- The Quarterly
- Audit Excellence
|Quarterly: Winter 2019 - Kristen Clark|
Chief Audit executives embrace and encourage equity in auditing
Before her career as a government auditor and now a chief audit executive, Mary Hull Caballero worked on the U.S.-Mexico border for 10 years. While leading a nonprofit organization in El Paso, Texas, she observed how disparately the state distributed money to its local governments — an experience she says gave her “enlightenment” on what equity in government really means.
“[As auditors,] we always say we look at ‘efficiency and effectiveness.’ But if you look at the history of government, you can be very efficient and very effective and be very inequitable — and those governmental decisions and outcomes create so much havoc for communities. We see this over time,” Hull Caballero said.
When Hull Caballero first ran for auditor of Portland, Oregon five years ago, she campaigned on integrating equity analyses in the office’s audit work. She set that tone on day one in her elected position and has carried it into what is now her second term in office.
“I’m a big believer that government can intervene in people’s lives for the good,” Hull Caballero said. “Our work is just falling way short if all we’re looking at is if things are efficient and effective. Then we have these crippling decade-after-decade-after-decade fissures, money not being spent well, programs not being run well for everybody — and I just think that auditing should be front and center in the equity question, in the analysis, and in the recommendation-making.”
Additional resource: “Diversity, Equity, and Inclusion (DEI) and Auditing: Frequently Asked Questions”
Hull Caballero is among many chief audit executives in local municipalities across the U.S. and Canada who prioritize diversity, equity, and inclusion issues in their audit work. (ALGA itself advocates for this approach through its DEI Committee, established in 2018.) Using everything from census data to city policies as criteria, these shops shed light on ethnic, gender, and other disparities across a range of public services — inequities that affect both the residents receiving city services and sometimes also the city personnel providing them.
Eduardo Luna brought an equity focus to his previous work as San Diego’s appointed auditor, and he continues it now as the appointed auditor of Beverly Hills, California. He said that in San Diego, “often times, there was a clear dividing line that was pretty visible when you would map out the data…. Time and time again, during various audits, we would see tremendous disparity on where the needs were, where the money was going.”
For example, Luna said for pedestrian safety, auditors found communities of color had a higher rate of traffic injuries to pedestrians, but those same areas were excluded from the city’s traffic improvements.
“We have an obligation to focus on efficiency and effectiveness but as important — if not more so — is really focusing on disparity of services. Does everyone have equal access to government services and benefits, or are we just serving the wealthier communities? It’s really important to focus on the entire city,” he said.
In some shops, like Hull Caballero’s and Luna’s, looking at audit topics through an equity lens has become a natural step in the audit process. For other shops, the work materializes through specialized products published to aid local government leaders’ decision-making.
For example, a few years ago at the request of a city councilmember, the City of Sacramento’s Auditor’s Office began issuing annual reports on the gender and ethnic diversity of the city’s personnel. Auditors analyze data from human resources and compare that to census data for the city. The analysis has proved valuable and sparked change in city government — but not without some controversy, acknowledged Jorge Oseguera, the city’s appointed auditor.
“One of the more sensitive things is what it implies,” Oseguera said. “When you do this kind of analysis, you notice greater deviations from where the city residents are to where your employee composition is. It implies there could be some intentional or unintentional bias in our selection of who we’re hiring.”
Oseguera said the analyses revealed employees of color were much less represented at a management level than when looking at city employees as a whole. There was also a visible gender pay gap, although that gap was surprisingly narrower at the management level than it was among all employees, he said. (The office also puts out a similar analysis every two years on membership of Sacramento’s boards and commissions to see how reflective those are of the broader community.)
“It brings potential issues into light and allows management to be aware of that in making compensation decisions going forward,” Oseguera said. “Our approach was to try to be as fact-based as possible. So, we were very specific in disclosing our methodology and what it was that we were doing to conduct the analysis, then we just let the information speak for itself.”
These revelations, while uncomfortable for city leaders, have inspired tangible change. Sacramento hired a diversity manager as “a direct consequence from the work we have done,” Oseguera said.
“That individual has been very actively involved in pursuing policy changes and changes in hiring practices and working with our community groups to integrate their perspectives and concerns into how the city does business and how that changes going forward,” he said. “It’s made a difference and brought awareness to an area that, in the past, I think had been neglected. Anytime we can be value-added as an auditor’s office, it’s good for our profession.
“It doesn’t have to always be these critical audits that we’re working on that demonstrate the value that internal audit can provide for our organizations. Doing work like this that is more analytical and informative — the good can go a long way.”
Ginger Bigbie, the internal audit director for the city of Minneapolis, has a similar perspective on integrating equity through “value-added” audit work.
Her office recently spearheaded a consultation among various city agencies to look at equity in Minneapolis’ efforts to recruit police officers. Through data analysis, her office’s report identified some disparities along gender and racial lines and recommended solutions. For example, the audit team found gender disparities existed in the results of the fitness tests that recruits take, in part because recruits had the same pass/fail criteria regardless of age or gender.
“A lot of people are just afraid that if it’s a consult or advisory services, then we’re crossing a line — and that’s absolutely not true and you’re missing a lot of value-added opportunities,” Bigbie said.
Discussing issues of equity — such as those around gender and ethnicity — can be difficult and complex, particularly for individuals who don’t often talk about the importance of diversity and inclusion or who don’t interact often with people from backgrounds different than their own. But audit shops are leaning into those discussions for their equity-related audits.
Additional resource: ALGA’s Diversity, Equity, and Inclusion Committee
“When you start looking at things from an equity perspective, you are forced into those conversations, because the evidence will take you there,” Hull Caballero said. “There is an evolution of people’s maturity about those conversations that takes place. [To my knowledge,] we have not had the kinds of conversations where people won’t go there; some people are quicker to go there or more comfortable going there.”
Hull Caballero said she earned her staff’s buy-in for her vision by approaching equity analyses similarly to audit processes auditors already do routinely.
“The Yellow Book requires us to do fraud brainstorming and look for red flags for fraud; we’re doing something similar with equity issues,” Hull Caballero said. “We’ll have an equity brainstorm — we’ll think through what we’ve learned in the planning phase of an audit and basically just sit down and start talking about where might there be pitfalls for equity. Where might some of the decisions that have been made in this program or in this department be affecting some people more than others? When you’re on the lookout for it, it’s pretty easy to start identifying specific areas.”
She continued: “Auditors are used to doing what auditors do, and they aren’t the most change-embracing folks, because we have our processes and our checklists, and so I think there was a moment of ‘oh my gosh, how are we going to do this? What are you talking about?’ But when you can tie back to things they’re already doing and things they already know, it seems less daunting — like brainstorming for fraud. If we can do brainstorming for fraud, we can brainstorm for equity.”
To maintain objectivity, chief audit executives said they root their analyses in the same criteria they would for other topics — such as leading practices, existing city policies around diversity and inclusion (such as strategic plans), and in guidance from city agencies that specialize in the topic. For instance, Minneapolis has a Division of Race and Equity, which Bigbie said her office will consult during the planning phase of their audits.
She said auditors talk through high-level objectives with the division’s staff and ask them about areas involving equity to explore. “They always think of things that I would not have thought of,” Bigbie said.
To maintain independence in the audit, though, Bigbie noted: “When we ask for their opinion, we document the discussion that there’s no guarantee we’re going to do different types of audit steps or they’re going to dictate to us what we do. I make it clear to them this is just a collaborative discussion, and we want to make sure we’re aware of any other concepts or problem areas that we can, at least, explore more.”
As much as the chief audit executive’s tone at the top matters in integrating equity into audits, a staff’s willingness to explore those issues with awareness and sensitivity help toward the effort’s success, chief executives said.
“It’s really a group effort, and it’s the tone that you’re providing as a director — telling your staff ‘it’s OK to do this,’ and then you have to have staff really being aware and attuned to that,” Luna said.
What helps with that attentiveness, he said, is auditors truly knowing the communities they serve, which means interacting with residents and those directly affected by the government policy or program being audited. “That means leaving your desk, leaving city hall, going out and exploring those different communities,” Luna said.
Hull Caballero agreed, saying public outreach is a significant part of her office’s work.
“We’re talking to the people affected by government decision-making — and that is powerful medicine,” she said. “It is really powerful to talk to somebody who is policed a different way than my neighborhood is policed, or who has potholes all over the place when my street in front of my house does not have any potholes in it. And then you look around and start wondering why that is and why decisions are made. … We are in listening mode in a big way right now.”
But sometimes the reluctance to investigate issues of equity starts not within the audit staff but with a chief audit executive themselves. Luna said he’s spoken to some elected chief audit executives who were hesitant to discuss diversity, equity, and inclusion as part of auditing.
“If you’re an elected city auditor, you’re elected to serve the entire city, not just those who voted for you,” he said. “You have to focus on looking at if there’s any disparity, because that can be indicative of other issues.”
Hull Caballero agrees. She calls herself “an evangelist for incorporating equity into every audit you can.”
“I know it makes people uncomfortable, but I would just say: You gotta get over yourself,” she said. “We are in the business of providing government services to everybody — and we’re not doing that. We should be in that space every chance we can.”
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