Audit:  N.C. fails to watch where money goes
9 internal auditors monitor $3.5 billion in expenses

State agencies do not adequately monitor billions of dollars in public money, leaving the state vulnerable to errors and inefficiency, according to a report issued Thursday.

The Department of Transportation is particularly weak, investigators from the state auditor's office found. DOT's nine-person team of internal auditors produced just one complete report and eight memos or letters in three years.

DOT's chief auditor told investigators that his staff spent most of 2003 on training and did not produce any new reports after that because his office "decided to wait until (2006) and start anew."

Employee time sheets showed that auditors spent almost as much time on "miscellaneous" tasks as they did on actual auditing projects.

Time sheets also showed 422 hours spent revising an audit manual, but investigators could not find any indication that changes suggested by an outside group had been implemented.

The DOT chief auditor told investigators that most of his staff's time was spent on "special projects" but could not provide any documentation of those projects.

"Given its size, the DOT internal audit section needs to be far more productive than is currently evident," the report said. "We believe the primary cause for the issues we identified stem from the lack of effective management within the internal audit section and insufficient senior Department management oversight."

DOT spokesman Ernie Seneca would not respond to the specific allegations, though he said improvements are needed, including more direct supervision from top DOT officials.

"The audit helped identify some significant issues, and we are working to improve the internal auditing role to best meet needs and expectations," Seneca said in a statement to the Observer.

Thursday's report came from State Auditor Les Merritt, who is responsible for monitoring all of state government. His spokesman, Chris Mears, said internal auditors within large agencies are important. "(They can) nip a problem in the bud, as close to the ground as we can get it," he said.

Mears said he did not know of any specific problems that could have been averted with strong auditing in the agencies.

Merritt, elected in 2004, is a Republican. Most of the rest of state government is run by elected Democrats or by Democrats appointed by Gov. Mike Easley.

An Easley spokeswoman said the governor's staff would not comment until it has reviewed the report.

The report criticized dozens of state agencies and community colleges with a total budget of $5.85 billion for having no internal auditors at all. Other agencies, including the Departments of Agriculture, Public Instruction and Environment and Natural Resources, have one auditor each.

Carmen Hooker Odom, secretary of Health and Human Services, wrote that her department is "painfully aware" that it needs more than seven auditors.

"An expanded audit staff will yield rich dividends in terms of enhanced accountability and improved efficiencies," she wrote.

The report urges the legislature to require that agencies hire internal auditors and make them follow accepted standards.

State Sen. Robert Pittenger, R-Mecklenburg, who has often called for more accountants and auditors in state government, had not read the report yet. He said he would prefer that Merritt's office get more investigators.

"We don't have much of any kind of audit system," Pittenger said. "We need oversight."

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KEY FINDINGS

• N.C. DOT auditors spent almost as much time on "miscellaneous" tasks as they did on auditing projects.

• DOT's chief auditor said staff time was spent on special projects but could not provide documentation.

http://www.charlotte.com/mld/observer/news/local/15746852.htm