May 09, 2011
Audits save money so cut Auditor's ability to do them

Washington Legislature thinking: Hobble the program that led to added tax revenues of $321 million - $264 M for the state and $57 M for local jurisdictions.

The Legislature and Governor are happy beyond belief that an extra cash infusion came in - just in time to ease the budget deficit they caused. But they want to kill the program that generated the idea that caused the windfall: State Auditor's ability to conduct performance audits. Performance audits look beyond if the dollars are spent for their intended purpose - the scope of regular audits - to ask "is the State getting value out of this program?" Which leads to the question are the results a good value for the money spent on the program.

The powers like getting big smiles for passing out your tax dollars for good programs, but they don't like the results being measured and questions being asked.

The business tax amnesty was passed by the Legislature during the special session last December, but State Auditor Brian Sontag's performance audit program generated the idea for it. Washington State Wire

Washington State Wire

Just as lawmakers are cheering an unexpected $321 million that will bail out the state budget, they're thinking about whacking the program that made it all possible.

   It is the inside story of the "May Miracle" announced by Gov. Christine Gregoire on Tuesday. The money came from a tax-amnesty program run by the state Department of Revenue - a wildly successful effort that generated more money than anyone dreamed.

The cash comes just in time to save the Legislature's bacon...

... That the performance audit program is responsible there is no doubt. Sonntag's office outlined the idea in a "performance review" of state government in December 2009. It noted that 46 other states had run tax-amnesty programs since the early 1980s, forgiving penalties and interest if people would just pay up. In the previous two years, 16 states had raised a total $1.4 billion.

But Washington had never done it.

The auditor's office gathered information from the Department of Revenue to make the case. "I think they deserve credit," said Revenue spokesman Mike Gowrylow. "They contacted us when they did the original audit."

So now...

But the Senate budget proposal transfers money from the account and gives it to other agencies - $3.2 million to the Department of Revenue for additional auditors, $5.3 million to the Department of Social and Health Services for welfare-fraud investigations.

It may not sound like it makes a difference, but it is one of those subtle distinctions that mean plenty in Olympia. After an account has been raided once, it sets a precedent, and it can happen again and again, until finally there isn't much left.

Oh... The Legislature never let the ability to do performance audits pass their gate and live. It was Initiative 900, passed by voters in 2005, that enabled them. Those voters again. And Tim Eyman!

Posted by Ron Hebron at May 09, 2011 09:01 PM | Email This
1. I haven't seen the arguments pro and con, but one point seems obvious: they are moving the funds from one type of audit (performance) to two other types of audits (fighting fraud).

Arguably, when government faces a huge deficit, it's more important to stop people from stealing public funds than to begin a new program that might eventually increase governmental effectiveness or lead to a political process of changing/eliminating programs. Or maybe we should do both. It's hard to prioritize stuff like this. But you might start by recognizing both sides of the issue.

Posted by: Bruce on May 9, 2011 09:32 PM
2. Bruce, demo kid, tensor, et al, is there any chance you could state your occupations and employers? I am a general and electrical contractor. It helps to better understand your points of view.(I am having a hard time with that.) Whether that leads to sympathetic, indifferent or unsympathetic reaction is secondary to full disclosure for what should be obvious reasons to all of us. Whoops, did that sound like I was auditing you?

Posted by: shaydo on May 10, 2011 06:39 AM
3. Demo kid and Bruce, It doesn’t have to be an either/or. The state can spend money on both types of audits, and save even more money! You know how the left is always saying that this or that program doesn’t cost any money because 15 years down the road it will keep some kid out of prison? Well, this is just like that, only the returns are verifiable and they happen much more quickly.

Posted by: Moondoggie on May 10, 2011 06:57 AM
4. Moondoggie, I agree that auditing for both fraud and performance might make sense. But fraud audits save money immediately and therefore help the state balance its budget -- as it must. Performance audits, like investments in education, transportation, tourism promotion, etc., have the potential to save money in the long term. A performance audit provides information that politicans and voters can use as one of many inputs in determining policy. That sounds like a good idea, but the payoff is indirect and more tenuous. There's also much less track record for performance audits than for fraud audits throughout the state/country/world. And there are alternative ways besides performance audits for people to decide whether a program is successful, while there is no good alternative to a fraud audit.

So while both types of audits sound good, if government is forced to save money immediately, it makes sense to increase fraud audits and decrease all sorts of optional programs, even good ones, such as performance audits.

Posted by: Bruce on May 10, 2011 08:36 AM
5. Shaydo, I try to be persuasive with the logic of my arguments, not with my personal experience or the vitriol with which I insult others. So my personal background should be irrelevant. But if you care, my entire career (except for volunteer work) has been spent in the private sector.

Posted by: Bruce on May 10, 2011 08:43 AM
6. Bruce...Did it ever enter you awareness that a Performance Audit can and will uncover FRAUD! Yes, there are more to a Performance Audit than just, pointing out inefficiencies and poor use of funds. Other than, through anonymous tips, there would be little reason to do a Fraud Audit unless discrepancies have first been found/uncovered by the Performance Audit to begin with. A Performance Audit is a Vital first step in uncovering fraudulent activities to and therefore, giving reason to do an Fraud Audit. Why, do you think the cooked Politicians want to reduce Performance Audits? It is because, it will also, reduce Fraud Audits.

I believe that you DO work for Government and NOT the Private Sector. You wouldn't defend and try to obfuscate the workings of corruption within Government. What you are is a Lying Liberal Government employee...PERIOD!

Posted by: Daniel on May 10, 2011 09:34 AM
7. As an accountant that has over 30 years in private industry far more money is saved by doing targeted performance audits. Using best practice for procedures, implementing internal controls to reduce fraud opportunity, streamlining procedures to reduce unit costs and perhaps reduce headcount result in ongoing savings that will save far more funds than any type of "fraud" audit. It is very satisfying "catching a thief (I have, as a result of a performance audit)" but the time spent targeting individuals unless someone else has given you a suspect to investigate is very time consuming and usually not worthwhile.
Many performance audits may / should lead to procedures to minimize / prevent some abuses or fraud as part of the result. Cash benefits being paid out at a casino / "gentlemans" club ATM are the types of abuse / fraud that could come up in an audit and measures could be implemented to prevent that type of activiity. Daniel posted several good points while I was typing this, sorry for any redundancy.

Posted by: Kevin on May 10, 2011 10:03 AM
8. Bruce, most private industry audits are either operational audits done by employees of the company or internal control audits done by external auditors. Neither type targets fraud, but as part of the audit may uncover irregularities that could lead to a fraud type audit.
These audits make sure procedures are in place and followed in order to prevent fraud and maintain good business practice.
Most fraud audits are the result of tips from other employees, who may have a personal reason for making allegations that may or may not be true.

Posted by: Kevin on May 10, 2011 10:17 AM
9. Kevin, thanks for the info. I don't know much about performance audits but they sound like a good idea that cost money in the short term and would probably make government more effective and efficient eventually.

Ron Hebron's original post said the performance audit funds were transferred to the Dept of Revenue, presumably for tax audits which typically (at least at the federal level) return a large ROI, and to DSHS for welfare-fraud investigations (I have no idea what the ROI is on this, but I hope the legislature does; in any event it's ironic that conservatives would oppose this when historically they decry welfare fraud at every opportunity).

When faced with a choice between one program with short-term favorable ROI and another with long-term probably favorable ROI, I'd like to do both. But faced with a short-term financial crisis, the state must prioritize the short-term, just as a private corporation would in that situation.

Posted by: Bruce on May 10, 2011 10:45 AM
Hey, Bruce...You still don't get it. Performance Audits give you the best in overall ROI...PERIOD! They open the door to the need for a Fraud Audit. During Performance Audits, not only are discrepancies expose but, those who are doing the audits have been known to discover Fraud plus, get anonymous tips of Fraud as well. Performance Audits are a Win, Win for short term ROI as well as long term ROI. For the State to prioritize the Fraud Audits over the Performance Audits is to reduce the frequency of the Fraud Audits for reasons that have already been explain to you. Bottom Line: Crooked, corrupt Politicians want it that way. Get it? Probably not...You're a Liberal.

Posted by: Daniel on May 10, 2011 11:17 AM
11. Thanks Bruce. An opinion is generally based, at least in part, on one's life experiences. Simply having a carrot already in the pot doesn't mean your soup recipe is bad necessarily. If, however, the mix actually cooks better without carrots and being the carrot supplier or you just love carrots to be provided to you, you argue for carrot inclusion, you have what's known as a motive. We all have motives at times, I just think it's relevant to know when they might be there. Sometimes opinions should be taken with a grain of salt. Caveat audiens.

Posted by: shaydo on May 10, 2011 01:07 PM
12. Bruce,

Performance audits can save money immediately as well, since you can identify programs that need to be re-evaluated when doing budgets - low-performing programs should be the first to be eliminated.

demo kid,

If the money saved by the State Auditor is greater than the budget, then it's a net benefit to the budget - it's money well spent. Why cut a program that returns more dollars than you put in?

Posted by: Shanghai Dan on May 10, 2011 04:36 PM
13. Shaydo: True, if I just say we should add carrots to the soup, it helps you to know that I'm a carrot farmer. But if I say the soup won't cook until you add heat by turning on the burner, my background is irrelevant.

By analogy, if I say "I think performance audits are good" or "I think Obama is good", I don't expect that to influence you unless I have some impressive and relevant credentials. But neither I nor other serious commenters make many comments like that online. Why bother? To see my name on the monitor? It wouldn't persuade anyone.

Not that I have any delusions about persuading anyone anyway. But I read SoundPolitics to understand all sides of an issue, and I assume some people on the right do so, too. And sometimes it helps me to see how people rebut my arguments.

Posted by: Bruce on May 10, 2011 04:44 PM
14. demo kid,

Why stop, then? Let's allocate the entire state budget to the Auditor, and then we'll get back even more!

Are you really that ignorant, or that pressed to make any point?

The SAO has specifically stated that they can do the job with the cut.

Nothing has been stated about why the other departments SHOULDN'T receive funding, and the purpose of the funding is comparable.
Start with their own oversight programs - why didn't they catch the fraud and waste first? Perhaps it's not best to let the fox guard the hen-house? That's why you have OUTSIDE auditors, so they are free from any repercussions of those being audited.

This is nothing but armchair quarterback whinging with little to no proof.
I'd say $321 million is quite a bit of proof...

Posted by: Shanghai Dan on May 10, 2011 09:41 PM
15. I noticed that they slid through a bill to allow colleges to set their own tuition. What a mistake, this will soon look like the US Post office. No one will be able to afford to use their services at this pace of increase, so attendance will plummet, and teachers will be cut.

Posted by: GS on May 12, 2011 02:37 AM
16. GS@19 writes, "this will soon look like the US Post office. No one will be able to afford to use their services at this pace of increase"

Nonsense. US postal rates have generally stayed constant over the years when adjusted for inflation, are lower than private delivery services (admittedly for somewhat different services), and are lower than rates in most developed countries.

Posted by: Bruce on May 12, 2011 08:11 AM
17. demo kid wrote:

No, but you do appear to be that stupid. You've provided no proof that additional funding for the SAO would result in comparable savings.

So you can't provide anything contrary, and refuse to go on past performance as an indicator of future returns. I guess absurd conclusions are expected from you...

It's proof of nothing.

Yes, we know that, to Democrats, $321 million of tax revenue is irrelevant and proves nothing. But to real people it's real money.

Show me that a reduction would severely impact the SAO, or a significant increase would result in comparable savings.

You made the claim that "The SAO has specifically stated that they can do the job with the cut. "

Are you now stating that you just Made That Up? Or did you say it mistakenly? Can you show us where the SAO stated that?

Posted by: Shanghai Dan on May 12, 2011 04:37 PM
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