax dollars for the public sector.

Josh Lehner explores the size and presence of public sector employment in Oregon over the past several decades, and points out some trends that illuminate issues with public education employment and tax revenue. Read more here.

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CPA-Scribo ReBlog – Audit Documentation: If it’s not documented, it’s not done

In the AICPA’s Enhanced Oversight program, one in four audits is nonconforming due to a lack of sufficient documentation. This has been and continues to be a hot-button peer review issue. And it’s not going away.

But auditors ask, “What is sufficient documentation?” That’s the problem, isn’t it? The answer is not black and white. We know good documentation when we see it–and poor as well. It’s the middle that fuzzy. Too often audit files are poor-to-midland. Why?

Charles Hall writing for CPA-Scribo explores what comprises sufficient, and insufficient, audit documentation. While this piece was written for CPAs, his advice is applicable to just about any auditor and auditing function. Read more here.

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How becoming an amateur baker taught me to be a better auditor

This past spring I took on a new hobby: baking homemade bread. I have long been a home cook, but I had never baked a loaf of bread.  One of the key differences between cooking and baking is the balance between art and science.  Cooking is much more art than science.  In cooking, there are underlying techniques and key steps that must take place, but a cook has tremendous flexibility in how they make a dish, just as an artist has tremendously flexibility in how they paint a picture (Think Van Gogh vs. Picasso vs. Manet).  As a cook, you can deviate quite significantly from a standard recipe and get a great result.  In baking, the key to success is being precise and scientific.  Deviation can bring failure.

Where a cook might take a pinch of salt, a baker measures out an exact ratio of salt to flour. This is known as a baker’s percentage (it really should be called a baker’s ratio IMO, but we will leave that for another blog post).  Deviating from a recipe will have tremendous consequences in bread making that are not typically seen in cooking.  Add a percent too much salt or too little yeast and your bread will not rise.  A bit too much water and the bread will lose structure and be flat (and the dough will be super sticky).  Too little water and it will be dense like a bagel.  Bake it until it reaches 150 degrees and it will be gummy and undercooked inside despite looking golden brown and delicious on the outside.  However, bake it past 160 degrees and it will have that beautiful crumb inside we all know.  The reason behind this? Chemistry. Gluten gelatinizes around 160 degrees.

The crumb structure inside bread is due to fermentation and gelatinized gluten

I am not trying to say there is not an art to bread making, there certainly is, but in general, it is a more scientific pursuit than cooking. Just like auditing, is a more science than art in my opinion.

So what does this have to do with being a better auditor? Well actually a lot when you start thinking about it. Results in both bread making and auditing come from good planning and implementation of your plan.  If we invest the right time into planning and implementing our plan, we will get a good audit.

What else has it taught me? Patience.  Bread making is a long ordeal (well not as long as auditing, but do not expect to get something on the table in 10 minutes).  Most artisan breads require a long fermentation.  From start to finish, a nice flavorful loaf takes 3 to 4 days to make.  Over time, the dough develops and builds flavor if the right ingredients are mixed together.  Just like our findings are slowly developed over time using the right mix of condition, criteria, cause, and effect. In the end, we strive for ‘flavorful’ findings. One of the important stages of bread making is “proofing” or proving the bread is alive and rising. Proofing is the last step before baking. With proofing I see some similarities to our quality assurance processes. QA is the stage of an audit where the findings are proved out.

This ciabatta was well proved, with a nice rise and airy texture

Lastly, control is critical. Bread making is all about controlling ingredients, temperature, and time.  With good controls in place, you can achieve the same results every time.  Every professional baker knows this and that is how they churn out delicious bread every day.  Bakers control ingredients by precisely weighing them.  Good bread makers never measure by volume, as no two cups of flour are the same and by weight can vary by 25% or more.  Auditors should do the same and measure using precise tools. Bakers also control for time and do not try to rush or delay.  A baker aims to get the dough into the oven at the right moment. If it is put in the over too early flavor development through fermentation and rising has not occurred. If put in too late after fermentation has ended the bread will lose all the air that was made and the bread will be flat and dense.

This ciabatta did not go into the oven at the right time and came out flat because it was overproved

We should strive to do the same thing and get our reports into the ‘oven’ at the right time by auditing what is relevant now and issuing our reports timely.  Lastly, bakers control for temperature to produce a bread with the right characteristics (baguettes only get crispy and crunchy in a hot and steam filled oven). We should consider our tone (e.g. temperature) that we use when ‘baking’ our reports.  Sometimes we need a hotter oven and other times we can cool it down.

Peter Reinhart has been a valuable resource for me as I learn about bread making. You can listen to his TED talk or get any of his great books on baking if you are interested. He likes to give what he calls his bakers blessing “May your crust be crisp and your bread always rise”. In his honor, I am ending with an auditors blessing: May your findings be impactful and your recommendations always implemented.

First attempt at a Miche, a whole-wheat sourdough loaf

 

Ian Green, CGAP and OAD Principal Auditor

 

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