Markkula Center of Applied Ethics

State Auditor's Report: Waste and Fraud or Checks and Balances?

By Judy Nadler


Waste. Corruption. Fraud. Misuse of state resources. Falsification of records. Inexcusable neglect of duty.

These emotionally charged terms were part of the news coverage for the recently released California state auditor's report on state government. The public is no doubt outraged (but not surprised) that the official document shows there have been some wasteful activities, signs of misconduct, incompetence or inefficiency.

That's not how I read the report.

First, it is important to know who conducts the audit and why. Elaine M. Howle is the state auditor, serving the legislators and the public in a special role outside the regulatory duties of other state departments.

According to the official website, the independent, nonpartisan office serves as an external auditor, and the only one given full access to all state and local agencies as well as the records for special districts and school districts. It also administers the California Whistleblowers Protection Act.

The state auditor was "established by the Legislature with the belief that governmental audits are an important cornerstone in the system of checks and balances expected by the people of California."

As with all audits, the mandate is to point out deficiencies and areas for improvement, with the goal of both improving government and saving money for the taxpayers.

To me, the data showed a thorough review of the workings of our state government, and along the way found some bad apples as well as some loosely enforced policies. It called out, for example, the Department of Mental Health, which paid some $51,000 to an employee who was engaged in activities outside his job assignment. He comes under the "bad apple" example; his supervisor should have taken a closer look at how employees were spending their time.

Several of the "big seven" examples showed individuals taking advantage of state property (a car), inadequate payroll procedures (falsified time sheets and absences), and poor oversight of employees, including one who was conducting a private psychology practice while employed as a state psychologist. These generally fall under the lack of detailed guidelines for employees.

What good news could be found in the audit? From July 1, 2010, through March 31, 2011, the state auditor's office received 4,428 calls or inquiries from the whistle-blower hot line, mail or the auditor's website. That says to me that there are good, hardworking and ethical state employees who took the time and perhaps the risk to question activities or individuals that were not in the best interest of California.

As a former mayor and member of Santa Clara's audit committee, I've read over many audits, including those for nonprofit organizations. When I read an audit, I look for the problem areas as detailed by the auditor, as well as those areas that have shown improvement since the last report.

The summary page, or letter that accompanies the document, makes recommendations to tighten controls, enforce greater accountability and set into place better checks and balances. In the case of the state auditor, an important service is "offering insights and solutions for value-added approaches, process improvements and future strategies based on independent assessments."

Of course some audits do show widespread corruption and fraud. But not this one.

JUDY NADLER, former Mayor of Santa Clara, is Senior Fellow in Government Ethics at the Markkula Center for Applied Ethics at Santa Clara University. This article first appeared in the San Jose Mercury News 9/6/2011.


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