April 2011

 

Oversight and Review at Core of Stewardship

Judge David Katz is chair of the Judicial Conference Committee on Audits and Administrative Office Accountability. He was appointed to the U.S. District Court for the Northern District of Ohio in 1994.

the scope of your Committee’s jurisdiction—and the committee’s name—changed in recent years. Can you tell us about your committee’s focus and new responsibilities?

A Committee on the Administrative Office (AO) was first established in 1987. In September of 2009, the Executive Committee changed the name of the AO Committee to the Committee on Audits and Administrative Office Accountability or the AAOA Committee, and modified its jurisdiction. The change was made to highlight the Committee's continuing focus on the AO's audit review, and investigative assistance services for courts and federal defender organizations. The AAOA Committee oversees audit, review, and investigative assistance activities and addresses certain other matters involving the Administrative Office, recognizing that the AO’s Director is responsible for day-to-day managerial and administrative matters.

Although the Committee had always been involved in these subject areas, we have plunged into them in much more depth and I must say we have gained a much greater appreciation of their importance and their complexity. Through its oversight of these activities, the Committee helps ensure the ongoing effectiveness of the Judiciary’s audit program and the soundness of the Judiciary’s accountability systems.

How does the Judiciary’s audit program work?

By statute (28 U.S. C. § 604(a)(11)), the Director of the AO is charged with conducting audits, and the AO has done so since 1975.

The AO’s Office of Audit carries out a comprehensive audit program for all Judiciary funds in accordance with generally accepted government audit standards. This program includes AO staff auditors augmented by contracts with independent CPA firms. There are many different types of audits performed. Courts are most familiar with the cyclical independent audits of local court operations. In addition to those cyclical court and federal defender organization audits, the Office of Audit performs change-ofclerk audits and various special audits. Independent auditor firms also examine funds, programs, contracts, and systems, such as financial systems, Judiciary retirement trust funds, the electronic public access system, and the court registry investment system.

Over 100 financial and administrative audits of Judiciary funds, financial activities, operations, and systems are conducted annually.

The Committee has regular direct access to, and communication with the AO’s Audit Officer and with the independent audit firms retained by the AO. The Committee receives detailed briefings at its biannual meetings from the AO Audit Officer and representatives from the audit CPA firms.

We ask all of the auditors to discuss the scope of their audits and their findings and to give us their assessment of any risks. We want to ensure that audit findings are promptly addressed, and we also consider appropriate ways to mitigate any perceived risks. For instance, if a particular finding is repeated in numerous court units, there may be a need for clearer guidance and training.

It’s a term used regularly, but what exactly does internal control mean for the Judiciary?

Internal control measures are built-in checks and balances to protect assets and to prevent or catch mistakes before they happen. For example, requiring valuable items to be stored in a locked vault or restricting access to sensitive data are internal control measures, as is prohibiting a single person from both serving as a cashier who receipts funds and making the bank deposit. Having another person involved helps to ensure the funds are accurately The Third Branch n April 2011 11 See Interview on page 12 counted and deposited. Collectively, internal control measures are policies and activities that provide reasonable assurance that assets and resources are protected; that operations are efficient and effective, that financial reports are accurate and reliable; and that business practices are in compliance with applicable laws, regulations, and Judiciary policies. No matter how careful, human beings occasionally make mistakes and so these internal procedures and review measures provide critical insurance. One thing I have observed clearly in my time on the Committee is that where there are good systems of internal control, there will be fewer audit findings. To supplement the cyclical audits, the Judiciary requires each court unit to assess the effectiveness of its internal control procedures at least annually. Not only is this a good practice generally, but there is also considerable management value from these self-assessments.

Accountability is a core value for the Judiciary because it is essential for the Judiciary to accomplish its mission. Accountability entails stringent standards, self-enforcement, fiscal and operational integrity, and effective and efficient use of resources. Through operational and management systems of internal control, we protect against error, loss, waste, unauthorized access, or abuse. Our internal control measures help us to achieve accountability, which is vital to sustaining public trust. We are fortunate to have conscientious managers throughout the Judiciary who take these responsibilities very seriously. The compilation of internal control requirements is lengthy, and I realize these rigorous standards take time and resources to meet, but we believe the end results are worth the investment so that the Judiciary operates well.

what roles do the AO and the Committee play in strengthening internal control?

The Committee has played a key role in supporting internal control enhancements in the Judiciary. Among the key enhancements recommended by the Committee have been the following:

• the expansion of the Administrative Office’s audit program to include high-risk areas;
• training and awareness presentations that focus on the need for strong accountability systems are held on a continuous basis for Judiciary employees at all levels;
• numerous administrative policies and guidance documents have been updated to address internal control risks and clarify requirements;
• training programs for the formal certification of court contracting staff were instituted;
• financial management guidance and training were enhanced; and
• minimum internal control requirements for numerous administrative functions were defined and consolidated.

Finally, the Committee supports the AO in actually implementing these and other improvements to the audit and internal control programs. For example, we asked the AO’s Audit Office to establish a regular process to follow up with courts to ensure that they address audit findings in a timely manner.

One of the goals of the Strategic Plan for the Federal Judiciary is to "Ensure the integrity of funds, information, operations and programs through strengthened internal controls and audit programs." Considering all that has been done already, what other things can be accomplished?

Some of the major initiatives that our Committee currently has underway include:

• Overseeing efforts by the AO to provide courts with additional information and tools for reviewing their internal control practices, and to enhance follow-up to ensure internal control self-assessments are completed.
• Requesting a comprehensive assessment of the AO’s non-audit related review activities with respect to court units and federal defender organizations to document the scope, objectives, and benefits of these reviews, and identify any opportunities for improvement.
• Along with other Judicial Conference committees including the Committees on Codes of Conduct, Judicial Conduct and Disability, and Financial Disclosure, playing a role in accomplishing the strategic plan’s goal to enhance education and training for judges and Judiciary employees on ethical conduct, integrity, and accountability. For example, we have asked the AO to post information to ensure that all Judiciary employees are aware of existing channels for reporting concerns about fraud, and waste and abuse. Also, we have asked our Committee staff to document changes to the Judiciary’s oversight mechanisms.

How would you rate the Judiciary’s accountability systems?

I believe the Judiciary has effective oversight and review systems to control and audit expenditures, and to promote stewardship of resources and integrity of operations. The Judiciary’s three-tiered system of oversight and review involves local, circuit, and national judicial entities. It is an approach that works well because this system is suited to the Judiciary’s unique governance structure.

Obviously there is always room for improvement, and improvements are continually being made. But, the federal Judiciary and the American system of justice enjoy a high level of trust and confidence by the public, and our Committee believes that this trust is well deserved, but we know it must be continually earned. We are committed to doing our part to ensure the Judiciary retains the public’s trust.