Tuesday, June 12, 2012

Performance Audits

At neighborhood meetings people often ask what good are performance audits? I try to explain to them that the auditing profession has changed dramatically over the years, certainly since my serving on the State Legislative Audit Committee over 49 years ago. I remind them that an old fashioned green eyeshade audit would report how much an agency was owed or how much it misspent. Important information, but more important is how to fix the problem auditors encounter in an agency. What steps and how long will it take for the agency to correct the faults? It’s sort of like holistic medicine, we want to know how the whole body is working. Is everything working together as it was intended. Lots of younger people probably don’t even remember the green eye shades accountants used to wear in black and white movies. Some auditor and accountants have a hard time getting away from the narrow focus of the green eyeshade mentality. Let me give you an example of a May performance audit of The Colorado Division of Wildlife which shows value to the taxpayers and the department audited. Auditors found that $32 million went unrecorded; checks were written and not deducted from the accounts involved; Wildlife Commissioners received confusing and mistaken fund amounts as to what was available to the agency. Because of the accounting bloopers commissioners delayed some and eliminated other programs based on faulty accounting information. No one caught the mistakes until the state auditors came in to review what was going on with the communication procedures and accounting practices. I recall the old joke accounting students at Regis University could spout after taking Fr. Joe Ryan’s accounting class. “Debits on the left, credits on the right. Debits by the windows, credits by the door.” Fray Luca Passioli, a Franciscan monk, in Florence, Italy come up with single page left/right double entry accounting in the mid-14th century. State auditors recommended the Wildlife department go back to basics in following Fray Luca’s principles. The auditors recommended better and accurate communication with commissioners to make sure they have the right figures in the many accounts under their watch. Congratulations to state auditors for an excellent performance audit. And the department agreed with the recommendations. After reading the audit, I am puzzled, however, as to why the negotiated deadline for implementing the corrections is pushed out to September 2013, 14 months away. Surely under Governor John Hickenlooper’s prodding, and with all the assistant directors helping and CFO’s chiming in like a chorus, and all those bright CPA’s marching behind, the agency folks should be able to implement the recommendations before then. Legislators on the state audit committee are skeptical if the corrections will be made. Cast a cold eye on this one. Horseman, pass by.

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