making local government more ethical

How and Why to Bring Budget Transparency to a City Near You

It's a nice coincidence that, just when I was preparing to write a blog post about a trendy thing in the corporate world called "open-book management," the former comptroller of Dixon, IL, Rita Crundwell, pleaded guilty to a federal fraud charge that she siphoned more than $53 million from the town of only 16,000 people (over a period of 21 years), according to an article in the Chicago Tribune.

Open-book management is, according to an article in last week's Economist, "sharing all or most of a firm's financial data with employees on a monthly, weekly or even daily basis." In other words, it's budget transparency. Companies that practice some form of open-book management include Harley-Davidson, Southwest Airlines, and King Arthur Flour.

Most local governments are doing better at placing budget information online for its employees and citizens. But it is generally an annual exercise, not an ongoing exercise. In between, full transparency might get in the way of playing with the numbers at budget time. In order to allowing playing with numbers (or to prevent the public from seeing through the numbers by seeing how money is actually being spent), access to ongoing budget and spending information is limited to the city or county's financial personnel, the city or county manager (Dixon doesn't have one; another problem), and those legislators who may bother to look.

Even now, here's what you can find on the Dixon website. The last financial statement (and this is itself unusual) is dated April 2011. There are only two 2012 budget documents between the annual budgets.

Monthly Reports
But in May 2012, five years of monthly Treasurer's Reports were suddenly made available online. Since May 2012, however, only one monthly report has been made available online. Well, it's hard to start a new good habit. The city's financial personnel probably haven't been to the gym for months, either.

Monthly reports should be made available to the public the day they are made available to financial personnel and local legislators. This should occur at least a few days before each council meeting, so that the public can review the reports and prepare questions and comments for the public comment section of the meeting. The website should also have a detailed guide to reading monthly reports, budgets, and other financial documents so that the public, especially journalists and bloggers, can understand what they are reading, ask intelligent questions, and be expected to deal with budget issues responsibly.

It's good to provide a few years' worth of budgets and reports, so that people can make comparisons and see trends and which numbers are out of line (or consistently out of line).

The Benefits of Budget Transparency
If Dixon had practiced open-book management, it is likely that the comptroller would not have gotten away with what she did. In fact, she probably wouldn't have tried.

But transparency is not as much about preventing bad apples from stealing the public blind. It's about preventing officials from playing with budget numbers so that they can fool the public blind, and cover up a number of serious problems, including false budget items, and increased contract numbers, overtime, and pay packages.

It was by getting access to monthly reports given to the board of finance (which were not made public in my town) that I learned to understand and expose the games that were being played with budget figures. And to change things. Without the monthly reports and years' worth of budgets (I kept a pile of physical budget proposals in my office), I couldn't have done a thing about what the daily newspaper ended up calling "budget numbers ... as suspect as the people who put the figures together."

Even still, I was constantly told that I didn't know what I was talking about. But, of course, I received no help from the financial personnel. By not making financial information public, financial personnel are complicit in the misuse of budget figures to hide the reality of the government's taxing and expenditures. They have an obligation to let citizens provide oversight and, when they do so, to know what they are talking about.

Getting Financial Information Online
Budget information did not go online until I started scanning it and putting it online myself. If your city or county's financial information is not available online, ask. Tell the financial personnel about their obligations, about complicity in misconduct. Remind them that budget information is not confidential. And tell them you don't want a Rita Crundwell in your town.

If they don't comply, FOI the budget and reports (in an electronic format), and put them online yourself (call the site something like Dixon Financial Info). Shame them into acting like professionals who believe in citizen participation. They'll come around.

Robert Wechsler
Director of Research, City Ethics