Staffing Challenged

To maintain continuity and provide the level of assurance necessary for organizations to navigate an increasingly complex risk environment, public sector internal audit functions must find a way to level the talent playing field with the private sector.

Staffing Hit Hard

No business has been immune to the effects of The Great Resignation, but the struggle may be greatest in the public sector. According to the U.S. Bureau of Labor Statistics, the U.S. government lost more workers — over 600,000 — between January 2020 and January 2022 than the manufacturing, wholesale trade, and construction industries combined.

Digging deeper, the figures are even more discouraging. In the U.S. Office of Personnel Management's 2021 analysis, Strengthening the Federal Workforce, only 8.1% of employees who remain in the public sector workforce are under the age of 30, compared to 23% in the private sector. On the other side of the age spectrum, 38% of state and local government agencies surveyed said their retirement-eligible employees are accelerating retirement plans, according to the State and Local Government Workforce 2021 survey from Washington, D.C.-based retirement services provider MissionSquare. That is the highest percentage since the survey began in 2009.

What is driving such negative trends? In a February 2021 Pew Research Center survey, 63% of respondents said low pay was a reason they left their job, tied with lack of advancement opportunities as the top reason for quitting. Other reasons included feeling disrespected at work (57%), childcare issues (48%), lack of flexible work hours (45%), and poor benefits (43%).

Findings from a January 2022 MissionSquare public sector survey were consistent with these trends. Among the 1,100 state and local government employees surveyed, 52% said they are considering changing jobs because they want a higher salary or better benefits, while 57% said they feel burned out from pandemic-related stress, and 36% said they want a better work-life balance.

Public Sector Must Step Up

Staffing considerations are central to maintaining a successful, efficient internal audit function. Such considerations can include hiring and retention, but more importantly, audit leaders must identify the proficiencies required for internal audit work and ensure they are fulfilled either through in-function skills, cosourcing, or staff rotation. As stated in Standard 1210: Proficiency, of the International Standards for the Professional Practice of Internal Auditing, "The internal audit activity collectively must possess or obtain the knowledge, skills, and other competencies needed to perform its responsibilities."

The IIA's new guidance, Building an Effective Internal Audit Activity in the Public Sector, elaborates on this further. "The CAE should work with the audit committee and senior management to determine whether the established size of the activity and mix between in-house and outsourced staff is appropriate to adequately provide audit coverage to the organization's universe," it states.

What's more, the guidance makes clear that no two public sector internal audit function staffing models will look alike, with individual functions varying in terms of budget considerations, key risk areas, organization size, etc. Smaller functions, for example, may prioritize having more experienced internal auditors to focus on key risks. Conversely, large functions may benefit from a blend of staff who are new to auditing, experienced auditors, and others who bring more diverse academic and professional backgrounds to the table.

Despite these considerations, public sector organizations large and small face significant hurdles in meeting their respective staffing requirements. "It all begins and ends with staffing," says Catherine Melvin, chief auditor of the Texas Department of Public Safety in Austin. "That's the biggest challenge we face in the public sector. Resources in any government organization are inherently limited, and those organizations are going to drive their resources to things that directly impact their mission. And internal audit is viewed by some as more of a support function."

Where the Public Sector Can Compete

For public sector internal audit functions, staffing challenges can seem daunting, but that does not mean hope is lost. Indeed, although surveys of the workforce show that compensation is at or near the top of considerations when choosing an employer, it is far from the only factor. In fact, by viewing workforce desires and expectations more holistically, public sector positions have the edge over the private sector in several key categories.

The Value of Values Some of these advantages come from the fundamental differences between the two sectors. One example, Melvin says, is the public sector's focus on the overall well-being of society, as opposed to the well-being of the company. "On the public sector side, with certain exceptions, there's an absolute expectation of transparency," she explains, "while on the private side there has to be an emphasis on protection. It's their money, and they still have an obligation to shareholders to protect their competitive advantages when possible."

This division gives public sector positions an advantage over the private sector in a few key workforce demographics. In the Deloitte Global 2021 Millennial and Gen Z Survey, 44% of Millennials said they make choices on their career path and potential employers based on the organization's values and ethics. This attitude is even more widespread among Generation Z. According to Deloitte's Welcome to Generation Z study, 77% of Gen Z respondents said it is important to work for a company whose values align with theirs.

Key to assuring such values align is an explicit commitment to transparency, accountability, and action from the employer. "Without question, ethical scandals are toxic to organizational health and success. And it's not just a compliance or public relations issue anymore," according to a 2021 Gallup article, "4 Things Gen Z and Millennials Expect From Their Workplace." "Employees, themselves, want more than the legal minimum or executive platitudes. They expect bold action to address moral blind spots. And they want to know that the work they are doing has a net positive impact on human beings and the natural world."

With transparency and a commitment to the public good more clearly defined, the public sector — at least in the long term — might be better equipped to meet these expectations. Melvin notes that people want to be valued by their employers and feel they are making a difference. That particularly drives younger generations. "In the public sector, we have a connection to the mission," she says. "We can really market that to connect with a younger workforce and say, 'You have a part to play in this purpose, in this larger good.' That's a huge advantage."

Variety of Work Another key difference between the sectors is the practical function of the internal audit department within the organization. While the core goals and principles of internal audit remain consistent across sectors and industries, variance in the risk landscape means that internal audit's day-to-day priorities may be quite different.

"In the private sector, so much of what internal audit does is tied to Sarbanes-Oxley compliance," Melvin says. "That doesn't leave a whole lot of space for performance auditing or advisory services."

Contrast this with the average public sector internal audit function, which, despite an emphasis on transparency, is not bound by Sarbanes-Oxley's strict disclosure requirements. "In the public sector, internal auditors have more latitude to be part of a truly progressive internal audit function," Melvin explains. "This makes us special. The nature of the work is very different, and you're going to get the opportunity to take part in a greater variety of complex projects that are very meaningful."

Avoidance of Burnout Such variety should strongly appeal to newer auditors, Melvin says, because it gives them the opportunity to grow their skills and improve their desirability in the workforce. It also has broad appeal to new and experienced hires alike for a different reason: avoiding burnout.

In 2019, the World Health Organization officially recognized burnout as an occupational health issue, and evidence of how widespread it has become continues to grow. Nearly half of respondents reported that they feel at least somewhat burned out at their current employer, according to a 2021 McKinsey & Co. survey, Employee Burnout Is Ubiquitous, Alarming — and Still Underreported. Moreover, employees reported a 21% increase in burnout between December 2020 and July 2021 alone, according to a survey by digital wellness company meQuillbrium, Overwhelmed: Threats to Employee Wellbeing Persist and Employer Support Remains Critical.

The reasons why burnout has become so prominent in the workforce are varied. Some reasons are directly related to, or have been exacerbated by, the pandemic, but others have deeper roots. For example, online job-search site Indeed cites how the amount or type of work the employee is subject to can be a major contributor to burnout. "Whether it disrupts work-life balance, or work that feels monotonous or boring, burnout is directly related to workload," it said in an article, "Major Causes of Burnout (and How to Manage It at Work)." "Ideally, the amount of work you do matches your capacity to do it, and chronic overload disrupts balance while monotony depletes motivation."

Variation in day-to-day work, while not a total cure, can go a long way toward helping internal auditors avoid feelings of burnout, Melvin says. "Internal audit can and wants to do more, but practically there's only so much we can do in a day," she notes. "We have to be the internal audit function our organization needs, and in some sectors, what those needs are will be more varied than in others."