Sunday, September 30, 2007

Gov't Mismanagement Part 3: Time to cut the FAT

In a previous letter, I discussed examples of apparent mismanagement and lack of accountability in certain government departments. That original letter appears at the bottom of this edition. In today's letter, I offer a tangible solution for true reform.
How to Reform Government: Transparency

Since my original letter in May about gross mismanagement and overspending by state government, I have attempted to "get to the bottom" of the problem.  Most of my time has been spent pursuing the DIT contract with Policy Studies Incorporated (PSI). This consulting contract was initially signed in 2000 for $5.6 million and was to have lasted about a year. The purpose was to bring the state Child Support Enforcement System in compliance with federal requirements and standards. It ended up lasting 40 months, and costing the state $200 million.


As I began asking questions I became frustrated with department staffers who were slow to respond to questions, or vague in their answers. Documentation was often unclear or simply not there.  Finally, by going to the department directors, I ultimately did receive answers to all my questions and have received assurances that, "these problems have been addressed and won't ever happen again", though I have yet to see any policy procedure documents to verify this.
Where did the money go?

Probably the best example of this is the response I received from both the Department of Management and Budget (DMB) and the Department of Information Technology (DIT) to a request for documentation and rationale for a $10 million "change order" in the last three weeks of the PSI contract.  I could find no explanation for the expenditure, only a signature approving the disbursement. Here are the answers I received to my request for information.

DIT: "We are unable to attain any information in regards to the December 2003 change order based on the information you provided. The PSI contract was a FIA contract that occurred prior to the creation of DIT."

DMB: "Unfortunately, the file is missing documentation that would identify the change notice and the reason for the increase. Today, Purchasing Operations has an established contract management focus which has eliminated the potential for such contract file deficiencies. Each buying division...has centralized contract changes by identifying...a single staff person...[which] will eliminate instances of missing documentation."

The Solution

I believe the core problem here is lack of transparency. Asking people to be responsible for other people's money, without clear and constant oversight is a recipe for misuse of funds. I am introducing legislation later this month with some of my colleagues as part of a package which could eliminate the problem.  The package is called the "Funding Accountability and Transparency (FAT) Act". Simply stated, my bill will mandate every dime of government spending be made available on a searchable database available on the Internet.  The best way to describe it is "Google Government". Imagine, you can look up any item, any department, any contract with just a few keystrokes.  Sound impossible? It is already being implemented in five other states and at the federal level.  Expensive to implement?  Oklahoma is doing it for $260,000. The $2.9 trillion federal budget will be put online for $15 million over the next five years. Seems like a bargain to me.
Imagine having all state expenditures online.  We would potentially have 10 million taxpayers looking over the shoulders of state bureaucrats watching their every move.  Talk about transparency.  Do you think that would lead to greater accountability?
Background from original letter in May
Over the past several months, there has been much posturing about how to balance this year's budget shortfall which as of mid-May had ballooned to over $800 million.  The assumption from the governor's office is that we have "cut to the bone" and there is no where else to find savings, therefore we must raise taxes to balance the shortfall.

What the governor seems unwilling or unable to deal with is a basic problem of mismanagement in state government, a problem that only the head of the executive branch can address. Governor Granholm herself was quoted as saying in December 2003 regarding cuts to higher education, "just like any other entity, if you can't cut 5 percent a year, you are not doing your job." (Booth Newspapers, December 17, 2003). But since 2003 state government has grown by $4 billion and hundreds of millions have been lost because of gross mismanagement by the governor's own department heads.  Let me cite a few examples (some of these started before the Granholm administration, but continued into her term):
  • The Department of Information and Technology (DIT) signs a contract with Ameritech for voice and data communications worth $17 million, but after several "change orders" ends up paying $129 million.

  • The Department of Management and Budget signs a contract with EDS for computing hardware, software and services worth $58 million which explodes to $555 million after "changes".

  • DIT signs a 13-year contract with Oracle for software and support for "all state agencies" for $2 million, but somehow additions are approved to increase the contract to $144 million.

  • A forty-month contract with Policy Studies, Inc. for the Michigan Child Support Enforcement System to provide project management services worth $5.6 million is increased to $200 million, (over $1 million per week in overcharges!)

  • The Department of Community Health makes over $55 million in questionable or over-payments to its Pharmacy Benefits Manager.

Meanwhile, in 2006 the Department of Human services (Mary Ann Udow, Director) overspends its budget by $30 million, doesn't report it as required by law and goes on spending, even though they know two months before the end of the budget year that they are over-budget and in violation of the constitution.

All of these overpayments and many more like them were reported by the Auditor General of the State.  You can see this audit at:  The legislature responded when appropriate with new legislation to tighten controls.  But the only way to truly address these serious issues is for the Department heads to be held responsible by the "CEO" (the governor) for their incompetence or lack of accountability.  This has not happened. To my knowledge, no department heads have been dismissed or even disciplined for their gross mismanagement.

The governor continues to ask for tax increases.  She has recommended an additional $1 billion in spending for next year.  She has recommended an additional 700 civil service positions, (while threatening to lay off 29 state troopers).  As a state representative responsible for sound fiscal policy, I cannot in good conscience even consider voting for tax increases when spending continues to spiral upward and hundreds of millions of dollars are mismanaged and misspent by government.  I am hopeful that the executive branch of government will get its house in order.

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