Penny Wise, Pound Foolish…Again

Here’s a great example of what happens when a fixation on keeping taxes low no matter what (yes, Governor Pence, I’m looking at you) ends up preventing authorities from engaging in oversight that would actually save taxpayers money.

The IBJ has reported that 

Local governments will see fewer audits due to a recent change in Indiana state law.

The State Board of Accounts used to audit cities and counties every year, and audit school corporations every two years. Now those audits will be conducted every four years unless there are red flags.

And why is the frequency of audits declining? Budget constraints.

But budget limitations and the sheer number of entities that require auditing means there’s too much work and not enough people to do it, Caldwell told The Muncie Star Press….

Local officials confirmed this week that Delaware County and the city of Muncie haven’t been audited for three years.

State audits are important because they can uncover costly financial mistakes, wrongdoing by officials and other issues that local governments can correct–ideally, before the error or wrongdoing has cost significant amounts of money.

In the not-so-distant past, audits by the State Board of Accounts have found problems with the Muncie Sanitary District’s finances and then-Delaware County Treasurer John Dorer, who resigned in February 2015 after pleading guilty to a charge over the mishandling of funds. It would seem prudent to continue supervision of Delaware County to insure that these problems are not continuing, rather than taking a three-year hiatus.

There’s an axiom from the criminal law literature that is relevant here; it is the certainty of punishment, rather than the severity, that deters criminal behavior. (In other words, if you are considering a burglary, and the punishment is 20 years, but the likelihood of getting caught is 5%, the deterrent effect is negligible. If, however, the punishment is 5 years, but the likelihood of getting caught is 95%, the deterrent effect is considerable.)

Most reasonable people would not reduce police patrols in a previously lawless neighborhood and expect crime to go down. Same principle.

The Pence Administration is “saving” us money by keeping taxes (and revenues) low. In the process, it is issuing an unintended invitation to embezzlement and mismanagement. I’d be willing to wager that taxpayers will end up losing much more money than the administration is saving by reducing the mechanics of oversight.

But then, as a former student of mine who was working for the administration until he quit in disgust puts it, this Governor’s office has zero interest in actually governing.

That’s becoming more obvious with every passing day.

17 thoughts on “Penny Wise, Pound Foolish…Again

  1. Conservatives cry about government being too big and this is actually an area that needs to be funded and kept very active, year upon year!

    Just the other day, I heard about a major airport, I think it was JFK, that had their computer network crash and delayed hundreds of flights in the process. The lines were long, the people furious and yet, Verizon is a service provider for their computer network. We need government to make sure that Verizon (or any other service provider) is not taking shortcuts in their network configurations (cheaper for them of course) so that there is not a single point of failure like this again!

    That’s the regulations I’d like to see monitored because that’s what makes a civilized society.

    Are there areas that the government could cut? Sure, but I’d like a list presented to the citizens before they actually get cut and make sure that government services (like Verizon) are doing their job, keeping services running and maintained and being paid a fair price (no corruption). I know, that’s a pipe dream. ugh.

  2. When I first read about the reduction in audits a week ago I had the same thoughts that you have written in today’s blog. If there are officials out there who gained office simply for the power and connections they could make and know that there is a good chance they can get away with abusing that power and finances they control then the opportunity is ripe for the taking.

    Pence claims to be a Republican, but he is actually a Libertarian who follows the direction of the Koch brothers and the rest of their millionaire/billionaire colleagues who want to completely do away with government.

  3. The best way to make government ineffective is to underfund it. In America, the only thing we fund adequately is defense, and even then, we continually fund programs that DoD doesn’t want. I believe strongly that you get what you pay for.

  4. How much smaller, Grover Norquist, does government have to get to fit in your bathtub?

  5. These people are not so secretly in favor of corruption and embezzlement because they admire wealth, any way you can get it.

  6. My husband was an auditor for the State Board of Accts….while it is true they can catch theft one of the things they did was to help those employees who work at the schools, the license branch, etc.. who may not know how to keep financial books, etc…and teach them on ways and systems that eventually made their lives easier. He helped find ways to minimize waste which many appreciated. (Fyi…their pay for CPA’S were pitiful and they are not immune to political power)

  7. On both the state and Federal level, Right wingers have sought to defund the IRS. Regular people, those of us that get W2 and 1099INT forms, file pretty simple and HONEST returns. The “Creative” returns that could / should be looked at are from the 1%. This is another way of making life easier for the 1% at the expense of the 99%. When the 1% don’t pay, the rest of us do. Don’t you just LOVE the Republicans?
    And God Bless Amercu

  8. Dan Coats is always tolling the negative effects of the national debt and the deficit. The republican solution to both is to cut taxes that will “create jobs”. Like most of the tea bagger rhetoric, these ideas are based on wishes. Based on past performance, it seems unlikely that cutting taxes to reduce the deficit is a viable strategy. It’s like the old hippy response to the Viet Nam war: Fighting for peace is like f*#@ing for chastity.

  9. One way to look at audits is as vehicles of transparancy – they reveal to the public as well as government the inner financial workings of public services.

    That is why corporations have strict audit rules, they benefit shareholders, management, government interests, supply chain partners including customers; they reveal the health of the corporation.

    Now who would benefit from fewer public audits? To me it is those who don’t care about the health of public services. The Grover Norquists of the world. The Gov Pences of the world. All of those that we can no longer afford to have in government.

  10. Daleb, you mention Dan Coats and his complaining about the national debt. It’s odd that he seems blind to the fact that half the national budget is military spending, at the tune of around $600 billion, and that the GAO has given up on actually accounting for it. So, I guess the idea is that we let the military spend more than the next ten countries at whatever level they want, without any accountability, and then complain about the national debt. It’s like being blind to half your visual field, or allowing the bull to tear up your china shop but complaining that the clerks are keeping the lights on too long.

  11. Back in the 1970’s in college, I took a course in accounting in order to receive my business degree. The instructor was very proud of the accounting profession. He said Audited Financial Statements performed by properly qualified personnel was the gold standard. Banks, investors and stock holders relied on the audits to make decisions. The accounting profession developed rules, regulations and enforced standards of ethics.

    My finance instructor asked – What is 2 plus 2?? Answer what ever you need it to be. Two extreme views. My accounting instructor must have had a heart attack, with the advent of junk bonds and “creative” accounting.

    “Creative” accounting allowed companies to call liabilities assets or simply keep the liabilities off the books. I do not think my accounting instructor ever thought the accounting firms would engage in such collusion.

    When I was working my company provided crime coverage, Robbery, Burglary, etc. We also provided employee dishonesty coverage. An audited financial statement was sometimes required, or at the least our expectation was the company followed best practices such as two signatures on a check drawn on company funds and a third person to validate or reconcile the check book.

    This does fit the Indiana philosophy of government, little to no enforcement of rules.

  12. Back during the reign of Bush II when Republicans were confronted with the reality that conservatism was a massive failure in almost every respect they put on their corporate hats in desperate search for survival. Under those corporate hats was the one mission of business, make money regardless of the impact on others, plus the business accounting dictate that everything that you can’t control is an “externality” and has to be ignored.

    So the indisputable failure of conservatism became an externality and the focus became selling what they could to the American public using the assets that they had, oligarchy and the Fox Network and the like.

    That’s how the GOP became incompetent but sold to the public that it was government that was incompetent not just them.

    I suppose that there is some kind of sick success story in that steaming pile of BS – they did survive but at the expense of that which they were formed to support, American government.

    So now they’ve effectively shut down Congress and the Supreme Court and have set their sights on the remaining branch, the Executive, by proposing a completely unqualified President which they hope can be sold to the least informed among us, the victims of oligarchy, Fox News and the like.

    Meanwhile the beneficiaries of their broken thinking like Governors of deep red states continue the conservative practices that have never worked anywhere.

    It will take decades for us to recover from the damages and that’s the best case scenario. The worst case is that the least informed outvote the most informed spelling the end of Democracy at least here.

    Because one thing is certain; bad government in the face of the climate crises is not just bad it’s terminal.

  13. They simply don’t want their relatives getting caught with hands in the kitty. Makes sense to me☺

  14. Remember that at all levels we are dealing with Goldsmith cronies and recycled appointees via Daniels, Pence and Ballard. Inventories are a physical form of audit; physical proof of where the our tax dollars in those audits were spent. Mayor Hudnut required annual inventories of every item in the City County Building and beyond, in the outlying facilities. This stopped when Goldsmith moved in; his “people” roamed the building picking and choosing what they wanted to make use of. The newest and best furniture and equipment disappeared and no accounting was ever made nor was another inventory done. I returned from lunch one day to find my entire computer system (property of Circle Centre Mall and Melvin Simon Associates) was gone along with my bookcases. An older model computer appeared but all records and files from my bookcases were stacked on my desk, in my chair and on the floor. Would this have shown up in an audit? Was there no accounting for all property purchased with our tax dollars in all levels of local government? Were no questions asked then? Are no questions asked today? Or are the Republicans still refusing to make an accounting of where the tax payer’s property is located as well our funds? Much can happen and large amounts can disappear; staff members can change numerous times over a four year period; more difficult to track than during one 12-month period.

    And who is to stop them?

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