The role of the public relations (PR) department is to maintain a positive image of the company and to communicate with those outside the organization. Typically, those individuals skillfully manage perceptions and expectations, but at one company, these skills were used to mask a hostile work environment.
The department was led by a vice president, Ginger Dahl, who promoted Scott Goss and Roseanne Gray, two of her close friends, to director and manager, respectively. Dahl delegated all staff management responsibilities to Goss and Gray, leaving Dahl with no direct supervisory responsibility over employees except for these two individuals. Goss and Gray were inexperienced in managing staff, had no industry knowledge, and made decisions without staff input or consideration. For example, they initiated an overhaul of a new project methodology that stalled for months because of their lack of direction. Then, when forced to move forward with the project, they rushed to implement it. Clients called daily to voice their concerns over time delays and roadblocks but were dismissed by Goss and Gray without further investigation by Dahl. Staff members who raised questions were reprimanded, and those who approached Dahl were directed back to Goss and Gray.
When the organization received a hotline complaint regarding abuse of company assets, internal audit was called in to review. The auditors found that the complaint was just the tip of the iceberg. In initial interviews with staff, the environment was described as hostile and toxic. Seasoned staff members who were well-respected and valued by clients throughout the organization were leaving. The most creative and longest-tenured employee in the department was left to work on projects by herself rather than engage with others within the department and given the least important assignments. Several employees were seeing counselors to help them cope with the environment, many were too afraid to do anything, and all were fearful of saying anything that could be perceived as critical.
The auditors were so shocked by what they heard, they immediately pulled in human resources (HR) and general counsel to collaborate on next steps. The first step taken was putting Dahl on administrative leave. The company assigned an interim vice president and directed all employees not to make any changes to systems or destroy any documentation. As the internal auditors dug deeper and interviewed others within the department — including a few who had left — they found there was an inadequate internal control system. Gray was allowed to hire relatives and directly supervise them. Company policy regarding gifts to employees was ignored. Purchases to clients throughout the organization were made regularly.
In digging into the time-tracking system, which was used for departmental chargebacks, internal audit noticed that adjustments could be made without an audit trail. Staff noted that their time was regularly changed on projects by the system administrator, an assistant to Gray. Goss and Gray said this was done to better reflect “revenue” from the job.
When the auditors turned to the budget, they found numerous overruns. Their analysis revealed what could only be described as a shopping spree of nonbusiness expenses. Upon further review, auditors identified several instances of misuse of company assets. Dahl, Goss, and Gray each had a laptop for home and work, and a separate tablet for meetings. Dahl used company money for personal donations to organizations of her choice that had no affiliation to the organization. There were lavish celebrations totaling thousands of dollars for Gray’s wedding and baby showers. And perhaps the most egregious was the use of company funds for lunches and dinners several times per week, sometimes with their families. The analysis extended over a two-year time frame and the trend was consistent. This was beyond an extravagant routine.
All of this was possible because no one tracked expenses. The accounting department did not perform budget-to-actual reviews, and the PR department was left to their whim to spend. While a budget was assigned, there was no accountability for adhering to it, as evidenced by several years of overruns.
After weeks of gathering data, the internal auditors met with Dahl, Goss, and Gray to hear their explanations. They truly believed they had done nothing wrong and seemed shocked that these behaviors were unacceptable. In light of the observations, which were supported with data analysis, HR, general counsel, and senior leadership decided to terminate Dahl. Goss and Gray left on their own within the following three months. The company did not press charges because nothing was done illegally; there was no restitution paid. The company hired an industry consultant to work with the interim vice president to establish and implement internal controls and process improvement within the creative work methodology. Internal audit was asked to work with the consultant on the process improvement, which it did, and internal audit provided a training session on internal controls to the department. Within a year of Dahl’s termination, she had secured a similar position at another organization in the same industry.
- Toxic cultures are often masked by leadership as something else. These environments are very uncomfortable and difficult to navigate. It is worth recognizing that a toxic work environment requires a lot of effort to create and maintain. Consider its purpose and evaluate its impact on the organization’s performance. In the end, these cultures are often designed to protect leadership’s selfish aims and offer no productive value to an organization.
- Critically review turnover data. If a department’s turnover rate is extremely high, that is a red flag. Auditors should ask questions, talk to HR to find out whether there are any employee concerns, and raise the red flag if there are any issues.
- Exit interview results should be reviewed regularly. Even in the most fearful situations, those leaving the company will often leave some indication of their frustrations and concerns. In environments where people are afraid, this could offer a significant piece to the puzzle.
- Chargeback systems are great places to hide resources and could be overlooked — they impact only intercompany allocations, not the financial ledger. Consequently, they should be reviewed like any financial system. Examine reports to source documents, check interfaces, and audit IT general controls.
- Assess controls over travel and expense reports to see how they are being reviewed and approved. Is there documentation available to support the expenses? Look beyond the controls, as well, and use graphs and charts to trend the data. Often, seeing the information visually is more impactful.
The author is currently working in public accounting in Connecticut and has more than 15 years of experience in internal audit and accounting roles.