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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Audits in the News: Oct. 12

We here in the audits division are proud that the work we do makes a difference. Our work attracts the attention of the legislature, statewide news sources, and even local media outlets. Local media coverage of our audits is just another way we communicate with the people of Oregon about the work that we’re doing on their behalf to make government better. This is part of an ongoing series of posts rounding up recent instances in which the Oregon Audits Division makes a cameo in the local news.

The Oregon Audits Division recently released its audit of Oregon’s debt collection practices, which found that liquidated and delinquent debts owed to the state have nearly doubled since 2008. You can read the full audit here.

The audit was talking some big dollar figures, leading several media outlets to jump on the story.

KTVZ – Audit: State debt collection falls short, $ owed nearly double

Read the story here.

 

“Liquidated and delinquent debts owed to the state of Oregon have almost doubled since 2008, to nearly $3.2 billion, and the state needs a sustained focus to improve collections performance over time, a new audit released Tuesday by Secretary of State Jeanne Atkins found. “

Oregon Public Broadcasting – Oregon’s Delinquent Debts Double Since 2008

Read and listen to the story here.

“Secretary of State Jeanne Atkins says collection rates on the debt have also dropped, from 13 percent to 11 percent.  “The state’s debt collection system needs leadership, it needs sustained focus and accountability to assure Oregonians that the state isn’t squandering opportunities to collect funds owed essentially to tax payers,” she said…. The audit recommends that one agency, the Department of Administrative Services, oversee collections instead. It would set policy and require departments to report their success rates.”

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Audit Release: Oregon Needs Stronger Leadership, Sustained Focus to Improve Delinquent Debt Collection

Executive Summary


Liquidated and delinquent receivables owed to the state of Oregon have almost doubled since 2008, to nearly $3.2 billion, while collection rates on the debt have dropped. The state’s debt collection system needs more leadership, sustained focus and accountability to improve performance over time.

 

Read full report here.

Past due receivables are growing

Oregon’s liquidated and delinquent debt rose from $1.7 billion at the end of fiscal year 2008 to nearly $3.2 billion by 2014, while statewide collection rates on that debt dropped from 13.5% to 11.2%. Nearly $800 million of the debt is tied to the state’s general fund.

Liquidated and Delinquent Receivables

collections audit blog pic 1

Source: Legislative Fiscal Office. Adjusted for PERS errors. Excludes Department of Administrative Services interagency debt.

The recession contributed to the increased debt. Evidence indicates many of the debtors are low-income, and more than half the debt may be uncollectible.

However, bumping up Oregon’s collection rates could still make a substantial difference over time. At 2014 debt levels, every percentage point increase in the statewide collection rate would improve collections by about $38 million. If Oregon had collected delinquent debt at a 13.5% rate in 2014 – last achieved in 2008 – the state would have brought in nearly $90 million more in collections.

Our audit found four key improvements that could help Oregon increase collections:

  • Improved oversight of collections;
  • Enhanced performance measurement and reporting;
  • Increased expectations for private collection firms and the state’s central collection agency;
  • Better use of proven collection tools.

Oregon has not focused on improving collections

collections audit blog pic 2Our audit found Oregon’s highly decentralized approach to collections has contributed to a lack of sustained focus on improvement. This is our sixth collections-related audit since 1997. Significant improvements identified in those audits have not been implemented, some dating back 18 years.

Oregon has not implemented productive collection tools used by other states, has not resolved lingering legal issues that hinder collections, and has allowed inadequate performance measurement to persist.

Individual agencies have made some improvements. Statewide, however, no one has been tracking collection improvement efforts or encouraging them. Our discussions with leading states on debt collection highlighted the importance of having a system “expert” responsible for identifying potential improvements, looking outside the state system for new opportunities, and reporting to decision makers.

In Oregon, the statutory authority and history of the Department of Administrative Services indicate it is the best agency to serve as a statewide strategist on debt collection.

Performance reporting, measurement are flawed

collections audit blog pic 3State agencies routinely collect receivables, or bills for charges and services. Statewide performance reporting focuses on receivables that become “liquidated and delinquent” – past due debt that debtors have had a chance to contest.

The Legislative Fiscal Office prepares an annual report on liquidated and delinquent debt collection, designed 16 years ago by the Legislature to help drive collection improvements. However, the report includes few large-debtor agency details – not even their collection rates – contains noteworthy inaccuracies, and does little to hold agencies accountable for collections performance. It also does not identify potential collections improvements or detail the status of agency improvement efforts, key to encouraging advances.

In addition to reporting, we also focused on “assignment” of debt, accounts sent by agencies to private collection firms or the Other Agency Accounts unit at the Department of Revenue, the state’s collectors of last resort. Private collection firms carried nearly $1 billion of the state’s debt as of 2014 – more than double the 2008 balance – with a collection rate just over 1%. Other Agency Accounts, the state’s central collection agency, had a better rate, roughly 7%, according to Legislative Fiscal Office data. Assignment to OAA has stayed relatively flat, however, hitting $259 million in 2014.

We found the Department of Administrative Services is not evaluating the performance of OAA or private collection firms. We also found some large-debtor agencies are not using performance information to strategically assign debt.

Oregon is not using some proven collection tools

Our research, discussions with other states and interviews with Oregon officials suggested eight tools Oregon could pursue to increase collections, including some the state has considered for years but not implemented.

Among the most promising:

State vendor offset: Forty states are intercepting state payments to debtors who are also state vendors, including corporations and consultants. Our work indicates vendor offset in Oregon would collect at least $750,000 a year.

collections audit blog pic 4Bank levies: Other states have systems that allow for automated matching of a wide variety of debtors to bank account records, a process that yielded $30 million for Wisconsin in 2014.

Internet posting of debtors: Twenty-three states maintain public online lists of debtors, some focused only on large debtors, to increase collections. Many of the debtors pay after they receive a warning letter but before the information is posted.

2015 Legislative changes should help

The Institute for Modern Government at Willamette University drafted Senate Bill 55 in the 2015 legislative session to improve debt collection. We issued an interim report to the Legislature to suggest further legislative changes. Our recommendations were incorporated in the bill, which the Legislature passed and the governor signed in July.

At our recommendation, Senate Bill 55 charged the Department of Administrative Services with monitoring and improving debt collection. DAS’s duties, detailed in the bill, include improving performance reporting and assignment of debt for collection. DAS started a committee last year to address statewide collections, and contributed to Senate Bill 55.

Senate Bill 55, passed by the Legislature, included changes we recommended.

Even with stronger oversight, improving collection of Oregon’s rising debt will not happen overnight. During our audit, we found that improving collections requires meticulous work with agencies.

DAS officials – and policy makers – will also have to be persistent to ensure improvements are made.

Recommendations

Beyond the changes implemented in Senate Bill 55, we found improvements OAA could focus on. We also found other steps DAS could take, including:

  • Preparing meaningful annual reports on debt collection, relevant to the public and policy makers.
  • Helping agencies adopt successful collection tools.
  • Developing short- and long-term plans for a sustained focus on debt collection.

Agency Responses

Both the Department of Administrative Services and the Department of Revenue generally agreed with our recommendations, with DAS noting that it recognizes its oversight role.

DAS said it would focus efforts on current receivables as well as liquidated and delinquent debt. The response also included concerns about the difficulty of adopting a fully integrated vendor offset program.

The Department of Revenue said agency officials will continue to discuss many of the collection improvements noted in our audit with policymakers and stakeholders. A computer system upgrade now underway will help the agency make further improvements, the response said.

The full agency responses can be found at the end of the report.

 

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Oregon State Hospital: Significant Actions Taken to Improve Safety and Promote Patient Recovery, but Further Improvements are Possible

Executive Summary


The Oregon State Hospital has undergone enormous change. To better promote patient recovery, management has taken significant action to improve safety and patient care. The hospital offers more treatment options and strategies to create a safer environment. It has also undertaken efforts to reduce overtime, and implement an electronic health record system. However, more action is needed in these areas to further improve safety and promote patient recovery.

 

Read full report here.

Oregon Moves Towards Recovery- Oriented Mental Health Care

The first treatment mall opened at the hospital in 2006, marking a shift from decades of unit-based treatment. The hospital operates much like a college campus. Patients reside on the living units, attend class-like treatment groups on the treatment malls separate from their living space, and eat in cafeteria-style dining rooms. Treatment groups help patients learn skills like handling difficult emotions, developing healthy relationships, managing medication, and understanding the legal process.

OSH pics 1New Salem campus facilities were completed in 2011 to further create a sense of well-being. Architectural features incorporate design elements intended to minimize physical safety risks while promoting patient recovery. The buildings look and feel similar to a college campus with plenty of green space. Holding an average of about 600 patients, the facility offers them opportunities to interact with their peers and simulate community experiences such as visiting a coffee shop or a salon.

The adoption of treatment malls is part of Oregon’s larger move towards recovery-oriented mental health care. This approach takes the view that individuals with mental illness can improve their health and wellness, live a self-directed life, and strive to reach their full potential through the recovery process. The recovery focus guides mental health services in Oregon, including the Oregon State Hospital.

Improving Treatment Plans and Groups Could Help Patient Recovery

OSH pics 2.1Hospital staff work with patients to develop treatment goals to address challenges that stand in the way of patient recovery. Patients attend treatment groups directed toward their treatment goals and group leaders evaluate their progress.

Case formulation is an important tool to help clinicians create effective treatment care plans that guide patient treatment. Formulations identify the signs and symptoms of mental illness, motivations behind patient behaviors, and patient strengths and skill deficits at a particular point in time. The process distills critical elements from the huge amount of information available and places them into a narrative context. It can be used to help develop treatment goals and guide patients to the treatment groups most likely to benefit them. We found that the hospital provides very little guidance and training on how case formulations are developed. As a result, case formulations are not consistent.

Treatment groups should be aligned with patients’ treatment goals given their importance in addressing patient challenges and evaluating patient progress. However, it is unclear whether hospital staff designed therapy groups to help patients address these goals. Hospital staff did not use patients’ treatment goals when selecting classes to offer on the treatment malls.

Also, the hospital does not have policies and procedures to ensure patients schedule classes that address their treatment goals and hospital staff do not use treatment goals to evaluate class effectiveness.

OSH pics 3The hospital initiated improved treatment by first implementing strategies to improve patient safety and adopting a new culture centered on patient recovery. Management is committed to further treatment improvements. However, the hospital has not yet developed a formal plan for implementing additional treatment improvements.

We recommend Oregon State Hospital management develop a formal plan for implementing treatment improvements to ensure the consistency of case formulations and integrate treatment goals with the treatment mall groups offered. The plan should include steps for communicating the needs for continual improvement, strategies, and timelines for implementation, milestones to monitor progress, and measures designed to evaluate the plan’s success.

We also recommend Oregon State Hospital management develop policies and procedures for developing and documenting case formulations; and designing, selecting, and scheduling treatment mall classes that consider treatment goals.

Fewer Incidents of Seclusion and Restraint Improved Patient and Staff Safety

Patients need to feel safe in order to make progress towards recovery. Hospital staff also need to feel safe to form therapeutic relationships with patients that support their recovery. Reducing patient aggression can reduce the safety risks their behavior can pose, and so reduce the need for staff to place patients in either seclusion or restraint.

OSH pic 4The hospital adopted the National Association of State Mental Health Program Directors’ (NASMHPD) strategies for safely reducing seclusion and restraint (S/R) use. These strategies address underlying reasons for patient aggression and, if implemented, can help organizations reduce the need to use seclusion or restraint. Management has made progress in implementing each of the six strategies, and their continued efforts can further reduce the use of S/R, and improve safety.

To improve safety at the hospital, we recommend Oregon State Hospital management:

  • continue to address organizational culture, training needs, and attitudes;
  • continue to use data to inform decision-making and practice in S/R reduction efforts;
  • continue Collaborative Problem Solving and Safe Containment implementation to ensure staff competency;
  • update policies and procedures that guide the on-the-job training of nursing staff to ensure consistency among the programs;
  • consider reestablishing the nursing staff mentoring program;
  • continue efforts to integrate S/R reduction tools and assessments into individual patient treatment;
  • provide adequate resources to the Peer Recovery Services Director to help ensure the department’s success;
  • continue to ensure stakeholders and consumers have a role in S/R reduction efforts;
  • continue to work with the Governor and legislature to fill vacant seats on the Oregon State Hospital Advisory Board; and
  • continue efforts to finalize the hospital’s debriefing policy.

Overtime Has Been Reduced— Fatigue Concerns Remain

OSH pic 5Excessive overtime can lead to fatigue, affecting nursing staff’s ability to deliver good patient care, make good clinical decisions, and communicate effectively. Nursing staff provide the bulk of direct-patient care at the hospital, comprising registered nurses (RNs), licensed practical nurses (LPNs), mental health therapists (MHTs) who are licensed certified nursing assistants, and habilitative therapy technicians (HTTs).

The hospital has worked to reduce overtime by hiring nursing staff to fill vacancies, using ratios to ensure appropriate staffing levels, creating a float pool of nursing staff to cover unscheduled absences, revising weekend shift times and hours, and addressing patient aggression to reduce the need for additional staff. Additional actions could further reduce overtime and its effects on patient care.

We identified several staff whose overtime hours indicate they may be at risk for fatigue and its effects. There are no policies that limit overtime hours or consecutive days staff can work. Nor does the hospital offer training on fatigue and its effects, recognizing fatigue, or on employee obligation to ensure they can provide safe patient care.

To reduce overtime and its adverse effects on patient care, we recommend Oregon State Hospital management develop strategies to limit unscheduled absences and manage individual staff’s overtime. Management should also provide training to staff on fatigue and its effects on patient care.

We further recommend Oregon State Hospital management consider the analytical framework used in our 2012 audit of the Department of Corrections to explore other strategies to further manage personnel costs while meeting patient treatment needs and maintaining a high level of patient and staff safety.

Automation Can Improve Patient Care

The hospital is implementing an electronic health record system, but parts of the system remain incomplete. The incomplete system adversely affects organizational efficiency and potentially, the quality and cost of patient care.

OSH pic 6Completing the system would help automate several key manual processes. For example, the hospital could replace its manual process for dispensing patient medication with an automated system it purchased several years ago. The automated system would provide safeguards designed to prevent medication dispensing errors.

The hospital is working to convert patient records from paper to electronic records but critical medical records such as patient prescriptions, allergy information, and “do not resuscitate” and “advanced directive” documents are still maintained as paper. Hard copy record systems can lead to additional costs, lost productivity, and limited accessibility.

We recommend Oregon State Hospital management complete implementation of its electronic health record system, prioritizing automation of processes that significantly impact patient care and conversion of critical patient information to electronic format.

Agency Response

The agency generally agrees with our findings and recommendations.  The full agency response can be found at the end of the report.

 

Featured New Audit Release Noteworthy Performance Audit

Oregon State Lottery: Unclear Laws May Let Prohibited Casinos Operate in Oregon

Executive Summary


The Oregon Constitution prohibits casinos, but enforcement is difficult because “casino” has not been clearly defined. The Oregon State Lottery’s current rules and practices may not be detecting retailers that receive most of their income from video gambling machines. We recommend Lottery seek legislation to define “casino” and take several steps to improve compliance.

 

The Oregon State Lottery offers a variety of gambling options including Powerball, Mega Millions, and Oregon games: Megabucks, Raffle, Keno, Lucky Lines, Win for Life, Pick 4, Scratch Its, and video gambling machines.

Machines are the largest annual revenue source with average net receipts of $727 million over the last five state fiscal years. Net receipts as used in this report are dollars deposited in machines minus dollars won. During fiscal year 2014, machines generated net receipts of $743 million, of which $178 million was paid in commissions to retailers and the remaining $565 million was used for state purposes. As of December 2014, there were about 2,300 retailers operating nearly 12,000 machines.

Lottery3The Oregon Constitution prohibits the operation of casinos in the State of Oregon, but does not provide a definition for a casino. In 1994, the Oregon Supreme Court concluded that “voters intended to prohibit the operation of establishments whose dominant use or dominant purpose, or both, is for gambling.” Neither the court nor the legislature has defined the terms “casino,” “dominant use,” or “dominant purpose.”
Lottery has established administrative rules to enforce casino prohibition. Under its current rule, retailers are not casinos if their non-lottery sales are at least 50% of their total income. For retailers whose non-lottery income may be less than 50%, the rule allows the Lottery to consider additional factors such as a visual inspection to determine if a retailer is operating as a casino.

In practice, Lottery is satisfied if a retailer’s facility does not look like a casino, so they perform no review of retailer income.

Lottery has identified Limited Menu Retailers as Lottery1 posing a higher risk of operating as a casino because they tend to have limited sales of non-lottery products, thus, relying more on Lottery income for their business. In 2014, 234 Limited Menu Retailers operated 1,305 or 11% of the nearly 12,000 machines in use and generated about 21% or $158 million in machines net receipts.

We focused our procedures on the higher risk Limited Menu Retailers and found that Lottery’s enforcement practices may not adequately address the Oregon Constitution’s casino prohibition. We followed the procedures prescribed by Lottery’s current enforcement program and found the program does not detect all retailers whose dominant income is gambling.
While most of the Limited Menu Retailers we reviewed did not have the appearance of a casino, over half of these retailers derived more than 50% of their income from machine commissions. Many of these Limited Menu Retailers had difficulty generating non-lottery sales sufficient to comply with the income threshold.

Recommendations

To help Lottery strengthen existing controls and to facilitate compliance with casino prohibition, we recommend Lottery management work with the legislature and other stakeholders to develop a clear and enforceable definition of a casino that aligns with the 1994 supreme court ruling of dominant use/dominant purpose. Lottery should verify gross sales reports when using them to perform an income analysis. For retailers challenged with meeting the 50% non-lottery income threshold, Lottery should evaluate whether removing a machine would enable the retailer to comply with the dominant use/dominant purpose court ruling.

Agency Response

The agency response is attached at the end of the report.

Read the full report

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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.

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GED Audit wins national award

Audit Manager Sheronne Blasi

Audit Manager Sheronne Blasi

We are very pleased to learn that our

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