Vermont Legislature SmartTranscripts:

[Rep. Robin Scheu (Chair)]: Okay, now I see the little red line. Good afternoon, this is the House of Appropriations Committee. It is Wednesday afternoon, January the twenty eighth, we are here this afternoon to hear from our state auditor, Doug Coffer, who will tell us about his budget or about the activities of his office and his budget proposal for next year. We are missing two persons here had to be in another committee. So we will, but we have most of us still here. So certainly we are welcome to have you Mr. Hoffer, and we're glad you're gonna be able to present some information for us.

[Doug Hoffer (State Auditor)]: Well, thank you very much. I'm happy

[Rep. Robin Scheu (Chair)]: to be here. There are three documents that were sent. We have one that's called the budget page, believe. One's a performance report and one is the nice big graph about the budget. I would suggest that we start with the colorful one that's called the budget page first and then your performance report, if that's okay with you. Then we can look at actual numbers.

[Doug Hoffer (State Auditor)]: Sure. As I think most of you know, our office has a very simple budget. Thankfully, it's as large as it needs to be. I wouldn't mind more people, but we're doing pretty well, I'll get back to that in a minute. A modest amount of our budget, a rather small part actually, is from the general fund. The rest is from our internal service fund, which is referred to as the single audit revolving fund. The methodology is well known, approved by both finance and management and the office of management and budget in Washington because it does involve the single audit as well as the ACFR, the financial audit. And a little tiny special fund of about $50, which is the source of which is the treasurer's office, and the reason for that is hidden in the mists of history. I don't know why. As for how we use it, as I think you also know, we starting actually, when I worked for Ed Flanagan back in the nineties, that office began to focus on something that GASB thought was important, which was performance auditing. And that is not something that state auditors did back in those days. But slowly, was a move through Ed and eventually through Randy Brock and Tom Salmon. They understood that that was probably the best use of our resources because to do the financial auditing and the single audit requires very focused and rather tedious technical expertise that has to be updated every year and really doesn't as important as it is to those who make use of it, it isn't of much use to you, to the legislature, to the general public, and to program managers for that matter. Performance auditing is much more important, and to be honest, much more interesting and fun. And if that wasn't the case, I wouldn't be here, which which may or may not matter to people. But, we have a contract with a group called CLA. We had KPNG for many, many years. And about five or six years ago, I just thought it was time for a change. And we went out with an RFP, and and we like these guys, and they've made it a good made me look good. They do good work. And the 5th Floor folks enjoy them. They work well together. So that's good. The bulk of our the use of our funds is for our staff. I'm happy to say that they are well paid and stick around in part because we have the market factor adjustment for those positions. And we have somebody who I'm sure you know who has returned to state government recently, Kai, who is now the commissioner of DFR. And he was in the auditor's office back in the old days and wanted more money, and the only place where they were offering it was DFR. So he left. And Randy Brock, to his credit, said, oh my. We need to do something about this and started the process which led to that. So it's a big number. These guys are well paid, but they're very capable. We've had some retirements in the last four or five years and replaced them with excellent people from all over the country. So I I'm leaving in a year, but I I feel really good about the crew I'm leaving behind. So, happy about that. We have 16 total positions. I I will tell you that I have accomplished something that I expect you've never heard before from an appointing authority. I gave up an exempt position, which which I think in the bureaucracy people work very hard to to create and and protect. I didn't give up the position, only its exempt status. When I took office, this fourth exempt position in our office, myself, the deputy, the executive assistant, and this other person, was used for PR purposes. And it was evident to me that there was no need for that, and I didn't think it was a good use of those resources. So I tried an experiment and hired an exceptionally bright young guy to be an investigator, for lack of a better word, to do effectively audit like work, but not to the Gagasc standards. And he was exceptional. And he is now the CFO of the tax department, and he's dead to me because he left. But, anyway, his name is Andrew Stein. You may have come across him over time. I think he deals mostly with ways and means, but, he was excellent. I've had three or four others. One one other, a woman who's at AHS Central, was just as good as Andrew, and it was fantastic to have both of them. But we didn't do as well with the others, and it was a lot of my time as well supervising them. So about a year ago, I said, you know, I think we would do better to get HR to approve an RFR for that position and make it another senior auditor. And they agreed. We are recruiting for that position now. So it'll be four of us, myself, the deputy, the executive assistant that's vacant at the moment, and our financial person, and 12 audit staff, which is fantastic. So we could use more, but I'm very happy to have that number. It's it's an improvement from when I came in. So that's basic and our overhead is almost nothing. And in fact, it's even less now since we don't have a building, as you may know. Our building was flooded in '23, and we've been out of there all that time. And I I don't I don't know exactly what the plan, if any, is for that building. But my staff, which was a little nervous about working remotely in the beginning, has come to appreciate the flexibility of it, and they they would rather stay that way. And I think the attorney general's office and some other statewides have expressed concern about the governor's recent now not so recent, but instruction to state employees to come back. It doesn't apply to the statewide. So hopefully, we'll be able to continue as we are with very happy employees, which makes me happy. We have a good crew. We do good work, I think. I I sometimes it takes longer than I would like. But the good news is these folks live and die by GAGAS, generally accepted government auditing standards, so that when we are peer reviewed or when we bring something to you folks, I have every confidence that every single word in that document has been indexed, referenced, and backed up with evidence. So it just makes my job that much easier. You can rely on what we do. There are some people who might argue with some of the findings and conclusions and recommendations, but they can't argue with the facts of those because they are that carefully backed up and the evidence exists. As for the office, we continue as we have been. We've we've released quite a few audits in the last two months. In fact, I was concerned that DTE Digger, just as an aside, had not been covering a couple of them, which was unlike them because they were always pretty good about it. They covered the state house pretty well. So I sent a note to the two folks that are now assigned to the state house and to statewide stuff and said, what's going on? Are you just too busy, or is it because those two audits are fairly positive and you live on conflict? Tongue in cheek. And the guy wrote back and said, you're right. We now view we now view positive audits as status quo, and we're not covering them. And I thought, I'm through the looking glass. This is just too strange because and I had to write a note to Garrett Johnson at PSD and and Kai at DFR. Said, guys, we released this. Just because there hasn't been any coverage doesn't mean we didn't try. But it's disturbing, frankly, because as you well know, there are many in in the state and around this country who view state employees or public employees as incompetent and or corrupt. And, you know, that bothers me. There's an awful lot of hardworking people in state government. Is is everybody a superstar? No. But that's not true in the private sector. We have a lot of good people, though. And if they're doing well, I think people have just as much right to hear that as they do when we find problems. So I was bothered

[Rep. Robin Scheu (Chair)]: wanna hear the good news. You're right.

[Doug Hoffer (State Auditor)]: So anyway, so we we have a newsletter, which I think always comes to you guys, and, we are gonna have, one issue soon, which will cover those audits that were not reported upon. So sorry about that. So the only change really in our budget, which doesn't change much year to year, the the contract with CLA changes only to the extent that the number of programs to be audited for the single audit varies based on the rules from the feds and so forth. And of course, it grows, as all programs do, that have state employees with these, you know, the monies for the pay act. Otherwise, the only change is that, as I've said, we've switched a person from exempt status to audit status, a classified auditor. And that's moving money from the general fund into the SARF, our internal service fund. So there will be a what in your terms is generally a modest adjustment, but a little bit less for the general fund and and more for the SARF. And that's probably for the best for people who care about such things because in most cases, the agencies and departments can use a little bit of federal money if they get it to help pay off part of their SARF obligation to our office. Office. So not only will there be a need for less general fund, but less out of the programs as well. So that's really all I can say. I mean, you have questions, I'm happy to answer them, but it's pretty straightforward. Although I do remember I remember the first time I ever came into your committee in 'thirteen, and I followed the deputy secretary of the agency of human services with 40% of state government. And I sat down and I said, you know, they spend in a day what we spend in a year.

[Rep. Robin Scheu (Chair)]: Nevertheless, your office is very important to us. So we thank you

[Doug Hoffer (State Auditor)]: for I your appreciate that. Thank you.

[Rep. Robin Scheu (Chair)]: Are there any questions from the folks here at the table so far? No. Well, we thank you for that overview. You did provide us as well with a performance report. Would you like to go over that briefly with us? We can't hear you. Are you muted?

[Unidentified Committee Member]: It's muted. We

[Doug Hoffer (State Auditor)]: do not have any authority to compel, excuse me, to compel agencies and departments to implement our recommendations. So I like to think that the reports speak for themselves and are both logical and supported by sufficient and appropriate evidence, which is the term of art. And as a rule, they do implement implement most of our recommendations. That is sort of the key performance measure for us. But we have no control over the outcome except the quality of the work that's done, and that's pretty high. The other and we track those, as you can see, you know, the number of recommendations and the extent to which they have followed through. And that's one year out from each audit and then two years beyond that. And we have a goal of seventy five percent ultimately. And we do pretty well, although sometimes we get stuck. We often make recommendations to you guys, but you don't always adopt our recommendations. Can you hang on one sec? I think I need to answer this and tell them to stop bothering me. Hang on.

[Rep. Robin Scheu (Chair)]: Okay. Okay.

[Doug Hoffer (State Auditor)]: I apologize.

[Rep. Robin Scheu (Chair)]: That's fine. We did have one question here so far. Hold on.

[Doug Hoffer (State Auditor)]: Of course, please. So on

[Unidentified Committee Member]: these sheets, are these links? They're you got one some of the titles are in the left like Medicaid, AHS, and the same thing with the blue. That what do I find those on your website?

[Doug Hoffer (State Auditor)]: Yeah. The first page shows links to the audit reports released in 2025. And on the other side, when you get to recommendation follow-up as we call it, those are links to what are referred to as the corrective action reports, our recommendation follow-up. It's all on our website. Autumn has the original, the PDFs, which will give you the links if you want them.

[Unidentified Committee Member]: So if you just click on the links on Yeah. Okay. Thank you.

[Rep. Robin Scheu (Chair)]: It's on the particular page. It's just H u a will be live links if you look at it. They're live. They are. Yeah. They're live. Okay. Perfect.

[Doug Hoffer (State Auditor)]: I should also say I used to report with a couple of graphs, findings and repeat findings and some other things from the single audit. But it occurred to me that it's a stand alone. It's not our work. It's done by an independent audit firm. It also reflects the work of state government to the extent they are in compliance with federal requirements and regulations. It's very important. I didn't want to mess this up, I decided going forward, unless my successor changes something, that we will get a report specifically about an overview and summary of the major findings from the single audit in late March when it's released each year. So So it won't be part of this.

[Rep. Robin Scheu (Chair)]: And

[Doug Hoffer (State Auditor)]: they actually, they've the 5th Floor really picked up the pace about five or six years ago and now provide much better guidance and assistance to the departments for the purposes of the single audit. And the number of repeat findings and problems have declined. So it's a good story.

[Rep. Robin Scheu (Chair)]: It sounds like you're serving obviously a valuable function for us and it's working in terms of the circle, in terms of finding and then people improving as well. Any other comments from the group? Questions for the auditor? Yes, John.

[Rep. John Kascenska]: Just a real quick, and so thanks for joining us, this John Kascenska from Essex Caledonia District, Northeast Kingdom area of the

[Rep. Robin Scheu (Chair)]: state here. When are looking at performing an audit here, what's a typical amount of time that you need to perform?

[Rep. John Kascenska]: I know it varies here depending on what you're looking at here, like Luke Grout, for example, so one of the links there, just clicked that one off just to get a sense of that.

[Doug Hoffer (State Auditor)]: They run anywhere from six months to eight or nine. And as I said at the outset, you know, anybody in my position would like them to take less time. One way to do that is to limit the scope of the objectives. And my feeling is, you know, we don't go into a department or an agency every week. We do it every few years, unless it's a big agency with a lot of programs and departments. So I my gut feeling is when we start with well defined objectives over time as they go through their paces with fieldwork and the research they do, if they come up with something that I think is of interest and could lead to, good conclusions and recommendations for you guys, then I say expand the scope. I don't wanna get into scope creep. It's not like that. But sometimes I'm responsible for the extra time. Sometimes in fairness, and this is a challenge for our office routinely, we need a lot of information from the auditee. And they don't always get it back to us as quickly as we would like. Sometimes it it takes a while, in part because they may not have it organized or collected in in their office the way we need it, sometimes because, you know, the key person is on vacation vacation or or out out sick sick or whatever it may be. But I can't recall an audit where we didn't have problems in that area. Furthermore, as you as I'm sure you guys all know well, the IT side of state government is a continuing challenge. And some have, you know, prevailed with the right money and the right contracts to get over the hump and they're in much better shape than they were in the past. Others still struggle. So, for example, if we wanna go and do a job in DCF, where we like to look at the data that they have in their own programs. What we do is get a read only access with an MOU to literally access their computers. So we don't have to bother them with endless requests for information for the sample that we're looking at. Sometimes, that doesn't do us any good because the programming and the system that they're relying on is so out of date that it can't even answer the questions we're asking. So we it it just takes a lot of their time and a lot of our time. So that's not an excuse for how long things take, honestly. But as I say, when we're done, the quality control piece is time consuming. We also give the auditee weeks to respond. As you know, each audit is is at the end has a management response. I would say, like I said at the outset, I would like them to take less time, but all things considered, I think they take the right amount of time because of the quality of the work.

[Rep. Thomas Stevens]: Thank you.

[Doug Hoffer (State Auditor)]: You're welcome.

[Rep. Robin Scheu (Chair)]: We have another document, the famous ups and downs sheet. It's not quite the same, I guess it is. Are there any particular comments you'd like to make on this big budget sheet we see?

[Doug Hoffer (State Auditor)]: No, hope you got the one with the corrected stuff on it because the one I sent to Autumn originally was part of a much bigger file and I didn't think you wanted the other six worksheets, so I deleted them. But when in fact, what I wasn't thinking was all those worksheets feed that one you have. Oh. So I sent her the whole thing, and she probably just printed you the main page. But, no, there's nothing really to say. We haven't changed much, in our budget in years, honestly. So it's pretty straightforward. There's only two major components. One is the contract with CLA, and the other basically is our staff. And that represents 95% of our budget.

[Rep. Robin Scheu (Chair)]: Autumn confirms we do have the one first sheet with all the information fit into it. We do The

[Doug Hoffer (State Auditor)]: only changes I said was a little drop in the general fund and a little increase in the SARF. But we came in under the governor's recommended budget.

[Rep. Robin Scheu (Chair)]: Yes, well, we appreciate that. And we do appreciate this background information. We are aware that it's a simple but important office. So, think we have a good grasp on that. Are there any other questions or anything else you would like to offer us?

[Doug Hoffer (State Auditor)]: Yeah. If you don't mind, I am working on something that I wanna share with you when you get the time, which is probably never. But I've been interested in performance measurement for a long time. And one of the first jobs I did under contract to then auditor Ed Flanagan in the nineties was about performance measurement. That's when it began in state government. And the state, after many false starts, is doing a better job now. The fellow in the administrative office for performance work has really helped get his colleagues to do a little better, but there's one piece of it that he doesn't have the time or resources to do, and that is agencies and departments submit information about their own performance to him, and then it goes into a big annual budget or rather report for the whole state. And, of course, the departments have annual reports and other other documents with additional material. But they don't check on the validity or accuracy of the information provided. And, you know, some of that is just resources. Some of it is we should care about this because you're making important decisions about how much to spend. And for the most part, the information you have about program performance is from people who are not objective, if you know what I mean. So, I picked six programs from the Department of Economic Development, which I've been working on on and off for different reasons for twenty five years, and have dug in to look at the validity and accuracy of the data that they presented. And I'd like it's just a short memo, like a page for each program. I'd like to share that with you later in the session. I

[Rep. Robin Scheu (Chair)]: think I see nods around the table that yes, they'd really interested in So seeing as you develop that further, we certainly would be willing to take a look at that as we

[Doug Hoffer (State Auditor)]: get to.

[Rep. Robin Scheu (Chair)]: Thank you. And Representative Stevens has a comment here.

[Rep. Thomas Stevens]: Hey, Doug. First of all, yeah, performance review, one of the things being on this committee now for all of a year that drives me crazy is that we talk about ups and downs, which mean nothing in terms of performance review. I mean, they really don't. It just means on how they're proposing to spend money or how we're going to propose to spend money. Anything that any kind of we used to adhere for several years to results based accountability, which came and went as a marker for us. But we have less time than you have to dig in to stuff like that. So anything that helps us at least try to get a grip on how do we measure not just how much we're spending on the programs, but the programs themselves in conjunction with policy committees would be fabulous. But more as a log rolling thing, just wanted to thank you for your service all these years. You've been probably the most auditor, auditor you know, that we've had in terms of not wanting to be anything else but the auditor and focusing on that work. And I just think as a, you know, I've been very peripheral in watching your work and reading your work and touching base with you over the years. But it has been really nice to see someone who, you know, enjoys their work and focuses on it and I just want to pass on that appreciation. Thank

[Doug Hoffer (State Auditor)]: you very much.

[Rep. Robin Scheu (Chair)]: I see several nods around the table. We all agree. We have been appreciative of your work.

[Doug Hoffer (State Auditor)]: Thank you. I know it's late in the day for you guys, so I appreciate your time. If you don't have anything else, wish you well.

[Rep. Robin Scheu (Chair)]: All right. Thank you very much for being with us this afternoon.

[Rep. Thomas Stevens]: Thank you. Thank you.

[Rep. Robin Scheu (Chair)]: Thank you. All right. Our agenda for tomorrow is 09:00. We have disabilities aging and independent living. Then we have a break and then we have the cannabis control board. No, they rescheduled. So do we have anything at 11:15? You know we just have a break.

[Rep. Thomas Stevens]: It says lunch at eleven. So we might as well start at seven.

[Rep. Robin Scheu (Chair)]: I guess you do. Okay, but at 01:00 we have ADS. Is that still on? Yeah. And then the Department of Taxes? Yeah. And then at 03:30 we're on the floor with the budget adjustment as part of the floor. Okay? So tomorrow morning at 9AM, Dale will begin. Right.

[Unidentified Committee Member]: I want to take a look at his audit report there for notice a couple of two or three of those little Right. Things on If

[Rep. Robin Scheu (Chair)]: it relates to any of your budgets, yes, it would be interesting to take a look at the reports that he's produced and the responses that came back. Right, then