Analysis of the 2007-08 Budget Bill: Capital Outlay
Details Still Forthcoming on Executive Order for Accountability
Governor’s Executive Order.
On January 24, 2007, the Governor signed an executive order with the intent of increasing governmental accountability
and public information about the use of the November 2006 bonds. The Governor’s executive order focuses on three main areas.
- Prior to Spending. For each bond funded program, a department is required to delineate the criteria or processes for spending the funds. The criteria and processes would be based on one or more of the following: existing law and regulations, strategic plans,
capital outlay programs, and performance
standards or outcome measures.
Spending. Departments would
report semiannually to the Department of Finance (DOF) on what actions they
are taking to ensure that costs are controlled and funds are spent as
Expenditures would be subject to audits by DOF staff (unless alternative
audit measures are approved by DOF).
- Plans Due March 1, 2007.
Each department has until March 1, 2007 to develop its accountability
structure consistent with the executive order. Departmental plans must be
approved by DOF prior to the expenditure of bond funds, unless DOF provides
Public Web Site. The DOF is
required to develop and maintain a Web site that contains information provided
by each department; including:
- Each department’s accountability and
- Project listings, with the amount of
funds allocated to each project.
Laudable Purpose. As described
elsewhere in this write-up, the goal of the executive order—to increase
accountability and transparency—is commendable. The emphasis on measuring a
program’s performance would assist the Legislature in its efforts to ensure that
programs are meeting their stated purpose. Similarly, an up-to-date Web site
would provide the Legislature and the public much of the information we
recommend that departments provide.
Many Implementation Questions.
At the time this analysis was prepared,
the administration could not provide many implementation details about the
executive order. If implemented strategically, the order could increase the
effectiveness of the bond program. If, however, the order is implemented
uniformly without regard for specific programs and their existing accountability
measures, it could create an unnecessary level of paperwork that slows projects
down while increasing costs.
- Audits. The bond package
will fund thousands of projects, loans, and grants. Currently, every public
works project is subject to audits. Audits typically consist of verifying
that programs adhere to laws, regulations, policies, and financial controls.
In many cases, the bond programs already have auditing programs in place.
For instance, Proposition 1C requires the Bureau of State Audits to conduct
periodic audits of housing projects. The executive order reemphasizes that
all expenditures of bond proceeds are subject to audits. The executive
order’s language is unclear as to the administration’s plans for the
magnitude and scope of audits to be required.
- Web Site. Currently,
information on bond-funded programs is not centrally available. The many
departments that administer the programs each have their own approach to
A central repository, therefore, has appeal. The DOF, however, will have to
spend a considerable amount of time developing and maintaining such a
site—given the volume of information that will have to be posted and new
reporting formats and systems that will have to be developed. Moreover, such
a site would only add significant value if it is regularly updated and
maintained with accurate information. In addition, the format and
consistency of how the information is presented would be a major factor
determining its usefulness to the Legislature.
Additional Resources? To date,
the administration has not identified how many additional audits it will seek
above those already scheduled occur. The development of a useful Web site may
require a substantial investment of time and money by DOF. Assuming that these
activities would be funded from the bond proceeds, they would reduce the amount
available for projects. As such, the Legislature will want to balance
accountability and transparency with timely delivery of infrastructure projects.
Return to Capital Outlay Table of Contents,
2007-08 Budget Analysis