This is how state government stays broken

LANSING — State Fire Marshal Richard Miller cannot guarantee churches, restaurants, theaters and thousands of other public gathering spots in Michigan are safe, lawmakers were warned in spring 2014.

The state’s Bureau of Fire Services hadn’t performed any pre-opening or annual inspections of such places since the law requiring those inspections was passed in 1978, the Michigan Auditor General — the Legislature’s main oversight arm — said in a report.

Lawmakers had seen this red flag six times before — in 1979, 1984, 1988, 1996, 2002 and 2006 — but there’d been little or no action.

In 35 years.

This is how state government stays broken.

The Auditor General, with a nearly $23-million annual budget, identifies dozens of problems every year that were previously diagnosed but left unmended because of a term-limited Legislature with an institutionally short memory, a shrinking state government workforce, dwindling resources for many agencies, and the slow churn of bureaucracy.

Over the last four years, about one of every four recommendations from the Auditor General was repeated from a previous audit because the problem wasn’t fully addressed. Over the past decade, auditors found departments complied fully with only half of suggested fixes to the more-serious “material conditions,” according to a Lansing State Journal analysis of audit reports.

Problems range from the relatively mundane — weak financial controls or poor documentation — to more serious issues that raise questions of public safety or cost taxpayers millions of dollars.

Sometimes, problems are fixed during the audit but still must be reported. Sometimes, agencies fix problems but not to auditors’ standards. The state’s education and technology agencies, for example, improved and are looking for further upgrades to security weaknesses in a payments database but have “accepted the risk” in the meantime, Education Department spokesman Bill DiSessa said in an e-mail to the State Journal.

Jeff Bankowski, head of Gov. Rick Snyder’s internal auditors, said eliminating repeat findings was possible but “might not be ideal,” because money spent fixing one problem could take from somewhere else.

“You have to prioritize your resources,” he said. “All findings are important ... but if everything is important, nothing is important.”

Bankowski, who was hired in January to lead the $5.4-million Office of Internal Audit Services, is working with the Auditor General on an unprecedented statewide risk assessment that would help departments set those priorities. Snyder has made fixing problems found in audits — especially repeat findings — a top second-term priority, spokeswoman Sara Wurfel said.

$1.7M spent in error

The problem got heated in February.

Holding copies of the third audit in nine years that accused the Michigan Department of Transportation of inadequately monitoring warrantied highway jobs, lawmakers gave MDOT officials a verbal beating, accusing them of everything from mishandling public funds to misrepresenting facts.

But MDOT is far from unique.

Last month, for example, auditors reported the Michigan Department of Corrections had wrongly paid $1.7 million for health care for prisoners who already had been paroled or released. The department failed to effectively monitor its medical program, something they had been warned about in 2008 when auditors found an unexpected, $10.4-million hike in prisoner health-care costs.

Seven years after the DOC promised improvements, auditors found the department still “had not developed a process to verify the accuracy and validity” of the payments. In addition to the 2008 state audit, a third-party review in 2010 had warned the department it could be paying for health care it shouldn’t.

In an e-mail, DOC spokesman Chris Gautz said the department had changed vendors and now uses a new type of contract in which the state and contractor share financial risk. The DOC also has a new approval process for off-site services, he said.

Problems persist throughout state government.

Just this year, auditors also found the Secretary of State may have charged thousands of motorists incorrect registration fees because the department didn’t double-check information provided by dealers and manufacturers, a problem also cited in 2009. The Education Department failed to reclaim about $92,000 in questionable spending by local school districts because of weaknesses in the department’s review process — hangovers from a 2003 audit finding, though auditors said there had been improvements.

‘A lack of focus’

Trying to force reforms on the administration, lawmakers sometimes battle career bureaucrats resistant to change, said state Rep. Ed McBroom, R-Vulcan, chairman of the House Oversight & Ethics Committee. The Legislature is hamstrung by a 2000 Michigan Supreme Court decision stripping the body of its power to oversee administrative rules and policies.

Yet McBroom said the real problem is “a lack of focus from the Legislature on dealing with these issues,” partly because term limits boot them from office before they can see a reform through to the end.

There will be hearings on DOC health-care spending, he said, but “not only will I not be the chairman, I won’t even be in the Legislature the next time that department is audited.”

Highlighting a pair of bills passed by the House in June that would expand lawmakers’ subpoena powers, the oversight chairman said he’s “trying to restore a very aggressive, very focused legislative practice to handling the audits and other oversight issues” because “it’s really our responsibility to put the teeth behind (auditors’) work.”

Snyder, too, is “really upping the ante on this,” Wurfel said. Partly because Snyder, a former accountant, understands the importance of audits and partly because the governor was dismayed by recent reports — including the February report on MDOT — Snyder has made clear to department heads that audits are “something that he expects to be taken seriously,” Wurfel said.

Bankowski is part of that.

In June, Bankowski’s Office of Internal Audit Services signed a first-of-its-kind agreement with the Auditor General, spelling out better collaboration, including a shared database of findings. By mid-September, Bankowski hopes to issue a report that not only prioritizes some of the problems but identifies “what’s systemically happening” to cause failure in the first place.

“Some stuff isn’t necessarily a quick fix,” Bankowski said. “The key is to develop milestones.”

By and large, agencies “are very focused on, ‘Let’s be efficient and effective,’ ” said Kelly Miller, state relations officer for the Auditor General.

She said many conditions improve between reports. Agencies often work to improve but need more money or time: Financial audits happen annually, for example, “and sometimes a year isn’t enough time to remediate a finding,” she said.

Things are getting better, McBroom said. Snyder’s administration is responsive and Bankowski’s auditors work with the Auditor General to “crack the whip” on needed changes.

A simple fix

Still, 35 years’ worth of audits at the state Bureau of Fire Services shows what happens when the process breaks down.

In 2005, nearly a quarter-century after the first audit, the state fire marshal told auditors he couldn’t afford to annually inspect 220,000-some establishments across the state because lawmakers never backed up the requirement with any money. The bureau performs thousands of other inspections — day cares, hospitals, schools, fireworks stands, and more — but can’t tackle “places of public assemblage” such as restaurants and churches.

The law allows local fire departments to inspect such places with written permission from the state, and “the perception is that local units of government may already be” doing so, auditors wrote. Cities are inspecting — both Lansing Fire Marshal Marshaun Blake and East Lansing Fire Inspector Don Carter said they do — but the state doesn’t track and can’t guarantee that’s happening.

So, the fix was relatively simple: Seek new funding, ask lawmakers to clearly delegate inspections to local departments, or ask for a repeal of the law all together. Fire Services promised improvements.

But nine years later, auditors found the bureau “has not conducted any inspections, has not received dedicated funding, and has not pursued the delegation of authority.” The law stands unchanged today, and Fire Services spokeswoman Jeannie Vogel said in an e-mailed statement that, while the state trains and advises local departments, the bureau “cannot speculate on any municipalities’ inspection performance.”

It isn’t clear what efforts were made between 1979 and 2014. Miller was appointed in 2012 and there’s no documentation of past efforts to address the issue, Vogel said, though there were “several unsuccessful attempts to obtain additional funding from the Legislature.”

After the last audit, a committee was formed and is exploring several solutions, such as asking lawmakers to change or fund the requirement and creating a database to track local inspections.

Contact Justin A. Hinkley: 517-377-1195 or jhinkley@lsj.com. Follow him on Twitter @JustinHinkley.