Good Government Group Grades The Fiscal Transparency of Special Districts
HARTFORD, CT — They’re outside the traditional forms of local or state government, but so-called special districts spend more than $200 billion annually.
Nationwide, there are 38,000 of these government entities that provide a specific service for a designated area that would otherwise typically be provided by a local or state government.
The U.S. Public Interest Research Group Education Fund and the Frontier Group inspected 79 special districts in a report they released Tuesday. The report found many lack fiscal transparency and easy access to audited financial statements or checkbook level spending data.
Here in Connecticut, there are over 447 special districts. In 2013, the last year for which data was available, those special districts managed over well over $1.4 billion. These numbers, according to the Connecticut Public Interest Research Group, are conservative because only a fraction of special districts in each state actually report to the U.S. Census.
One of the 30 lagging special districts highlighted in the report was the Metropolitan District Commission, which provides water and sewer services to Hartford and seven other member towns.
“Special districts like Hartford County Metropolitan District play an important role in public life, providing valuable services,” Kate Cohen, state director of ConnPIRG, said Tuesday. “However, they’ve often fallen off the map when it comes to transparency because of how these districts are structured. That makes it all the more vital that districts themselves and the states in which they operate are proactive in ensuring the work they do is transparent to the public.”
The report gave the Metropolitan District a C- grade.
Researchers found it provides a procurement portal with past awarded contract information, including the name of the contractor, payment amount and a brief description of service provided, earning the district partial points for checkbook-level spending. The district earned 12 points in the category “checkbook-level expenditures”, 19 points under the category “budget”, and 16 points in “financial reporting”.
Kerry Martin, assistant to the chief executive officer at the MDC, said Tuesday there’s always room for improvement, but found it “truly misleading to suggest that the MDC’s finances are not transparent when so much information is readily available to anyone at no cost.”
Martin added the district provides a budget on its website, “which includes both revenues and expenditures, the last five years of certified financial reports, the last five years of federal single audit reports, all of the official statements involved in hundreds of millions of dollars of bond and bans sales, water revenue and expenditure reports, personnel status reports and lists of all bonds issued, which include the method of sale, the identity of the financial adviser and the underwriters, the projects financed and the cumulative value of all bonds sold.”
Martin noted the report cites the Government Finance Officers Association, which gives out certificates for financial transparency. She said the MDC has receive 22 of its awards, including in the last four years.
Of the 79 special districts reviewed, only seven special districts had detailed spending checkbooks available online. These checkbooks allow citizens to see how their tax money is spent, dollar by dollar.
The districts that performed best in this study were based in states like Texas and Illinois, which have taken action to pass legislation or enforce financial accountability standards for all levels of government or certain districts.
“Across a diverse array of budget sizes, function types and geographic service areas, what most of these special districts have in common is their lack of financial transparency,” Rachel Cross of Frontier Group, co-author of the report, said.
The report offers a series of recommendations to ensure that special districts aren’t left behind as state and city governments move towards greater transparency.
The report makes several recommendations.
● Connecticut should establish clear and uniform financial reporting guidelines for all special districts.
● Connecticut has already started a portal that details quasi-public agencies in the state, but should expand that to include more data on those and special districts.
● States should open their transparency portals to local governments. Some states have already begun to do this, allowing local government bodies to upload spending data to a pre-built website.
● Special districts should prioritize establishing an online checkbook database of their spending. This could be as simple as an excel document, or could be as complex as uploading data to a state database. However, it is checkbook level spending information that most informs how special districts operate, and can most efficiently decrease costs and waste and increase public confidence and engagement.
State Comptroller Kevin Lembo has been a leader when it comes to making more information available at the state level.
“Government budgets are the most direct reflections of its commitments to the people they serve,” Lembo said Tuesday.
He said public dollars belong to the people and “the people deserve to know how every dollar is spent – whether at the local, state or federal level.”
That’s why Lembo has transformed his own office’s website to highlight the information available from the state. A year ago he set out to see if he could get quasi-public state agencies to join him.
Lembo said he’s happy to work with any city, town, quasi-public agency, or special district that wants to make their financial information available to the public. Lembo has been successful over the past year in getting at least seven of the 13 quasi-public state agencies to provide checkbook level data to the public.