Table Of Content

next five years. Most agencies with custom developed Fall 2003 George R. Aldhizer Ill, Ph.D., CPA, CIA, is an legacy systems will replace those systems with Joint associate professor in the Calloway School of Financial Management Improvement Program State Budget Crisis: The Perfect Storm Business and Accountancy at Wake Forest Universi- (JFMIP)-compliant Commercial-Off-the-Shelf (COTS) By: Don H. Chamberlain, DBA, CGFM ty, and has published extensively on internal auditing. software. Implementing such systems will allow for States find themselves in their most precarious James D. Cashell, Ph.D., CPA, is a professor of improved financial reporting capability which will not financial position in decades, and no immediate relief accountancya t Miami University. He is active in the IIA only help managers to make better decisions by is insight. While the recently enacted federal tax pack- and has written several articles on internal auditing. obtaining timely information, but will help them meet age will provide some $20 billion in assistance, most new accelerated reporting deadlines. states are finding themselves having to cut programs Activity-Based Costing and Benchmarking: A Tandem Charles R. Carrigan, MS, MA, CGFM, CPA, a once thought sacred, find new sources of revenues for Quality-Oriented Governments member of AGA’s Washington D.C., Chapter, is a man- and at least give a second thoughtt o raising taxes. By: James J. Kline, MPA, ME agement consultant in the IBM Business Consulting Don H. Chamberlain, DBA, CGFM, an at-large mem- Over the past decade, the globalization of the econ- Services Public Sector. ber of AGA, is an associate professor of accounting omy has put pressure on governments around the Angela Carrington, MBA, CISA, a member of AGA’s at Murray State University, where he also serves as world to adopt new practices and approaches. Com- Washington, D.C. Chapter, is a managing consultant chair of the Department of Accounting. He teaches monly called "New Public Management,’ the new prac- with IBM Business Consulting Services and the prac- governmental accounting and other financial ac- tices and approaches are characterized as emphasiz- tice lead for financial systems assessment and counting courses. ing productivity and performance measurement; implementation within its Public Sector Practice. competition between the public and private sectors for Avoiding the Downfall of Windfalls Tom Cocozza, MBA, CGFM, CPA, a member of the provision of services—often called competitive By: Wanda A. Wallace, Ph.D., CPA, CMA, CIA AGA’s Washington, D.C. Chapter, is an associate part- tendering or marketization; customer service; decen- States’ windfalls from tobacco settlements and ini- ner at IBM Business Consulting Services. tralization of decision-making and authority; and the tial public offerings/analyst agreements underlie se- Denise Rabun, CGFM, CPA, a member of AGA’s adoption of private sector-style management practices. Curitizations and budgets. Potential downfalls must be Washington, D.C. Chapter, is a managing consultant James J. Kline, MPA, ME, is a Total Quality Man- identified and managed, including risks, revenue inter- with IBM Business Consulting Services and the prac- agement researcher and consultant based in Portland, actions and incentive issues. tice lead or financial statement assistance within its OR. He has more than 12 years experience in federal, Wanda A. Wallace, Ph.D., CPA, CMA, CIA, is the Public Sector Practice. state and local government. He has authored a number John N. Dalton Professor of Business Administration at of articles on TQM in government, high performance the College of William and Mary. She also serves on Public Sector Outsourcing: A Modified Decision work structures and work force development. an advisory committee for GASB’s Asset Impairment Model Project. She was the 2002 recipient ofA GA’s Cornelius By: Robert C. Kee, DBA, CMA, and Walter A. Robbins, Measuring Governmental Performance—The Tierney/Ernst& Young Research Award. DBA, CPA, Cr.FA Accountants Weigh In Over the years, outsourcing in the public sector has Reconciling “Consulting” Under GAO and IIA Audit By: Timothy A. Wendland, CPA become an accepted management practice. Too often, Standards Annual financial reports are the primary accounta- however, administrators choose to outsource when it By: Sam M. McCall, CGFM, CPA, CIA bility documents made available to the public. is more economical to continue providing the service Many state and local government audit organiza- Historically the reports haven't included much infor- internally, or reject outsourcing when it is more tions subscribe to Government Auditing Standards, mation that the common citizen, or for that matter economical to purchase a service from an external issued by the Comptroller General of the United States, the common legislator, could understand. With the vendor. and to Standards for the Professional Practice of implementation of the Governmental Accounting Robert C. Kee, DBA, CMA, is an associate professor Internal Auditing, issued by the Institute of Internal Standards Board (GASB) Statement 34, strides have in the Culverhouse School of Accountancy at the Auditors, Inc. (IIA). However, the U.S. General been taken to make annual financial reports useful University of Alabama. Accounting Office’s (GAO) new Independence Stan- to more readers. To make the reports even more Walter A. Robbins, DBA, CPA, Cr.FA, is professor dard has caused some to question the propriety of user-friendly, GASB is supporting meaningful perform- of accountancy in the Culverhouse School of continuing to reference both organizations’ standards ance reporting. Accountancy at the University of Alabama. in audit reports. A recent letter from GAO to the liIA Timothy A. Wendland, CPA, a member of AGA’s provides GAO’s views on how the IIA’s consulting Idaho Centennial Chapter, is a senior financial spe- Performance Auditing in Ohio: A Customer Service services related to independence under the Yellow cialist at the Idaho State Controller's Office, and is in- Orientation Book Standards. volved with implementing new accounting standards By: Daniel E. Schultz Jr., CPA, and Richard E. Brown, Sam M. McCall, CGFM, CPA, CIA, a member of for the state. CDPA, CGFM, CFE AGA’s Tallahassee Chapter, is city auditor for the City of Ohio has set up a performance audit organization Tallahassee, FL. He has served on the U.S. Comptroller Winter 2003 that provides an affordable and persuasive means, General's Advisory Council on Government Auditing through logic and analysis, to re-engineer processes Standards and the Institute of government auditor's Data Mining for improper Payments in local and state government. Ohio's program has Internal Auditing Standards board. He has also held By: Bonnie L. Derby, CPA, CFE proven effective in overcoming traditional challenges leadership positions with the IIA and AGA. With government auditing agencies increasingly associated with performance auditing such as project called upon to identify weaknesses that could lead to expense, lack of experience, adversarial viewpoints of Governmental Contract Auditing: Best Practices from fraud, waste and abuse, user-friendly data mining soft- management and concerns of “airing dirty laundry.” the New York Metropolitan Transportation Authority ware is a powerful tool to increase auditor efficiency Daniel E. Schultz Jr, CPA, member of AGA’s Cen- By: George R. Aldhizer Ill, Ph.D., CPA, CIA, and and effectiveness in combating improper payments. tral Ohio Chapter, recently retired as chief deputy au- James D. Cashell, Ph.D., CPA Bonnie L. Derby, CPA, CFE, is a senior auditor at the ditor, Office of the Ohio Auditor of State, a posth e held Auditing construction projects that are externally U.S. General Accounting Office. Her audits of govern- from 1995 to 2002. contracted is an effective way for government auditors ment purchase cards use at the U.S. Departments Richard E. Brown, CDPA, CGFM, CFE, is professor to provide significant and tangible value to their of Education and Housing and Urban Development and chair of the Department of Accounting at Kent employer. This especially applies to government identified fraudulent, improper and questionable State University. He also served for a decade as the auditors who work for cities, transit authorities, purchases totaling about$ 2m illion. appointed Legislative Post Auditor of Kansas and di- educational institutions or other governmental entities Procurement Fraud and Data Analytics rector of Operational Auditing for what was then Price that frequently hire outside contractors for large By: Sridhar Ramamoorti, Ph.D., ACA, CPA, CFE, CIA, Waterhouse’s Office of Government Services. construction projects. CFSA, CRP, and Scott Curtis, CPA, CFE SPRING 2004 JOURNAL OF GOVERNMENT FINANCIAL MANAGEMENT 71 Journal Index Continued Procurement Fraud is a growing problem as empha- the quality, quantity, timing and cost of service delivery Financial Reporting for Affiliated Organizations sized in recent U.S. General Accounting Office reports. is meeting expectations. These managers are relying By: W. Mark Wilder, Ph.D., CGFM, CPA Government auditors face significant challenges in the on their audit staffs to examine the issue of outsourced In May of 2002, the Governmental Accounting investigation and detection of procurement fraud. Data services to determine whether outsourcing is meeting Standards Board (GASB) issued Statement No. 39, analysis methods provide the auditor with sophistic service delivery requirements. Determining Whether Certain Organizations Are ated tools aimed at building a successful fraud detec- Nicholas M. Zacchea, Ph.D., CGFM, CFE, CM, a mem- Component Units (an amendment of GASB Statement tion program. We believe that government auditors can ber of AGA’s New York Capital Chapter, is a former U.S. No. 14). The issuance of this standard provides guidance significantly improve their fraud detection capabilities General Accounting Office staff member. Dr. Zacchea’s for reporting of affiliated organizations. by understanding some basic principles of data analysis. latest work in audit, accounting reform and organiza- W. Mark Wilder, Ph.D., CGFM, CPA, is an associate This article describes several of these principles using tional development has taken him to Armenia, professor of accountancy at the University of practical examples. Bosnia-Herzegovina, Brazil, Haiti, Moldova and Ukraine. Mississippi's Patterson School of Accountancy. Sridhar Ramamoorti, Ph.D., ACA, CPA, CFE, CIA, CFSA, CRP. a member of AGA’s Chicago Chapter, is Fraud in New Zealand Government—Despite Auditor Government Transformation: Helping Shape Federal assistant director of Thought Leadership in the Global General's Warning Agencies to Help Shape the Future Investigations and Dispute Advisory practice of Ernst & By: Helen Bishop, MCA, CA, and Ashley Burrowes, Ph.D., By: David M. Walker, CPA Young LLP in Chicago. CA, CMA Several key trends will shape our society and define Scott Curtis, CPA, CFE, is a senior consultant in the The exposure of a major scam that had been perpe- America’s role in the world in the years ahead. New Global Investigations and Dispute Advisory practice of trated in the Ministry of Social Development shocked the security threats have emerged since the end of the Cold Ernst& Y oung LLPi nC hicago. He has implemented fraud New Zealand public because the government was War. On September 11, 2001, that most modern of detection programs atFortune 500 companies. thought to be active in stamping out fraud. However, an scourges—international terrorism—finally reached our employee was able to defraud New Zealand taxpayers shores, and homeland security has become an urgent Developing a Strategy for Auditing Outsourced Public of $1.1 million in U.S. dollars. This article presents a case priority. But we must also come to grips with other Sector Contracts study in fraud and some lessons learned. challenges or risk their consequences. By: Nicholas M. Zacchea, Ph.D., CGFM, CFE, CM Helen Bishop, MCA, CA, teaches auditing at Massey David M. Walker, CPA, a member of AGA’s Atevery public sector level, government officials are University, Auckland, New Zealand. Washington D.C., Chapter, was sworn in five years ago contracting with commercial sector firms at an ever-in- Ashley Burrowes, Ph.D., CA, CMA, is an associate as the nation’s seventh comptroller general. Ten years creasing pace to provide services previously developed professor of accounting at the University of Wisconsin, remain in his term. by their own employees. With the current emphasis on La Crosse. During the summer of 2003, he was visiting outsourcing services, public sector managers may find professor at his alma mater, Massey University, New *All biographical information was correct as of the themselves without adequate resources to assure that Zealand. date of original publication. IDEA 2004 is now a MORE powerful, easy to use, productivity tool. = Advanced Text Search - Wildcards, boolean logic, multiple characters, proximity = Enhanced Print Report Import - View the entire report and preview the entire database = Equation Editor - “Intelli-sense" for functions and field names = Publish to PDF or RTF - For databases, reports and results = Action Fields - Allows drilldown across fields and files = Aging - Choose month or years as interval SEUEDSD Ie MATION SERVICES OZR “9 Experts in Data Analysis CASEWARE AUTHORIZED DISTRIBUTOR