Delaware State Auditor Kathy McGuiness announced on June 20 the findings and recommendations made by the independent firm – Baker Tilly – that she hired to perform an audit of the Office of Auditor of Accounts.
As part of this audit, staff from Baker Tilly reviewed and evaluated past practices, examined the many initiatives McGuiness undertook during her first 100 days in office and looked at other state auditors offices to see how the Delaware Auditor's Office compares. Baker Tilly’s report presents observations and gaps on all facets of how the office operated before the start of McGuiness’ administration in January. It paints a picture of an eroded office.
“This report paints a picture of an eroded office when I began my administration,” said McGuiness. “Baker Tilly has given me nearly 60 recommendations. I am taking a hard look at all the recommendations with the goal of making your Auditor's Office a best in-class organization to best serve Delaware’s taxpayers.”
Among the many observations and findings, two stood out: a failure to fulfill statutory mandates, and a failure to perform risk assessment.
Delaware Code mandates a schedule for specific audits to be performed by the Auditor of Accounts. Baker Tilly’s review of issued reports from the past five fiscal years found that the office never met its statutory obligations. Between 2014 and 2018, from 24% to 51% of the fiscal year reports completed were for non-mandated audits, while mandated audits were not completed.
Furthermore, Baker Tilly’s review found, “…no information was available to determine how non-mandated audits were selected for inclusion in the fiscal year engagement plan.” This means that there was no risk assessment performed nor was there in place a risk-based methodology, or any clear methodology, to determine and justify which non-mandated audits to pursue and which mandated audits to disregard.
Along with the Auditors Office not fulfilling its statutory mandates was the fact that the office lacked processes or methodologies to determine when to perform any audits. The report notes, “It is generally considered a best practice for an auditor to perform a risk assessment of an organization in order to prioritize resources when drawing up an audit plan/schedule for the next year(s) audit plan. We determined that other state auditors take a risk-based approach when determining the non-mandated audits to identify the areas with the highest risks and to perform more audits that add more value for taxpayer’s money.”
McGuiness said she is taking a hard look at all the recommendations provided to her in the report. As for addressing these two gaps McGuiness inherited, she and her staff have initiated a number of mandated audits that haven’t been performed in years and begun developing an audit plan based on a comprehensive risk assessment to analyze and prioritize objectively audit requests from various sources.
It has been documented that the Office of the Auditor of Accounts has been operating at fiscal 2008 levels from a staffing and funding level. Additionally, it appears that office has never been optimally staffed in past 10 years and has, in fact, surrendered more than $4 million during that time.
“Since the beginning of my administration, my focus has been on resetting this office and making it relevant to Delawareans,” said McGuiness. “In six months, this office has made huge strides. With new staff and a different structure, I believe this office is on the right track.”
Read the full report at auditors.delaware.gov.