Bonuses fuel calls for audit reforms
HARRISBURG – Spurred on by the secretive handout of millions of dollars in bonuses to legislative staff and ballooning legislative costs, lawmakers are turning to in-depth legislative audits as a key to better tracking and curbing how the Legislature spends tax dollars. The annual independent audit of the Legislature’s financial statements by Ernst & Young has been notoriously limited in scope. By legislative restrictions, it scraped the surface of spending to assess whether revenues and expenditures from accounts were “free from material misstatement.”
Whole spending categories were off-limits.
Auditors couldn’t look at whether House and Senate employees and contractors were performing services for the compensation they received. Whether goods and services the Legislature purchased were for the lowest prices available. Or whether a legislative purpose was served for the purchase of a host of items: postage, per diems on non-session days, meetings outside Harrisburg, office furniture and equipment, and merchandise distributed to constituents, employees, or lawmakers, according to summary in the 2004 Ernst & Young audit.
Additionally, the Legislature’s audit has not met generally accepted government accounting principles, which would have resulted in unqualified or “clean” opinion, as other states and local governments often employ.
Meanwhile, the 2006 audit revealed that legislative spending had jumped 9 percent over the previous fiscal year to $308 million and spending reserves had grown to $215 million.
“The audit was not a telling audit,” said Senate President Pro Tempore Joe Scarnati, who added an auditing overhaul is needed. “It’s going to be about openness and putting all the laundry out. It will send a shock wave through members when they know there’s an audit that will be revealing.”
Scarnati and Senate Republican Leader Dominic Pileggi are calling on slashing legislative reserves by $75 million and putting that money in one-time property tax relief to taxpayers. Scaranti said he also wants to be more judicious in future budget years over how much money is appropriated to the Legislature so spending reserves don’t continue to grow so large.
The $3.7 million in bonuses handed out to legislative staffers in 2005 and 2006 were a main instigator in the renewed interest in more comprehensive audits, said Sen. John Pippy, an Allegheny County Republican.
Pippy said many lawmakers, including himself, were caught off guard by the bonus controversy.
“The majority of rank and file members I’ve met with weren’t aware of [the bonuses],” said Pippy. “That goes directly to the reporting issue – how the expenditures were reported.”
Rep. John Maher, an Allegheny County Republican, said the state’s Legislative Audit Advisory Commission, to which he’s House chairman, is in the process of overhauling the reporting requirements for the 2007 audit.
Maher, a certified public accountant, said the format of the Legislature’s financial statements dates back to the 1970s but is “archaic” to today’s accounting practices. The new audits, he hopes, will “go beyond the financial statement results to look at the propriety of spending as well.”
Sen. Patrick Browne, a Lehigh County Republican and Senate chairman of the audit advisory commission, said the thrust of the new audits will be making sure legislative spending conforms to internal spending policies.
“Audits in the past looked at what revenues came in and what the expenses were and that was it,” he said. “We will probably extend that to include how expenditures met policies.”
Other than the independent audit, there is little other oversight on how the Legislature spends tax dollars and that’s perhaps why there’s such focus on expanding their scope.
The Attorney General has stepped in, on occasion, to prosecute cases of criminal behavior involving state tax dollars, including the jailing of Rep. Jeff Habay, a six-term Allegheny County Republican, for using aides for campaign work on state time.
Attorney General Tom Corbett is currently looking into the distribution of staff bonuses.
But a 30-year-old state law bars the state Auditor General from reviewing legislative spending, although the office routinely looks into the spending of state dollars by state agencies and local governments.
“We can’t dip into any spending done by the General Assembly,” said Steve Halvonik, spokesman for Auditor General Jack Wagner.
Kinney Poynter, executive director of the National Association of State Auditors, Comptrollers, and Treasurers, said most state governments follow generally accepted accounting principles, as spelled out by the Government Accounting Standards Board. He couldn’t speak directly to how legislatures typically audit.
“It’s not an absolute requirement,” Poynter said. “But it’s standard best practice at this point.”
Alison Hawkes can be reached at 717-705-6330 or begin ahawkes@calkins-media.com ahawkes@calkins-media.com end