- Hi, I am Donna King, filling in for Marc Rotterman.

Coming up on "Front Row," what is the state government doing with your public resources?

The latest from State Auditor, Beth Wood, next.

- [Voiceover] Major funding for "Front Row with Marc Rotterman" is provided by Robert L. Luddy.

Additional funding provided by Patricia and Koo Yuen through the Yuen Foundation, committed to bridging cultural differences in our communities.

And by... Funding for the Lightning Round provided by Nicholas B. and Lucy Mayo Boddie Foundation, A.E.

Finley Foundation, NC Realtors, Rifenburg Construction, Stefan Gleason.

A complete list of funders can be found at pbsn.org/frontrow.

[dramatic music] ♪ - Welcome back, joining me today is North Carolina's State Auditor, Beth Wood.

Thanks for being here.

- Thank you for having me, Donna.

- Oh, I'm glad you're here.

We really are excited about this, because good governance, you know, it's something we do year-round, we talk about on this show.

And you're the state watchdog, really.

Tell me a little bit about what "good governance" means to you.

What are the variables in it?

What are you looking for?

- We're looking for, not only are the dollars properly accounted for, receipts coming in, went in the bank, checks written, had support for the things they were written for, and they were written for the right things.

More importantly, I think to us today, because given technology, that part is so easy now, it's really easy now.

The bigger piece is, did you waste any of those tax dollars that you spent?

Are we running our government as efficiently?

Are we, as we should, are we providing the services, not just to a few people that we're supposed to, or a lot of people that we're supposed to, but everybody that we are supposed to?

So, again, good governance to me, is not only is the checkbook, right- - Sure.

- but are we getting the most out of every hard-earned tax dollar that comes in to Raleigh, to run our state government?

- Sure, sure, as a taxpayer, I'm glad to hear that.

One of the things that we've talked about a little bit is that your organization, the Office of the State Auditor, runs differently, I think, than other state agencies in our system, much more corporate to me.

Can you talk a little bit about what your goals are for that agency, and how you've set it up, how you've designed it?

- Absolutely, so we are making sure, just like in a CPA firm, just like in an audit firm, we are budgeting the work that we do.

- [Donna] Sure.

- We are ensuring that people are in the office and that they're working.

So I've got budgets, and then I've got accountability for your time through our time sheets.

Our time sheets are very detailed.

And then we go back and look at, "This was the amount of time you're supposed to spend on this segment, or this project in general.

How much time did you spend?"

And back before I became State Auditor, and I was working for the State Auditor's Office, one of the auditors asked me, he said, "Beth, why can't we ever get an audit out the door?

Why can't we..." And I started looking when I became State Auditor, people don't show up for work.

If I'm planning a year- - [Donna] Right.

- based on a certain number of man hours, people have to be there.

So people say, "Well, I got vacation time, I've earned that."

Yes, you did.

But at the same time, I've gotta have a commitment for a certain amount of man hours- - [Donna] Sure.

- to put out all the work that we need to do.

So again, upfront, we look at how many man hours we have, and I look at vacation, I look at sick time, I look at holidays, we look at computer problems.

- Sure.

- We look at a lot of admin stuff.

And then we back up and say, "Our staff need to have 80% of their time charged to a productive audit or investigation."

And then you can't push that time into one audit 'cause it's got a budget.

Now if you go over budget, that's another, something that you should not do.

- [Donna] Sure.

- So we are managing our man hours, our time, our resources, much like a CPA firm does.

- Very interesting, because you started off in the treasury's office in state government- - I did.

- I believe.

What was your experience there?

Did that shape how you're doing the State Auditor's Office?

- Absolutely not.

- [Donna] Okay.

- I was in the corporate world for 10 years.

And when I was in the corporate world, it was always about quality, but yet efficiency.

- [Donna] Sure.

- And when I got into state government, and in the corporate world, you're always looking at the bottom line.

- Sure.

- And I came to state government and you couldn't find the bottom line.

And so I'm thinking, this is not... And I grew up very, very humble means, people would call us poor.

And I know my parents struggled to make ends meet.

And I got into the State Auditor's Office, and I thought, "Oh my gosh, this is the agency that oversees, not only the accounting for our tax dollars-" - Sure.

- but the efficiency or wastefulness, whichever we land on."

- [Donna] Sure.

- And so I really made that place my home.

But no, the corporate world was what prepared me for how I managed the State Auditor's Office.

- Sure, sure, now you're the first woman to hold that office in a century, I believe, I'm not really even sure.

Has that affected how you've approached it?

I mean, it's certainly is, to your credit, that you're the first woman in this role.

- Absolutely not.

People have asked me all the time, how's it different for you?

It hasn't been.

- [Donna] Right.

- I've always been a hard charger.

- [Donna] Sure.

- I've always been very confident of what I'm doing.

I always work hard to make sure we're doing it right.

And then we make sure, again, with vetting- - [Donna] Sure.

- that what we're doing is right.

I look for, you know, we didn't just pick a number of 80% out of the sky- - [Donna] Right.

- We stepped back and said, "What is reasonable without running a sweatshop?"

I've worked in a sweatshop before.

- Sure.

- What is reasonable without running a sweatshop?

And then that's the bottom line, and everybody must adhere to it.

- Sure, and when you talk about quality, you know, an opinion is difficult to keep out of your work, regardless of what you do.

But in an audit, it's particularly important.

You're known as probably one of the most bipartisan, nonpartisan, apolitical people in our leadership.

Talk a little bit about how important that is for the political side in these audits.

- It's critical that we are nonpartisan.

First of all, I'm a CPA, and all of my work is required to be independent, objective, and not biased.

- [Donna] Right.

- And then we get into the State Auditor's Office, and it was never meant to push political agendas.

- [Donna] Sure.

- It was never meant, it was always, "Are the monies accounted for properly, and is any of it being wasted, and is any of it being stolen?"

And you can't do that pushing political agendas.

And I've worked for a Republican State Auditor, and I've worked for a Democratic State Auditor, and watched them push political agendas.

And nobody will believe your work, it holds no credibility if there's any biases built into the work.

So people have to leave their opinions and their biases.

And early on when I became the State Auditor, people would be in meetings with me, and they say, "Well, in my opinion..." And I'd say, "Wait, you have no opinion, you have no opinion, what does the evidence say?"

And we hire consultants to come back through my work, to make sure that all of our conclusions, which lead to findings, are backed up by hard evidence.

- So hard evidence is thing, what do the numbers show?

- What do the numbers show?

- [Donna] Right.

- What do the documentation show?

- [Donna] Sure.

- What supports that conclusion, which leads to a finding?

So our work goes through a lot of scrutiny, several levels of scrutiny within the agency, internally, and right on up to me.

- [Donna] Yeah.

- I sit in meetings with my staff, and ask the hard questions that somebody else might ask.

- Sure.

- And then we have a consultant that comes in and follows up behind that.

We change lives, we destroy lives, we put people in jail.

We can make, we've made laws, for the most part, changes in laws, changes in policy that leads to better government.

If people can't rely on our work, that's never gonna happen.

And the $20 million, $23 million that I spend every year, running my offices, is for nothing.

- Right, now one of the things we've talked about is the money.

You know, we have gotten, North Carolina has been, all states have gotten a lot of money following COVID, and the American Rescue Plan.

That has got to be a daunting task to manage it, but also track how it's being managed.

You had an audit this spring, and a statewide audit of all these different facilities.

What were some of those key findings?

- I think probably two key findings here.

We've got 'em really good at sending the money where it needed to go.

- [Donna] Right.

- We didn't find, that the state government did a wonderful job of making sure that how the General Assembly allocated the dollars- - [Donna] Right.

- that they went where they were supposed to, when they were supposed to.

What we haven't done a great job of is, asking people, "When you get this money, what do you plan to do with it?

- [Donna] Right.

- "Does that make sense?

Are you getting the most bang for your buck?"

Again, you could, in the instance of the summer schools, - [Donna] Sure.

- for those kids that were in that last quarter, when COVID first hit and they were struggling, there were summer schools that were opened up for for kids to go to school.

And try to make up if they were struggling, to make sure they were ready for the next grade.

- Right.

- What nobody has done is to find out, were all the students that needed to be in summer school, in summer school?

- Right.

- And for all the students that went to summer school, did they get anything out of it?

And did they really get prepared for the next grade?

That is the more important spend-- - [Donna] Yeah.

- of our COVID monies, is are we accomplishing the intent, and are we accomplishing for everybody?

For everybody, every dollar spent, every dime spent, accomplished all that it could.

- Sure.

- And that isn't where we are not great at our job.

- So finding that, in the example of summer school, it's about the reporting process.

It's not that we don't know that they didn't benefit from it, we just don't know.

- That's right, and that's a problem.

We have no idea if the summer schools that we have offered were to every student that should have.

- [Donna] Right.

- And that everyone that went through it, that it made a difference.

Or was it somebody in front of a classroom or online- - Sure.

- going through the motions?

- Sure, part of that audit also talked a little bit about Medicaid enrollment.

And that's important, particularly as a General Assembly comes back in and possibly considers expanding Medicaid.

What has your office found, about the way our current Medicaid system works, particularly as so many more people were added to the roles during COVID?

- Again, for the most part, the enrollment process, who's eligible and who isn't, most of that information is self-reported.

- [Donna] Okay.

- And I'm not allowed to go into tax returns.

- Okay.

- That is probably the one place that I have access to everything and everybody.

But the federal government prohibits me from looking at, a person that's on Medicaid, what does their tax return say?

- Oh.

- And do the two marry up?

- Okay.

- Because Medicaid, and getting on the program, is about income and dependents.

- Right.

- And there's no better place than on a tax return, for those people who are reporting more dependents through Medicaid than they really have, they're getting away with the IRS and and Department of Revenue.

And then the other side of that is we have doctors, medical providers, who are still providing, were providing services to our most vulnerable, and they had lost their license to practice.

- Wow.

- They had limitations on their license, but limitations were not being recognized.

So there was two issues that we came out of the Medicaid audit that we've done so far.

- Sure, now, in your position as State Auditor, you're not in a law-making position.

Do you make recommendations to the General Assembly about what you would like to see change?

And some of the red flags that you've seen in your audits?

- All of our audits have recommendations.

We can't tell you if you need a new computer system- - [Donna] Sure.

- which one.

- [Donna] Right.

- But we can tell you that the one that you have couldn't provide data that we needed.

So we make recommendations and a generality that way.

One of the things that we just finished with Division of Employment Security, people who are filing for unemployment- - Sure.

- just have to certify online that they made three attempts to get a job.

There is no data that verifies that they really didn't make an attempt to get a job.

- So that potential employers never contacted or- - No, no, but more importantly, is we are not taking the data, and the US Department of Labor has recommended this for years, that our own Division of Employment Security pull in, save.

I'm looking for the word.

- Sure.

- That they store all of these applications, but then to compare the application and your resume, were you even qualified to get that job?

'Cause people can be filling out applications all day long.

- Sure.

- And if they are not qualified for the position, they'll never be called for an interview.

So they're certifying, "I made three attempts," but they weren't real attempts, given the spirit of what unemployment is about.

So again, we're not really measuring the success of the programs that the state of North Carolina has in place.

- Sure, so you mentioned data and how important that is.

Is this a focus in your office, a growing focus?

Because really, if it's about numbers, we have a lot of data available; it's how we're using it.

- We have a lot of data.

Available is a different story.

- [Donna] Sure.

- I can tell you I've got several audits, I'm working on one at the Department of Public Construction, right now as we speak.

And the data of school attendance has been a nightmare.

- Wow.

- Trying to just get data that's complete, it's accurate, and I can rely on it.

Because again, when I take my audits to the General Assembly, I take my findings and my recommendations.

The organization that I audit, in this case, it'll be DPI- - Sure.

- has an opportunity to disagree with my findings.

And if they can't give me evidence that shows I'm wrong with my findings, then they are required to say, "I agree, this is what we're gonna do to fix it, here's when I'm gonna have it fixed, and here's who's gonna be held accountable if it's not fixed."

Now the General Assembly, and in this case, the Legislative Oversight Committee for Education- - Sure.

- will have a roadmap of what needs to be fixed.

The Division of Employment Security, we have asked them, "Show us, tell us you agree with our findings.

You agree that nobody is really following up to make sure that the jobs people apply for, they could actually get them, because they're qualified.

Show us, tell us what you're gonna do to fix it, when you're gonna have it fixed, and who's gonna be held accountable."

Again, a roadmap to the General Assembly.

So I'm providing that now.

It'll be the follow-up of the General Assembly to make sure these kinds of things happen.

- Sure, sure, this is a tough, tough gig.

Most of the people, I know you are a CPA, how do you guide potential auditors and CPAs in this process?

Because one of the things that I'm seeing, I have college students too, there seems to be fewer and fewer people choosing this as a field, you know, as a CPA, and because they maybe think it's automated.

But it really is, to have these critical-thinking skills.

- It absolutely is, and we are automating data retrieval.

- [Donna] Sure.

- I put in a data analytics division in our agency over two years ago.

- [Donna] Right.

- And so we are automating the things that a computer can do.

We call it robotics.

- [Donna] Sure.

- So that's pulling stuff in with verifications, and now I'm using my auditors as critical thinkers.

- Right.

- But what I am doing is I am speaking to the accounting societies, in several of our universities, to help students understand that there is a path in government- - [Donna] Sure.

- for an auditor, for a CPA.

And it's work that, not only is challenging, I will develop you better than any CPA firm.

I will train you, and at the end of the day, the sky is the limit.

You can start out in my agency as an Assistant State Auditor I, and you can sit in my seat, 'cause it's exactly what I did.

I worked my way from an Assistant State Auditor II, all the way into the position of State Auditor.

So there's much room to grow in the State Auditor's Office.

There's also impactful work.

- [Donna] Right.

- You're changing how our state government works to benefit the lives of citizens all across this state.

And it's challenging work, you will be developed to be the best you can be, if you just apply yourself.

So again, I'm speaking at a lot of universities, to their accounting societies, to their accounting classes, to help them understand this path in the State Auditor's Office.

- Sure, you mentioned impact, you know, that's a key part of this.

It's not just seeing what went wrong, where there may have been, you know, waste or abuse.

It's how it impacts every single North Carolinian in some way.

Talk about that shift in focus that I think I've seen in your office recently.

- Absolutely, so a lot of the work that we're required to do is financial statement audits.

And basically all that is, is somebody hands you a set of financials.

You got a balance sheet, you got a income statement, and you got a cash-flow statement if it's required.

Ton of notes that try to explain these very big numbers.

But the bottom line is creditors are looking at, they know how to read these financials, and they can tell the financial health of an organization and whether or not we need to be lending you money.

- Right.

- So we've gotta have these for the state of North Carolina, our universities, and our community colleges.

We've gotta have these, 'cause the state borrows money, universities borrow money.

And then people contribute to universities and community colleges.

So those are required.

What we are working to do today is to shift about 10 to 15,000 man-hours from those audits that are required, and they're important.

At the same time, they have no impact on the lives of the citizens of North Carolina.

Finding out that the Division of Employment Security gave out $1.2 billion during COVID, in first-time unemployment checks.

Think about that.

- Wow.

- "I lost my job, I've gotta make car payment, house payment, in 30 days.

I've lost my job, no checks coming.

I filed for unemployment, and that check needs to be there in 30 days."

What we found, in $1.2 billion of first-time payments, 1/3 of it was anywhere from 2 months to 365 days late.

Can you imagine having a mortgage, car payment, grocery bills, medical bills, and you can't get the first unemployment check?

Well, the Feds have a standard that 87% of your first-time payments should be made in 14 to 21 days.

Makes sense- - Right.

- before the monthly bills are due.

A third of them, as I said, were anywhere from 2 months to 365 days late.

But what we found is that the Division of Employment Security had not met the 87% benchmark of the Fed's requirement in 10 years.

- Oh wow.

- 10 years, 9 years before COVID hit.

This is impactful- - Sure.

- to the citizens of North Carolina, because think about how many lost their jobs, and were looking for that first-time payment.

And then the National Economic, the National Bureau of Economic Research, has stated that since 1950, the United States has seen an economic downturn, on average, every 5.5 years.

- Wow.

- Every 5.5 years.

So what does that tell you, Donna?

We got another one coming.

- Sure.

- So DES needs to get their act together, and get these payments out the door, in the 14 to 21 days that the federal government requires.

- Sure.

- And you talk about impact, we did a audit on online classes that DPI put together.

They have retired teachers, they have teachers that are on contract, that prepare the courses, and deliver the courses online.

This virtual public school has been around since 2008, 131 courses.

And we heard, at the State Auditor's Office, from a very reliable source, that the courses did not meet North Carolina Education standards, required education standards.

We took 12 of the courses, we hired PhDs who assessed courses across the nation, have done this for the State of North Carolina DPI.

And what we found is that out of the 12 courses that they reviewed, 8 of these online courses did not contain all of the content they were supposed to.

Didn't even have all the information in it that it was supposed to deliver.

11 outta 12 courses did not meet the rigor standard that DPI guaranteed.

Rigor is, how hard is the course?

- Sure.

- How hard does a student have to work?

And DPI guaranteed that these online courses were the most rigorous of any course you could take in North Carolina.

- Wow.

- The ratings from one to six five and six, very rigorous.

11 out of 12 rated a 1 and a 2.

These are courses for gifted students, these are courses for students that wanna go to college, and some general courses.

And these are supposed to look good on that student's resume.

But you talk about impact, this is a $20 million program, but you think about the impact, it reaches students, because it's online all across our state.

So we're picking issues that are impactful- - Sure.

- to the average citizen of North Carolina, which would be me.

- Sure, absolutely.

Now we have just a few minutes left, but I wanted to get into quickly, you're also, because of your role as State Auditor, Chairman of the local Government's Commission, there's nothing that touches people closer than their local government.

You know, you help governments, local governments, figure out their system, but also identify waste and abuse.

What are you looking for in a well-run local government?

- We're looking for, number one, the city council, or the Board of Commissioners, to be doing their job.

That they are getting reports every month, to make sure that the budget they set was the right one, that they're spending in accordance with budget.

They're supposed to make sure that bank reconciliations, I can't tell you how many come before the Local Government Commission, and they're not even doing their bank rec's.

You don't, they don't know how much money they got, cash they got in the bank.

I'm looking for them to make sure that the finance officer and the city manager are doing their job to make sure that, unlike in the case of Spring Lake, an accounting technician took over $500,000.

Not the finance officer, not the city manager, an accounting technician.

- [Donna] So same person signing the back and the front?

- Yes, yes, yes.

And so I want the local government elected officials to take responsibility.

Stop letting the finance officer tell you what's going on, you make sure that what should be going on is taking place for the benefit of those that elected you.

- Absolutely, and that's good advice for anybody who's running an organization- - That's right.

- public or private.

So as we wrap it up here, where would you like to see, if we were gonna audit the Auditor's Office, what would you like to see coming in the next, you know, five, six years changes you'd like to see in your office?

- We are, again, working hard to ensure that our data analytics group is everything it should be, so we can analyze data, and it will point me to where the problems are faster, I wouldn't just have to sort of guess.

I am looking for the best and the brightest to work in my agency.

People that wanna come to work, want to do a good job, want to be trained well, and are committed to serving the citizens of North Carolina.

- Wonderful.

- And there is a place in our agency for all of that.

- That is exciting, I appreciate you being here.

I am so impressed with your background, and as a, you know, the first woman in this role, and you really seem like you're tough.

You have the respect of, it seems, the Democrats and Republicans; it can't be easy.

And I appreciate you being here on "Front Row" with us today.

- My pleasure, Donna.

- Do you think you're gonna run again?

- I'm absolutely gonna run again.

- All right, wonderful, thank you.

And that's it for us, thank you, see you next week.

And thanks for watching "Front Row."

[dramatic music] - [Voiceover] Major funding for "Front Row with Marc Rotterman" is provided by Robert L. Luddy.

Additional funding provided by Patricia and Koo Yuen through the Yuen Foundation, committed to bridging cultural differences in our communities.

And by... Funding for the Lightning Round provided by Nicholas B. and Lucy Mayo Boddie Foundation, A.E.

Finley Foundation, NC Realtors, Rifenburg Construction, Stefan Gleason.

A complete list of funders can be found at pbsnc.org/frontrow.

[dramatic music] ♪