Academic journal article The Journal of Government Financial Management

Controller's Corner

Academic journal article The Journal of Government Financial Management

Controller's Corner

Article excerpt

I am amused by the double meaning of something Warren Buffet said: "Beware of geeks with models." I am pretty sure he did not mean Tom Brady, the New England quarterback and Gisele Bündchen. OK, so maybe I need to get it in gear as I sit here pondering my monitor in mid-summer.

Actually, that is not too off the mark on where I wanted to start this column, and it is a lesson auditors probably know betterthan controllers. The lesson is to have a healthy dose of skepticism. That's skepticism, not cynicism. The corollary and probably less-thought-of lesson is that of inevitability.

Skepticism is really more backward-looking, such as whether data is accurate, reliable and relevant, but it can be forward-looking. An example of the former is having doubts about data you have received. An example of the latter is questioning whether someone can do what they say they are going to do.

Inevitability is mostly forward-looking in that something is very likely or almost certain to occur. The arena where we so often see skepticism and inevitability play out is sports.

I can give you three examples in the last couple of years:

* 2008 Super Bowl- the New York Giants upset the heavily favored and undefeated New England Patriots.

* 2008 Wimbledon- Rafael Nadal, in the longest Wimbledon final ever, outplayed the favorite, Roger Federer.

* 2009 PGA Championship- Y.E.Yang, little-known and ranked No. 110 in the world, shocked everyone, especially Tiger Woods.

I imagine in each case very few people picked the winner before the event (I cannot speak to after). There is a certain inevitability, isn't there? No disrespect to Tiger Woods, but I am weary of hearing sportscasters make comments like "Tiger againstthe field," and citing his record when leading after some number of holes. Yes, he is good but could we have just a touch of skepticism oran understanding that - as in any stock or mutual fund-past performance should not be taken as an indicator of future results?

I have some personal experience, albeit indirect, with this phenomenon. In 1976, then-Governor, now-Senator, Kit Bond, was running for re-election and was heavily favored. Two things happened. It was a Democratic year and his administration wanted to put a prison in Jackson County, near Kansas City. They tried to use straw parties to get binders on the land. Then State Auditor George Lehr released an audit shortly before the election. I was the staff person on the audit. I was briefly in the limelight when George held a press conference to release the results. For reasons that escape me, I had to cross from one side of the room to the other and my foot caught one of the power cords to the klieg light, knocking it over. Color me red. Audit assistants should be seen and not heard. Pardon my trip down memory lane, but the point is Bond's inevitable election turned out not to be inevitable in part to unforeseen factors.

Beware of the tyranny of conventional wisdom. I can tell you two things about conventional wisdom. First, it is conventional. Second, it is not wisdom.

The lessons for government financial professionals may be familiarto you but allow me to give you my take on them.

Start with audits. As Noel Bayne of the Missouri State Auditor's Office said about 30 years ago, "In God we trust, everyone else we audit."

In the military, when soliciting the opinions of others, you start with the lowestranking members so their opinions are not influenced by those most senior - a lesson I imagine Art Hayes addresses when talking about the audit huddle and hopefully is usefully employed in controller shops.

If you are the contrarian, if you are swimming againstthe stream, how do you persevere? How do you know you are right and not just a crazy person?

You don't go it alone. Find someone to validate your view or at least to help you think it through, to make sure you have not overlooked some critical piece of data and that your logic is sound. …

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