VISION 2020: A STATE AUDIT ODYSSEY

Transcription

1 VISION 2020: A STATE AUDIT ODYSSEY Presented to: NSAA 2018 Annual Conference June 13, 2018 Gila J. Bronner, CPA President & CEO BRONNER GROUP, LLC Chicago, IL NSAA 2018 Annual Conference O PTIMIZING G OVERNMENT

2 Historical Perspective State Audit is constantly evolving and changing Colonial Period: Many colonial governments did not have full time permanent Auditors. Local boards or temporary appointees oversaw financial records Early Independence: Some state constitutions created an Auditor position to oversee state accounts 2 NSAA 2018 Annual Conference

3 Historical Perspective Early 1900s: State Auditors began to expand their role. Role expansions often included: Compliance Audits Establishing Uniform Systems of Accounting Increased responsibilities for local government audits 1934: National Committee on Municipal Accounting established 1971: Federal Election Campaign Act mandates audits of political campaign finances 3 NSAA 2018 Annual Conference

4 Historical Perspective 1980s forward: Creation of Governmental Accounting Standards Board Increased automation improves state accounting and related auditing tools Increased private sector scandals shifted more focus to role of State audit in preventing and detecting similar type issues in the public sector Competitive accounting marketplace begins to challenge government s ability to attract and retain audit personnel Proliferation of accounting/auditing standards 4 NSAA 2018 Annual Conference

5 Historical Perspective Current Trends: Increasing operational limitations from budget cuts 30 out of 47 states analyzed reported a smaller staff due to budget cuts Increasing use of technology to conduct audits Utilizing new software platforms to increase efficiency of the audit process Developing an adaption strategy to prevent technological challenges (disruption) and maximize technological opportunity Increasing utilization of private firms Many states are increasingly contracting audit work to private firms for lower costs Increased utilization of remote auditing NSAA 2018 Annual Conference 5

6 Factors Impacting State Audit Expanding Mandates Staff Reductions/Shortages New Standards New Technology Legacy Staff Capacity Increased Accountability / Transparency Demands 6 NSAA 2018 Annual Conference

7 Vision 2020: A State Audit Odyssey Presented at NSAA annual conference June 13, 2018 Scott DeViney, CPA O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r

8 Get Data Portal Remote Auditing Audit Focus Central Surveillance Data Collection Transform Audits Connected Audits Central Testing Automated Testing Use it O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 8

9 WSAO s current portal Get Data Portal First launched in 2011 Central Surveillance Data Collection O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 9

10 WSAO s current data collection efforts Get Data Central Surveillance Data Collection Portal Annual reports (from govts) Confirmations of asset or liability balances, grants or revenues, etc. (from state agencies) General ledger / subledger data for common systems (from govts) O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 10

11 Keys for data collection Automated / routine collection process In a central database Uniform coding Can be reconciled to financial statements O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 11

12 Annual reporting through the Portal BARS Manual defines annual report content Governments input / upload data in portal Auditors access files and reports based on that data O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 12

13 Annual reports All local governments Files Requested For small local governments (remotely audited) Profile information Questionnaire Schedule of Revenues and Expenditures Schedule of Liabilities Summary Bank Reconciliation State Grant Expenditures Federal Grant Expenditures Board Minutes List of Board member information County Treasurer Reports Check Register Receipting policy Rate and fee schedule Public Works Activity Self-Insurance O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 13

14 GL data for common systems Central data requests (~ 525 govts) 107 prepared reports IT Audit team uses automated processes to import and validate data Auditors access suite of reports based on that data O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 14

15 Example: School District data collection From state agency State funding and grant revenues From schools Financial statements GL and subledger data From schools via state agency Cash receipts, disbursements and debt From counties via state agency O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 15

16 WSAO s current Central Surveillance efforts Get Data Portal 42 local newspapers 12 types of continuing disclosures (EMMA.msrb.org) Central Surveillance Data Collection Debt limit (state agency) Annexations (state agency) IG reports (oversight.gov) Audit reports or inquiries (from various federal and state oversight agencies) O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 16

17 How does this work? Assigned person monitors source Auditor reviews during audit Potentially relevant info added to file for each government O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 17

18 WSAO s current Automated Procedures Edit checks on annual report data Standard analytical procedures and CAATS Automated reconciliations Confirmation spreadsheets for GASB 68 and sales / excise tax Low risk auditee status and other Single Audit steps Report creation and distribution Central Testing Automated Procedures Use it O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 18

19 Example: edit checks on annual report data 32 automated edit checks O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 19

20 Example: School District automated tests From state agency Automatically reconciled Financial statements State funding and grant revenues Automatically reconciled From schools GL and subledger data From schools via state agency Cash receipts, disbursements & debt From counties via state agency Automatically reconciled O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 20

21 Example: GASB 68 Auditors select government, FY and input contribution record Spreadsheet gives ALL line item amounts, notes and RSI, for all state plans from PEFI O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 21

22 Example: sales / excise tax revenues Auditors select government Spreadsheet gives line item amount confirmations for 111 different state sales or excise taxes remitted from State Treasurer O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 22

23 Example: Low Risk Auditee Status Automated calculation of low-risk auditee status based on download of Federal Clearinghouse data O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 23

24 WSAO s current Central Testing efforts GASB 68 for state plans (certain aspects) GASB 73 for college plans (certain aspects) OPEB alternative method tool Certain application controls for schools Consistent use of enterprise funds across state Central Testing Automated Procedures Use it O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 24

25 How does this work? One expert auditor performs and documents testing Many Audits refer to central testing and use results O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 25

26 WSAO examples Historically conducted audits entirely on-site 681 governments <$300K conducted 100% remotely Researching how to spend less time onsite for all audits Remote Auditing Transform Audits Audit Focus Connected Audits O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 26

27 WSAO examples Recognizing and leveraging related work on different audits, like: Remote Auditing Audit Focus Medicaid Transform Audits Connected Audits State Colleges Schools State O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 27

28 Example: Medicaid Performance audit, investigations, etc Single Audit Specific controls High risk CAATS testing Specific compliance testing CAFR Overall analytics Overall control testing (SOC report, edit checks, reconciliations) Overall sampling (stratified) O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 28

29 Improved audit focus More time for High risk areas Remote Auditing Audit Focus Designing more sophisticated testing Value-added time with governments Transform Audits Connected Audits O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 29

30 Why? Get More Do more in less time Shift hours to more value-added work Raise floor and raise ceiling on audit effectiveness O f f i c e o f t h e W a s h i n g t o n S t a t e A u d i t o r 30

31 Indiana State Board of Accounts Strategic Vision 2020

32 SBOA Goals for the Future Preliminary Planning & Audit Work Perform preliminary planning and audit work prior to the start of an audit Increase efficiency in audit processes Remote Auditing Conduct more audit procedures from a remote location Less time spent onsite at the local units Increase efficiency and collaboration amongst our audit teams Real Time Audit Procedures Conduct audit procedures in real time to provide quick assistance Conduct timely and effective risk assessments

33 An odyssey is a long exciting journey on which a lot of things happen.

34 I read in more than a few of the articles that I searched that Henry Ford defined the lean concept in one sentence: We will not put into our establishment anything that is useless.

35 We are doing this because we want to optimize the State and local government audit process.

36 This raises the question: How does this apply to us?

37 I think we have to ask ourselves: Why are we still auditing like this?

38 For the Board of Accounts, I have asked my staff these three questions.

39 I think what we are really doing during our audits is just redoing what we did on paper but make it look different because we are doing it in our notebooks.

40 For me, that means Indiana needs to take advantage to today s technology. How do we do that?

41 We need to apply the lean process and eliminate of all non-value-adding activities and waste from our audit process.

42 What Have we Accomplished Financial information entered into Gateway Application Data Retrieved from other State Agencies for Expectation Figures 79 Compliance and Review Engagements Completed Remotely in 2017

43 Where are we going? Estimated that we will file 400 Compliance & Review engagements using remote approach in 2018 Establish Process for Remote Audit Procedures Statewide Remote Auditing Process Implemented

44 How do we get there? Secure Document Upload Portal Implement Monthly & Annual Secure Document Uploads for all governmental units Conduct a pilot project on non federal-audit engagement to finalize process

45 Files Requested Monthly Annually Bank reconcilements Year End Bank Statement Year End Outstanding Check List Approved Board Minutes Funds ledger Year End Investment Statements Salary Ordinance Detail of Receipts and Disbursements for the year Employee Earnings Record Annual Vendor History Report

46 Direct Request Feature SBOA sends direct request to unit through secure portal Unit is notified by a direct request has been submitted Unit uploads direct request documents SBOA receives direct request documents Remote Testing procedures are performed

47 Implementation Time Frame For Uploads July For all units (excluding counties and schools) January 2019 For counties and schools

48 State Audit is evolving Conclusion Improving State Audit operations is an on-going and continuous process driven by new technologies, stakeholder demands, and resource constraints There are many risks maintaining the status quo Consider existing models and strategies currently used by other states Do not be afraid to think outside the box in your own State Audit Odyssey 48 NSAA 2018 Annual Conference

49 Questions 49 NSAA 2018 Annual Conference