The City of Portland appoints influential business and community leaders to its Portland Development Commission (PDC). This agency operates with tax-increment financing to subsidize projects for commerce or housing.
Historically, most of its efforts invested in the downtown area to counter the flight of retail to suburban shopping centers. These “urban renewal areas” have remade large swaths of the central business district, financed with twenty- and thirty-year borrowings to be paid off, in theory, with property taxes gained from the increased value the renewal areas are intended to generate.
More recently, the voters approved a charter amendment granting the auditor full audit authority over the PDC. Portland City Council asked PDC to extend its attentions to neighborhoods and affordable housing. While the commission leaders welcomed these added responsibilities, they and their staff were less keen for what came with them: scrutiny by the auditor. They pointed to legal ambiguity in the city charter that didn’t recognize the auditor’s authority, excepting annual financial audits.
PDC always had a reputation for hubris that was not appreciated by many city bureaus. Its employees expressed a pride in creating jobs, enabling new construction, and vitalizing the downtown. Yet they also showed some scorn for the rest of the city’s “bureaucracy.” I heard of one PDC employee who boasted that to survive they constantly needed to make deals, in the same way that a shark must never stop moving through the water to survive. Yet those deals were never closely examined, since the agency operated with little scrutiny.
I once encountered a PDC director on a walk and cautioned that the agency needed to do a better job of tracking and reporting its results. The director replied, “We do so many things we couldn’t possibly commit the resources to determine their impact.”
That changed after the PDC came under the explicit purview of the auditor’s office We initiated discussions with their director to conduct performance audits. One of the first issues was funding. The source of an audit organization’s funding can adversely affect its effectiveness. It can threaten independence, but short of that, a limited budget can hinder the pursuit of complex or large audit topics.
To its credit, Portland’s funding approach creates full discretion to its auditors. The city allocates the cost of auditing in the same way it does its support services (such as payroll, budgeting, personnel) among the bureaus, using a set of factors such as the size of the budget and number of employees. Each bureau gets attention, with the smaller ones getting less frequent audits than larger ones. As the auditor, I called it a sort of insurance that provided every bureau with audit coverage, and smoothed the costs of audits across years for more predictable budgeting.
PDC had never been a part of this overhead model, so we needed to negotiate reimbursement for our audit work. Settling on a budget for audit services can create an odd dynamic. An agency is never enthusiastic about being audited, especially because it risks a public report that may not be complimentary. It will get billed for experiencing the reproach. Not a good way to start or sustain a relationship.
We agreed upon a dollar amount and a mix of smaller audits of PDC programs as a start. As we routinely began all our audits, we asked commission members’ and management’s topic interests. They pointed to some compliance issues, and also wanted us to validate their measures of success.
We chose to look at how well they ensured that development projects met their intended goals. They wanted us to look at the specific activities, but not at the larger objectives of their projects. For instance, we looked at the square feet of retail space, which they were tracking, probably hoping for ratification of their success. Yet, in proposing these projects, they had also publicly promised other goals like job creation. While jobs were an intended outcome and promised as part of the project, as we reported, PDC wasn’t tracking them. This prompted the director to respond, “you have substituted your judgment of what ‘should’ be monitored instead of what is ‘required’ to be monitored.” The requirements in the PDC’s contracts with developers were complied with, but they had also promised the public more, yet never followed up.
Another audit examined housing tax abatements to determine whether residents’ incomes qualified them to receive the subsidy. Again, we found that PDC’s tracking efforts were not sufficient. Our exit conferences to discuss the draft results were unpleasant.
A few weeks later, the commission chair asked for a meeting with me. I went to his immoderately appointed place of business and he politely explained to me that we were not properly performing our audit responsibilities. He said that PDC was contracting with us for specific audits and our audits were not what they asked for. We were not respecting the scope or objectives requested by the leadership.
I did not tell him that those topics were simplistic and less meaningful to the public. Instead I said, “You are paying us for accountability, not to limit our reviews.” He was visibly surprised, chagrined, then confused. He was a businessman and thought that we worked for PDC because they were paying us, like any consultant or accounting firm.
I made it clear that we audited on the public’s behalf and that all the city bureaus contributed to our budget without strings attached. They benefited from our independent audits, producing transparency and recommended improvements. We chose topics important to Portland residents, not just back-office procedures, or simple compliance efforts. To his credit, the chair grasped this distinguishing feature of our work, and our future interactions with the agency were no different than other bureaus.
A year later I was in the audience of a meeting in a minority community about PDC and the new chair of the commission was speaking. He was a relatively new to the position and, while respected in the business community, he was experiencing the steep learning curve of public service. He was explaining the PDC’s work and a project of particular interest to this part of the city. He was greeted with some skepticism about PDC’s responsiveness to community interests.
He pointed me out in the audience and stated, “We are more accountable because we are now being audited regularly by the city auditor. Wouldn’t you say we are more accountable than in the past?” I didn’t expect to be asked a question and had to think quickly. I didn’t want to embarrass him and didn’t want to be dishonest.
While it was true that PDC was getting audited, it was also true that they weren’t tracking and reporting whether they were delivering on the promises tied to their projects. These were important accountability questions that their leadership should have been asking.
“I think PDC is learning accountability.” He registered a brief moment of dismay but then seemed to declare victory and move on.
Auditors teach about accountability with the questions they ask. An organization that has never been audited before is less likely to be able to explain how well it’s achieving its mission.
Managers who don’t know what they accomplish, or what the cost breakdowns are, can’t hold themselves and their organization accountable. Our basic question, “What did you do with the money?” has many dimensions to it, from the detailed financial transactions all the way to the benefits received by the public. When we ask it, agencies are more obliged to answer it for themselves. We are also more likely to find wasted money or wasted efforts if they haven’t asked themselves those questions.
We occasionally encounter an organization that has the answers to all our audit questions. That offers a different kind of gratification than a good audit report.
