Red Tape Diaries: Why 18,000 Local Governments Need to Release Their Annual Federal Audits

Audit the "Parks and Recreation" department...

Every year, the federal government collects 18,000 audits from local governments which received at least $500,000 in federal grants, a potentially vast resource for researchers in a variety of fields. After high profile bankruptcy filings by cities like Detroit and California's Vallejo, economists could learn an incredible amount about how cities and towns dealt with the financial crisis. However, even though part of the filing process is an electronic submission, these records are rarely made available to the public.

Many local governments, such as the city and county of San Francisco (PDF), publish these single audits online, but a large portion require the red-tape circumvention and persistence of FOIA requests. Freedom of Information Act requests are perhaps the greatest tool for transparency advocates in the fight for government disclosure, but it's a tactic rife with loopholes, hurdles and the unending tedium of bureaucratic endeavors.

Mark Joffe, founder of Public Sector Credit Solutions and contributor to the Sunlight Foundation, discovered that such FOIA requests for four audits of California governments took an average of two-and-a-half months of regular pestering to yield any results. The documents are there and eventually available for public consumption, but the process isn't for the faint of heart. However, there is hope on the horizon:

Based on a review of regulatory comments and an email dialog with Census, it appears that the main objection to releasing single audit packages is that they may include Personally Identifiable Information (PII). Reviewing 44,000+ documents annually to scrub PII is a large undertaking. However, this concern seems only to apply to Indian tribes and some types of private not-for-profit organizations. Since single audits all carry an entity-type code, it is simple to distinguish the local government audits and just make those public.

In the long term, the Office of Management and Budget (OMB) has plans to improve single audit transparency. Recently, OMB published new single audit regulations in the Federal Register. Under these new rules, local government audit packages for fiscal years ending Dec. 31, 2014 or later will be publicly available. If the new rules are implemented on time (which is not assured) we should start seeing reporting packages on the Census web site in late 2015.

On the downside, the new regulations lift the single audit threshold to $750,000 in annual federal awards – which will exempt roughly 2,000 of the 18,000 local governments from filing. It also leaves a large corpus of previous audits not open to the public.

The need for this "treasure trove" of data is paramount when tax payers' dollars are being spent by governments that don't always have the best interests of said citizens as motivation. And while that may be a pessimist's worst-case scenario, an optimist's case can certainly be made for the improvement of functionality that studying all this data can create for communities across the country.

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Brandon Perkins
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