The Office of Auditor of Accounts Sets the Record Straight
Updated: Tuesday, November 24, 2015
The Office of Auditor of Accounts (AOA) would like to provide information to address various questions regarding the Office.
Why are technical audits (e.g. the State's Comprehensive Annual Financial Report (CAFR), "Single Audit" of federal expenditures), while not easily understood by the general public, so important?
The State of Delaware is highly dependent upon the results of technical audits. Without them, the citizens would see significant adverse effects, including a reduction in government-provided services or an increase in taxes.
Successful and timely completion of such audits is integral to the financial health of the State of Delaware. Historically, the State has maintained a "AAA" bond rating, the highest awarded, based, in part, by the results of the CAFR audit. This attractive rating has allowed the State to secure low interest rates on bonds needed to finance construction of new buildings, schools, and infrastructure. A lower bond rating would result in higher interest costs on current and future bonds and would deter investment in our State, making it difficult for the State to issue new bonds. Additionally, negative results in the Single Audit could force the State to repay federal funds or eliminate future federal funding.
Why doesn't AOA force agencies to correct problems found during audits?
These powers are referred to as enforcement. AOA does not have the legislative authority to force agencies, the legislature, or entities to make changes or correct problems. These powers are vested with others in the State and federal governments; as such, duplicating those efforts would be wasteful. Further, professional auditing standards require the Office to be independent to ensure objectivity. Therefore, as the State's independent auditor and investigator, we are prohibited by professional standards from acting as an enforcement agency or standing in as management to perform their duties and responsibilities. Management's responsibility includes preparation of the financial statements that are subject to audit. Hence, no audit, mandated or otherwise; can commence without management fulfilling its responsibility to prepare the statements. Further, professional staff are responsible for abiding by professional standards and codes of conduct. Failure to do so would result in the potential loss of professional licenses and credentials.
Why does AOA use contractors to assist with financial audits?
There is a balance between utilizing contractors to assist with certain types of work versus completing the job without any contractor assistance. Make no mistake, all work, including contracted engagements, is performed under the direction and technical supervision of AOA professional staff. The amount of staff needed to conduct all the work statewide during the peak financial audit period is at least five times our current staffing level. Hence, contracting such work helps to manage the increased workload during that period.
In contrast, overreliance on the work of CPA firms can result in cost overruns and an extreme dependency on contractors for technical expertise. The Office prides itself on understanding the audit environment better than any contractor since we are 100% focused on State of Delaware internal controls and processes; therefore, we do not rely on any one firm or group of contracted auditors.
Why is it important to hire qualified individuals when filling the State Auditor positions?
The Office has made a firm commitment to ensure that all professional staff meet certain baseline minimums to optimize every professional position and ensure that taxpayers' dollars are well spent. Filling the job simply for the sake of giving someone employment is wasteful from day one and has a negative ripple effect as time goes on. Since unqualified individuals never reach job proficiency, they drive away the professional staff who are technically competent and must pick up the slack for the poor producers. Over time, this will compound the strain on technical management staff, reduce the Office's productivity and inevitably result in an incorrect and substandard product. In addition, hiring unqualified staff goes squarely against the principals of performance auditing, which is to ensure efficient and effective government operations.
Does the AOA audit my taxes?
As a regular practice, AOA does not perform federal or state tax return reviews. There are instances where a state tax review is necessary as part of a financial audit or fraud investigation. AOA has also referred items to the IRS for investigation.
Who do you audit?
Generally, AOA may audit any organization that receives or collects money from or for the State.
What kind of audits does AOA do?
The following summarizes the types of engagements completed by AOA under professional standards.
|Type of Engagement||Purpose of Engagement||Professional Standards|
|Financial Statement Audit||To provide an opinion about whether an entity's financial statements are presented fairly in all material respects in conformity with an applicable financial reporting framework and report on internal control and compliance.||Government Auditing Standards, issued by the Comptroller General of the United States and Generally Accepted Auditing Standards, established by the American Institute of Certified Public Accountants|
|Examination||To provide an opinion on whether the subject matter is in conformity with the criteria in all material respects or the assertion is presented, in all material respects, based on the criteria.||Government Auditing Standards, issued by the Comptroller General of the United States and Attestation standards, established by the American Institute of Certified Public Accountants|
|Agreed-Upon Procedures||To perform specific procedures on the subject matter and report on the results of those procedures.||Government Auditing Standards, issued by the Comptroller General of the United States and Attestation standards, established by the American Institute of Certified Public Accountants|
|Performance Audit||To obtain and evaluate sufficient, appropriate evidence to provide findings or conclusions to management and those charged with governance in order to improve program performance and operations, reduce costs, facilitate decision making, and contribute to public accountability.||Government Auditing Standards, issued by the Comptroller General of the United States|
|Special Investigation||To research alleged fraud, waste, abuse, and violations of criminal or civil laws, as well as administrative requirements.||Quality Standards for Investigations, issued by the Council of the Inspectors General on Integrity and Efficiency|
(Commonly referred to as quick response auditing.)
|To evaluate, review, study, or analyze the programs or activities of an organization to provide information to management for various purposes.,Inspections may be used for a variety of objectives, including, but not limited to, monitoring compliance, measuring performance, and inquiring into allegations of fraud, waste, abuse, and mismanagement.||Quality Standards for Inspection and Evaluation, issued by the Council of the Inspectors General on Integrity and Efficiency|