Performance Counts : State should experiment with auditing technique that promises big savings

Performance-based auditing: not a titillating concept for most people but one that excites many who are concerned about the health of the state budget. The absence of this evaluation tool--which gives government the ability to measure efficiency on a continuing basis--is costing California handsomely at a time when every penny must be pinched.

State Controller Kathleen Connell has used the technique to streamline operations in her office. The positive results were confirmed when accountants examined Connell’s operations over eight weeks, looking at management, money-handling practices, time and resource allocation, accounting technology and regulatory compliance. Over the next five years, the controller estimates, performance-based auditing could save about $27 million. Even if the saving turned out to be only a fraction of that, using the technique would be worthwhile.

Connell is now pushing for passage of SB 974, which would authorize periodic audits to bring needed fiscal discipline to state agencies while providing greater rewards for innovation and improved service. The legislation easily cleared the state Senate earlier this year but has been bogged down in the Assembly. SB 974 would also create a bipartisan Performance Audit Task Force consisting of the governor and the controller. The two would select audit targets in consultation with other state finance officials.

Some in the Legislature have suggested that the marriage cannot be realized because the governor, a Republican, surely wouldn’t put his signature on legislation that might open himself to recrimination from a politically ambitious Democratic controller, especially if any hint of mismanagement turned up. However, political one-upmanship must be shunned at a time when the state is desperate for revenue and is in a yearly struggle to balance its budget.

Nine states--Alabama, Connecticut, Florida, Georgia, Louisiana, Maine, Massachusetts, New York and Texas--use some form of performance auditing. Texas--which like California has a Republican governor and a Democratic comptroller--alone has saved $2 billion.

SB 974 will be heard soon in the Assembly Appropriations Committee. In light of the experiences of the controller’s office and other states, California should at least experiment. Finding ways to do more with less has become common among businesses in an increasingly competitive economic environment. Now, Sacramento too should move aggressively in that direction.