Understanding government audits: Who watches the watchers?

Have you ever wondered who makes sure our borough or city government is spending your tax dollars wisely? The answer lies in a government audit, and it’s more important than you might think. And while many people know what an audit is, they often misunderstand that there are different types.

Think of a government audit as a financial check-up at the doctor’s office. Just as you need regular health exams to catch problems early, governments need regular financial exams to make sure everything is running smoothly. But here’s the key question many residents accuse: doesn’t the government just check itself?

The short answer is no, though it’s a bit more complicated than that. Government audits come in different types, and understanding them helps you know how your local government stays accountable.

First, there are internal audits. These happen when the government examines its own operations, but not in the way you might think. Internal auditors work for the government, but they operate independently from the departments they’re checking. Think of them as referees in a basketball game. Even though they’re part of the game, their job is to call fouls fairly, regardless of which team they affect.

However, the most important audits are external ones performed by independent accounting firms that have no connection to the government being audited. It’s like having a neutral third party look at the books. Every borough and city must have an annual independent audit of its finances.

Not all government audits are the same. There are three main types you should know about: Comprehensive Annual Financial Report (CAFR), Single Federal Audit, and Forensic Audits.

Comprehensive Annual Financial Report (CAFR): This is the standard yearly financial audit that every government must complete. Think of it as the government’s annual report card for money management. The CAFR audit examines whether the borough followed proper accounting rules. It looks at revenues, expenses, debts, and assets to ensure everything adds up correctly.

Single Federal Audit: This special audit is required when a government receives more than $750,000 in federal funding in a year. The single federal audit checks whether the agency spent federal money according to federal rules and regulations. The audit is stricter than a regular financial audit because federal funds have specific requirements.

Forensic Audit: This is the detective work of the audit world. Forensic audits happen when there’s suspected fraud, theft, or serious financial misconduct. Unlike regular audits which look at overall financial health, forensic audits dig deep into specific transactions or activities. They’re like financial investigations, often involving law enforcement. These audits are less common but make headlines when they uncover wrongdoing.

During an audit, professional accountants examine financial records, interview staff, and test various procedures. They look for mistakes, waste, fraud, or areas where the government could work better. If they find problems, they write recommendations for improvement. The government being audited must respond to these recommendations and explain how they plan to fix any issues.

Audit results are public information after the municipality has accepted them at a public meeting that allows the public to comment on the audit. You can find the borough’s annual financial audit on its website at matsugov.us. Look in the “Finance Department” section, where annual audit reports are posted. All three of our cities also have copies of their audits, usually available online.

The audit report includes a “management letter,” which is often the most interesting part for regular citizens. This section highlights any concerns the auditors found and suggests improvements. Reading this can give you insight into how well your local government is managing its responsibilities.

The next time someone asks whether the government just polices itself, you can tell them that while internal controls exist, independent external audits provide the real accountability. These audits are your window into government operations and your assurance that someone is indeed watching the watchers on your behalf.

Christian M. Hartley is a 40-year Alaskan resident with over 25 years of public safety experience and public service. He runs a freelance business, Big Lake Writer, from home in Big Lake that he shares with his wife of 19 years and their three teenage sons.