Iowa Public Television


David A. Vaudt - Auditor of Iowa

posted on May 16, 2008

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Borg: Accountability. Iowa's elected auditor scrutinizes public revenues and dispersements. A conversation with State Auditor, David Vaudt, on this edition of Iowa Press.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Iowa Bankers Association -- for personal, business and commercial needs Iowa Banks help Iowans reach their financial goals. And by the Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure.

On statewide Iowa Public Television this is the Friday, May 16th edition of Iowa Press. Here is Dean Borg.

Borg: The public services we all depend on require money, millions of dollars flowing daily through various layers of government. From Iowa's state government through the 99 counties, townships, cities and towns and school districts, public money is lifeblood. And by and large raising the revenue and spending those millions follows state law -- usually. But every now and then there is a misstep by public officials handling public funds and usually it is the state auditor and his staff checking the ledgers who find what went wrong and who is responsible. The sheer scope of public spending makes that a daunting task but David Vaudt of West Des Moines campaigned for the job and he is now on his second four-year term as Auditor of Iowa. Am I correct, Mr. Vaudt? Is that what you signed up for?

Vaudt: That's what I signed up for.

Borg: You know the two journalists across the table, Radio Iowa News Director, Kay Henderson and Iowa Public Radio Statehouse Reporter, Jeneane Beck.

Beck: Mr. Vaudt, you released another audit of a small town organization, I think a public library this morning. Since the CIETC scandal that we all know about you mentioned at one point that requests for audits had increased for your office. Does that continue today that small organizations are saying, look, can you take a look at our books? We need to know if we're on the up and up.

Vaudt: It definitely has. Over the last couple of years we've seen a real peak in the number of cases brought to our attention. In fact, this year we've already issued 20 reports and we have almost another 20 cases either in process or pending at the same time.

Beck: As I mentioned sometimes these are smaller organizations or smaller communities. What is the value in doing that? Why is that important for Iowans?

Vaudt: It is so important because everyone trusts the taxpayer’s money is going to be used appropriately. And what we're finding in some of the smaller communities is because everybody puts their trust and faith in this one individual and no one is overseeing what they are doing that some things can go wrong. And that is what we're definitely finding in many small communities.

Beck: What are those typical things? And what needs to be done to ensure they don't go wrong?

Vaudt: Some of the typical things are because they control all the cash and checks and so forth is there's lots of times undeposited cash that never gets to the city's bank account, gets to their own personal accounts or they're paying their own personal expenses with the city's funds. And the real key there in small communities you're never going to have enough segregation to do these because you just can't afford to have those resources. So, the real key is does the government oversight body provide some oversight? And one of the things I tell elected officials is, even when it comes to the bank statement, if the mayor or the city councilperson actually directly receives that bank statement, sees what the balance is versus just relying on what the clerk tells them it helps protect the clerk, it helps make sure that the city is informed.

Henderson: Just over two years ago you released an audit of CIETC which is the Central Iowa Employment and Training Consortium, in case people aren't familiar with that acronym. Are there unresolved issues there that you are involved in reviewing?

Vaudt: No, at this stage the audit was completed. Our special investigation was completed. Obviously then we turned that special investigation over to the federal authorities and that is processed through the court system, still some pending items there. Obviously we might be called in to testify, again, someone from my office when they bring the last defendant forward.

Henderson: That audit came about because of a whistleblower, let's call that person a whistleblower. Are state laws adequate in protecting other whistleblowers who may come forward with similar information?

Vaudt: I feel confident they are. I felt very comfortable when we went through the situation with CIETC that the individual that brought that forward was protected. We made sure that he had direct contact with the Attorney General's office should anything happen. And the other part is it proves that it worked because he's still employed and he's even been promoted since that time.

Borg: Has the whistleblower traffic increased or decreased since CIETC?

Vaudt: I would say it has increased and probably gets more direct contacts from people that are willing to share their names. Many times we get something that is anonymous which is much more difficult to follow up on. But there are more and more people that are willing to at least step forward with their name and phone number.

Borg: How does a whistleblower, someone who says this doesn't look right to me, what is the proper procedure and what protection do you give that person?

Vaudt: They have direct access to my office, of course. Many times it will be actually an employee maybe with a particular governmental unit and they also have access to my office. And we do get a lot of direct phone calls, e-mails and letters from people and then we work with them and the first thing we do is sit down and discuss with them -- that's why I like to have people identify who they are so that we can figure out what the issues are and it gives us a chance then to take a look at what documentation is available and decide if we're going to go in and do a special investigation.

Borg: But if they give you their name, do you keep it anonymous or will it some time be public?

Vaudt: We keep their name anonymous as we're working through the investigation and that is the really good process because people want to make sure that they are protected if they go through the process.

Beck: You mentioned that there were some additional whistleblower protections put into state law after CIETC. One of the other changes legislators looked at was to make public records more open in part because of the scandal surrounding CIETC, that quasi-governmental agencies like that would have to make sure their meetings were open, that their ledgers were open to the public or open to other governmental agencies for review. But that legislation died and did not pass. Did they fail to do that? Do you think they should have?

Vaudt: I think, obviously, the more open government is the better it is for all the taxpayers because they have access to information. There are certain instances where you're going to want to provide protection, confidential information and informants, those kinds of things I think if you had all that information available to everyone I think you'd get a lot less referrals into our office and to other sources.

Henderson: You are a certified public accountant and your office in state government conducts audits. What sort of authority do you have as State Auditor to enact any changes in accounting procedures in state government?

Vaudt: Really we follow the standards that the profession sets for us but as far as changes to state law we don't have any ability to make those changes. We can make recommendations to the legislature but obviously it is the legislature that would make those decisions.

Henderson: Do you think you should have more authority?

Vaudt: I feel very comfortable with the level of authority that we have now and the ability for us to take a look at instances or concerns that are raised. We have a great deal of authority to at least investigation preliminary to see what is going on.

Henderson: You have sort of used the bully pulpit in your term in office. Did you know going in that this would be your job?

Vaudt: I knew that there would be some of this but I've been surprised by the number of referrals that we get to our office. But I've also really worked hard to make sure that what we do gets communicated back out to all the public because I think it's so important when people hear about these instances I hope that will discourage other people from doing the same things.

Borg: I don't know how he came up with this estimate. I'm wondering and I'm referring to the State Auditor in the state of Mississippi who is estimating that for that state illegal immigrants and undocumented workers cost that state, he said, $23 million, if my memory is correct. Do you have a way of quantifying what that category of people in Iowa costs the state of Iowa?

Vaudt: I think it's really an impossible thing to do because no one knows how many illegal immigrants there might be here and so you don't really know who is receiving services that should or should not receive those services or what the extra costs are for those illegal immigrants.

Beck: Is that something you can do, though, take a look at things like that or do you have to have a request from a governmental body or legislators who say, look, we want you to do some research in this area or can, as a state agency, you just say this is a priority I want to look into and then release a report?

Vaudt: Yes, we do have the authority to conduct our own performance reviews so if we see issues that we can go out and look at -- obviously part of the thing that we struggle with is funding in order to accomplish all the tasks that might be available.

Beck: One of the reviews you took a look at was the state spending of the Help America Vote Act money, when Governor Culver was Secretary of State the state received some money in part for voter education, things like that and there was some question of how that money was spent on a large party celebrating voting and some money spent on talent and people brought in to perform. Talk about that -- was that money misspent because the federal government is asking for some of it back?

Vaudt: Our responsibility when we look at federal dollars that are spent, the federal law requires us to look at cost and look at the regulations from a federal perspective and then we are supposed to look at those, if we see something that is questionable as to whether it's proper or improper, our task is to question those costs. Then we provide those questioned costs to the federal government and the federal government will then make the determination whether they are proper or improper. In this case they sided with the improper and said that the state should re-pay those dollars. The state did appeal that, it is before a federal commission right now and the federal commission will make the final determination.

Beck: So, in that role you're in a way obligated to say when your own state you believe misspent money?

Vaudt: Yes, definitely.

Beck: Even though it's going to cost your state money.

Vaudt: Even though it's going to cost because we have regulations to follow and we must follow the law that covers those federal funds.

Henderson: Your office has also reviewed the records regarding a Chicago consulting firm which a state agency hired to find savings in state government. First of all, tell our viewers what you found in two separate audits.

Vaudt: Yes, we had actually a couple of phases that took place on that particular contract and the savings that were projected in the contract were substantially less than what was able to be validated by my office. And, in fact, in total we paid about $4.8 million for about $3 million worth of savings. The second phase that we just recently released was supposed to provide originally about $1.6 million worth of savings. We were only able to validate $50,000 worth of savings yet we had to pay the consulting company $880,000 for their services.

Henderson: So, what should be done?

Vaudt: Definitely when you're taking a look at contracts like that where there is unknown as far as what the consultant might be able to do for you, you want to make sure you're structuring the contract such that the vendor that is providing the service also had some risk because if they can truly bring something to the state that the state doesn't have available from its own resources you want to make sure they're willing to do that. I found it somewhat ironic in this case too is the first phase of that contract was where A.T. Carney actually came in and did an opportunity assessment phase. And we actually paid them $200,000 to tell us whether they thought there were any opportunities to save money. So, obviously we had the opportunity for them to give us feedback and usually a lot of times consulting companies will do that on their own because that is usually their way to get in the door is to say, I think we can provide this type of savings.

Beck: In that case, when initially you pointed out problems with the first phase, do you think state government failed to then take action before completing the second phase?

Vaudt: Regretfully the second phase was too far down the road already, they had already gone into phase two. It would have been nice to have been structured such that phase two did not start until the results of phase one were validated. And in this case they were already down the road with phase two. The good part was they did not qualify for any extra payments in phase two so it was only the fixed payments that they were paid. Otherwise they could have been paid another $225,000.

Henderson: So, where does the buck stop on this? Who made this decision to hire the consultant?

Vaudt: I believe the contract was signed by the Department of Administrative Services. I'm not privy as to who might have suggested they go that route but obviously the Department would be responsible for making sure that the contract is structured such that the state gets the benefits they were expecting.

Henderson: The consultant himself, or the consultants rather, suggest that these savings will accrue over time and that the state has spent money at the front end and over a period of decades the state will save a lot of money. Do you buy their arguments?

Vaudt: There is some reasonable approach to that, that you could assume. But part of our concern is some of these contracts that were entered into that would provide savings, there is nothing that requires agencies to use those contracts and the other thing is how do you go back and validate where they really got those savings. And the other key thing you have to remember is the savings they projected were built into the contract and all these additional savings were supposed to be on top of what they projected for us to save. So, the $12 million they projected on those two phases for us to save was supposed to be just a piece of it and these were supposed to be pluses, not just to make up the rest of the difference.

Henderson: Is this an indication that state government is bare bones, that they are finding so little to save?

Vaudt: Yeah, I think in this case part of the way the contract was structured was not very well structured and in fact many times the reason we couldn't validate savings is because the contractor did not follow the terms of the contract and didn't use the right comparisons.

Beck: One of the things that others in state government have raised concerns about, particularly members of your party are bonuses and the Governor and others and his staff will use bonuses as a sort of tension tool or as a tool to unpaid overtime, things like that. Is that a legitimate way to pay state employees? Private companies use bonuses. Or is it not a good way to pay people?

Vaudt: I think it's a very difficult area to get into just because most of the times when bonuses are granted it's based upon subjective measure, not objective and so it is much more difficult and the private industry many times it's driven by financial facts and performance, how much profit they generated and so forth. We don't have a lot of those same measures in government. I think it can work but you have to be very careful to make sure that it's closely oversaw by somebody that can actually make sure that the measures you are trying to reach have actually been validated.

Beck: Will you make recommendations to lawmakers then on how to do that? Or is there some concern -- I know that people say the problem is we don't know what that person was paid in entirety by the end of the year, that there is some concern that that's not as open or accessible to see -- we know what they were paid annually but maybe the public records aren't strong enough to show what the bonuses were. Will you make any recommendations for upcoming sessions on how to look at that?

Vaudt: I think definitely if they want to approach the bonus area that we would definitely want to sit down with them and try and structure any type of bonus system such that it is open government so the public can see what is taking place. And number two, to make sure that they are actually accountable because if you look at the CIETC salary scandal obviously that was full of bonuses and bonuses were for doing a good job. I think when it comes to anyone we expect people to do a good job, that is part of their performance, it's an expectation, not an extra bonus.

Henderson: So, it is safe to say you have some questions about bonuses given to state employees. How do you feel about merit pay for teachers which essentially is a bonus for doing something well in the classroom?

Vaudt: I think whenever you look at payments whether it's private industry or government what you're trying to do is saying are you carrying out your job responsibilities and how do I make sure that I can measure that. So, to me it's always taking a look at did you perform? What were the measurable goals of what I asked you to perform? And how do I make sure that you met those goals to do it? I think that's the real key. If you leave it very subjective then I think it's open to a lot of scrutiny and a lot of questions.

Borg: You have been critical in the past of state spending and saying we're not providing for adequate possibly bad times ahead. Do you still feel that was because the Democrats are claiming that the rainy day fund is sufficiently funded now and it is?

Vaudt: I think we need to take a look at Iowa's finances. It's so important to focus on the fact that we have to make sure that our ongoing revenues will cover our ongoing expenditures and what we've been doing over the last several years is spending up here but our ongoing revenues are down here and the way we've been able to do that is to be able to use other funds and special accounts to supplement our revenue stream.

Borg: Was that perpetuated in this last session?

Vaudt: Yes, it will be and I have not completed my analysis yet of the legislature's budget but I do find that we're continuing to shift a lot of our cost. And as I look at it when you try and look forward to fiscal year 2010 I think that's the real thing you need to look at when you look at the 2009 budget and when you do that we're building a huge spending gap and our ongoing revenues are going to be almost half a billion dollars short of what our ongoing expenditures are. So, that tells you by looking forward you can better evaluate what the current budget proposal is because otherwise what happens is you kick the can down the road, you get through the fiscal year 2009 budget and everybody is happy and then you get through an election and then 2010 is when we get the surprises.

Henderson: Let's talk about surprises, perhaps, in 2010. Do you have aspirations for higher office?

Vaudt: I entered this public office with the idea that my qualifications made me one of the best suited to serve as Iowa's State Auditor and that has really been my primary focus and my only focus since running for election originally in 2001.

Beck: Granted you were one of the bright spots in the 2006 election, your re-election was one of the few bright spots for Republicans who lost control of the legislature. There have got to be people coming to you saying, well, as we look for candidates for higher office your name is a statewide name now?

Vaudt: I'm flattered by the fact that other people would consider me to be a potential candidate for a higher office. I look at it and say, you know, the next election cycle isn't until 2010 and we haven't even gotten through the 2008 election cycle yet so it's a long ways off. And I look at it and say right now I'm only about a third of the way through my current four year term so I've got a long ways to go before I'm trying to make one of those decisions.

Henderson: There is a governor's race in 2010 and that’s what we're talking about when we say higher office. It cost about $20 million for Chet Culver and Jim Nussle to wage a campaign in 2006. Surely if you're plotting or even thinking about running for governor you've got to start thinking about starting to raise money just about now.

Vaudt: I think a lot of times people think that's the way to do it. I think it's so important to make sure that whenever you're making one of those decisions that you look at the facts and the circumstances and say can I make a difference if I run for that office? And I think somebody trying to make that decision today doesn't have enough facts to make that decision and I definitely wouldn't feel that comfortable making that type of decision. So, I continue to carry out my job as State Auditor and will continue to do that.

Henderson: So, when might you start pondering?

Vaudt: It would be well past the 2008 election cycle before I would ever even give serious consideration to another office.

Beck: Let's talk about your party in general. When a national figure comes and you're invited and you're one of the lone Republicans now standing on stage with them to be introduced how is the health of your party and are you happy with the nominee? I don't remember if you backed someone in the caucuses.

Vaudt: No, I did not back anyone and I really see it as our opportunity to bring everybody together and support the Republican candidate. And I'm very pleased with the turn outs that I've seen as I travel across the state. I think Republicans are anxious for a change, I think they are anxious to bring us back into control and as I tell them we do that one candidate at a time. And we all need some work for those candidates identifying the best candidates we can and make sure we're there to support them.

Beck: So, will you be helping in legislative races and that kind of thing? Will you be out campaigning for candidates?

Vaudt: Yes, I will and I've been doing that already and I will continue to do that.

Henderson: I know you're not a psychologist but you said people are anxious for change. Do you sense that they are anxious for change at the Iowa statehouse or they're anxious to have the George Bush era over?

Vaudt: I really think they're anxious for change at the statehouse. I think we look at it and I think they've been able to see two legislative sessions and feel that the Republican principles are not there from a fiscal responsibility and some of those types of things so I think there is a real strong message to say we need to do that. Obviously when you get to the federal level people would like to maintain the White House within the Republican hands and would also like to make some strides to take back the House and Senate at the federal level.

Borg: Where do you think at the federal level that Republicans, other than the war in Iraq, set that aside -- there have been other missteps by the Republican Party in Congress, maybe even in the White House, that have damaged the perception of the Republican Party nationally. Where would you say is the biggest misstep nationally?

Vaudt: As I take a look at it I think there are always wherever you look going to be some missteps and I think what you always do is step back and say, what do we stand for as the Republican Party and how do we make sure we get that message out there? And as I look at it I don't see any one particular instance. I think you have to always consider all the different factors that impact it.

Borg: Well, I was hoping that you might comment on fiscal responsibility.

Vaudt: Definitely that is one of the most important cases and as we look at it from both the state level and a federal level fiscal responsibility is so important and obviously that is one of the core Republican principles.

Borg: And do you think that has been not followed at the federal level?

Vaudt: Definitely and I think part of it was as we were in control as Republicans I'm not sure we were as fiscally responsible as we should have been. I think as we look at it today there is definitely a change between having Republicans in control and Democrats and I think we will see much more fiscal responsibility by Republicans that we wanted this not only at the state level but at the federal level.

Beck: You talked about the values of Republicans. What are they right now? Is there a struggle within the party of whether it is fiscal conservatism, whether it's also social conservatism? Is there a struggle within the party to figure out where you want to be as you go into the future?

Vaudt: I really don't think so because what I like to do is focus on we have a lot of core principles that we can all agree on such as fiscal responsibility, limited government, helping people help themselves and those are the kind of things that we can all agree on and will continue to and that's what I would focus on as we look to rebuild the Republican control is to say we agree on all these issues, let's move forward and make sure we can put them in place.

Beck: So, when you're out on the stump for these legislative candidates will you be saying that the current batch of lawmakers overspent? Is that the argument you'll be taking to people? Give us a scorecard of how they did.

Vaudt: What I look at is to say did you balance both the revenue, the tax side with the expenditure side and what I'm seeing is we're not bringing those two in balance and we've got to step back and say how can we make sure that for the future we have an ongoing revenue stream that will match up with our spending level and not defer that ongoing revenue stream to the future.

Beck: Forgive me, because you're very good about saying it a level-headed, even manner but other Republicans take that to say they're going to have to raise your taxes. Will you make that argument?

Vaudt: I think definitely what we have to do is look at how government provides services. If you stop and look at it, government provides its services the same way it did 15 or 20 years ago and we have to step back and say are we providing those services in the most efficient, effective way that we can? And if we go down some of those roads I think we can make some real changes because if we continue to do everything the same way we all know it's just going to cost more than it did in the past. If it continues to cost more than it did in the past that means you're going to have more taxes and fees and I don't think we can continue down that path forever.

Henderson: So, what are you talking about, fewer than 99 counties?

Vaudt: I think we look at it every place. One of the things I even look at from state government side is to say I don't think we leverage technology enough and if you take a look at what's happening in state government we're so short-term focused we've put blinders on that say I'm only going to worry about how I balance this year's budget. But when you do those things you're not considering what some of the long-term impacts are. We all know that technology will have a longer-term impact but if you never take a look long-term you're not going to get there. And that is the real key. How do we focus in on how we're providing our services? When it comes to services it's a people cost. If you can leverage technology to help control those costs that's how you can provide ...

Borg: You segwayed into something I wanted to ask about and so as long as you're talking about technology -- has that made your job easier as a state auditor or more difficult? I'm going back to voting. They want a paper trail as a voter casts his or her ballot. Do you need a paper trail?

Vaudt: Many times you're going to want some paper trail but in general if you have the ability to print it that's the key and it can be stored electronically. But the key is to have that printed. And what we find is technology has made everything I think easier because you can access information, you can sort information, you can do searches for information. So, I think it can be very valuable.

Henderson: Speaking of voting, as I recall you were involved in sort of monitoring the voting at the Iowa Republican Party's straw poll in Ames this past August. That straw poll has been criticized as Iowa Republicans trying to have two first events in the presidential nominating season. Do you think the straw poll should be held again?

Vaudt: I think it's a great way for people to measure what is taking place and I think everybody looks forward to it. It's really not a lot different than what the polling has done except it's done by individual voters actually coming in, showing their valid ID and showing who they would support.

Henderson: Well, Rudy Giuliani and John McCain didn't look forward to it.

Vaudt: No, and part of that I think always depends on where a candidate feels they might come out in it and I think in some cases candidates will feel that they have been probably outspent and outworked in certain jurisdictions so it's going to make a difference. But I think it's so important that everyone gets the chance to voice their opinion.

Borg: And you think the straw poll has valid results?

Vaudt: I think it definitely shows where the active Republicans are at that point in the campaign and not to say that they can't change their mind later because of other circumstances but I think it does give you a valid measure at a point in time.

Borg: I'm sorry that we're out of time. Thanks so much for spending time with us today.

Vaudt: Pleasure to be here. Thank you.

Borg: Well, on our next edition of Iowa Press another statehouse guest, we'll be questioning Secretary of State Michael Mauro about the new procedures that will be in place for Iowa's June 3rd primary election. We'll see Secretary of State Mauro at the usual Iowa Press airtimes next week at 7:30 Friday night and 11:30 Sunday morning. I'm Dean Borg. Thanks for joining us today.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Iowa Bankers Association -- for personal, business and commercial needs Iowa Banks help Iowans reach their financial goals. And by the Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure.

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