Auditing the auditors: McGuiness gets recommendations to improve office

Delaware State Auditor Kathleen McGuiness during a press conference at the State Archives building in Dover Thursday. (Special To The Delaware State News/Gary Emeigh)

DOVER — Kathy McGuiness, in her first year as Delaware’s state auditor, said she expected to face many challenges after she won the position in last November’s elections that was previously held by Tom Wagner for almost 30 years.

She said that the longevity of the prior administration was her primary reasoning behind having independent auditing firm Baker Tilly examine the differences between past leadership in the auditor’s office and her leadership since she took over as head of the Office of Auditor of Accounts in January.

“A couple of months ago when I released my 100-day report I said I would not be taking a Band-Aid approach to restoring the office’s relevancy and I announced that I would have an independent firm come in and audit the auditor’s office,” Ms. McGuiness said, during a press conference at the Delaware Public Archives Building on Thursday afternoon.

“Why would I do that? Because as the first new auditor after 30 years I believe it’s important to bring in an outside professional with the ability to offer their perspective and constructive observations to improve this office for Delaware taxpayers.”

She said as part of the audit, staff from Baker Tilly reviewed and evaluated past practices, examined the initiatives Ms. McGuiness has undertaken during her first 100 days in office, and looked at other state auditor’s offices to see how the Delaware auditor’s office compares.

Ms. McGuiness, a Democrat, said there were three “critical gaps” related to the prior administration in Baker Tilly’s 56-page final report — which is expected to come in at a final cost of $45,000 — that concerned her of Mr. Wagner, a Republican, and his staff’s performance.

Mr. Wagner was quick to praise the work that his office was able to accomplish over the course of three decades.

“When I took office in 1989 we had well over 60 employees,” he said. “When I left we were down to less than 30 employees. We still accomplished our core mission with technology and good assessments.

“With what I had to work with (the state auditor’s office) is the only agency in state government that is smaller today than it was 30 years ago. We more than accomplished our job with the resources that we were given. I’ve made that argument that we needed more resources, but with the reduced resources we had I’m extremely proud of the work we had done.”

Ms. McGuiness describes a different scene in the wake of the report.

“This report paints a picture of an eroded office when I began my administration,” Ms. McGuiness said. “Baker Tilly has given me nearly 60 recommendations. I am taking a hard look at all the recommendations with the goal of making your auditor’s office a best in-class organization to best serve Delaware’s taxpayers.”

Ms. McGuiness said among those three “critical gaps” of the previous administration were failure to fulfill statutory mandates. Delaware Code mandates a schedule for specific audits to be performed by the Auditor of Accounts.

Baker Tilly’s review of issued reports from the past five fiscal years found that the office never met its statutory obligations. The report said between 2014-18, a total of 24 to 51 percent of the reports completed were for non-mandated audits, while mandated audits were not completed.

Ms. McGuiness said Baker Tilley’s review said, “… no information was available to determine how non-mandated audits were selected for inclusion in the fiscal year engagement plan.”

She said that means there was no risk assessment performed and there wasn’t a risk-based methodology, or any clear methodology, in place to determine and justify which non-mandated audits to pursue and which mandated audits to disregard during the previous regime.

Failure to perform those risk assessments was Ms. McGuiness’ second concern.

The Baker Tilly report noted, “It is generally considered a best practice for an auditor to perform a risk assessment of an organization in order to prioritize resources when drawing up an audit plan/schedule for the next year(s) audit plan. We determined that other state auditors take a risk-based approach when determining the non-mandated audits to identify the areas with the highest risks and to perform more audits that add more value for taxpayer’s money.”

Ms. McGuiness’ said her third concern was the previous staff’s underutilizing audit and data analysis software.

Mr. Wagner defended his office vigorously, saying it was scrutinized at least once every three years and never had a problem meeting its statutory obligations or with performing proper risk assessments.

“We have a peer review done every three years which is mandatory so that your work is approved by the agencies, in particular, the federal government,” he said. “We passed every one of those so I’m sure we were able to meet all of the mandates that we needed to meet.”

Ms. McGuiness said she would be taking a hard look at the recommendations provided in the Baker Tilley report and have already “initiated a number of mandated audits that haven’t been performed in years and begun developing an audit plan based on comprehensive risk assessment to analyze and prioritize objectively audit requests from various sources.”

Ms. McGuiness said the auditor’s report will help her as she sets a course for her office in the future.

“It has been documented that the Office of the Auditor of Accounts has been operating at Fiscal Year 2008 levels from a staffing and funding level,” she said. “Additionally, it appears that office has never been optimally staffed over the past 10 years and has, in fact, surrendered more than $4 million during that time.

“Since the beginning of my administration, my focus has been on resetting this office and marking it relevant to Delawareans. In six months, this office has made huge strides. With new staff and a different structure, I believe this office is on the right track.”

The full Baker Tilley report on the auditor’s office can be viewed at www.auditors.delaware.gov.

Delaware State News staff writer Mike Finney can be reached at mfinney@newszap.com.

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