Question

After numerous cases of waste and abuse in several state agencies and a major fraud in one of the state’s public universities, a committee of the state legislature is drafting a bill to improve accountability in state government. The bill being proposed would require all state agencies, state colleges and state universities with over 200 employees to implement an accountability function. Two approaches to this accountability function are being considered (1) an Inspector General (OIG) model and (2) an Internal Audit model. As a member of the staff for one of the legislators on the committee, prepare a report (not to exceed 2 pages) setting out the advantages and disadvantages of the two models. Conclude the report with a recommendation as to which model you think will be most effective in improving accountability in state government, and why it is the better alternative.

Answer 1

The difference between inspection auditing and internal auditing are summarised below :

Both are designed to look for waste, fraud and corruption. Both get accused of being on witch hunts when they discover problems, but both save more than their cost and provide assurance that the public's money is being used for the public good.
Part of your problem with the local office is a lack of understanding of the difference between a financial audit and an internal audit. You have stated more than once that the internal auditor is a duplication of the annual financial audit. There is actually very little overlap.
The financial auditor is there to verify that there is accurate reporting of all revenues and expenditures in accordance with rules of governmental accounting. In their Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards contained in the 2010 Comprehensive Annual Financial Report, the independent financial auditors indicate that they are not expressing opinions on the effectiveness of the internal controls over financial reporting or on compliance with a variety of provisions of laws, regulations, contracts, grant agreements and other matters.
To the extent that they run across an issue in these areas while conducting their financial audit, they do report it in a letter, but they have little ability to insure that it is fixed.
The internal auditor focuses on issues such as the effectiveness of internal controls to highlight areas where there could be waste, fraud or corruption.
They also make sure that systems are in place and being followed to assure that government is compliant with laws, regulations, contracts, grants and other agreements.
Since they are involved all year, not just a few months as is the case with the financial auditor, they are in a far better position to make sure that any weaknesses are addressed.
An effective internal auditor is just as valuable to parish government as an inspector general is to state government.