3.30 g. Structural threat: The threat that an audit organization’s placement within a government entity, in combination with the structure of the government entity being audited, will affect the audit organization’s ability to perform work and report results objectively.
Now, how did this happen? I don’t really know since the law has been around for decades. I imagine whoever wrote the County Auditor role into Texas law didn’t really understand what auditors do and how auditors need to be shielded from negative repercussions when telling the truth about finances, compliance or operations.
As we auditors know, most people – including most county commissioners – don’t understand the power the county commissioners have with an audit function. It provides them with an objective and fact-based viewpoint of activities all over the county, including the goings on at the County Auditor’s office.
The GAO does its best to address each audit shop’s unique situation in the standards. If you believe you’re suffering a structural threat, please read sections 3.52 to 3.58 of the 2021 Yellow Book.
Ultimately, to prevent confusion and to keep the public from being mislead, the Texas legislature should revise the law so the title County Auditor is changed to something more accurate, like County Finance Officer.
More in the series on getting to know the fraud tree better. To get a better sense of where we are on the fraud tree and which branch we are talking about in this newsletter, please see the entire fraud tree at http://www.acfe.com/fraud-tree.aspx. Learn to do good; seek justice, correct oppression; bring justice to the […]
Just because you’re unaware of the risk, doesn’t mean it isn’t there Just because you aren’t conscious of something dangerous, doesn’t mean it isn’t lurking. One of the most important themes of the GAO’s Green Book (and the 2013 COSO model it is sourced from) is consciousness. Instead of just playing along with the crowd […]
It seems like everyone is always crunched for time and “busy” these days. As auditors, we can save our readers a few moments of precious time. How you ask? By writing executive summaries, of course!
Your audience often includes high-level decision makers and one of their most fundamental needs is brevity. So, the executive summary should be as short as possible with one page or less as the ideal length.
The sequence of items in the detailed section must match the same order in the executive summary. Otherwise, the reader of the executive summary may become frustrated wading through the detail trying to pick up more information on important issues. Understandably, audit reports can be complicated and this is your chance to clarify your message.
Some think of the executive summary of an audit report as just a teaser, or something to entice the reader to open up the full detail. To intrigue your readers to delve deeper, the executive summary can quantify or state dollars with significant issues. Additionally, an enticing executive summary includes action titles and points directly to major issues.
The executive summary should present an objective and fair view. Avoid judgmental language, such as poor, weak and inadequate. Surely that’s easy to do if you simply stick with the facts. Also, don’t make a mountain out of a molehill. Besides, if everything is fine except for a few minor issues, go ahead and say so.
While we auditors are busy designing our audits to catch fraud, we often bypass government corruption because it is so hard to prove. It’s easier for us to uncover the account clerk’s transfers into a personal account or prove that the executive assistant overcharged for travel expenses than it is for us to look at things like conflicts of interest.
But corruption is what really moves the needle; government corruption makes fraudsters powerfully rich – not just a little better off. And because of that, we should design our audits to detect government corruption, too.
Do you remember the scene in Godfather II where a US Senator attempts to extort Michael Corleone? What a great drama! But don’t naively assume that corruption only happens in a Hollywood movie or some third-world country because our government officials can be corrupt, too. Check out Inside Job, a brilliant documentary that details how Federal Reserve Chairmen and US Presidents all conspired to enrich the big banks at the public’s expense.
Technically, corruption is the broad title for any behavior on the part of a person in a position of authority to further her own interests, forgetting her responsibilities to the people she serves.
The mayor of the City of Brandon, Mississippi (population 23,000) says he was not in a conflict of interest when he voted along with City Council to allow a local developer to purchase $812,000 in land from the city. This local developer was one of the mayor’s campaign volunteers.
“I don’t gain personally from anything to do with the applicant or any of the other applicants as well,” he told the Sun. “Of the five applicants (for the land), I know every single one of them.” [1]
Purchasing professionals have a lot of power that may go unchecked. When I work for a government entity, they usually make me jump through hoop after hoop after hoop to prove that they were objective in their choice of vendors, although usually we both know that I am their first choice.
Yellow Book CPE RequirementsI frequently get requests for bids from governments with which I have no relationship. But I know they are usually just going through the motions. I am not going to waste my time bidding on a job that I know that someone else has a lock on. And, unfortunately, a lot of people’s time is wasted in the hoop jumping process, especially when the bidding documents are 20 pages long!
In 2010, State criminal investigators looked at efforts by the Oregon Department of Energy to steer federal money to a company run by the Governor of Oregon’s girlfriend after her firm lost the bid on a state contract. The winner of the bid was encouraged by the Department of Energy to include the girlfriend in the contract. The girlfriend was eventually employed as a subcontractor by the winning bidder. Three Energy Department officials happened to be on leave during the investigation.[2]
Goldline employs several conservative pundits including Glenn Beck, Mike Huckabee, Laura Ingraham, and Fred Thompson to sell gold coins on the air. By feeding public fears during the recession, conservative pundits encourage their listeners to invest in gold.
Glenn Beck, for example, has dedicated entire segments of his program to explaining why the U.S. money supply is destined for hyperinflation. He often promoted the purchase of gold as the only safe investment alternative for consumers who want to safeguard their livelihoods. When the show cut to a commercial break, the viewers were treated to an advertisement from Goldline.
Goldline marks up its coins an average of 90% over the melt value of the coin. By selling gold at more than the melt value, the price of gold would need to double for consumers to break even on their “investment.” However, since Goldline is not licensed as an investment advisor, they have no responsibility to advise their clients.
Paul Harvey, the radio newsman whom my grandmother listened to on country radio, used to use a similar sales method. He’d talk about a snowstorm in Montana and, before you know it, you were being pitched some sort of miracle skin lotion to use during cold weather. He was smooth. But I remember all of his ads as being relatively benign and for products that cost under $100. I could be wrong.
Science Applications International Corporation (SAIC) served as an advisor to the Nuclear Regulator Commission (NRC) to develop rules for recycling radioactive materials released from nuclear facilities. At the same time, they entered into a partnership with another corporation, British Nuclear Fuels, to perform the recycling that the NRC regulated.
In a 2008 decision, a federal jury concluded that the firm’s executives knowingly concealed this business interest that stood to benefit from its consulting role at the NRC. It found that SAIC had made 17 false statements and 60 false claims under the Federal False Claims Act.[4]
Bribery is when a person pays an official to make a decision in his favor. The person in need offers or gives something of value to influence the action of an official in the discharge of his public duties.
In August 2009, after a month of testimony in a federal court, a jury found former Congressman William J. Jefferson guilty on 11 charged counts, including solicitation of bribes, honest services wire fraud, money laundering, racketeering, and conspiracy.
“We have been reminded today that we are a nation of laws, and not men,” said Dana J. Boente, U.S. Attorney for the Eastern District of Virginia. “It should be a clear signal that no public official – and certainly not a U.S. Congressman – can put their office up for sale and betray that office. It cannot be tolerated. It cannot just be another cost of doing business. And today, a jury of his peers held Congressman Jefferson accountable for his actions.”
“Trust and integrity in public officials is at the heart of our democracy,” said Joseph Persichini Jr., Assistant Director of the Washington Field Office of the FBI. “What a better way to ensure those virtues, than to expose those who breach that trust.”
According to evidence at trial, from August 2000 to August 2005 Jefferson used his position as an elected member of the U.S. House of Representatives to corruptly seek, solicit and direct that things of value be paid to himself and his family members in exchange for his performance of official acts to advance the interests of people and businesses who offered him the bribes. The things of value, according to evidence at trial, included hundreds of thousands of dollars worth of bribes in the form of payments from monthly fees or retainers, consulting fees, percentage shares of revenues and profits, flat fees for items sold, and stock ownership in the companies seeking his official assistance.
Evidence at trial showed that Jefferson performed a wide range of official acts in return for things of value, including leading official business delegations to Africa, corresponding with U.S. and foreign government officials, and utilizing congressional staff members to promote businesses and businesspersons. The business ventures that Jefferson sought to promote included telecommunications deals in Nigeria, Ghana, and elsewhere; oil concessions in Equatorial Guinea; satellite transmission contracts in Botswana, Equatorial Guinea and the Republic of Congo; and development of different plants and facilities in Nigeria.
In 2008, the German engineering conglomerate Siemens paid an $800 million fine to the Securities and Exchange Commission and the Department of Justice for widespread bribery of government officials. Among the billions authorities accuse Siemens of paying out to government officials is a $2.6 million payout to former Argentinean president Carlos Menem in order to win a bid to manufacture national ID cards for the country. Other allegations include a $55 million bribe to Russian officials for a medical devices contract and $22 million to China for a metro trains contract.[6]
China appears to be the fastest growing country in every category, and now we can add fastest growing luxury market to the list. Gifts to government officials are prohibited in China, but who can resist a Swiss watch? Especially a $30,000 diamond studded one?
