International Journal on Governmental Financial Management – 2008 139
INTERNAL INVESTIGATIONS ANDTRANSPARENCY: THE END OF MR.DOMINICK’S DISTINGUISHEDCAREER
Daniel Edelman, Director of Accounting ProgramsDaniel_Edelman@tamu-commerce.eduAssistant Professor, Texas A&M University-Commerce, USAVirginia FullwoodInstructor, Texas A&M University-Commerce, USAGordon HeslopAssistant Professor, Texas A&M University-Commerce, USATim WilsonAssistant Professor, Texas A&M University-Commerce, USA
Abstract
Investigations of allegations of misconduct are necessary to monitor and control actions of agents (employees). Reports on facts found are also necessary to provide transparency andto provide a basis for action or change. Reports on allegations found not to be true andresulting in no recommended action serve a limited purpose and sometimes cause harm toagents. A balance is needed between disclosures required for transparent agencyrelationships and the harm transparency causes to agents. The purpose of this paper is todescribe the need for this balance, using the example of a specific investigation conducted by a Government Agency. The illustration will then be used to comment on the currentstate of internal controls over investigations of financial management and to suggestimprovements in these controls.
Introduction
Organizations, such as businesses and government agencies, rely on human agents(employees) to achieve goals. Internal controls are needed to monitor and control theactions of agents and assure faithful performance of agency duties. Actions of agents arecontrolled and monitored by policies and procedures intended to assure agents do not actwithout authority and that they comply with procedures limiting and documenting their
140 International Journal on Governmental Financial Management – 2008
actions. These policies and procedures should prevent unauthorized actions and provide ameans to monitor actions taken. These policies and procedures form part of what is knownas internal controls.Effective internal controls require a willingness to investigate allegations of unauthorizedaction or failures to observe required procedures. Persons working as agents must expectto be subject to investigations regarding their performance of agency duties. For agents of the US Federal Government, allegations of misconduct are investigated by the Office of the Inspector General, within an agency. According to the US Department of Justice, theOffice of the Inspector General “conducts independent investigations, audits, inspections,and special reviews of the United States Department of Justice personnel and programs todetect and deter waste, fraud, abuse, and misconduct, and to promote integrity, economy,efficiency, and effectiveness in Department of Justice operations”(www.USDOJ.gov/oig.index.hmtl
). We believe these goals to be similar at other Offices of Inspector Generals within other agencies.Transparency requires investigations whenever reasonable suspicion of misconduct exists,and requires the scope and actions of an investigation to be driven by the facts discovered.Investigatory resources and credibility are reduced when investigations occur withoutreasonable suspicion and actions taken by investigators are not determined by findings of fact. Transparency in agency relations is increased when principals have reason to believeinvestigations are not used for political or other reasons not related to monitoring agencyduties. The broad scope of the investigatory powers of the Office of the Inspector Generaldoes not necessarily provide this assurance. The purpose of this paper is to describe thedelicate balance of disclosure of transparent investigations and allegations of misconduct.We describe an actual case, with fictitious identities (Roscoe B. Dominick) to illustrate our concerns.
The Case of Roscoe B. Dominick
Roscoe Dominick was a senior executive at a high profile agency (ABC). ABC is a branchof the Department of XYZ. During Dominick’s three year tenure at ABC, the politicalenvironment at XYZ was allegedly chaotic. A series of scandals occurred at XYZ duringthat time and its management was characterized in the media as “dysfunctional” by political leaders from both of the main parties.In January, 200X, the Office of the Inspector General of XYZ received an anonymousletter alleging Dominick engaged in “egregious acts of gross mismanagement of publicfunds and failures of leadership.” The letter alleged eight incidents of financialmismanagement and also alleged Dominick engaged in unfair hiring practices andtolerated a hostile work environment. The Office of the Inspector General investigated theallegations and issued a report.
International Journal on Governmental Financial Management – 2008 141
The OIG Report
The Office of the Inspector General’s report described eleven allegations againstDominick. Nine of the eleven were found to have no basis in fact. One was found to havean arguable basis, but a “de minimus” amount of funds were involved. Another was foundto have a basis, but related to actions of subordinate ABC employees and was onlyindirectly attributable to Dominick. This allegation, in which Dominick was at fault, wasdiscovered by the Office of the Inspector General while investigating the others.The Office of the Inspector General report made no material recommendations for changesand generally confirmed Dominick’s substantial compliance with internal controls. Thereport did offer lots of opinions and unsupported conclusions about issues outside thescope of the investigation or the expertise of the investigator. The report harshly criticizedDominick, using vague and sensationalistic terms. The opinions expressed in the reportapparently substitute the judgment of an independent investigator for that of a politicallyappointed agent with biased responsibilities. The only change to result from theinvestigation was the resignation of Dominick. Press coverage of his resignation, “amid aninquiry into his spending”, suggests the investigation may have caused him to resign.The allegations against Dominick, and the Office of the Inspector General report on them,may be summarized as follows:
1.Hiring Policies and their Budget Impact
Dominick was accused of hiring excessive numbers of ABC employees. The report foundno unauthorized employees were hired and no policies or procedures were violated. Thereport then criticized Dominick for hiring new employees, expressed an opinion that thefunds should have been used for other purposes, and suggested that Dominick denied ABCemployees safety equipment and training programs.
2.Design Changes to ABC’s Headquarters Building
Dominick was accused of making unnecessary changes to the ABC headquarters buildingcompleted during his tenure. Again, the Office of the Inspector General report found nounauthorized acts or failures to follow policies and procedures.The Office of the Inspector General report then proceeded to detail building expenditures,including the use of premium materials in portions of the building used by Dominick andother senior ABC managers. The report provided sensationalistic details and dollar amounts and expressed an opinion that funds expended for these offices could have been put to better use.
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Edelman, Fullwood, Heslop, Wilson, Internal Investigations and Transparency the End of Mr. Dominick’s Distinguished Career
Investigations of allegations of misconduct are necessary to monitor and control actions of
agents (employees). Reports on facts found are also necessary to provide transparency and
to provide a basis for action or change. Reports on… (More)
agents (employees). Reports on facts found are also necessary to provide transparency and
to provide a basis for action or change. Reports on… (More)
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