1. Auditing What Matters Sharon Erickson, San Jose City Auditor Contact info: sharon.erickson@sanjoseca.gov (408) 535-1238

2. “Legislators, government officials, and the public need to know whether (1) government manages public resources and uses its authority properly and in compliance with laws and regulations; (2) government programs are achieving their objectives and desired outcomes; (3) government services are provided effectively, efficiently, economically, ethically, and equitably; and (4) government managers are held accountable for their use of public resources.” – Government Auditing Standards Why audit? Auditing What Matters

3. The role of the auditor Auditing What Matters “Auditing is essential to government accountability to the public.” – Government Auditing Standards Responsibility to the public Asking uncomfortable questions Are we just testing controls OR are we providing independent, objective assessment of performance

4. Selecting audit subjects that matter Auditing What Matters Important, relevant, timely The first of many decision points Annual citywide risk assessment Role of suggestions and organizational knowledge EXAMPLES: Employee health benefits Pension sustainability Take home vehicles Animal services Street maintenance

5. Decision points every day Auditing What Matters Choices in direction Audit selection Audit scope and objectives Allocating resources (staff and time) Prioritizing Testing Extending testing Interpreting results Reporting results

6. Deciding what’s important Auditing What Matters Important = consequential, significant, far-reaching, critical, crucial, pivotal, momentous, serious, grave, urgent, substantial, weighty, valuable, relevant, influential

7. A question of judgment Auditing What Matters Importance of independence, objectivity, and due professional care Balanced Realistic Open-minded, objective evaluation Experience diagnosing problems Little details; big picture Tough, but fair

8. Gauging significance Auditing What Matters Looking for patterns Frequency Significance Materiality Risk EXAMPLES: Pension Sustainability Retirement Travel Airport Concessions

9. Audits that challenge existing policy Auditing What Matters Selecting audit subjects that matter Have you asked why? Do you stop once you’ve audited to the current policy? The next logical inference A question of judgment EXAMPLES: Pension Reform Health Benefits Police Civilianization Team San Jose

10. Audits that are relevant and timely Auditing What Matters Role of the auditor Aware of your surroundings Upcoming issues facing your jurisdiction Responsive EXAMPLES: Recovery Act Cardroom Licensing Take-home Vehicles

11. Importance of audit planning Auditing What Matters Start with broad overview Preliminary survey Risk assessment Professional skepticism Significance Deciding the type and extent of audit work Sufficient and appropriate audit evidence Audit risk EXAMPLE: Health Benefits

12. Thinking critically Auditing What Matters Evaluating evidence Professional skepticism Attitude Accepting – Open-minded – Overly critical Optimistic – Realistic – Pessimistic Disinterested – Curious – Suspicious Hard work Pulling the thread Questioning attitude No coasting

13. Thinking strategically Auditing What Matters Selecting audit subjects that matter What interests you? What piece seems most important? Why? Being aware of your surroundings Changing environment Timing What will be deemed relevant and actionable? A question of judgment

14. Formulating audit conclusions that matter Auditing What Matters Allowing sufficient time to interpret results Distilling the main idea Balancing details and big picture Not just that the writing process takes too long Thinking critically about the overall/combined result Assessing materiality and impact Relevant and actionable recommendations EXAMPLE: Animal Services

15. Writing audit reports that matter Auditing What Matters Focus on what’s important Use definite, specific, concrete language Clear, persuasive conclusions Clear, actionable recommendations  Impact Avoiding confusion Use of graphics Whose story is it? Placing yourself in the background Avoid overwriting or overstating conclusions

16. Recommendations that matter Auditing What Matters Actionable Impact service delivery Will this recommendation make a difference? Talk to people on the front line Quantifying audit benefits Calling out recommendations with potential budget impacts Relentless follow-up EXAMPLES: Pension Sustainability (SRBR) Police Civilianization $5.1 million

17. SUMMARY Auditing What Matters Select audit subjects that matter Decision points every day A question of judgment Gauging significance Thinking critically Thinking strategically Formulating audit conclusions that matter Writing audit reports that matter Recommendations that matter