Carcello testifies before Congress

Carcello

UT professor and former county Audit Committee Chairma Joe Carcello testified in Washington, D.C., before the Subcommittee on Capital Markets and Government Sponsored Enterprises, a committee within the U.S. House of Representatives Financial Services Committee.

Carcello serves several roles within UT's Haslam College of Business—department head for accounting and information management, EY and Business Alumni Professor, and cofounder and executive director of the C. Warren Neel Corporate Governance Center.

Carcello will be testifying on five proposed bills under the heading "Legislative Proposals to Improve the U.S. Capital Markets." Of the five witnesses, two are academics—Carcello and a law professor from Stanford University.

Carcello will encourage Congress to consider the needs of suppliers of capital (investors) rather than only the users of capital (companies).

"Efforts that focus on reducing regulatory safeguards may make it easier for companies to seek public capital but may fail in their intended purpose if they drive the suppliers of capital, the investors, from the market," said Carcello. "In the absence of sufficient regulatory safeguards, investors can currently withdraw from the market or raise the cost of capital to higher levels to compensate for increased risk, but neither outcome enhances capital formation.”

Carcello has testified before U.S. Treasury Department committees, working groups on the future of the auditing profession as well as a Congressional subcommittee on accounting and auditing regulation.

Carcello resigns from audit board

Long-time Knox County Audit Committee Chairman Joe Carcello, who led the panel as it looked into a series of financial scandals, has resigned.

In a letter sent to Knox County commissioners on Tuesday, Carcello said the committee “has made a contribution to improving financial reporting and controls over the seven years it has been in existence, and it has been my pleasure to work with you and other Audit Committee members during that time.”

Carcello, who served as chairman of the 5-member committee since its inception, said his resignation is effective immediately.

The County Commission, on Monday, will talk about replacing him during its monthly work session.

“He has been a valuable asset for Knox County,” said commission Chairman Dave Wright. “He’s been a driving force in keeping us in line – bringing us the information so we know what the rules of the road are.”

Wright said Carcello “will be tough to replace.”

“He’s done an exceptionally focused job, helping us to make sure we can do things as best we can,” he added.

Carcello, an accounting professor at the University of Tennessee since 1992, became the department head, Ernst & Young, and business alumni professor in the Department of Accounting and Information Management, Haslam College of Business at UT in January 2014.

He also serves as a member of the Securities and Exchange Commission’s investor advisory committee.

In his resignation letter, he said those duties "coupled with all of my other faculty responsibilities, has me working 6-7 days every week and late into the evening on most nights."

He added: “This situation has become increasingly untenable, so I have begun the process of identifying activities that I can exit.  Unfortunately, chairing the Knox County audit committee is more peripheral to my day-to-day responsibilities at UT than my other activities.”

Rest of story RIGHT HERE.

State suggests Audit Committee meet with law department about meetings

In a wordy and somewhat convoluted letter from the Tennessee Open Records Counsel to Knox County Audit Committee Chairman Joe Carcello, officials suggest that the panel might have violated state open meetings act.

Elisha Hodge (the state open records counsel) also suggests that Carcello (he’s singled out only by default because he is the chairman and, hence, the main contact) talk further with the county’s law department.

At issue is whether Carcello and County Commissioner Amy Broyles, a committee member, provided adequately public notice when they met for lunch at 11:15 a.m. on Oct. 24. The county sent issued a public meetings notification on Oct. 22. (It’s feasible that the two gave 48 hours – the generally accepted time – notice, but, there’s no time stamp on when the notice was sent out.)

Also at issue is how, when and whether the panel publicly narrowed down its candidates for internal auditor from roughly 20 applicants to three.

Hodge said her office looked into the matter after receiving a complaint about it.

You can read the entire letter right smack here.

County to seek new internal auditor

The Knox County Audit Committee on Tuesday in a 4-0 vote recommended to the Knox County Commission that the county should hire a new internal auditor and not outsource the position to a private company.

The move comes a couple of weeks after officials offered former auditor Richard Walls a severance package that included about $31,000 and medical coverage for 18 months. Walls’s last day on the job was Sept. 3.

The commission is expected to talk more about the audit committee’s recommendation later this month. Officials then are expected to advertise the job posting. From there, the county’s human resources department will select three candidates who will interview before the audit committee.

The county commission will make the final decision.

Officials during Tuesday’s meeting talked briefly about the position, but said they still want to collect more data.

For now, though, officials said they would like someone who has at least six years of experience, a college degree, and “appropriate certification.”

Additionally, Commissioner Amy Broyles, a committee member, said officials will “still need to talk about what expectations we want in place and whether they staff the office to meet those expectations.”

The internal audit department, which reports directly to the County Commission, operates on $257,000 a year and has three employees, although it’s short-staffed by one since Walls stepped down.

Commission Chairman Brad Anders said the two employees will keep their jobs, and help run the office.

Anders added that he also wants officials to annually review the new internal auditor, something that wasn’t done with Walls.

“I want a more clear path for the incoming auditor, so we don’t get where we are today,” he said

Audit Committee Chairman Joe Carcello also suggested that county increase the pay for the position. Walls earned $92,700 annually.

The Audit Committee, in a 4-1 vote, on July 9 initially recommended firing Walls. Only Mary Kiser, who resined in the wake of the decision, dissented.

Committee members called Wall’s work “limited” and said he only conducted three audits last year. Kiser, though, said the accusations were unfair and that Walls was never given a chance to defend himself. She also pointed out that his last review came in 2009, so the panel held some culpability, since it didn't provide him better feedback.

Last month the County Commission opted not to fire Walls and instead offer him a buy-out package, so long as he didn’t seek legal action against the county.

Kiser officially submits letter

Yesterday we broke the story about Knox County Audit Committee member Mary Kiser stepping down from the panel, a month after members decided they wanted to get rid of county internal auditor Richard Walls. (Right smack here for that bad boy.)

This morning, Mary sent over her official resignation letter. Committee members after the meeting tried to persuade her from quitting, but she wasn't having any of that. Right smack here for her letter.

Personally, and as a taxpayer, I was kind of hoping she would reconsider.

Anyhoo, the letter contains much of what we reported yesterday. Kiser was upset that committee chairman Joe Carcello didn't meet with her to discuss the proposed termination, and that he didn't give Walls enough warning.

County officials more than likely will move to fill her spot on the 5-member panel in the coming weeks. They'll solicit the East Tennessee Chapter of the Institute of Internal Auditors for a recommendation, and then probably take it to the committee from there.

In the meantime, the Knox County Commissioner will talk more about the matter during its work session on Monday.

Not all happy with audit committee

A month after the Knox County Audit Committee recommended firing the county's longer-time internal auditor, one member resigned and another local leader publicly berated the panel's chairman.

Mary Kiser, in an often emotional speech during Tuesday's meeting, told the committee that she felt it unfairly suggested to the Knox County Commission the need to terminate Richard Walls.

Shortly after her announcement, Knox County Commissioner Mike Brown, who attended the meeting, accosted its chairman, Joe Carcello.

"I know crap when I see it and you're throwing some here, fella," said Brown, adding that he was "tired" of Carcello's "smug and smiling attitude."

The resignation and the heated discussion came a month after the committee in a 4-1 vote agreed to ask the County Commission to fire internal auditor Richard Walls. Committee members, led by Carcello, said Walls did not do anything illegal or inappropriate, but, rather, it was what he didn't do while performing his duties that made them want to replace him.

Officials called his work "limited" and said he only conducted three audits last year, a low amount for the money spent on the responsibilities. Committee members also said he should better focus on areas where the "county has the greatest risk," including the Trustee's Office, which has a recent history of wrongdoing.

The panel, which makes recommendations to the County Commission, is comprised of Carcello, a University of Tennessee accounting professor; Kiser, a manager for internal audit services at Oak Ridge National Laboratory; and county commissioners Ed Shouse, Dave Wright and Amy Broyles.

Kiser, who's served on the committee since its inception five years ago, cast the dissenting vote to get rid of Walls. The County Commission, which oversees the county's internal audit department, will talk more about the recommendation during its Aug. 19 work session.

During Tuesday's meeting, Kiser said she was stepping down, but not before defending Walls and suggesting that the Audit Committee could have done more to guide his work.

She said the "overall" audits that he's conducted during the past half decade "have been satisfactory and some even more than satisfactory."

"I believe Richard, as a long-time county employee, has been treated unfairly," said Kiser, who represents the East Tennessee Chapter of the Institute of Internal Auditors on the committee. "He has uncovered fraud and identified controls that needed to be strengthened."

Click right smack here for the rest of the bad a$$ story.

Audit Committee member steps down, commissioner rages, fireworks fly

Talk about an insane Knox County Audit Committee meeting this morning. The fireworks were a flyin'!

Committee member Mary Kiser resigned and Knox County Commissioner Mike Brown, who is not on the panel, let the committee Chairman Joe Carcello have it. (All this, by the way, is in response to the committee suggesting to the County Commission that the board fire county internal auditor Richard Walls.)

I posted a very short story earlier today and will have the full length, full brawl up later today. Good stuff. Heh.

In the meantime, the Knox County Commission will take up the matter during its work session on Monday and - if no deal gets worked out - will vote on whether to keep Walls.

In the meantime, here's an excerpt (that will no doubt be tweaked, edited and refined) from tonight's report:

Brown, a county commissioner who has long supported Walls, disagreed, pointed at Carcello and said: “We’ve got a failure to communicate and the biggest part of it is sitting right there in that chair. Why did you wait five years to wait do something about it? You have an axe to grind and I don’t like your attitude and I won’t stop until you’re out of that chair, fella.”

At one point, Carcello told Brown he was “acting inappropriately,” but continued to let him talk. The two bantered back and forth somewhat for a number of minutes, before panel member and Commissioner Dave Wright cut them off, saying: “Please we’ve got daylight to burn.”

Brown then warned Carcello: "You will hear some more next week (during the commission work session). This is just a preview.”

Carcello, responding sharply to Brown, yet addressing the committee, said: “Mike is free to say whatever he wants to say next week and we’ll have evidence with us that will refute anything you say. So think long and hard before you do.”

Walls days more than likely numbered

Richard Walls

I've always gotten along with Knox County internal auditor Richard Walls, but he's certainly rubbed people the wrong way. And it's always been the wrong people, too.

Mayors, top commissioners and, not the least, audit committee chairman Joe Carcello, who led this morning's revolt against the (let's call him "embattled") auditor.

Only Mary Kiser voted to keep him. Carcello and Knox County Commissioners Ed Shouse, Dave Wright and Amy Broyles voted to fire him. The audit committee only makes recommendations, so the full commission will talk more about it on Monday.

Heh, what a coincidence: The same day they talk about firing their auditor (the position reports directly to the commission), they'll also talk about replacing the trustee, too.

Anyhoo, I somewhat expected this move.
Walls' office in the past couple of months has overseen two audits - one that looked into the county's purchasing cards practices and the other into its ethics policy - that have raised eyebrows.

And not about what he looked into, but rather some of what officials say are unfounded accusations.

Afterward, he and Carcello got into a somewhat heated/sarcastic debate about each of them. Walls backed off somewhat, but not all the way.

I'm not going to go into the details of the audit. I wrote about them awhile back, but essentially it's about "risk versus reward," and Walls felt the county should take a more conservative approach and the mayor's office feels that by using them more often, the county gets back larger rebates (and no, these aren't those Pilot rebates).

It certainly makes sense and if that's the position you take - and Carcello agrees with the position - then there's not point dying on the hill over it. Walls didn't agree, though, and I can respect that.

So, we'll see what happens in two weeks, but if Shouse, Broyles and Wright don't change their minds, I don't think he'll make it. I know that at least three other commissioners have privately said that they will not vote to support him.

Plus, a number of commissioners think that outsourcing the office, something they've discussed number times, will save the county money. It won't, but whatever.

That's another issue.

Also, another matter is whether Walls will sue if fired.

My guess is yes. A whole bunch of folks. 

Expect this to turn into a mess.

Meetings set for audit department

Apparently, Joe Carcello likes the Copper Cellar. The chairman to the county's Audit Committee has scheduled three meetings at the Cumberland Avenue restaurant to talk about the bidding process for internal auditing services.

You might recall that the county is looking into whether it's cheaper to hire outside help or keep Richard Walls and his crew. (I'm here to tell you keeping this in-house is not only going to be cheaper, but more convenient, particularly with the amount of mileage county commissioners get out of the office.)

Anyhoo, the meetings are in December and open to the public. I'm betting that you have to pay for your own food. Click right smack here for the list.

Audit tattletale line quiet lately

Remember the ol' tattletale line? Yeah. Didn't think so. Apparently a lot of people forgot. What was once a place to regularly leave late night drunken messages or rat screw your work buddy is pretty much dead. Either that or the county is just so full of goodness that nothing is wrong.

Anyhoo, during today's county audit committee meeting, the panel's chairman, Joe Carcello, said that in the past eight weeks, the hotline has received two reports. He said both are being investigated and – according to Mark Jones (who was out today) – there also is “no urgent need to close any open or active reports.”

All this means we probably won't know jack for a long time.

Attorneys show up to endorse Jarret

OK, here's the deal: If you're a candidate in an upcoming Knox County political race, feel free to send me your spin release and I'll post it.

So far, only county Law Director Joe Jarret has taken me up on the offer. I'm sure there will be more. Joe takes on former county Commissioner Richard "Bud" Armstrong. This is going to be a good race.

Anyhoo, I know there's a good lawyer joke in here somewhere - but more than 200 local attorneys have officially endorsed Jarret. You can read the release and check out the names by clicking right smack here.

Please note that I see a lot of folks on the KNS message board (man, there are some numbskull comments that get posted over there) say the paper has already endorsed Jarret. I have no opinion in the election. As always, I'll be voting for myself.

We need a cage fight, not a PBA audit

At some point, the county commission should just throw PBA top dog Dale Smith and local developer Sandy Loy into a steel cage and let the two go at it.

I'll get to what I'm talking about in a minute.

Earlier this week, I covered the county audit committee, but the big story that came out of it was the release of the Beck Cultural Exchange Center investigation. You can find that right smack here.

Anyhoo, I didn't get around to writing or talking about the Public Building Authority audit. Or proposed one. Or lack thereof. Or whatever.

The commission in July authorized the audit committee to authorize an audit of the PBA and the financial aspects that led to the construction of the $50 million Hardin Valley Academy. (That's a lot of authorizing.)

Sooooo, on Tuesday, the audit people talked briefly about it. The problem that chairman Joe Carcello brought up, however, is that the commission wants the internal auditor to go back six years. That's a ton of work. And a ton of dead trees to go through. I'm pretty sure the commission had no idea what six years entails. A lot of work. And work done by the county's small internal auditing department. But, again – whatever.

I'm rambling here, I know.

But Carcello knows this, too.

“The Hardin Valley one is at least more limited in scope,” he said. “The PBA? This is ambitious.”

In the end, the committee asked auditor Richard Walls to examine the Hardin Valley issue.

Carcell said “if it comes though squeaky clean then I don't know if it's the best use to use the limited resources we have to do a six year audit of the PBA. If it comes back clean, we can say: 'Do you really need an audit of the PBA?'”

Walls said by mid-November, the next time the committee meets, he should almost be done with the investigation.

In the meantime, Carcello also, albeit very, very briefly, talked about the deal between Loy and Smith.

You see, these two do not like each other. For years, Loy has beat Smith over the head in news columns about some supposed mischief that went on in the construction, bidding, building, whatever process of Hardin Valley school.

It culminated awhile back when Smith talked about the issue in front of commissioners and then Loy threatened to sue him for slander.

You can read that bad boy right smack here.

On Tuesday, Carcello asked rhetorically whether the two have ever been in the same room together to hash out the allegations. He talked about how one says one thing; then the following week, the other answers. Or how their attorneys will do the talking.

I say: Screw that!

Either get them in a public forum to debate.

Or get them in the cage.