A recent report found a “majority of departments could not provide supporting documentation” for savings from the state government reorganization enacted in 2019.
The “special report” by Arkansas Legislative Audit is not an audit but a “review of associated expenses and potential reduction in costs” requested by legislators.
PA 565 of 2019 states the Legislature’s intent that reorganization “shall result in efficiencies to reduce the duplication of services and administrative costs and reduce overall state government general revenue expenditures.”
“Cabinet-level Departments created by the Transformation process,” the report notes, “are to identify and eliminate excess administrative expenses, unnecessary expenditures, and duplication of services and report those savings and efforts to operate efficiently to the General Assembly.”
For taxpayers, these are laudable policy goals. Yet the report noted only “5 of the 15 Departments provided supporting documentation for part or all of the amounts” in two spending categories, while only “2 of the 15 Departments” submitted documents for two other categories.
At a hearing, state legislators observed this was the most troubling aspect of the 50-page report.
The Hutchinson administration, for its part, said the report “had a much narrower objective,” and “is more limited in scope than an audit or attestation engagement performed in accordance with Government Auditing Standards.” The report “does not evaluate efficiencies in processes, improved managerial support, or improved delivery of services, and it dismisses out-of-hand any identified savings that were not general revenue expenditure savings.”
Legislative review of these processes is likely to emerge as reorganization exits the first quarter of a long contest.
Six years ago, broad state government reorganization was a policy dream. Indeed, the last broad reorganization occurred in the early 1970s when then-Gov. Dale Bumpers reduced agencies from 60 to 13. They grew to 42 before Gov. Asa Hutchinson and legislators reduced them to 15.
Sound processes are essential to efficient government. Two examples – risk management and tax collection – illustrate this point.
In 2016, PricewaterhouseCoopers, an international management consulting firm reviewed state Department of Finance and Administration (DFA) operations. “According to interview feedback,” the firm noted, “although risk assessments and risk management functions are loosely coordinated across some organizations, these crucial processes are not consolidated across the State.”
PwC also observed, “tax assessment and collection processes have resulted in significant backlog of taxes for the State. The State has approximately $1.434 billion in uncollected tax debts, of which $321 million has been deemed collectable by the State.”
DFA’s strategic plan explains the agency later launched “an online tool to help state agencies work proactively to mitigate internal risks before fraud or audit findings occur.”
The agency also launched a “second-shift payment” system that operated outside of conventional office hours. It collected $44.9 million between February 2017 and September 2020, records show.
In both instances, step-by-step reviews of risk management and tax collection processes increased DFA’s efficiency.
The question, in the report’s wake, is whether staff at other agencies will consider the process of reorganization.