The Single Audit Act of 1984 (as revised) requires any organization receiving more than $500,000 in federal grants to submit an independently verified audit to the federal government annually. Over 44,000 organizations filed 2012 audits which are due within nine months of the end of the organization’s fiscal year.
Filers include states, cities, counties, school districts and other local government agencies as well as Native American tribes and private not-for-profit institutions such as universities and hospitals. Over 18,000 of the 2012 filers were local governments.
The Census Bureau collects the audits on behalf of the Office of Management and Budget, who’s Circular A-133 governs the filing process. Each filer must provide Census with a completed Form SF-SAC containing descriptive information about the organization and the audit, as well as an electronic copy of the audit itself. The audit packages are dozens or even hundreds of pages in length and typically contain financial statements, a management discussion of the agency’s performance, an audit opinion and details of federal grants being administered by the agency. A good example of a single audit package is the City and County of San Francisco’s filing which can be found here.
The federal government thus has an incredible trove of data on local government financial performance. This collection of 18,000 annual audits can tell researchers an enormous amount about local government financial conditions and about how these agencies spend federal grants. Unfortunately, this valuable resource is not available to the public.
After collecting each audit electronically, Census distributes it to the federal entity that has the largest involvement with the local government filer. For example, a rural county’s audit may be sent to the Department of Agriculture or Department of Interior while records for a city with a large concentration of public housing might go to the Department of Housing and Urban Development. Over 100 federal entities may receive and review single audits in their role as “cognizant” or “oversight” agencies (these terms are defined under §___.400 Responsibilities on this web page).
The Census Bureau also publishes all the descriptive data from Forms SF-SAC on its Federal Audit Clearinghouse web site. The public can use this site to search for audit filers and view their forms on-line, but the detailed audit packages are not available on the site – at least not yet.
Ideally, the audits themselves should be published by Census together with the contents of Form SF-SAC. Many single audit filers already publish their entire federal audit packages – or at least the financial statement portion – on their web sites. The San Francisco audit linked above is just one of hundreds of examples. Many local governments also upload their audited financial statements to the Municipal Securities Rulemaking Board’s EMMA web site as discussed in Alisha Green’s Sunlight blog post earlier this year. Finally, a few states maintain repositories of local government audits. Examples include Michigan and Oregon.
Although many of the audits in other states are already online, hunting them down at individual local government web sites or on EMMA is a tricky, time consuming process. Take it from me: My group located audits for 316 California local governments last year – with the help of a Sunlight Foundation OpenGov grant. Local government posting procedures are highly variable; in some instances we had to file California Public Records Act requests to obtain the audits.
Getting single audits via FOIA
To better understand how the federal government stores these audits and what barriers exist to releasing them, I filed a Freedom of Information Act (FOIA) request for a sample of four single audits. The idea of doing a “test FOIA” as a way of learning the bureaucratic dynamics came from a fellow Transparency Camp speaker, David Reed, who is a member of the Federal FOIA Advisory Committee. Filing test FOIAs is a great tactic for transparency advocates in many fields. It costs nothing, takes little effort at the start (you can generally initiate a FOIA by completing a simple online form) and can provide useful insights.
In my case, I received all four of the single audits I “FOIAed,” but the whole process took 2 and a half months and required multiple follow-ups on my part. I have posted some of the agency responses (including one of the audits) here. To summarize, this is what I learned:
- Census has the documents, but does not believe it has the authority to release them.
- Instead, Census refers FOIA requests to the Cognizant or Oversight federal agency responsible for receiving the audit.
- The Cognizant or Oversight agency typically requests permission from the local government filer, but if there is no response within ten days, they treat the lack of response as a grant of permission. In all four of my cases, the filer either gave permission to the federal agency or did not respond.
The test FOIA exercise shows that the federal government can retrieve these valuable public documents and that there seems to be no expectation of privacy on the part of local government audit filers. Thus, there appears to be no reason for the Census not to publish the local government audits.
Hope for the future
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. If released, these historic audits would show researchers how local governments around the country dealt with the financial crisis.
Since Vallejo, California filed for municipal bankruptcy in 2008, concerns about U.S. local government solvency have grown. In 2013, these worries reached a crescendo with Detroit’s Chapter 9 filing. This year, the U.S. Treasury Department has even created an Office of State and Local Finance to address the perceived local government fiscal crisis.
The federal government’s repository of single audits is a valuable resource that can help researchers investigate, diagnose and ultimately help prevent local government fiscal crises. Rather than wait until 2015, now is the time to make this resource publicly available to assist in our understanding of local government finances.
Marc Joffe is the founder of Public Sector Credit Solutions (PSCS), which applies open data and analytics to rating government bonds. Before starting PSCS, Marc was a Senior Director at Moody’s Analytics. You can contact him at firstname.lastname@example.org. Marc is also one of the winners of Sunlight Foundation’s OpenGov Grants.
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