Association of Local Government Auditors

What do you do when you find that a compliance requirement is being ignored, but you think it's kind of stupid in the first place?

I'm guessing three possible responses: "Finding!", "Ignore the non-compliance", or "What's stupid about the requirement?"  I like the third response best. And suppose I answered that the requirement is stupid because it produces little or no benefit, distracts staff and management from more important matters, and really creates a false impression of agency activities.  Knowing that, do you write it up, or ignore the non-compliance?

You might then respond, it depends on who wrote the rule, I wonder why that should matter. If the agency wrote it, or if Congress wrote it, our expert assessment of its stupidity shouldn't change. The lack of utility continues to exist, regardless of the author.

Next question: What should an auditor of good conscience do when a rule is stupid? I would hope that we all deliberate on our role and the possible actions within and outside the audit. We should never blindly apply rules without understanding their intent and context. Obviously, more can be done, more easily, if it is an agency rule rather than a legislative rule. For example, we can recommend an agency review its rule and its compliance practices, which tells them to rewrite and/or comply.

Next question: In the big scheme of things, who questions stupid rules to make them better?  If you're in the Write-up-the-finding school, or in the Ignore-it school, then you've basically said that it's somebody else's job to improve the rules. So, who would that be? Again, an agency's own rules are relatively easy to address, but let's consider the others.

Suppose a central administrative agency has written a stupid personnel rule. Here's my favorite stupid rule: new hires aren't allowed any discretionary leave in their first six months. No one has ever given me a compelling reason for the rule. Your payroll audit reveals that a new hire was actually allowed to take a Friday off after a holiday, resulting in a four-day weekend. Since I'm sure you agree with my assessment as well, do you say anything about the stupidity of the rule? Probably not, because you're auditing payroll practices in the agency not the central administration. Do you schedule an audit of payroll rules of the central administration? Probably not because it is low on your list of risk areas.

So the world continues, with one more stupid rule still alive and needlessly complicating the lives of new hires. Sometimes the world changes and once-brilliant rules become superfluous, ineffective, and ultimately, stupid. Who troubles to go back and change the rule?

When it gets to legislative rule-setting, things get messier. Let's talk about Congress. They write a law barring state and local agencies from certain activities, and require federal agencies to turn the law into rules, and enforce them. Federal agencies add the prohibition to their grant specifications, then look to state (and local) auditors to test compliance during the single audit. The single audit method was devised to streamline oversight by the central administrative agency, Office of Management and Budget, but they don't have direct involvement in particular grants.

Within that framework, who can explain to Congress or the agency that the rule happens to be stupid? (It would be done in polite, respectful terms of course.) First, who understands how stupid it is? The local governments and other recipients, and maybe the state, but they aren't in a position to protest much since they are receiving the funds and are grateful to have them. They can politely, respectfully, explain their concerns to the federal agency but the agencies seldom take action because they have other concerns. Do the auditors? Well, see above. So Congress never hears. And who wants to risk the embarrassment of removing a rule and then getting slammed by a major scandal, or an angry legislator?

So the rules keep stacking up, enacted to solve problems but maybe accomplishing little, layer upon layer, year after year, and no one is in a position to make them better. The administrative burden eats away at the time and effort to actually deliver services to the public.

Here is a relevant quote: "Federal program requirements over the past several decades have sometimes been onerous, and they have not always contributed to better outcomes. With input from our State, local, and tribal partners, we can, consistent with law, reduce unnecessary regulatory and administrative burdens and redirect resources to services that are essential to achieving better outcomes at lower cost." That's from a February 28, 2011 memo from President Obama.

The President assigned the Office of Management and Budget to lead the effort and in response, OMB issued a memo on April 29 that calls for changes in the following areas:

• Establish better processes for cross-agency and cross-government collaboration
• Clearly define program outcomes
• Focus on high impact areas
• Increase transparency
• Facilitate use of robust and authoritative data
• Eliminate duplicative and unnecessary reporting
• Identify other barriers to cost-effectiveness
• Mitigate the risks of removing barriers

This is an invitation for us to think about the role that auditors might play in this endeavor, and longer term when this initiative is completed. From an auditor's perspective, the Single Audit recently celebrated its 25th birthday and it certainly warrants a review.

I think the world has changed since the single audit was devised. For example, we have more professionalized state and local audit organizations with the capacity and judgment to accomplish much more. Computerization has also made sampling and analysis of data outliers much easier to conduct, providing greater assurance that federal funds are properly reviewed. What was originally developed as a very mechanical process, can now become more risk-based.

You may have other ideas of how to improve the Single Audit and I encourage you to share them with me as we assemble suggestions that we can convey to the Office of Management and Budget. If you have a longer-term strategy for auditing to streamline rules and regulations, please share them with us all.