Unannounced Audits

At the school board meeting on December 19 there was extensive discussion about unannounced audits, which are an integral part of the internal audit function.  The discussion was lead by school board member Lillie Jessie (Occoquan) who appeared to believe that unannounced audits were an extreme nuisance to a school Principal’s day and unnecessary as the school division strives to hire respectable people.  She seemed to take great offense to the internal auditor’s efforts to uncover fraud.  Her concerns were echoed by Dr Otaigbe (Coles).

It seems to me that Ms Jessie and Dr Otaigbe are uninformed about what an internal auditor does and what his / her function is within an organization.  I hope this will inform them as to the internal auditor’s function and responsibility and help them understand why unannounced audits are a vital and necessary component of an internal audit.

Internal auditors examine the operations of the organization they are employed by to ensure that they are free from fraud, waste, and abuse. That is their primary job.  Organizations are supposed to have clearly articulated and documented policies and procedures to reduce the risk of fraud, waste, and abuse, so a large part of the internal audit function is determining whether established policies and procedures are actually being followed.

In a school system setting, examining operations to identify instances of fraud, waste, or abuse means ensuring that the property schools are entrusted with are physically where they’re supposed to be and that the cash received by the school is deposited each night as per procedure.  The only way to examine these things in a real world environment with any degree of accuracy is is with an unannounced audit.

Schools have lots of assets that can walk away.  Things like computers, printers, mini-fridges, laptops, cell phones, radios, and other things.  Whomever is tasked as the property custodian at a school must be able to account for every asset at a moment’s notice, which means they have to be able to locate each and every asset over which they have custody.  That’s their job.

With 24 hours notice of a site audit, as Dr Otaigbe suggested, the asset custodian can notify every employee with assets signed out that they need to bring them in that day, or, if they’ve been stealing assets, can make sure the property is in the building the next day.  Once you’ve allowed people 24 hours to cover their tracks, then any effort to ascertain whether assets have or have not been stolen or misplaced is wasted.

Just a note, if your primary concern as a Principal with unannounced audits is that you’ll be running around trying to find misplaced assets, then you might want to evaluate whether you are adequately securing the assets placed in your custody.   After all, if the proper procedures for safeguarding assets were being consistently followed, you wouldn’t be running around trying to find something.

Proper cash management procedures are also an item auditors look at closely.  Like most parents, it seems like I write checks to my children’s schools every week.   Proper cash management procedures call for that money to be deposited the day it’s received.  That’s because it simply isn’t safe to have large quantities of cash lying around and cash can be easily stolen (checks are considered cash).  Banks make it really easy on us.  They have nighttime deposit boxes for their business customers to deposit cash after hours, so yes, Dr Otaigbe, you can make a deposit in the middle of the night.

With 24 hours notice of a site audit, as Dr Otaigbe suggested, whomever is charged with preparing and depositing the cash each day can make sure they make and record the deposit that day, even if that’s not something they typically do.  With 24 hours notice of a site audit yo may as well forget about verifying whether proper procedures for securing cash are being followed.

As a result of internal audits last year, one PWCS Principal may be facing criminal charges and another may lose his / her job.  Assuming that PWCS Principals wouldn’t commit fraud because we only hire people of good repute is clearly not a safe assumption.

Yes, unannounced audits upset the day and cause stress.  But the value of the information they provide, about operations and custody of assets, is invaluable.    I’d imagine that most Principals would welcome an unannounced audit because it give them the assurance that policies and procedures are being properly followed.

One last comment. School Principals are not the only busy people in the world.  While their jobs are important, they are not the most important jobs on the face of the earth.  The leader of every organization spends their day being pulled in multiple different directions with meetings on top of meetings and having to choose what’s most important.  That’s part of being a leader.  Adding the stress of an unannounced audit is also part of that job, especially when your job and the assets you’re responsible for have been paid for by the taxpayers.

If you can’t manage that, then you need to find another job.


One Response to “Unannounced Audits”

  1. School Board Report for Dec 19, 2012 « PWC Education Reform Blog Says:

    […] Discussion {editor’s note:  from the discussion on the internal audit plan it appears that some of our school board members are unaware of what an internal auditor actually does or what they’re function is.  As a CPA I found the discussion which appeared to be derived from that lack of knowledge concerning.  Feel free to read the article I wrote last night in an attempt to shed light on the subject – Unannounced Audits} […]

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