Peoria County Government will see changes in both its internal and external audit functions in 2017. The internal audit changes are due to the previous elected County auditor stepping down, and a new auditor being appointed. The County also has a new external auditing firm, due to the County Board’s policy mandating a change in external auditing firms every five years. The board adopted this policy to ensure that a fresh set of eyes will audit the County’s financial statements periodically, while still allowing the auditing firm to gain familiarity and efficiency through multi-year engagements.
Both internal and external auditors in local governments are governed by the professional standards contained in the U.S. General Accounting Office’s publication Government Auditing Standards, known in the industry as the “The Yellow Book.” But internal and external audits serve different functions.
In Peoria County, the elected County auditor performs the internal audit function, which includes pre-payment audits and maintenance of the official vendor database. These “comptroller” duties are designed to catch mistakes or potential fraud in the payment of vendors and employees. They help ensure that the County’s financial policies are being followed, and they make up the largest day-to-day task of the auditor’s office.
The County auditor also performs more formal internal audits to examine the risks facing the County, and how it manages those risks. This includes evaluating and testing policies and procedures to make sure they are both well-designed and functioning as intended. The auditor can make recommendations for improvement as part of an audit report delivered in closed session to the Ways and Means Committee of the County Board. These recommendations can be both financial and non-financial. While the County Board can suggest specific areas of focus, the auditor is independent of County administration and other elected officials—answerable only to the voters and taxpayers.
County governments are required by state law to have an external financial audit performed annually by an independent Certified Public Accountant. Peoria County selects a CPA firm through a competitive, request-for-proposal procurement process. In 2017, it began a new five-year contract with Sikich LLP, after finishing a five-year relationship with Baker Tilly. The external auditors also report to the Ways and Means Committee.
An external audit tests whether the County’s financial statements are free from material misstatement and presented in accordance with Generally Accepted Accounting Principles (GAAP). For local governments, the Governmental Accounting Standards Board generally establishes GAAP. Here again, while the County Board can suggest specific areas of concern, the external auditor is required to maintain professional independence, planning and performing the audit according to the standards laid out in The Yellow Book.
As part of the audit process, the external auditors must provide a report that details any weaknesses in the County’s practices and procedures that might affect its financial statements. For several years now, Peoria County’s external auditors have found no material weaknesses. To be clear, however, it is not the role of the external audit firm to find all instances of waste, fraud or abuse. The audit firm performs sampled tests of the County’s internal controls and financial transactions, but it does not review every financial transaction and internal control.
Ultimately, the external audit firm expresses a written opinion on the County’s financial statements based on its audit. Whether you are an investor buying Peoria County’s bonds, a Peoria County taxpayer or a County Board member, you rely upon this outside assurance that the County’s financial reports are reliable. iBi
G. Allen Mayer is chairman of the Ways and Means Committee of the Peoria County Board.