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To serve and protect

Internal auditor John Hernandez brings insider knowledge, corporate experience to new role

John Hernandez brings a wealth of financial and institutional experience to his new role as the Center's first internal auditor. Photo by Stephanie Cartier

When most people hear the word "audit," their minds conjure dreaded images of the tax man, shoeboxes stuffed with receipts and sweaty-palmed anxiety. While most prefer to avoid such scrutiny, the Hutchinson Center embraces it. In a complex world of increasing federal regulation and corporate accountability, it pays to be proactive. That's why John Hernandez was hired last year as the Center's first internal auditor. His new role helps keep the Center out of murky waters by working to protect its funding, interests and reputation.

The position was created last year at the urging of the Center's external auditors, the accounting firm that issues opinions on the financial statements. Internal auditors, on the other hand, determine whether the Center's risk management, control and governance processes — as designed and represented by management — are adequate and functioning. To maintain his independence and objectivity, Hernandez reports directly to the 13-member finance committee of the board of trustees.

Hernandez, a Center veteran of nearly 17 years, compares his role to benevolent law enforcement. "People sometimes view internal audit as the police, and their first response is, 'Oh, you're here to see what we're doing wrong,'" he said. "When I hear that, I point out that most police officers spend much more time in a 'serve and protect' role than in the 'handcuff and arrest' mode. That's true of internal audit, too. I'm here to help."

"The Center has grown to a point where this is really a critical function. Most organizations of any significant size or complexity have an internal-audit function because governing boards require an inside look in order to give them an independent assessment of what they're hearing from management."

In his first months on the job, Hernandez conducted a Centerwide risk assessment. He looked broadly at vulnerabilities in the areas of compliance, financial, operational and strategic risk. Based on that initial work, Hernandez devised an audit plan, targeting areas that require more analysis to better understand how well the Center is managing or mitigating particular risks.

He is currently looking at how well the Center manages its conflict of interest policies and procedures. Audit steps include observations, interviews, document review and verification of controls.

Hernandez will produce a report for the board following each audit. Each report contains assurances — things that are working well — and findings, or policies and procedures that are either inadequate or not being followed. "The assurances let people sleep well at night, and the findings keep them up," he said. An audit report also contains recommendations, the consulting piece of Hernandez's work.

Jeff Maxwell, chair of the board's finance committee, said the search committee looked nationwide for an internal auditor but discovered the ideal candidate under their noses. "While John hasn't spent a career in internal audit, he was the best fit for this job," Maxwell said. "He's a quick learner and an excellent communicator. Perhaps most importantly, his years of institutional knowledge give him a significant head start over other candidates, even as he is learning about the requirements of conducting an internal-audit function."

Hernandez came here in 1989, admittedly burned out from a fast-track career as a corporate controller. He had just begun a business partnership — a local retail chain selling women's athletic wear — with a friend. They planned to run the stores in their spare time and not draw salaries, so a day job in the Center's accounting department sounded ideal. For the next six years, Hernandez juggled both roles, undaunted by 75-hour workweeks. "I was single at the time," he said. "It was fun." Hernandez sold his share of the business 10 years ago.

Hernandez's ambition and work ethic stem from a childhood of beating the odds. Growing up in a tough neighborhood on Chicago's South Side, he didn't hold typical boyhood dreams of becoming a firefighter or astronaut. "I just wanted to be employed and stay alive," he said.

Hernandez met those goals by attending the University of Notre Dame. Though he had no idea what a share of stock or accounting was, Hernandez was talked into pursuing an accounting degree by the prospect of always being able to land a good job.

Hernandez's early work included accounting and program-management positions at a bank, two universities and a Seattle-area retail chain. In his first years here, he managed the accounting department, overseeing financial functions including general ledger, financial reporting, accounts payable and receivable, payroll and more. In the late 1990s, Hernandez became a member of the PeopleSoft project team that led the replacement of the outdated financial applications. This familiarity with so many aspects of operations has proved invaluable in his current role.

"I absolutely love building from scratch or doing things that haven't been done before," he said, and looks forward to building his department to meet the needs. Even as the department grows, certain audit projects in highly technical areas, like information technology, will be outsourced.

"John is great to work with and he understands that internal audit should support the mission and goals of research by improving operations and enhancing effectiveness," said Myra Tanita, chief operating officer. "This means he must coordinate and work collaboratively with staff from all areas while at the same time working independently, objectively and analytically."

Hernandez said he relishes the challenges of his new job. "It's very exciting to be the first person in this role," he said. "I want to set the right tone. It's really about how the Center governs itself. I have always said that it is not sufficient to do things right the first time — you need to do the right things right the first time. Hopefully, I can provide insight into what the right things are."

"As long as I'm running internal audit, there will not be any kind of 'gotcha' mentality. That's the way internal audit is often viewed — you're not doing your job unless you find a few gotchas. But that's not true. If everything's going well, I should be completely comfortable telling the board that. I don't have to find some dirt to be successful. I just need to serve the Center's scientific mission and protect the interests of our stakeholders."

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