Methods (to our madness): Municipal audits at the state

Each summer, the state’s municipal audit manager, Amy Dale, heads out to perform field reviews of accounting firms around Oregon, as well as a few in Idaho. The firms she visits perform financial audits for Oregon’s municipalities. It’s part of Amy’s unique role as a municipal auditor manager for the state of Oregon to help ensure local governments provide annual financial reports. I sat down with Amy between some of her field reviews this month to learn more about it.

Oregon’s municipalities are any cities, counties, school districts, special districts, or corporations subject to local government control that receive tax dollars from Oregon residents. A municipal audit law, passed in the early 1900s and updated most recently in 2015, requires that municipalities file a financial report each year. These are made public on the Secretary of State’s website.  Annual filing helps promote transparency and accountability regarding the money they collect from residents, and the summary of audit reports completed by the state’s municipal program provides an overview of the status of larger municipalities.

Of the state’s 35 financial auditors, only two work fulltime in the municipal audit program. In addition to supporting the firms who provide the audits, Amy works directly with the municipalities throughout their submission process, oversees the review of a sampling of financial reports each year, and, with her team, provides feedback on whether the reports meet financial reporting requirements.

Amy Dale, Municipal Audit Manager for the Secretary of State Audits Division

“I love this role because it’s interesting,” says Amy. “There’s always something different happening, and there’s a strong sense of helping residents and local governments, which is something I value.”

Amy’s role may have been a bit simpler in the early days, when there were a lot fewer of these municipalities. Now, around 1800 municipalities of a variety of size and purpose must file financial reports. Oregon’s cities, counties, and school districts make up about a third of them. The remaining 1000+ districts are special districts. They perform specialized services for the area where they operate, such as water, irrigation, fire, emergency management, pesticide, parks and recreation, and many more. To fund these services, they collect money through separate taxes, assessments, or fees. A county or city can have several special districts in its geographical area. For instance, in Marion County alone there are almost a hundred special districts.

Amy and her team help the many municipalities submit accurate and timely reports. “Our reviews shouldn’t be seen as punitive for those who didn’t meet standards, but rather to help them get it right,” Amy explains. “Reviewing audit reports is great practice for our financial auditors, too, especially as audit and reporting standards continue to change.”

If the municipal audits team finds reporting errors they’ll let the organization know what didn’t go right. Says Amy, “The municipalities don’t always like getting a letter from us with corrections, but the goal is to be helpful. Sometimes we end up getting thanks.”

The state takes this reporting requirement seriously; as of 2015, the municipal audit program will place cities and counties who haven’t filed a report on time on a withholding list. Until they file their reports, these municipalities will not receive 10% of state revenue contributions they’d otherwise collect.

Reports go up on the Secretary of State’s website so any resident can read them. The Secretary of State’s summary reports of the previous fiscal year’s audits filed are also on the website.

Want to know even more about municipal audits and last year’s summary report? Check out the full report on the Oregon Audit Division website from FY 2016 HERE.

Auditors at Work Featured Financial Audit

State of Oregon Financial Condition Report: Fiscal Year 2016

The Oregon Secretary of State Audits Division releases an annual financial condition report for the previous fiscal year, which covers revenues and expenditures and reports on the State’s overall fiscal health. Enjoy our summary below, or read the full report here.

Featured Financial Audit New Audit Release

Audit Release: Keeping the State of Oregon Accountable, Fiscal Year 2015

Every year the Audits Division of the Secretary of State’s Office audits the State of Oregon’s financial statements to determine whether the information reported is reliable and accurate. This annual audit provides the state with our professional opinion about the completeness, accuracy, and validity of the state’s accounting information. See the Financial Statement Audit section of this report for more discussion of Oregon’s financial status.

In addition, we annually perform compliance audits of programs funded by the federal government to determine if they meet federal requirements for tracking and using federal dollars. These programs provide billions of federal dollars to Oregon citizens for important social, economic, and environmental missions. See the Federal Compliance Audits section of this report for more discussion of Oregon’s compliance with the requirements of federal programs.

The division communicates errors identified in financial reporting, financial processes, and non-compliance to state agencies and provides recommendations for correction to assure the integrity of financial information provided to the public. This report, “Keeping the State of Oregon Accountable,” reflects the findings of those annual audits of publicly funded programs. Important conclusions in this report are:

Audit of the State of Oregon’s Financial Statements

  • We concluded that the state’s financial statements, as corrected, are fairly presented in conformance with Generally Accepted Accounting Principles.
  • We reported fewer internal control weaknesses this year and found that management corrected several of the prior year findings.
  • Three major changes impacted Oregon’s financial statements for fiscal year 2015:  a $1.6 billion increase in Medicaid expenditures, a change in the reporting of three major universities, and new reporting standards that changed how pension information is presented.

Federal Compliance Audits

  • Because of ongoing internal control and compliance weaknesses, auditors were required to audit an increased percentage of the state’s federal expenditures.
  • Our audit included 35 findings related to 14 audited federal programs at seven state agencies. We issued “qualified” opinions on five programs, which indicate a department’s internal controls are inadequate to prevent or detect significant noncompliance in a timely manner.

Read full report here


For more information about audit results, you can also see the official reports on our website:

Oregon’s Financial Statements:

Single Audit (including Federal Compliance) Results:


Featured Financial Audit New Audit Release Noteworthy

The Evolution of New Auditor Training at OAD

How does training impact the work of new auditors?

We provide training to our newly hired auditors because government auditing is very different than business auditing. Unfortunately, no universities specialize in this field, and even a single class is rare. We try to update and improve our training each time, but what we’ve learned in the last year about our instructional design approach has given us new insights.

First, what we taught was not specifically designed to help new performance auditors conduct their day-to-day work. We explained about preparing a good workpaper, or using our software, Teammate. But there were gaps in the framework and perspective of auditing. To address those gaps, we began to develop trainings that complemented our practical nuts and bolts offerings with courses focusing on soft skills development and leadership.

Auditing has a maze-like feeling for the new hire but we sometimes forget that there are two perspectives of a maze – the bird’s eye view, and the view from inside. From above, our eye can trace the shortest route. But inside, there are no direction markers.  Success must come by assembling a clear memory of the layout of the maze through arduous trial and error.

Inside Hampton Court Maze

Inside Hampton Court Maze

Some people enjoy the puzzle of a maze and pay to wander through corn mazes. Some have no patience for mazes. The image to the right makes some folks feel like a lab rat. And not a very smart one, since I hear that lab rats are quite capable of negotiating mazes.

But even as we think about this frustration, we also need to ’embrace the maze’. Every new audit is an agency maze. We try to understand how all the program and financial pieces fit together, and build up the picture through interviews, data analysis, and observation.

On the financial side we have workpapers and team member continuity to guide us through the maze of risks each year. On the performance side, we are often entering new agency mazes and our initial, scoping phase produces a rough drawing of the maze to help us narrow down to an issue that we should audit.

Above Hampton Court

Above Hampton Court

The other maze is our audit process.  We want newly hired auditors to be able to negotiate their way through the agency maze without also getting lost in the auditing maze. The better we can prepare new auditors in our methods and procedures, how to audit, the more they can focus on what they are auditing.

Our instructional design efforts are laying out the tasks more clearly for new hires with 11 classes so far. For example, we have training on audit documentation, interviewing, elements of a finding, sufficiency of evidence, and report writing. This knowledge and skill set are spread out, presented when a new hire will encounter them, then reinforced as they do their work.

Nonetheless, we recognize that many aspects of auditing are affected by circumstances and context that can’t be set in procedure. Strategies, priorities, principles, and standards provide general guidance in these situations. Leadership is also important and we want to help our newly promoted team leads understand the new responsibilities and situations they must take on, and perform them with competence and confidence.

We are developing that team leader training in our next phase, and some intermediate auditor training, and some technical training on specific software or analytical tools.

This seems like a lot of work but we are asking our auditors to develop and offer the classes, which involves us all in the responsibility of defining expectations, developing the content, and presenting the instruction.

We want to shorten the learning curves of our auditors because that translates into highly professional work from everybody. Staff members that have had the opportunity to take part in thorough and holistic training are a key element of a learning organization.

Auditors at Work Featured Financial Audit Performance Audit

A new approach in financial accountability

Portland just released its biennial financial condition report, which is a great tool that auditors in our region use. Auditors for Portland, Metro, the State of Oregon, and Multnomah County all regularly issue financial condition reports. These reports follow the same method of looking at key financial indicators over a ten year period to spot trends. These trends may show the recovery from a problem, or could be a warning that a problem is creeping up, year by year.

They use graphics in creative ways to simply tell these stories. The reports are a great way to inform the public about the sources of a government’s money, and where that money is spent.

Featured Financial Audit

Keeping the State of Oregon Accountable, Fiscal Year 2014

Keeping the State of Oregon Accountable, Fiscal Year 2014

  • As the state’s independent auditors, we propose adjustments to correct errors and we report findings with recommendations to strengthen controls.
  • Overall,this year showed improvement addressing errors identified last year.
  • We found multiple federally-funded state programs are not administered in accordance with federal requirements, and our recommendations are slow to be implemented.
Financial Audit

2014 Oregon Financial Condition

Oregon Financial Condition Report

The impact of the Great Recession and the beginnings of recovery are told in this report about Oregon’s finances. The report covers the period ending June 30, 2014.

Oregon was hard hit, forcing difficult budget decisions to bring spending in line with revenues. The state’s biggest challenge was meeting the increased need for state services without enough state revenues, though extra federal funding helped.

As the economy recovers, and Oregonians get back to work, it is a good time to examine the state’s financial health for areas that need attention.

  • The state borrowed to build infrastructure and create jobs but the debt payments continue after the money is spent, leaving less money for future maintenance.


  • Health and human services spending grows year after year, reflecting the continued needs of the Oregonians whose income hasn’t rebounded enough from the recovery.
  • Oregon also relied on its Rainy Day Fund during the recession but has not yet begun to rebuild it.

It’s important to note areas of success and we should be pleased to see some encouraging longer-term trends.

  • State health care costs for employees have leveled off in the past four years, and declined slightly in 2014 as a result of employee contributions.


  • Crime rates for violent crimes continue their long decline though property crimes recently increased slightly.
  • With federal assistance, Oregon had sufficient unemployment insurance reserves to provide benefits through the recession, and has already made great progress rebuilding the reserves.

Sound financial condition is vital for sustainable government services. The state needs to continue rebuilding, and prepare for the next economic storm.

Read the report

Financial Audit