Every publicly held business utilizes audits to assure its shareholders that its operations are in accordance with commonly accepted financial practices and that those who manage the business are doing so for the benefit of the shareholders and not merely themselves. Many such businesses also utilize performance audits to ensure that operations are efficient and focused on the primary business of the entity. All of it is done in pursuit of a transparency that allows owners/shareholders an opportunity to determine the well being of their investment.
Not so for Oregon government. The managers of Oregon government (the governor and legislature) have steadfastly resisted any such accountability. They (Republicans and Democrats alike) have developed a financial system designed to confuse and obfuscate the use of public monies for virtually any and all purposes. This Byzantine system is paid forward to schools and local government to further mystify the actual expenditure of taxpayer funds.
It is virtually impossible for the average citizen to determine (without the assistance of a team of certified public accountants) how much is spent on K-12 education on a state level, at a school district level or at a particular school. It is even worse when one seeks to determine how much is spent on classroom instruction vs. administration vs. training vs. social programs. The same can be said for the welfare system, the transportation system, the healthcare system and virtually every other operation of state and local government.
There are operating funds, reserve funds, capital improvement funds, special program funds and a mind-numbing array of other funds. So many funds that most legislators are unaware of their totality. So many funds that, unless you know with specificity the identity of each such fund, you will never know whether a bureaucrat has provided full and accurate information when requested. So many funds and movement amongst those funds that the true financial picture of state or local government remains a mystery to those who provide the funds.
Here are two simple examples. First, the State of Oregon is unable on any given day to tell you how many people work for state government. Second, the State of Oregon is unable to tell you the precise amount of liability (funded and unfunded) it has sustained for the Public Employees Retirement System. (For instance, at one point, the state issued press releases noting a dramatic reduction in the unfunded PERS liability but did not state what portion was due to an improvement in the stock market and what was due to the issuance of bonds — the latter simply changing the source of debt rather than the amount. The public was left to assume that the problem was largely solved instead of just shifted.)
In addition, it cannot tell you how many people are receiving welfare benefits and of that number how many of them are illegal immigrants. The average citizen cannot tell how much of its gas taxes are spent on construction or reconstruction of roads, on repair of roads, on mass transit, on light rail, on administrative expense or other services.
But there is a simple solution and one that other states have routinely adopted. It is the creation of a non-partisan legislative audit office for the purpose of doing routine financial and performance audits on all agencies of state government. Other states have routinely adopted such practices and, in some, have extended the impact of such audits by implementing a “sunset process” which automatically terminates programs and agencies unless, based upon the report of the legislative audit office, their continuation is determined to be justified and efficient.
It is pointless to suggest that such an audit function already resides in the Secretary of State. The Secretary of State, under Bill Bradbury, has proven to be one of the most partisan offices in state government. Such partisanship is an automatic disqualifier in providing reliable and transparent information to the public. The lack of accountability is best demonstrated by the fact that Bradbury did not look for, or discover, any problems in the fact that while Neil Goldschmidt’s wife sat on the state board of investments, she and others on the board approved a substantial financial investment in a Texas group seeking to acquire Portland General Electric and which Texas group, the following day, hired Goldschmidt as its CEO for the acquisition.
As much as the transaction should have triggered an inquiry as to other transactions involving Goldschmidt’s clients and state funds, no such investigation was forthcoming.
In order to provide credibility for any such financial and performance auditing function, the following criteria must be met:
1. A joint legislative committee consisting of eight members, two appointed by the majority and two by the minority parties in each house provide the governance. The primary functions of the committee would be to hire and supervise the legislative auditor and to receive reports thereafter for transmittal to the whole of the legislature.
2. The legislative auditor must be a professional auditor (preferably a certified public accountant) with a demonstrated work history in auditing state and local government entities.
3. A work program should be determined that would assure that every state agency and program is subject to a full fiscal and performance audit at least once every six years. The committee could call for audits of specific programs out of cycle when specific problems are identified.
4. The legislative auditor should have free rein to determine the members of his/her staff without interference by the committee.
5. The legislative auditor should be charged with developing accounting practices and financial disclosures in a form that provides the maximum amount of transparency to Oregon taxpayers.
Oregon was once noted for its “clean government.” But today, the lack of accountability and transparency in the fiscal operations of the state make that claim suspect. It is well past time for the legislature to adopt a non-partisan financial and performance audit program that will assure Oregon’s citizens that they are getting what they paid for.