It seems like everyone is always crunched for time and “busy” these days. As auditors, we can save our readers a few moments of precious time. How you ask? By writing executive summaries, of course!
Your audience often includes high-level decision makers and one of their most fundamental needs is brevity. So, the executive summary should be as short as possible with one page or less as the ideal length.
The sequence of items in the detailed section must match the same order in the executive summary. Otherwise, the reader of the executive summary may become frustrated wading through the detail trying to pick up more information on important issues. Understandably, audit reports can be complicated and this is your chance to clarify your message.
Some think of the executive summary of an audit report as just a teaser, or something to entice the reader to open up the full detail. To intrigue your readers to delve deeper, the executive summary can quantify or state dollars with significant issues. Additionally, an enticing executive summary includes action titles and points directly to major issues.
The executive summary should present an objective and fair view. Avoid judgmental language, such as poor, weak and inadequate. Surely that’s easy to do if you simply stick with the facts. Also, don’t make a mountain out of a molehill. Besides, if everything is fine except for a few minor issues, go ahead and say so.
While we auditors are busy designing our audits to catch fraud, we often bypass government corruption because it is so hard to prove. It’s easier for us to uncover the account clerk’s transfers into a personal account or prove that the executive assistant overcharged for travel expenses than it is for us to look at things like conflicts of interest.
But corruption is what really moves the needle; government corruption makes fraudsters powerfully rich – not just a little better off. And because of that, we should design our audits to detect government corruption, too.
Do you remember the scene in Godfather II where a US Senator attempts to extort Michael Corleone? What a great drama! But don’t naively assume that corruption only happens in a Hollywood movie or some third-world country because our government officials can be corrupt, too. Check out Inside Job, a brilliant documentary that details how Federal Reserve Chairmen and US Presidents all conspired to enrich the big banks at the public’s expense.
Technically, corruption is the broad title for any behavior on the part of a person in a position of authority to further her own interests, forgetting her responsibilities to the people she serves.
The mayor of the City of Brandon, Mississippi (population 23,000) says he was not in a conflict of interest when he voted along with City Council to allow a local developer to purchase $812,000 in land from the city. This local developer was one of the mayor’s campaign volunteers.
“I don’t gain personally from anything to do with the applicant or any of the other applicants as well,” he told the Sun. “Of the five applicants (for the land), I know every single one of them.” [1]
Purchasing professionals have a lot of power that may go unchecked. When I work for a government entity, they usually make me jump through hoop after hoop after hoop to prove that they were objective in their choice of vendors, although usually we both know that I am their first choice.
I frequently get requests for bids from governments with which I have no relationship. But I know they are usually just going through the motions. I am not going to waste my time bidding on a job that I know that someone else has a lock on. And, unfortunately, a lot of people’s time is wasted in the hoop jumping process, especially when the bidding documents are 20 pages long!
In 2010, State criminal investigators looked at efforts by the Oregon Department of Energy to steer federal money to a company run by the Governor of Oregon’s girlfriend after her firm lost the bid on a state contract. The winner of the bid was encouraged by the Department of Energy to include the girlfriend in the contract. The girlfriend was eventually employed as a subcontractor by the winning bidder. Three Energy Department officials happened to be on leave during the investigation.[2]
Goldline employs several conservative pundits including Glenn Beck, Mike Huckabee, Laura Ingraham, and Fred Thompson to sell gold coins on the air. By feeding public fears during the recession, conservative pundits encourage their listeners to invest in gold.
Glenn Beck, for example, has dedicated entire segments of his program to explaining why the U.S. money supply is destined for hyperinflation. He often promoted the purchase of gold as the only safe investment alternative for consumers who want to safeguard their livelihoods. When the show cut to a commercial break, the viewers were treated to an advertisement from Goldline.
Goldline marks up its coins an average of 90% over the melt value of the coin. By selling gold at more than the melt value, the price of gold would need to double for consumers to break even on their “investment.” However, since Goldline is not licensed as an investment advisor, they have no responsibility to advise their clients.
Paul Harvey, the radio newsman whom my grandmother listened to on country radio, used to use a similar sales method. He’d talk about a snowstorm in Montana and, before you know it, you were being pitched some sort of miracle skin lotion to use during cold weather. He was smooth. But I remember all of his ads as being relatively benign and for products that cost under $100. I could be wrong.
Science Applications International Corporation (SAIC) served as an advisor to the Nuclear Regulator Commission (NRC) to develop rules for recycling radioactive materials released from nuclear facilities. At the same time, they entered into a partnership with another corporation, British Nuclear Fuels, to perform the recycling that the NRC regulated.
Yellow Book CPEIn a 2008 decision, a federal jury concluded that the firm’s executives knowingly concealed this business interest that stood to benefit from its consulting role at the NRC. It found that SAIC had made 17 false statements and 60 false claims under the Federal False Claims Act.[4]
Bribery is when a person pays an official to make a decision in his favor. The person in need offers or gives something of value to influence the action of an official in the discharge of his public duties.
In August 2009, after a month of testimony in a federal court, a jury found former Congressman William J. Jefferson guilty on 11 charged counts, including solicitation of bribes, honest services wire fraud, money laundering, racketeering, and conspiracy.
“We have been reminded today that we are a nation of laws, and not men,” said Dana J. Boente, U.S. Attorney for the Eastern District of Virginia. “It should be a clear signal that no public official – and certainly not a U.S. Congressman – can put their office up for sale and betray that office. It cannot be tolerated. It cannot just be another cost of doing business. And today, a jury of his peers held Congressman Jefferson accountable for his actions.”
“Trust and integrity in public officials is at the heart of our democracy,” said Joseph Persichini Jr., Assistant Director of the Washington Field Office of the FBI. “What a better way to ensure those virtues, than to expose those who breach that trust.”
According to evidence at trial, from August 2000 to August 2005 Jefferson used his position as an elected member of the U.S. House of Representatives to corruptly seek, solicit and direct that things of value be paid to himself and his family members in exchange for his performance of official acts to advance the interests of people and businesses who offered him the bribes. The things of value, according to evidence at trial, included hundreds of thousands of dollars worth of bribes in the form of payments from monthly fees or retainers, consulting fees, percentage shares of revenues and profits, flat fees for items sold, and stock ownership in the companies seeking his official assistance.
Evidence at trial showed that Jefferson performed a wide range of official acts in return for things of value, including leading official business delegations to Africa, corresponding with U.S. and foreign government officials, and utilizing congressional staff members to promote businesses and businesspersons. The business ventures that Jefferson sought to promote included telecommunications deals in Nigeria, Ghana, and elsewhere; oil concessions in Equatorial Guinea; satellite transmission contracts in Botswana, Equatorial Guinea and the Republic of Congo; and development of different plants and facilities in Nigeria.
In 2008, the German engineering conglomerate Siemens paid an $800 million fine to the Securities and Exchange Commission and the Department of Justice for widespread bribery of government officials. Among the billions authorities accuse Siemens of paying out to government officials is a $2.6 million payout to former Argentinean president Carlos Menem in order to win a bid to manufacture national ID cards for the country. Other allegations include a $55 million bribe to Russian officials for a medical devices contract and $22 million to China for a metro trains contract.[6]
China appears to be the fastest growing country in every category, and now we can add fastest growing luxury market to the list. Gifts to government officials are prohibited in China, but who can resist a Swiss watch? Especially a $30,000 diamond studded one?
Bain & Company, a global consulting firm, estimated luxury sales of $7.6 million in China alone in 2008. Industry experts say “gifts” to government officials make up close to 50% of that figure. During the Communist Party meetings in March of 2009, sales of luxury goods in Beijing spiked.
One fashionable land confiscation official in Chongqing was sentenced to 13 years in prison for accepting kickbacks. Chinese officials confiscated 200 pairs of luxury shoes, 100 luxury suits, and a luxury car. He even had the nerve to tell his female trial lawyer that she needed to polish her low-quality shoes before his trial. I wonder what sort of shoes they will issue him in prison. Gucci?
What about stealing money that was intended to pay for kids’ lunches? Sodexo, the world’s largest food purchaser, had received rebates from food suppliers that it failed to pass on to school districts.
In order to continue to do business with the state, Sodexo paid a $15M fine to the state of New York for overcharging New York school district cafeterias. The organization also agreed to disclose rebates in writing to clients, establish a hotline for clients and whistleblowers, and pay for an independent audit of their compliance with rebate provisions of their contracts.[8]
Will I ever feel good about banks and Wall Street again after the economic crash of 2008? I don’t think so. I am afraid our business schools are churning out opportunistic financiers looking for a quick buck! And unsophisticated governments are easy targets for these hucksters because governments have access to lots and lots of money.
When local governments issue bonds, they often don’t use the proceeds right away. Instead of letting the money languish in a low-interest account, governments often hire brokers to help them find investment contracts so they can earn more on their money. The U.S. Treasury requires that these contracts be bid on competitively to maintain the tax-exempt status of the proceeds.
Bank of America, seeing an opportunity to get a piece of the action, pursued these contracts in a big way. But they came up with a way to decide in advance which bank would be the winner of certain contracts and they did their best to cover their tracks. They occasionally submitted intentionally losing bids so that the bidding would look legitimate. As a result of bid manipulation, the Justice Department said Bank of America won investment contracts at “artificially determined price levels, which deprived municipal issuers of money and property.” And, as of this writing, the investigation has only just begun. On June 22, 2012, Moody’s downgraded Bank of America’s public finance obligations.
