INTERNAL AUDITOR CANDIDATE THEODORE GUBA

Transcription

1 INTERNAL AUDITOR CANDIDATE THEODORE GUBA 1

2 THE MERCER GROUP BACKGROUND & PRELIMINARY REFERENCE REPORT ON CANDIDATE THEODORE GUBA CANDIDATE S EDUCATION & PROFESSIONAL ASSOCIATIONS Mr. Guba receipt of a Bachelor s degree in Accounting from Boston College was verified with the National Student Clearinghouse, a degree verification service. His current license as a Florida CPA was verified in an on-line search of the Florida Department of Business and Professional Regulation. Mr. Guba s certification as an Internal Auditor was verified directly with the Institute of Internal Auditors. He also reports that he is a Certified Fraud Examiner and a Certified Inspector General. Mr. Guba indicates that he is a member of a number of professional associations - the American Institute of CPA s, the Institute of Internal Auditors, the Association of Certified Fraud Examiners, and the Association of Inspectors General. BACKGROUND CHECK RESULTS FOR CANDIDATE A national criminal records search provided no criminal record for Mr. Guba. There are no bankruptcies, overdue, or collection items on Mr. Guba s credit record. His Florida state driving record revealed no infractions within the past three years (the length of time available on the online records search). His social security number was reported to be valid. CANDIDATE S EMPLOYMENT HISTORY Mr. Guba has almost thirty years experience as an Internal Auditor, the first two thirds of which were spent working for various corporations and a transit authority in the New York City area. He started his audit career with Exxon in New York as a Senior Internal Auditor where he did both financial and operational audits. After two years with Exxon, he spent two years with Hertz as an Audit Supervisor, supervising up to five other audit professionals who did financial and operational audits. He then moved to the Ziff Communications Company as Director of Internal Audits for three years and Director of Special Projects for the last two years of his tenure. In his audit work there part of his responsibility was to supervise audits of subsidiary locations. As the Director of Special Projects, he dealt with the financial aspects of contracts for the sale of company divisions. He then spent four years as the Director of Internal Audit for a large architectural, engineering and construction firm where he acquired an expertise in auditing construction and design contracts. Mr. Guba s first public sector job was a six year stint as an Audit Manager with the Metropolitan Transit Authority of New York City. He indicates he was looking for a new challenge and 2

3 fulfilling a desire to live in Florida when he accepted the position of Inspector General (later retitled Audit Manager) of Florida International University in Miami. He held that position for nine years, through In that role, he reported to the University s Finance and Audit Committee and supervised a staff of auditors and investigators who did financial and performance audits, investigations, and performance reviews of contractors. He left the university, he indicates, due to a discomfort with the increasing involvement of the University President s administrative staff in his daily operations. Since 2008 he has been working as a consultant under contract with the City of Doral to assist them with budget matters, setting up internal controls and improve operational efficiency. COMPARABLE EXPERIENCE Mr. Guba s experience with design and construction audits, as well as his experience in the Florida University system relate to the responsibilities of the Monroe County Schools Internal Audit function. He is very familiar with Florida statutory provisions, open records laws, education funding, and governmental accounting standards. He was involved in a network of University auditors who shared information, policies, techniques and knowledge and would likely establish a similar relationship with other School District auditors were he to get the position with the School Board. His experience doing fraud investigations is also pertinent to the position. Mr. Guba answers to the technical questions posed to his were evaluated as acceptable by the internal audit professional who conducted that portion of the interview with him. A concern is that he has been operating with a sizeable staff at FIU and has not personally done any audits for some years. He has done investigations, but not audits. Also of concern is that he has never worked in a one-person audit shop or with just an administrative support person. INFORMATION GLEANED FROM REFERENCES I have only been able to reach one of Mr. Guba s references so far, a former university attorney who worked with Mr. Guba for approximately four years. I have a call into the former head of the FIU Audit Committee and another reference and will update this report when I hear back from them. References are asked in what capacity they worked with Mr. Guba and for how long, what they thought his strengths as an auditor are, and what they thought were his shortcomings. They are also asked to comment on how he approached the role of auditor, related to his bosses, subordinates and auditees, how he dealt with strong disagreement with his audit findings or recommendations, his integrity and whether they would hire his again. The input from the single reference so far is provided in the pages that follow. 3

4 Audit Style He s very fair; down the middle; digs to get the answers; I never observed that he has an agenda. Relationship with the Board, Subordinates, Others I always thought he got along with people very well. Being the Inspector General he did an excellent job dealing with people who were not always pleased to see him because of the nature of his job. Those were people who had reason not to want him there, not necessarily because of fraud, but because they were loose with procedures, or didn t do all the things they should. It was his job to investigate whistleblower complaints or allegations of fraud. People can get defensive when someone accuses them of something. I thought he did a very good job in those circumstances. I know in later years he ran into a buzz saw on some fairly high profile problems, where he was simply doing his job but there were those with an agenda, who wanted to deflect criticism away from themselves, who would make his job difficult. They were not necessarily the person he was investigating, but others on whom the findings might throw a negative reflection. Quality of His Audits The quality of his work was superb. We worked on a number of matters together investigations & preparing for litigation. I recall a very thorny dispute we had with a very large construction contract. He audited that project. His work was meticulous, extremely well organized, well presented. His work papers were very, very well-organized. The audit reports were extremely thorough (both those he personally did & the ones his staff did.) He did the audits himself in higher profile cases. Dealing with Strong Opposition to his Recommendations I found him to be very reasonable. Not at all dogmatic. Has a very human side. Integrity He is honest to a fault. Not always a good thing in a public environment when people have hidden agendas and you are very straightforward and honest. Strengths I could not speak more highly of him. I cannot say enough good things about him. He is extremely competent; extremely honest. A joy to work with. Another strength is that 4

5 he assembled a great team of auditors. He didn t have much of a staff when he arrived. Areas for Improvement Presentation Skills, Ability to deal with Press He makes a very professional presentation. He is very good at explaining his positions. He is direct and concise; knows his business & is able to explain it well. Would You Hire Him? Based on what I ve read in the paper about the Keys, Ted has the experience they need I believe he s trained as a forensic auditor. He would do a thorough, honest & excellent job. He would do a superb job at creating the controls they need. Follow up Question. He won t have a team of auditors in Monroe. He can work alone. He s done the work himself. Early on at FIU, he only had 1 or 2 people so he did a lot of the work himself. 5

6 SCHOOL BOARD INTERNAL AUDITOR INTERVIEW CANDIDATE: TED GUBA Tell me a little bit about your job at FIU. Who did you report to? Initially to the President functionally, and administratively to a VP. When they formed the Audit Committee in 2004, I started to report to the Audit Committee functionally. Audit Committee Chair is Kirk Langdon, philanthropist & CEO of a corp. He was chair of the audit committee with another corporation and is very knowledgeable. I reported to him for last two years I was there. Why the two different titles on your resume for FIU? When I started in 1998 state law called for the position to be called Inspector General & to do both financial audits and non-criminal investigations. Then 5 years ago all universities devolved from the state & became public entities. At that point they changed my title to Audit Director. What staff reports to you? Started with staff of 4; built it up to 8. Because of my construction auditing expertise, I started a construction audit section (mostly cost recovery audits) because for the last 10 years FIU has been in a major expansion mode. I also put in an IT audit function. Other universities all get together, do trng together. I introduced construction & IT auditing there & shared all of my audit programs with them; the other universities ended up implementing construction audits as a result. What were the challenges there? Towards the end, my challenge was political. The administrative person I reported to in the last year or so got too involved in my day to day work, e.g. the hiring decisions- that person wanted to tell me who to hire. Another problem, all audit depts. should have a quality assurance audit every 5 years the university auditors did other universities to keep costs down & because we are familiar with the setting. All we paid were costs. Did it that way for years, but this administrator wanted to hire a friend in a private firm to do it who didn t have the experience to do it. Things like that became a problem for me. Why did you leave? Several reasons. Work got to be repetitive after a while and I was getting a bit bored. They were making a lot of mgmt changes. I had looked at a couple public jobs & they knew it. Were you asked to leave? It was a mutual agreement. I got severance. It was not a dismissal. I had a contract & they didn t renew it. What was the Audit Committee Chair s position on this? His position was what he had to do what mgmt wanted. (I was constantly complaining to him about them interfering in daily matters.) If you look at the audit committee charter, they didn t have a lot of authority. The President was not involved in this at all. Just this one administrator. What is your arrangement with the City of Doral? Last year I reviewed the City Mgr s recommendations on the budget. Doral incorporated in 2003 & revenues went from $15 m to $55 million in Bldg dept revenues down 60%. Made recommendations, i.e. too many cars, no fleet mgmt function. Problems with cash 6

7 handling. Tell me a little bit about your job at the MTA in NY. Who did you report to? An Asst VP, who reported to the Audit Director 100 person staff there. What staff reported to you? I was an Auditor III which is a manager. When I was hired, 6 construction auditors reported to me. There were 50 audits we pumped out each year; too much work, so then they hired another mgr, and we split the staff. What were the most interesting aspects of your position? 1 st 4 years I did construction auditing; then they wanted me to do performance audits. What were the challenges there? Why did you leave? Getting bored. It was the kind of place that had career auditors who were staying there until they retired. People watched the clock. My kids were young, we had family in Florida, and we liked Florida. PLANNING & ORGANIZING 1. Tell me how you went about preparing your annual audit plan at FIU Risk assessment process Id d all auditable entities 400! We d assigned risk factors: Mgmt concerns Prior audit history Regulatory exposure Financial exposure (1 other interviewee did not capture) A methodical thing; lots of judgment involved % of time could be spent on investigations. That was uncontrollable; hot line for reporting fraud. Could really affect the audit plan. A lot of the major areas had to be audited on a cycle basis. We stayed away from the things the state auditors were looking at. They were there 6-7 months of the year, with a staff of 3-4 people. 2. What project planning process do you use? Does it apply to all internal audits? Start with a survey and walk through of the department Obtain the financial information Discuss with management any problems or concerns they have Test internal controls 7

8 Use canned audit programs or IIA audit programs Obtain policy and procedures manuals to test for compliance 3. How many audits did you accomplish in a year at (ask for several employers)? What % of the audits scheduled on the annual audit plan were completed? I personally haven t done audits for some time. At FIU, I personally did some investigations a few sensitive ones. E.g. a review of the President s expense accounts. On audits, I usually only reviewed the reports of my staff. 4. Explain how you manage your workweek and your record keeping system? Uses a time management system in Excel to track hours by project. Each audit has a budget of hours that shows the time spent in the field auditing and testing, and writing the report. Time is kept in ½ hour intervals. 5. Explain the system you use to track the implementation status of audit recommendations? Different ways I ve done it. If you have a strong Audit Committee or Board it can be very effective to send the status reports to them & they put pressure on management to get things done. Where no Audit Committee, I scheduled follow ups to do short scope tests to see if the recommendations have been implemented & then issue a follow up report indicating how many of the recommendations have been audited, which haven t. To save time, if you trust the manager, you can rely on mgmt to tell you in writing what they ve done & only verify some of the actions, not all. COMPARABLE EXPERIENCE Did more audits at Ziff, because of small staff. Have to review the audit reports. 1. Describe a couple of the most difficult audits you have had to personally do. What made them difficult? A. My initial construction audit at FIU, a $12m contract. The contractor was charging FIU a fringe benefit rate of 125%. Most contracts have clauses saying the rate is auditable & should reflect actual cost. But this contract didn t. The overcharge was so substantial - $600K, I really pursued it. The company was not cooperative, would not open up their records. Finally we told them we wouldn t give them any more work & they then let us in. What made it difficult, though, was the aftermath of the audit when we were pursuing recovery of the $600K. They wore our mgmt down with many meetings, throwing arguments and data 8

9 that wasn t relevant, etc. FIU settled for getting $300K back. I was upset we only got ½ of it back; felt we should have insisted on more. As a result, I recommended that we start using a standard construction contract. I also recommended putting an auditor in the construction dept. You can avoid a lot of problems if you set up a contract properly & the auditor sits down & tells the chosen contractor up front what you expect in terms of record-keeping, reporting, and compliance. B. At FIU they did one project in-house by hiring a project mgr. The guy turned out to be a thief. He had ghost employees on the payroll; inaccurate time sheets; purchases that wound up in his house; overtime for which there were no records. He said there were no records for overtime because the HR Dept had told him not to record any hours over 9 per day per employee. It was a difficult audit because one of the VPs recommended the guy & he was very upset with the audit results. He felt he was being innovative by doing a construction project inhouse. 2. In what positions have you had to present your audit findings to the CEO or Board of Directors? At Hertz, the Risk Mgr was my boss. At both Ziff and Ebasco I reported to the CFO. At FIU, my auditors attended the Audit Committee meetings but I presented the status report. 3. What experience have you had in working with audit committees? What was the role of the audit committee there & how many times a year would you typically meet with them? Only place I worked that had an Audit Committee was at FIU What did you do to keep the audit committee informed of your work and problems you were encountering? 4. Have you ever had to create an audit function from scratch? How did you approach that task? At Ziff I did. The IIA has manuals on how to create a dept. You get to know the operation, you talk to people, meet with the external auditors, prepare your charter, determine audit plan with estimate of time you have. Initially you do a multi-year audit plan. Need to create staff manuals, check lists, a staff library, have a quality control system in place, a follow up system. 9

10 5. Tell me about a time when you ve worked in an organization where there was a strong resistance to change. How did you deal with that? Took two years to get the Construction Dept to agree to hire an auditor. Pretty receptive to my recommendations otherwise at FIU. 6. What experience if any - do you have in working with a school system or university? Florida International University 7. One man shop Has never run a single person operation. Smallest was at Ziff, where he had three people reporting to him. His comments about Monroe Schools - First year is pretty obvious what has to be done. Look at all those cash receipts areas & implement controls. PERSONAL CHARACTERISTICS INITIATIVE, TENACITY, ETHICS, FLEXIBILITY 1. What was the most difficult professional situation you ve found yourself in? What were the circumstances and what did you do to manage them? Person in university administration getting involved in the running of my day to day operation. Looking back cold you have handled it differently? Yes. From the beginning. I had said initially to Kirk Langdon that particularly person was going to be trouble He asked if I wanted him to get someone else assigned and I said no, I d deal with it. That was a mistake. 2. Please give me examples of two situations where a manager challenged your draft audit report, demanding certain findings and the related recommendations be removed. What was the basis for the challenge in each and how did you handle it? The VP on the in-house project mgr audit I mentioned earlier. I had a very good investigator but sometimes he stepped on people s toes. The thief wrote a letter explaining how he didn t mean to do anything wrong. They (mgmt) didn t want to accept our findings, wanted to say he wasn t dishonest, just didn t keep good time records. Tried to turn it around and say it was the auditor s approach. He was a strong auditor who sometimes rubbed people the wrong way, but his work was solid and he had the backup. Did an investigation of an institute where it was common practice for an employee to sign the boss s name & initial after it. At one point the employee signed his name on extra compensation for herself. He caught her, told her to never do it again no discipline. She did it again. $6k between the two instances she put herself in at $90 an 10

11 hour for after hour events (she was making $35-40K salary). He called us in & we did the investigation. As a result he was let go. Two layers above 1 above knew & hadn t done anything. I was new at the time. People told me the dean knew about it but he denied that. 3. Have you had occasions where information was brought to you that would change your audit findings or recommendations after your report was issued? What did you do? With investigations you are dealing with people lives, you ve got to be so careful of the accuracy of your findings. Never made a big error. Audit findings are always gone over with mgmt before we finalize. We will remove the finding if mgmt comes up with documents that refute our finding. 4. In performing audit fieldwork, please tell me about a situation in which a person was not forthcoming with information you needed. 5. What difficulties have you experienced in getting entities to implement your audit recommendations and what have you learned as a result of those difficulties? At FIU, on all our recommendations, mgmt had to give an action plan & target date for completion. Status of those recommendations was reported in writing at Audit Committee. Before Kirk Langdon, we had a 50% implementation rate. We often had to go back and do follow up audits to point out how many recommendations had not been implemented. Langdon wanted an 80% implementation rate. He had an early meeting at his office with the managers who didn t implement audit recommendations & things changed after that. He also changed our practice of verifying everything, saying it wasn t necessary to check every item. 6. What job in your career did you like best and why? Liked them all for diff reasons. At Hertz, I got to travel all over the country but got old very quickly. The audits were compliance audits, very repetitive once you learned it. I got to meet a lot of people. I also got supervisory responsibility there at a young age. At Exxon, first 3 years boring but I learned a lot. Then I moved into a small, new section that was a lot of fun. At Ziff, I audited television, magazine operations advertising types, TV types are different type people. It was fun. Enjoyed my time at FIU, what kept it interesting were the investigations. FIU was always 11

12 changing, a lot going on there. 7. Which did you like the least and why? The MTA. I got bored there I learned the ropes quickly and the work was very repetitive. Environment was static. TECHNICAL/PROFESSIONAL KNOWLEDGE & EXPERIENCE 1. Describe test(s) you have included in an audit program to address Statement on Auditing Standards No. 99? I do not know. 2. What process or framework have you used to evaluate the adequacy of internal controls? He uses the IIA standards, checklists and the Red Book as opposed to the Yellow Book. 3. Have you ever conducted a formal risk assessment and, if so, how did you incorporate it into setting up the annual audit plan? I would take the following steps to conduct the risk assessment in order to develop the annual audit plan: Identify the auditable units Assign risk factors Identify managements concerns Prioritize auditable units based on their risk factor. High risk such as Cash transactions would be audited at least once per year. Low risk departments, functions, or transactions would be audited once every 2 3 years. 4. What is your familiarity with The Yellow Book? I know what it is but I am more familiar in performing audits in accordance with the Red Book. 5. Have you been given the assignment to audit a program funded by a Federal Grant? Under the Federal Guidelines what are examples of: a. Allowable Costs? Payroll for the individuals working directly on the project. b. Unallowable Costs? Travel costs that exceed the GSA rate, for example a $50.00 breakfast for one person would be an unallowable cost. 12

13 6. Please describe the steps you normally take to develop a presentation of a completed audit to the Audit Committee. I would prepare a one page executive summary that highlights the major findings to go along with the complete audit report. I would also prepare a follow up presentation to report the status of past audit recommendations. 7. What experience have you had auditing financial accounting systems? MUNIS - at the city of Doral PeopleSoft at FIU 8. Describe the main purpose of Statement on Auditing Standards No. 70? I do not know. 9. How do you keep current with auditing and accounting professional standards? I currently obtain CPE credits by working for the Thompson Company reviewing their training programs and test material. To date earned 50 CPE hours at no cost. 10. How have you used technology in conducting internal audits? Not really an IT audit expert. I have tested applications by reviewing the detail transactions. 11. As an internal auditor, have you been involved in a large technology system implementation? What do you see as the role of the auditor in that situation Yes. At FIU, all universities used to be on one financial system (Home Enterprise System), but when the universities devolved from the state, we put in People Soft. I assigned two staff to it form initial implementation to the end. Doing testing, keeping in touch with other cities that were also implementing People Soft so we could be aware of what problems they ran into that we could anticipate for it. Our role was to make sure that there was proper parallel testing done. At the end we had to certify to the state that the system was ready to go. SELF ASSESSMENT 1. What have several other people (at work) told you are your shortcomings or development needs? Can be impatient with staff at times (because wanting to meet deadlines) Try to deal with that by knowing my staff, and who can handle which audits 13

14 2. What have you been praised for by your bosses? That I get things done when I say I ll get them done. I m reliable. I m competent High degree of integrity. 3. What do you think are your strengths? I can read things behind the numbers. Can size up where things are wrong pretty fast. Current status My contract is thru this September with the City Doral. Don t know how much my new contract will be, but with the financial situation as it is I am looking. Salary Looking to be appointed at the top end of the range in Monroe. Relocation Would rent in the Keys and commute on weekends back to Miami because of kids in school. 14