Imagine… it’s Friday night. You’ve worked hard. Let’s face it, as the CAE for a high-profile government department you’ve got a lot on your plate. TGIF, you think. Your phone pings, and without hesitation you look at the email that’s just arrived. It’s 2 sentences telling you that due to changing priorities your services are terminated immediately – thank you for your service.
This awful scenario befell 17 or 18 US Inspectors-General (US public sector internal auditors) last Friday at approx. 7.30pm (reported in major American news outlets, including CNN, Fox and Washington Post*). The exact number of people impacted is a little vague, because the termination process bypassed the required government 30-day notice period. The only reason given, seems to be a change in priorities.
Almost every cabinet level department lost their person who was responsible for independent oversight. This includes State, Defense, Agriculture, Energy, Interior, Labor, Health and Human Services, Housing and Urban Development, Veterans Affairs, Transportation, SBA/Social Security, and Environmental Protection.
The role of Inspectors-General in America Federal government came into effect after Watergate to independently oversee government agencies and report findings in the public interest. While they can be appointed and removed by government, they conduct independent internal audits on their employer.
Watch Dog or Lap Dog
It is not new for a sitting President to remove an Inspector-General. It seems to be the scale and speed of the move that has people from both sides of American politics asking some questions. Why would a chief executive seek to remove a person whose role is primarily to improve the efficiency of the entity they manage?
In the absence of better answers, we give the last line (para-phrased) to Mark Greenblatt who, up until last Friday was Inspector-General of the Department of the Interior… are we being replaced with other watch dogs or will the new appointees be lap dogs?
Take-out for IIA-AU
Thankfully, our political system prevents a similar scenario occurring here. But peel open another layer and perhaps the root cause we should explore is how mandates are set up in the first place, what are they enshrining, and what unintended consequences may emerge.
In Australia, we have a great variety of internal audit mandates covering state and local governments in some jurisdictions, and listed entities through the ASX Corporate Governance Guidelines and Principles. They are not homogenous, and some have inherent weaknesses, such as allowing the internal audit function to be positioned so far from leadership as to undermine its ability to access information. But at least they exist.
IIA-AU has an important role to play in seeking optimal recognition of the profession and the application of the Global Internal Audit Standards. For this reason, we are an active contributor on the ASX Corporate Governance Council and have offered our full support to the Commonwealth Department of Finance and to State Governments as they look to mandate internal audit for public sector entities.
Want to get involved? Contact us here.
*Unfortunately, media coverage of the issue shows the lack of understanding regarding internal audit, referring to the Inspectors-Generals as cops and fraud investigators, which is not reflective of their full roles.