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Living Our Standards
By Carolyn Smith

Friedrich Nietzsche was right: That which does not destroy me makes me stronger.

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THE END: AUDITOR RECOGNIZED AS TAXPAYER HERO

This story has a happy ending. In addition to being recognized as a taxpayer hero, I have negotiated two contract extensions, increased my staff by two full-time equivalent positions, and was promoted from the director of internal audit to chief audit executive. This recognition by Ohio Auditor of State Dave Yost was one of the last events in a two-year attack on the independence of the Columbus City Schools’ Office of Internal Audit. I decided to start with the end of the story in case you do not read the entire article. I was very happy on this March day to have my work recognized because, just one year earlier, I was in tears when I found out that of all the people that cheated and manipulated data, my office was the sole function recommended for elimination.

The following was written by the local media editorial board:

Auditor Deserves Heroism Award
  
An award for Columbus City Schools Internal Auditor Carolyn Smith is well-deserved for the professionalism and courage she showed as she tried to get to the bottom of allegations that district administrators had rigged student data to fraudulently enhance the school system’s performance ranking.

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THE MIDDLE: OFFICE OF INTERNAL AUDIT RECOMMENDED FOR ELIMINATION

In the wee hours of the night on April 16, 2013, I tweeted out one sentence: “Education Commission Recommends Elimination of the Office of Internal Audit.” I learned that my office was going to be eliminated by reading an article about the commission’s recommendations. The recommendation was one of 25 designed to improve the academics and operations of the Columbus City Schools. Just four short months before, I had released a report that detailed a massive data manipulation scandal in our district. The data manipulation could be traced back eight years and two auditors earlier, but I was the auditor that saw the audit through to the end.

Recognize the Overt or Covert Signs of Independence Threats

About seven months into the audit, once I established that data was being manipulated and had led to incorrect results being reported to the State of Ohio, I started to believe management and the board president were interfering with the audit. For the first time since being hired, the board president instructed me to meet with her and the superintendent and provide them with a briefing of what I was going to report to the audit committee at the June meeting. Upon my arrival to the requested briefing, I learned the superintendent had invited two of her direct reports to also be briefed. I told the superintendent I was not comfortable with her direct reports being at the meeting and that they had to leave, which they did.

According to the Independence Standards Board, an “intimidation threat is the threat that arises when an auditor is being, or believes that he or she is being, overtly or covertly coerced by an audit client or by another interested party.” This was clearly a case of a threat to my independence by intimidation. I viewed this contact as improper and reported it to two other board members who served on the audit committee. I had decided earlier on in my career that I would operate ethically and not let my independence be jeopardized. I had long ago decided that I would leave any job before I went against my principle. This was not an easy decision, and I have even lost friends because some felt I never should have performed the audit or made the results public.

Act When Your Red Line is Crossed

I had hoped that informing the other board/committee members of the improper contact would lead them to intervene and correct the board president’s behavior. My hopes were soon dashed when the board president wanted me to meet again with her and the superintendent to update them on the audit results before the July audit committee meeting. For me, the red line was crossed when she asked me to wrap up the audit because of the negative publicity that was being generated. At that point, I had to make a decision, and I decided to inform the rest of the board members and the auditor of state. I contacted the auditor of state because his office had opened an investigation into the matter and was working with my office because we were a structurally designed independent Office of Internal Audit. At that point, I had informed some close friends that I was going to resign my position, as my integrity was being challenged.

Interference and Intimidation Temporarily Stopped

The media became aware of the issues and wrote numerous articles on the matter1.

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The picture above is at an Audit Committee meeting where the board president had just read a memo explaining how she never put any pressure on me to end the audit; I responded by saying that I stood by the memo I sent to the board.

After I sent my memo to the board and contacted the auditor of state, both parties were dismayed at what I had described and instructed the board president and superintendent to immediately stop interfering with the audit. After the board was warned by the auditor of state, the interference and intimidation temporarily stopped. I was free to finish the audit unimpeded and with no undue influence or management interference. At that point, I did not feel compelled to resign, and on December 20, 2012, I released a thorough report titled “Student Altered Attendance Special Review.” The local media led with my report release on the front page, above the fold.

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THE BEGINNING: EIGHT YEARS AND THREE AUDITORS LATER, THE TRUTH IS REVEALED

Listen to Whistleblowers

After releasing my report, I felt a cloud was lifted and a I had seen an eight-year journey to completion. My report was issued December 20, 2012, yet a whistleblower had first reported concern to the board, the superintendent, and the internal auditor in October 2004. Unfortunately, before a thorough investigation could be started, the internal auditor was placed on administrative leave in January 2005, and her contract was not renewed after the July 31 contract end date.

Anonymous whistleblowers had reported that student test scores and the district’s report card were being positively impacted by data manipulation. The reports contained specific actions, steps, and individuals that could have been adequately investigated and for which conclusions could have been reached had the auditor’s work not been interfered with in 2005. The auditor at that time reported about management interference to the audit committee chair, but her concerns fell on deaf ears. When the reports of data manipulation were reported to the board, the board asked the superintendent how to investigate, and the superintendent supported the recommendation made by one of the people identified as devising and implementing the data scheme (he later served jail time for his involvement in the scandal).

With no permanent audit leader at the district, the superintendent was able to implement her plan for an investigation; the results were that no problems were noted. Once a new auditor was hired, he was informed that the accusations of data manipulation were investigated and not substantiated.

All Investigations Are Not Equal

Years later, my review of the first investigation done in 2005 incorrectly concluded that no data was manipulated. Even though it was reported as an investigation, it was more of an agreed-upon procedure. Most of the work performed was interviews with those identified as being involved in manipulating data, and a review of procedure manuals that indicated how data was to be collected and reported to the state. No further work was done on the matter, even though staff continued to anonymously report concerns regarding district practices and alleged data manipulation.

In August 2011, a named and credible source provided information on how data was being manipulated. I opened an investigation into the matter and issued a report a year later on December 20, 2012. On April 16, 2013, my office was recommended for elimination. On November 5, 2013, the citizens of the Columbus City Schools District voted to retain the Office of Internal Audit. On March 4, 2014, I received the Taxpayer Hero of the Year Award from the Ohio auditor of state. On September 21, 2019, I will be celebrating 10 years with the Columbus City Schools as chief audit executive.


LESSONS LEARNED

I participated in an ALGA presentation about audit shops under siege at the 2018 Annual Conference. Preparing the presentation made me go back and reflect on the importance of our professional standards and how and why independence is so important. I am thankful I had ALGA to reach out to and seek guidance from.

Inside my organization, I was alone and felt like I betrayed them for exposing and hurting our district’s reputation. Networking with others outside my organization made me realize I followed our professional standards and code of ethics and helped our primary stakeholder, the district’s students. 


NOTES

1 Auditor’s memo reveals pressure to end school-official probe: The Columbus Dispatch, Thursday July 26, 2012.

Interfering in inquiry is illegal, Yost warns. The Columbus Dispatch, July 28, 2012.


ABOUT THE AUTHOR

Carolyn Smith, CPA, CRMA is the Internal Auditor/Chief Audit Executive for Columbus (OH) City Schools. Carolyn is also an At-Large Board member of ALGA and a Board member of the Governmental Accounting Standards Board.