Flawed Thinking About Auditors, the Truth Behind Conferences, and the Value of Field Trips

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October 3, 2013

Most governments make a lot of paperwork available to the public. We often read about scandals stemming from a back and forth of e-mails, and that sure seems like a good thing, but we’re curious as to whether there comes a point when too much transparency gets in the way of getting work done. Let us know if you’ve encountered instances in which perfectly helpful written documents never get written because they could make someone somewhere look bad.

In recent years, there’s been a trend of state and local governments cutting back on auditors. The logic is that tax dollars should go to direct services above all else, but this is flawed thinking.

Look at Mississippi: After realizing its citizens owed millions in back taxes, the legislature appropriated $3.5 million to hire new auditors and collections agencies, according to the Washington Post. That was in large part responsible for $80 million in taxes brought in -- a 23 to one return on investment.

If we could figure out how to get that kind of return on the money we invest, we’d be giving advice to Warren Buffet. Of course, some of the extra money came from a healthier economy and some asset sales -- but the return of back taxes was critical.

How do states get a reputation for leading in a particular management discipline? We got an interesting insider’s view about this recently that was kind of a wake-up call for us. We can’t share the precise details because we don’t want to embarrass anyone, but here’s the story:

We were looking for a state that was particularly strong in a specific human resources skill. We asked someone who knew his way around the field and he mentioned one particular state. We called the representative of that state, saying, “We hear you guys are doing really good work in such and such discipline.” The answer was laughter. It turned out that the state in question had long self-identified itself as a laggard in this area -- except for one high-ranking official who was hot on the topic and got himself on the lecture circuit. When our source heard the official’s zealous speech, he assumed that he was speaking for his whole state.

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Lesson: As useful as conferences can be in keeping up with the world, there are no guarantees that speakers are necessarily speaking for anyone other than themselves.

How important is it that a state publishes its annual report on-time (which usually means within 180 days of the close of the fiscal year)? If you’re talking about a few days or even a couple of weeks late, it’s probably not really crucial -- but then there’s New Mexico. Its 2012 annual report came out 426 days late, according to the Albuquerque Journal.

When states don’t report on their finances for such a long period of time, it makes it far more difficult to plan for the future. In a day when more and more governments are trying to make decisions based on solid data, New Mexico starts off with the disadvantage of publishing data that’s gathering mold.

“Whenever the people are well-informed, they can be trusted with their own government.” -- homas Jefferson

In late 2010, New York City announced dramatic increases in fees for a whole swath of city-operated athletic facilities. The idea seemed sensible: City tennis courts and ball fields are a valuable asset, so why not cash in?

The projections were impressive; the Bloomberg administration expected to bring in some $6.3 million in additional revenue in fiscal year 2012. But surprise! It only brought in $1.1 million more -- and not because people were sneaking through the fences.

According to the city’s Independent Budget Office, the fees were so high that people stopped using the facilities. For example, “With considerably higher fees at the start of the 2011 tennis season, the number of adult seasonal tennis permits sold by the city fell from 12,774 in 2010 to 7,265 in 2012, a decline of 43 percent. Single-play permits fell 46 percent, from 23,512 to 12,755 over the same period.”

This raises questions for which we have no answer: When city amenities become so expensive that many people can’t afford to use them, is it worth picking up a little more cash? What’s the real purpose of athletic facilities: to make money or to create a healthier citizenry? And finally, how could the city have been so wildly wrong in its projections?

We remember the things we learned during childhood school field trips well. But our fond memories of the benefits of these outings to us are possibly the least scientifically valid evidence of the value of field trips you're likely to find. 

But in a day when schools are cutting back on field trips as a result of economic pressures (and, we suspect, fears of liability), a recent study from the University of Arkansas backs us up. The study demonstrates that “students learn quite a lot. In particular, enriching field trips contribute to the development of students into civilized young men and women who possess more knowledge about art, have stronger critical thinking skills, exhibit increased historical empathy, display higher levels of tolerance, and have a greater taste for consuming art and culture.”

We’re not naïve. We know that schools are lucky if they can keep a sufficient number of teachers employed. But a couple of years ago, the American Association of School Administrators discovered that over half of schools were eliminating planned field trips and we’re not sure those are always the wisest decisions.

Utah, typically, is one of the most organized states. But according to a recent audit, it turns out that the state has one of the highest rates of prisoner recidivism in the country.

The audit indicated that one of the biggest reasons was that there was an absence of guidelines for sending people back behind bars. In one part of the state, someone could violate parole up to 15 times and still stay free. But elsewhere, just four violations could lock them back up. If the state had better practices and standards across the state, the audit indicates that it could save a fair amount of taxpayers; money, according to the Standard-Examiner.

Over a recent four-year period (from 2008 to 2012), Louisiana’s Office of Mineral Resources (OMR) waived nearly $6 million in penalties against mineral extraction companies, according to a Legislative Audit report. Apparently out of $12.8 million worth of assessments for making payments late or not at all, nearly half of them were dropped.

This practice may not deter companies from paying royalties late, failing to pay, underpaying, or submitting inaccurate royalty reports. According to the audit, “waiving penalties encourages companies to self-report underpaid royalties. However, OMR does not track the reasons why penalties were waived. Therefore, we could not determine how much in penalties were waived because of companies self-reporting their underpaid royalties to OMR.”

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