As The IIA’s president and CEO, I address many audiences about the internal audit profession. When I have the opportunity to speak to members of boardrooms and C-suites, I try to convey to them the value of having their internal audit functions conform to The IIA’s International Standards for the Professional Practice of Internal Auditing.
Indeed, affirming conformance to the Standards through a periodic External Quality Assessment, often referred to as a Quality Assurance Review (QAR), signals to stakeholders that an internal audit function operates at a high level of ethical and professional competencies. A properly executed QAR should be a trusted measure of a function’s conformance to the International Professional Practices Framework, and it should be one that identifies opportunities for improvement.
Unfortunately, stakeholders sometimes use a QAR as a weapon against practitioners who are simply doing their jobs. This may be the case in Dallas, where the school district butted heads this month with its chief audit executive (CAE) over work that identified overpayments to contractors.
The CAE, Steve Martin, was the subject of a hasty performance review after school district officials called for an early peer review of the function. The dust-up led the CAE to publicly accuse the district of attempting to quiet internal audit by “investigating the investigator,” and to submit his resignation. The school district countered that there were concerns about the validity and accuracy of calculations in the audits, that Martin was not being kept from doing his job, and that some of the audit’s findings already were under review.
I can’t really attest to the quality of the internal audits in question, but as I’ve noted on several occasions, “If it walks like retaliation and talks like retaliation, it’s usually retaliation!”
The findings of overpayments in two projects, and possibly more than a dozen others, come at a time when the district is asking taxpayers to support a more than $3 billion bond proposal to pay for improvements in school campuses. What is unclear is how the peer review will be carried out now that Martin has resigned. Under any circumstances, only a qualified independent reviewer should perform the QAR. Sadly, the next CAE for the Dallas Independent School District will have to keep one eye over his or her shoulder, in the event the wrong toes are stepped on by an internal audit.
As an internal auditor who spent much of his career in the public sector, I am always troubled when I see conflicts rise to the level they have in Dallas. That is why we should try to glean some positive lessons from the controversy.
Lessons for Stakeholders:
Lessons for Internal Auditors:
Finally, I must draw a parallel between my personal experience as a CAE and the circumstances involved in this case. According to an article posted by The Texas Monitor:
“(The CAE) and his staff concluded that officials broke contracts into sections of less than $500,000, so the contracts would drop below the threshold at which they would need board approval. The process is called “sequential purchasing,” which violates state law. Convicted violators are automatically removed from their position.”
In my over 45 years of internal audit experience, the most vehement pushback I ever received from management over internal audit findings involved evidence in my report of “sequential purchasing,” or what we referred to as “splitting contracts.” So, please forgive my skepticism in the Dallas school district case. To paraphrase from Shakespeare’s Hamlet: “Me thinks thou doth protest too much.”
As always, I look forward to your comments.