Cost Accounting in Local Government

Musings on Food-Truck Safety

I love the expression “Accountants just want to have fun.” When the accountant is also a consultant, the “fun” can mean enjoying the “inspirational” posters on despair.com and wishing that I had thought of that business first. I’d like to add a new idea to the list, “If you can’t be a ‘good’ example, maybe your role is to be a ‘good’ bad example.” My nomination for bad example goes to the County of Los Angeles for their Vehicle Inspection Program.

Thanks to David Lazarus of the LA Times for his review of this agency in the Business section on April 8, 2014. The following quote clearly defines the problem:

“About 40% of the roughly 3,200 food trucks and carts cooking up meals in the area have never been inspected in the field by health officials since letter grades were introduced three years ago. And most of the remaining 60% have been checked out only once a year, even though official guidelines call for at least two annual field inspections.”

In my years of consulting with local governments, this has often been the norm – charging for some kind of inspection service without actually performing it.

Why is this happening? There is a moral as well as legal obligation to provide the service that customers are paying for or the agency has mandated! The simple answer is that there is poor management. But, people are put into management positions with limited management training. So, I guess that makes the problem “poor management of managers?”

It could be that the answer is nothing more complicated than the failure of governments to have a policy of matching the revenues with the costs of providing each service. And, when the cost of the service is calculated, it needs to be based on the costs to provide the service “correctly” not as the service is currently being performed or, “the way we’ve always done it.”

If staff knows that their agency is charging for a service that is not being performed, they have an unlikely ally in Paul Gann’s Proposition 4 which is now Article XIIIB of the California Constitution. In Section 8 (c), it clearly states that collecting more for a service than what it costs represents a tax revenue to the entity. This language then kicks in Article XIIIA which states that a tax must be approved by a two-thirds vote of the qualified electors. Just waving Prop. 13 in front of supervisors (lowly or elected) should get their attention.

If the opposite is the case, a service level has been mandated but monies have not been provided to perform the necessary work, it should be sufficient to remind supervisors that to do the job correctly means either: (1) using general taxes to subsidize a service that only certain people are receiving; or (2) establishing or increasing a fee to provide the service. If your agency leadership does not provide the resources to perform the service correctly, the fallback approach is plenty of CYAs and updating your resume as someone will be blamed for not doing the work, and we both know, it won’t be a supervisor (elected).

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