Bradley Byrne to WSFA Editorial Board: Vital Internal Audit Policy Getting Lost

MONTGOMERY, Ala., Aug. 6, 2007 -- Chancellor Bradley Byrne told the WSFA Editorial Board last Thursday afternoon that he was "afraid" a vital policy he is placing before the State Board of Education is "going to get lost in all the coverage" of legislators and the double-dipping policy.  Byrne talked about the policy creating a new Division of Internal Audit at Wednesday afternoon's press conference with the media but "we spent a lot of time talking about what people get to do on their vacation...."

Byrne, who has talked repeatedly about the department being more proactive in trying to prevent problems instead of always reacting to them told the editorial board the function was critical:  "If this had been in place from 1996 until today, most, if not all, the problems you've seen and been reading about and y'all have been airing in your broadcasts, I think would have been avoided."

Byrne says the Board had asked for an internal audit function in the 90s and "in fact, they hired two people."  But somewhere between then and now, something went wrong.

"When I got over to the department, one of my first questions was with all this stuff that's happened where were the internal auditors.  Why wasn't this caught?  What I found out was that they never let the internal audit people do their job and that was easy to do because the auditors reported up through a vice chancellor to the chancellor and if the vice chancellor and the chancellor don't want internal audits they just kind of suppress it."  In fact, the rationale listed with the draft of the proposed policy also says for the policy to be successful over the long haul "adequate funding, proper staffing of the Division, and stakeholder support, will require continuing effort."

The chancellor says they looked at institutions from both inside and outside the state to come up with the proposed policy.  "There's a standard way to do this.  This is not something we had to invent. "

He says one important part of the policy is the way the reporting function is set up.  "The director of it (the division) will report not through the vice chancellor or the chancellor to the Board, but directly to the Board and concurrently to the chancellor so I can't control the flow of information to the Board.  Now, I'm not going to do it, but you have to institutionalize these things because sometime in the future Bradley Byrne won't be there any more; it will be somebody else.  So, they will report directly to the Board and the director will actually be appointed by the Board, so the chancellor can't control the director by the appointment."  The director can also be terminated by the Board.

To avoid other possible conflicts, the proposed charter for the division says:

"Objectivity and independence are crucial to the duties to the Division of Internal Audit. Either may be compromised if auditors participate directly in preparing records of designing systems and operations. Therefore, the Internal Audit staff will serve only in an advisory capacity regarding these matters."

Byrne says the internal audit division "will do regular audits on certain things in addition to what the examiners do.  They'll do sample audits on various issues."

The proposed charter outlines the following as the major responsibilities of the Division of Internal Audit:

  • "Assessing financial, program and operational processes to determine if these will produce reliable information and ensure that resources are used in keeping with the State Board of Education's relevant regulations and policies and with the Alabama College System's mission."
  • "Serving as a resource to the Alabama Department of Postsecondary Education community in identifying the need for and characteristics of adequate systems of control."
  • "Working in partnership with college officials to ensure that policies and processes are effective and efficient."
  • "Performing external audit review as specified in Board policy 318.01."
  • "The Division of Internal Audit will discuss the results of each audit with the President of the college being reviewed. These meetings help ensure that findings and recommendations are valid and understood. When appropriate, these issues will be presented in a written report after a project is complete. College presidents will have an opportunity to respond in writing to reports; their comments will be included in the final version of the report. Written reports will be issued to the State Board of Education, with copies provided to the Chancellor and to college presidents. "

The head man of the two-year system says the division will also be responsible for handling complaints about problems and/or deficiencies going on at the colleges.  "They will be the body that will receive anonymous complaints or not anonymous complaints...And, it's not limited to finance it can be compliance with laws, policies, etc."

But Byrne wanted to reiterate that he did not see the division as "a gotcha group."  He says this is a group that will go in when they hear about problems and say something like, 'We think maybe you don't understand how to do this, we'll just have to show you how to do this.'

"But, if there's a need to say gotcha, then they can do gotcha and they report to the Board so the Board will see it just as soon as I see it and that's the way it ought to work."

"This is a simple, straightforward oversight function that was not carried on within the department and we're going to do it."

On another issue related to oversight and accountability, Byrne talked briefly about the department's inability to get real time information from the colleges.

"I've got $700-800 million a year going through my colleges. I'm responsible for overseeing them and I do not have my colleges on real time with the department.  Now you tell me a bank that's got 29 branches, $800 million in revenue, serving 300,000 people and doesn't have at the central office all those bank branches online."

"When I first got into the department and started asking this question, I was told it would cost seven, eight, nine million dollars and take two or three years to do this."  Byrne says he got Bob Lockwood back from the Finance Department and told him he wanted Lockwood to tell him "how much it is going to cost and how long it will take."

The chancellor says it's "simple problem solving.  Working with the Super Computer Authority, he's going to have everybody online (real time) probably in January.  It's going to cost about $250,000 to $300,000."

Reported by:  Helen Hammons