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Quarterly: Fall 2020 - Eric Spivak

Towards a Healthier Relationship: Reflections on an Auditee’s Stress at Being Audited

By Eric Spivak

I suggest that as a profession, we consider how our approach to report writing ultimately impacts our ability to achieve the desired results of improved public services.

A speaker at last year’s ALGA conference rhetorically asked, “When was the last time you included a positive finding in an audit report?”

The CAE sitting next to me whispered, “That’s not my job; that’s not what I’m paid to do.”

I cringed at the CAE’s perspective. I believe that in the majority of situations, the “negatives only” approach to internal auditing is counterproductive to developing an open collaborative relationship that can maximize audit’s utility to the organization.

The “negatives only” approach brings back a memory from an exit conference I attended during my first year as an auditor. Holding the draft report, the auditee’s director asked, “I’m not arguing the facts, but can we talk about the tone?” At the time I worked for an audit shop that used the “negatives only” approach.

If, as a county auditor, my goal is to help a department improve its operations, then I have got to consider all the factors that can hinder me. Ideally, auditees would be open about their knowledge or suspicions as to where their operations aren’t optimally efficient or effective. This would allow us to focus our time on verifying the condition (not identifying it) and working towards root cause analysis. However, when auditees are overly worried about the audit report, they are less likely to be forthcoming and the process can turn into a game of hide and seek. This hinders me.

It may be easy to blame the auditee for not being open, but to borrow an old adage, “You shouldn’t judge a person until you’ve walked in their shoes.”

Consider the following….

Recently I was conducting an entrance conference with a department director. His stress and anxiety about the upcoming audit were visibly notable. This surprised me. In the 7 years that I’ve been county auditor, we had audited various areas of his department. In my humble, and of course objective opinion, the audit team had always delivered fair and balanced audit reports. I didn’t see any reason for him to be concerned, even though this would be the first audit of his department since he elevated to the position of department director.

Not one to keep my thoughts to myself, I finally asked him why he was so stressed about being audited. He responded, “I’ve put my heart and soul into this department.”

It was a fact I knew to be true based on my frequent formal and informal interactions with the director and my knowledge of the programs and community partnerships he had implemented during his tenure as director. He was not a slacker coasting towards a cozy government pension. He was, in my opinion, a guy who cared about his community and was doing his best to serve it.

If peer review or your annual performance review makes you nervous, think about what it must be like to undergo a full audit. To us an audit is an objective review conducted for the purpose of identifying opportunities for improvement. For the auditee, an audit is the equivalent of peer review combined with an annual performance review multiplied by the many challenges (budgetary, regulatory, staffing, political, etc. ) involved in running a department that will likely result in the auditors finding some shortcomings. For an auditee, the audit is these shortcomings resulting in a frontpage headline lambasting the auditee for being incompetent.

Though the director had experienced several audits in the past, this was going to be the first audit since he became department director. I should have recognized how stressful this would be for him.

From “Shame and Blame” to “Acknowledgement and Encouragement”: Shifting the Focus

Later, as I pondered the director’s perspective, the phrase “strength-based approach” floated into my thoughts. I hear this phrase often from my wife regarding her organization’s work involving parents with children in the child protective services system. Similarly, I often hear the phrase “positive reinforcement” and the word “encouragement” used in conjunction with parenting. We should consider the degree to which this type of perspective can be adapted to auditing.

As a profession, I believe it is in our best interest to give serious reflection to the perspective of the auditee and to the manner in which our reports are written and received. I believe that if we shift our approach to report writing, we can reduce the auditee’s stress about the audit process. This shift, over time, will build healthier auditor-auditee relationships. In turn, this will benefit our organizations.

Facts are facts. I’m not suggesting that we back off of reporting on operational shortcomings. We do have a role in ensuring accountability and transparency. However, I am suggesting that we have a choice in how we present the findings. Context is everything, as the saying goes.

Towards A Healthier Relationship

Can you imagine a world in which auditees want to be audited? I live in that world. The day after cringing at the “that’s not my job” comment I heard at the ALGA conference, I returned to my office. The first voicemail I listened to started with, “Hi Eric. You probably don’t hear this much, but I was hoping you could start the audit of my department soon.” True story.

I take great pride in the fact that during my tenure as county auditor, the audit team has become seen as a valuable resource. About half our audits are done at the request of department directors. Imagine that—being asked by a director to come in and audit their department!

I ask that you consider whether becoming a kinder, gentler auditor can, in the long term, produce better results for the organization you work for. By being seen as a partner and not an antagonist, you may be more likely to achieve the outcome we all desire: Improved Government Operations.

Avoiding inflammatory language, recognizing real world constrains, and acknowledging sincere efforts will help your department be viewed as fair and objective and ultimately lead to you being seen as a partner.

Here are seven suggestions for producing a fair and balanced report:

  1. Title your findings in a way that provides a balanced context. Rather than titling a finding with, “The department is not operating in conformance with all best practices,” consider writing, “There are additional steps the department can take to further strengthen controls,” or “The department has implemented some best practices and others still need to be implemented. ” The latter two recognize the department may not be perfect and that there is room for improvement but that it has done some things right.
  2.  Acknowledge that management is an act of juggling priorities. Directors are busy dealing with regulatory changes, angry customers, software issues, pandemics, etc. There will be many things they should have already implemented but that they haven’t. Don’t just “ding” them for what they haven’t done, without acknowledging they may have been busy doing other things. Writing “While the department has been focused on other priorities, those objectives have been accomplished and it is now time to …” recognizes they have a lot going on and now encourages them to tackle their next challenge.
  3. Consider the human element involved in what you are recommending. Often, a manual process can and should be automated. However, getting an employee who has been with a department for 28 years to give up their card catalog system and use a spreadsheet or database can make teaching an old dog a new trick seem easy by comparison. A department director has to pick and choose their battles and sometimes it makes more sense for a director to be patient and wait for an upcoming retirement to occur. Consider wording the recommendation, “As staff turnover occurs, the department should automate the XYZ process.” Rather than viewing the recommendation as unachievable or not worth the effort, the director will be more likely to accept the recommendation as a good idea and then plan to implement it when the timing is right.
  4. Be fair about what is achievable given a department’s budget or staffing levels. We recently started a finding by writing, “While appropriate controls have been designed, it can be difficult to maintain those controls because of the limited number of full-time administrative staff and turnover among part time/extra help administrative staff. ” When we listed out the exceptions we found, it was done within the context of the challenges they face.
  5. Acknowledge the difference between the ideal and what is realistic. We recently wrote, “In a perfect world, we would recommend that an independent staff member not responsible for receiving the required documents review the file prior to the event to make sure all forms have been received and are signed. However, we realize the department’s staffing size does not allow for this.” Differentiating between the ideal situations and realistic conditions lends itself to productive discussions among decision makers regarding risk and related issues.
  6. Recognize efforts regardless of their results. Sometimes a department doesn’t achieve a desired outcome. If they have made attempts, regardless of their success, we should acknowledge the efforts as a means of acknowledging that some things are beyond their control and to encourage them to keep trying. Recently we found that the public often submitted incomplete planning applications to our building department. This increased the time it took to review and approve an application and frustrated the department’s customers. Getting the public to change its behavior is difficult. The department could have given up after various changes to the application didn’t correct the issue and accepted the condition as “just the way things are.” To encourage them to not give up, we wrote “We commend the program for having taken many steps to decrease the likelihood that a submitted application will be determined to be incomplete and for continuing to look for additional ways to further reduce this number. ” We then provided them with our recommendations we thought might decrease the number of submitted incomplete applications.
  7. Don’t overstate the effort in order to demonstrate the significance of an issue. It isn’t necessary if your intent is to help management identify where time and attention is needed to improve operations. When we exaggerate, we lose credibility. When we keep things in perspective, we help management prioritize issues. For example, we recently wrote, “Overall, the net effect of the misclassifications was minimal…. We point them out only because a primary purpose of this audit was to highlight where management may want to pay additional attention as it prepares for the … ”

Implementation of these seven strategies has helped me transition my audit shop from being feared and avoided to being viewed as a resource by the majority of departments I have audited. I am confident that the fearful director I discussed earlier will, after he sees the final report, realize his level of fear was unwarranted. Most importantly, I think he will be comfortable requesting our assistance in the future and that is what best positions audit to be catalyst for organizational improvements. I encourage you to shift from the “blame and shame” approach to report writing and give the "acknowledge and encourage" approach a try.


About the Author

Eric Spivak has been providing audit, consulting, and training services for over 25 years, working primarily at the state and local levels of government. As a trainer, Eric has worked internationally training auditors in Micronesia, Bhutan, and India and has been a presenter at numerous national and regional audit conferences. For the past 7 years he has served as County Auditor for Jackson County, Oregon.