Critical thinking skills are in high demand and are a competitive advantage if you can give a prospective employer one or more true examples from your past. There are a lot of discussions and examples easily available on the internet, but they don't seem to provide a clear definition of what they are or, more to the point, how to develop them. In the 1950's and 60's, I was told that IBM offices around the world had signs posted all over the place that simply said, "THINK". I have a story from my past that seems to me to be a reasonable example of critical thinking.
What's It Like Being An Auditor
As far as I know, this was the first targeted vendor audit in recent memory in Maine State government. The state contracted with a single vendor for all computer and peripheral equipment based on competitive bidding, and this vendor was the low bidder. I had some experience with this vendor at a previous large company and there, we questioned the cost of our computers. There didn't seem to be any difference in what the company was paying and what the public was paying. We even called the company as a private member of the public and asked for a price on a standard computer the company used. We were quoted the same price the company was paying. No discount for large-volume purchases. Unfortunately, corporate politics stepped in and nobody was interested in challenging the person responsible for computer purchases, so we dropped it.
As a state internal auditor, I discovered the state purchased all their computer equipment from the same company, so I started asking questions. The answer I got was that the state contract called for a price for the state of Maine that was a maximum 5.85% markup on the vendor's item cost, period. On the face of it, that was an excellent deal, and certainly less than the general public paid. Most people would have stopped there, but my gut told me not to give up. I decided to pull 10 or so invoices from the company and take a look.
Virtually every invoice showed that the state’s cost was an even $550 or an even $800, or 1,275. The critical thinking came when I realized there was no way the cost represented 5.85% above the vendor’s cost. Do the math. It just would NEVER come out even.
The Right To Audit
I had to lobby long and hard before I got the green light to conduct my “audit.” This was my idea from conception through to the end. With my background and experience, I was convinced there was skullduggery afoot here. I was aided by the fact that the vendor contract included a "right to audit" clause that allowed us to request company records to verify they were complying with the contract.
The company was forthcoming in providing their original invoices and other purchasing records, and they did not attempt to conceal or otherwise compound their wrongdoing by attempting a coverup. Here is a good example of the saying, "It's not the crime, it’s the coverup.” Here, the company did the crime and came out pretty much unscathed. My estimate was a total overcharge of about $1.3 million over 4 years, but there was room for various interpretations of the contract terms.
There were STILL corporate politics because a scandal like this would reflect badly on the Chief Information Officer and the State Purchasing Department. Although I presented all my findings to the Attorney General's Office, there was no follow-up for almost a year when I reported my findings to the State Auditor under the requirement to report any suspicion of waste fraud or abuse. This can often be a career-limiting or killing act, but I felt protected by state law.
My estimate was a total overcharge of about $1.3 million over 4 years, but there was room for various interpretations of the contract terms.
From the January 11, 2011, Kennebec Journal newspaper:
AUGUSTA — The state will collect a $410,000 settlement over the next 12 months from its longtime computer supplier after a lawsuit claimed the vendor made “excessive profits” over a four-year period.
The Maine Department of Administrative & Financial Services sued Managed Technologies Partners — formerly known as CBE Holdings, of Massachusetts — and an affiliate, CBE Technologies, formerly known as CBE/ValCom, of South Portland, claiming the firm had collected excessive profits on state contracts from 2004 to 2008. A notice ending the state lawsuit was filed Friday in Kennebec County Superior Court.
Benson Dana
Retired CPA and author of "Tales From The Trenches: A CPA Internal Auditor's Stories of Fraud, Internal Controls, Auditing, and Embezzlement".
