I’ve stayed quiet on the question of whether TUSD should have an internal auditor. I’m an experienced educator and classroom teacher, not an administrator or budget analyst. I dive into administration-level questions when I feel I have to, like now, but I don’t do it with a great degree of confidence.
Some board members and others have been pushing TUSD to hire an internal auditor who would look deeply into the district’s finances, its compliance issues, questions of fraud or financial mismanagement, and so on. Board member Mark Stegeman has pushed the hardest, long before H.T. Sanchez became superintendent. In fact, before Stegeman was elected to the board, he was on the district’s audit committee and was pushing for greater scrutiny of district finances back then.
The topic has been discussed and debated for years. It looked like it might be resolved when Stegeman and fellow board member Cam Juarez got together and created a compromise proposal. But in the end, it was voted down at the Jan. 21 meeting, with Juarez voting against the proposal he helped create.
I think it’s very possible having an internal auditor at TUSD is a good idea. If that sounds like a weak, cautious endorsement, that’s because it is. I’m more certain that, unless the function is abused, it’s not a bad idea. The main abuse I see would be a board member using the auditor to go on fishing expeditions and witch hunts—the TUSD equivalent of the endless congressional Benghazi hearings of the past few years (“I know we’ll find something, anything, if we look long and hard enough!”). But the proposal just voted down stated that the auditor can’t take direction from a single board member. It “may receive direction only from the Governing Board (in quorum) or from the Superintendent or designated staff to the extent authorized by the Board (in quorum).” That means one or two board members can’t use the auditor as their private investigatory tool.
So I’m leaning toward the idea that an independent auditor might be a good idea. But I have a number of reservations I want to discuss here, many of which I haven’t heard brought up in recent discussions. A warning: I’m planning to get windy and very deep in the weeds soon, so if you’re not really interested in the topic, run for your life before it’s too late! That being said—
The current justification for hiring an internal auditor is the May, 2014, Operational Efficiency Audit produced for the district by Gibson Consulting Group. Among other things, the audit recommended “an internal audit function that reports directly to the governing board.” The beginning of the recommendation (it starts on page 14), has been much quoted by people in favor to give greater credence to their call for an internal auditor. What’s less quoted are the details of the recommendation. Gibson Consulting says the district should begin by “hiring an outside firm to conduct a comprehensive risk assessment” at a cost of $75,000. Gibson happens to offer those services. It also says that, once district hires an internal auditor, it should also continue to use “contracted resources,” which, of course, Gibson could supply.
On Gibson Consulting’s website, the company is clear that it’s in the business of “offering Internal Audit services.” So while the company’s recommendations may make good sense, it’s important to realize the Gibson folks have some financial skin in the game. The more school district internal auditors in the country, the more potential business for Gibson’s services.
How much would an internal auditing function cost TUSD? According to the Gibson audit:
Based on the size of TUSD, it should invest $250,000 a year in an internal audit function, likely through a combination of in-house (one to three full-time equivalents) and contracted resources.
So, for the five years in its recommendation, TUSD would spend $325,000 the first year, which includes the outside risk assessment, and $250,000 every year after that. Supporters of the idea say the district could spend less, more like $100,000 per year, but that wouldn’t follow the letter of Gibson’s recommendation.
But maybe the internal auditor function would pay for itself in money saved in the districts’s day-to-day operations, along with possibly avoiding costly lawsuits resulting from noncompliance issues, injuries caused by unsafe conditions, etc. Maybe so, maybe no. According to the Gibson audit:
While there is no guarantee, most internal audit functions experience a return on their investment through cost savings or improvements in internal controls.
This is literally a case of “You pay your money, and you take your chances.” The only way to get a sense beforehand if internal auditors are cost effective would be to look at other districts with internal auditors.
Adding a quarter of a million dollars to TUSD administrative expenses at a time when many people accuse the district of being administratively top-heavy and Governor Ducey is proposing a shift of district money into the classroom could be ill-advised, if not downright foolish. It isn’t all that much as a percentage of the TUSD budget—Less than one-hundredth of one percent—but a quarter of a million ain’t chopped liver.
The Gibson audit made it sound like TUSD is out of the norm because it doesn’t have an internal audit function:
TUSD does not have an internal audit function, which is unusual for such a large school district.
Is that true? So far as I know, Mesa is the only school district in Arizona that has the position, but it’s also one of the few big districts in the state. TUSD is the biggest. I admit I’m on shaky ground here, but a Google search revealed that a large number of districts in Texas and Florida have internal auditors, and a recent law passed in New York state makes them mandatory for every district over a certain size. Otherwise, I only found scattered districts with internal auditors in other states. If anyone knows I’m wrong here, please correct me.
If I’m right, two of the three, Texas and Florida, are states which are some of the least worthy of education emulation in the country. The two states, formerly headed by the Bush brothers, along with Arizona, led in its education priorities by the Goldwater Institute, form an unholy triumvirate of bad education ideas. As for New York, the state is so riddled with corruption—if you’ve been following the latest scandal involving state assemblyman Sheldon Silver, it’s just the most recent of many—it probably makes sense to have independent financial watchdogs snooping around wherever possible. So I’m not sure the internal auditor function in school districts is as widespread as Gibson Consulting states, which weakens the “Everyone else is doing it” argument.
Where is Gibson Consulting located? In Austin, Texas. (Consulting for TUSD from Texas? Again? In the words of the film, The Wizard of Oz, let me say, Dr. Sanchez, you’re not in Kansas Texas anymore. I hope you’re broadening your vision for outside resources beyond the birthplace of yearly high stakes testing and a host of other political ills.) The Gibson/Texas connection may help explain the existence of so many school districts there with internal auditors, and the Texas/Florida connection could explain why the idea spread to The Sunshine State. I’m just speculating, of course, but it seems curious to me (if true) that so many districts have the function in those states and so few in other states.
One area of controversy in TUSD is, if the district were to have an internal audit function, would the audit director report to the superintendent or the board? My Google search indicates there’s no consistent answer. Some report to the board, some to the superintendent or elsewhere.
One final note I find interesting. Yousef Awwad was TUSD’s Chief Financial Officer (CFO) during Sanchez’s tenure and during previous superintendent John Pedicone’s as well (He left TUSD recently). When Pedicone was superintendent, Awwad wrote a memo about the idea of an internal audit function. He said he supports the idea of internal auditing, but he thought one internal auditor wouldn’t be enough to do the job, which means that the $250,000 a year estimate from Gibson Consulting is closer to Awwad’s estimate than the more conservative $100,000 figure. He mentioned that TUSD and Scottsdale used to have an internal audit function “before being eliminated due to administrative cost reduction efforts.” In both cases, the director reported to the CFO, which is what Awwad recommended if TUSD decided to resume the function.
The purpose of all this information is to add to the discussion, not to come to a definite conclusion. I’m still undecided about what the district should do. If there were money enough, I’d say, do it. If I suspected deep-seated corruption in the district which has gone undetected, I’d say, do it. But there’s no extra money floating around, and I don’t see any evidence of truly bad actors in the district putting money in their pockets illegally. So this is probably an especially bad time to think about hiring one to three more administrators to look for problems which may not be there. If it’s a good idea, and I still believe it might be, it would be better to wait for a more stable financial moment.
This article appears in Jan 22-28, 2015.
They continue to promise transparency and then deliver none. Just look at the money spent on hotel and travel running in the Az Daily Independent.
What could it hurt?
All agencies who uses tax money should not fear an audit. They should take pride in their work and welcome an audit. The truth will set you free.
Dont they already have a pr team. An Internal audit would be controlled by AG.
WE ALL believe Grijalva and HER cronies are HIDING something… ARE they?? It sure FEELS like it, SOUNDS like it, and SMELLS like it… what do you have to HIDE Ms. Grijalva?? Why are YOU (and by extension your two cronies) SO afraid to have anyone LOOK at “the books?”
Someone who skimmed this article told me David Safier had written a post in TW where he waffled a bit, but looked like he might (?) be coming out in support of an independent auditor in TUSD.
After giving this post a close reading, I see that David is playing his usual rhetorical games, raising irrelevant questions and casting spurious doubts on a matter that should be clear cut for anyone who understands accounting norms for organizations of this size.
David: Instead of implying that Gibson Consulting’s motives were tainted, I suggest you engage in some genuine reporting and interview a few CPA’s in town to get their perspective on what the proper protocols would be.
And really — we don’t have enough money for an independent auditor, when somewhere in the neighborhood of 20 positions have been added to central administration during the last year, and several $10K bonuses were awarded to central administrators? If we eliminated the bonuses and just a quarter of the positions added to central by your friend from Texas, we would have more than enough money for the full blown $250K audit function.
If the public’s perception that TUSD is financially malfeasant is inaccurate and unjust, the current board majority and Superintendent should be eager to improve the district’s public image by installing a fully funded internal audit function reporting to the public’s elected representatives. Why do they not welcome this opportunity to put all doubts to rest?
Their continued resistance — and the most recent embarrassing “double cross” (Steller’s words in the Star) when Juarez voted against the agreement he had negotiated with Stegeman — can only do more damage to the district’s credibility.
Takes me back to the Clinton years when Republicans pressed for a Special Prosectutor to supposedly investigate Whitewater but what they really wanted was a means to disrupt and undermine the President. We should all be pushing for more transparacy but I understand the suspicions associated with an internal auditor in this case.
“If there were money enough, do it”
If an auditor is needed, it will save money. So this is a poor way of making the decision. Of course as long as TUSD is Adelita’s personal political machine, nothing will change.
I get slapped around for getting off of subject, (if David doesn’t agree with my opinions), but you mentioned Whitewater.
http://news.yahoo.com/first-whitewater-prosecutor-says–serious-crimes–were-uncovered-in-probe-220111087.html
Other than being an experienced educator, no mention of teaching our student’s (creating brain connectivity).
Choose one TUSD class randomly
Include parents and teachers of that class
Include the principal of that school
Include support of the Board Members and Administrators
Ask them all to take one school calendar year to complete an audit
The experience would be invaluable for the students forever
Take a look at the City of Tucson Independent Audit and Performance Review Commission. You can learn about it here: http://clerks.tucsonaz.gov/clerks/boards?b… Each member of the City Council and the Mayor get to appoint a representative to the Commission. The Commissioners are voluntary and get staff support from the City’s existing staff. It seems to work pretty well. It could be a model for TUSD that doesn’t cost $250,000 dollars a year and create more bureaucrats. It seems a reasonable model to follow to me.
David, you are to be commented for the depth and breadth of your research in trying to assess the wisdom of TUSD’s dilemma in resolving their issue of hiring an internal auditor. A lot has been said pro and con, and may I add my two cents.
First: nothing is said about what an auditor does, why one is needed, and if he/she would earn their keep – would it be cost effective, and how was that determined?
Second: an auditor audits financial processing system(s) already in place AND validates the integrity of that process.
Third: If the financial processing system(s) in place does not have a “checks & balances” protocol in place to prevent unauthorized run-a-way expenditures. that would be beyond an auditor’s purview.
Fourth: That said, if a requirement to audit financials is solely a requirement, then clearly that would be a function under the purview of the internal financial Officer.
Fifth: On the other hand, if there was an administrative “checks & balance” function in place, and expenditures were made that by-passed “checks & balances” limit (defined by the Board of Governors), that auditor should report directly to the Board of Governors to report the that event.
Sixth: David, give it up, TUSD is beyond any reasoning.
This was written long ago(It is March 11), and I have been following the politics much more closely around TUSD and I have come to a conclusion that the auditor would be a witch hunt constantly. THere is so much dark money out there to bribe and control such a person/ position. I say those that are pushing for it are the same ones who yell all the time about ‘waste’. When I called Hicks to ask what has happened that warrants such a high expenditure he says, “Have a nice day”. Hicks doesn’t get his way and he goes to the legislature and says he supports taking about 64M from the deseg program ? He who supposedly is representing and taking care of TUSD children? I have never heard that there are truly expenditures that are hidden or unaccounted for. So why spend this? This is in and of itself a witch hunt and I am so tired of the hypocrisy of some of these people that supposedly care about anyone.
Ciro, there are a ton of people out there that are just rooting for TUSD’s failure and I am assuming they are tea party people who want no public education . Don’t blame TUSD for the havoc these groups are creating internally and externally. I wish I could believe they care about the children at all but I don’t believe it. David S. you wrote a well thought out article . I said myself that maybe they should just get an auditor. I found out what they cost, and I can’t help but think that this is a another ploy to discredit TUSD which is so tiresome. So I don’t say stop trying to figure out TUSD, I say keep your eyes and ears open for any true evidence of wrong-doing that would really warrant this seeming ridiculous expenditure and I would really appreciate no more ‘anonymous’ letters posted from people who make things up.
Public dialogue on TUSD contains many different voices. The people offering their opinions have different professional backgrounds, different degrees of knowledge of the district, and different histories of interacting with the district’s board and administration. It is not helpful to impute motives to others, nor is it helpful to lump all those who are calling for a certain reform (e.g., adding an internal auditor who reports to the board) together. It is unfortunate that Mr. Hicks and his opinion on the bill relating to deseg funding have gotten mixed into recent discussions of the internal auditor. Whether or not that bill should be passed and whether or not an internal auditor should be installed are separate issues.
I can’t speak for other commenters or for the “anonymous administrators” who continue to publish letters — I don’t know anyone involved with that group — but I can tell you that I am NOT in favor of passing the bill that would phase out deseg funding, and I AM in favor of installing an internal auditor who reports to the board. Why am I in favor of installing this position, repeatedly recommended by external auditors who have advised the district on best practices in accounting?
TUSD is underfunded and it needs to successfully make the case to the public that it is worthy of additional funding. The district has for decades struggled with issues relating to public trust RE how money is applied. I would like the district to be able to pass bonds, raise money from private sources, and work together with other public ed supporters in the state of Arizona to successfully lobby the legislature for increased funds. I think it unlikely that TUSD will be able to make the case to the public for increased support if it does not show that it is willing to be 100% transparent to the public in how funds are applied. An internal auditor who reports to the public’s elected representatives would help the public regain trust in the district. The willingness to install such a position would be an important gesture on the board and administration’s part, showing that they are fully in support of transparency. As long as they oppose the installation of the position, some people will continue asking, ” Why [don’t] they welcome this opportunity to put all doubts to rest?” as one of the commenters above did.
Perhaps those who have questions about whether the request for an auditor is in fact a “witch hunt” (?) or whether “dark money” could be used to “bribe and control” the auditor (?) should take the time to talk to some accounting professionals about how these positions work in organizations like TUSD. Having conversations with professionals in the field could clear up a lot of the fear that seems to linger in the minds of those who question whether the position is in fact necessary.