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Lexicon of Reporting Objectives for Legislative Oversight

By:
Stephen R. Miller
General Counsel
Joint Legislative Committee on Performance Evaluation and Expenditure Review (PEER Committee) Mississippi Legislature

ASLCS Home Page

This paper defines reporting objectives of legislative oversight. It then illustrates them using examples of findings and conclusions from reports of the Mississippi Legislature's PEER Committee, the entity which exercises oversight by preparing investigative, audit, and evaluation reports for the Legislature. Requests for PEER's services may call for more than one category of objective.

The document aims to foster a common terminology for those engaged in legislative oversight as well as furnish a tool to help a committee or staff organization prepare oversight reports that respond to the information needs of the Legislature.

The Mississippi Constitution creates a state government with three distinct branches: legislative, executive, and judicial, each branch having exclusive authority to exercise certain governmental powers.1

A legislature performs four basic functions:

• Lawmaking and public policy making. The legislature makes laws and sets the public policy of the State. This function includes fact-finding and analysis related to both governmental and non-governmental activities.
• Raising revenues. Legislatures in the United States traditionally have exclusive authority to levy taxes and authorize the sale of bonds.
• Budgeting. The legislature determines the activities and purposes for which the government may spend money. In some states, including Mississippi, the Governor has a role in making budget proposals, but the Legislature has exclusive authority to make appropriations.
• General oversight of government. The Constitution prohibits the Legislature from executing or enforcing the law. But the legislature independently gathers information about the executive and judicial branches to aid it in its policy making functions. In Mississippi, Constitution Section 60 confers specific power to legislative committees, including PEER, to investigate public officers without the Governor's approval.2

The Legislature exercises its oversight powers to:

• protect the public health and welfare,
• protect citizens' freedoms and assure access to the government,
• preserve public property, and
• assure itself that public funds are properly spent and controlled.

Most legislative oversight begins when a legislator infers that a problem exists in the government that requires government action. The oversight process continues with the development of information that the Legislature can use to control government programs and activities, and may end with some form of legislative action.

The PEER Committee is a joint standing committee of the Mississippi Legislature. It consists of five senators and five representatives appointed by the Lieutenant Governor and Speaker, respectively, and who serve four-year terms that coincide with the terms of their legislative service. The Committee meets monthly, and supervises an interdisciplinary staff of about 25 persons with degrees in accounting, criminal justice, education, law, mathematics, political science, psychology, public policy and administration, business administration, and related fields. The Legislature created the PEER Committee in 1973.3

PEER provides timely, reliable information needed by the Legislature about state and local government in Mississippi. The Legislature uses PEER's reports in aid of its oversight function. Legislative oversight assists the Legislature's lawmaking, revenue raising, and budgeting functions. PEER does not make law or policy, nor does it execute or enforce the law. The term "legislative oversight" encompasses some activities not done by PEER, such as formal administrative rules review and formulation of performance budget targets.

Although the staff may respond directly to simple, non-controversial requests for information from legislators, most requests for PEER's services appear on the Committee's monthly agenda. When a legislator or a citizen makes a request for a review, usually in a letter of request, the staff prepares a summary of the request for the Committee's agenda which describes the type of analysis needed, a proposed scope of review, and an estimate of resources required. The Committee meets and considers requests. It may approve or deny the request, and it may add or delete research objectives. The Committee records its actions in its minutes. Committee management staff then sets more specific reporting objectives for the project and assigns a project manager. The project manager writes a detailed project plan. A project team then visits the agency involved, interviews people working in the program, reviews salient documents and conducts other fieldwork. The project team writes a draft report which presents findings and conclusions. Planning, fieldwork and writing usually take six to eight months. Typically, ten to twenty projects are underway at any one time. The staff presents a draft report to the Committee, which may approve, amend or disapprove it. The Committee distributes approved reports to legislators and the public.

The reporting objectives defined below comprise the type of oversight performed by PEER. The objectives are grouped generally in order of increasing judgment required for applying criteria of value. The first objectives require verification of facts and some analysis. The second group requires judgment in the application of criteria. The third group requires judgment both in developing reporting criteria and in applying the criteria.

A number of laws, rules, and other publications provide guidance on how legislatures should oversee the operations of government.

• Miss. Code Ann. __5-3-51 through -69 (1973). These statutes create the PEER Committee and authorize it to conduct "performance evaluations" and "expenditure reviews" and report the results to the Legislature. The law gives broad definitions for these activities.4

• Mason's Manual of Legislative Procedure (1989). Codifies comprehensive rules for legislative procedure and provides the theoretical basis for the procedures. __757-758 address oversight.5
• The Program Evaluation Standards (1994) ("Red Book"). Evaluators of educational programs originally developed these standards. Currently, a group of audit and evaluation organizations, including the American Evaluation Association, the National Legislative Program Evaluation Society and other leaders in the field of evaluation support the standards.6
• Guiding Principles for Evaluators (1994). American Evaluation Association. These standards focus primarily on the ethical issues encountered by evaluators.7
• Generally Accepted Auditing Standards (1997). American Institute of Certified Public Accountants, the Financial Accounting Standards Board, the Governmental Accounting Standards Board and others. Primarily governs financial statement auditing.8
• Government Auditing Standards (1994) ("Yellow Book"). The U.S. General Accounting Office publishes these standards to govern audits of governmental entities. Formerly concerned solely with issues of financial statement auditing, these standards have grown to encompass broader scope "performance auditing," which relates to the kind of program evaluation performed by PEER.9

The following list describes the forms of information (i.e., analysis, findings, evaluation conclusions, and recommendations) that PEER transmits to the Legislature. PEER reports often present the results for more than one type of objective. PEER produces information in:

• formal PEER Committee reports,
• legislative assistance memoranda,
• fiscal notes,
• nominee background investigation reports,
• letters to individual legislators and
• presentations to committees.

PEER uses the term "legislative assistance" to describe a memorandum report for an individual member of the Legislature. The objectives of such reports may include any of those described below, although most legislative assistance projects involve fact gathering and provide only limited analysis.

"Output" means the amount of workload accomplished, usually expressed as the quantity of goods and services delivered. "Outcome" means a measurable program result, due to the provision of goods and services through the program.

After the PEER Committee has set reporting objectives for a project, the staff prepares the following types of findings and conclusions for a report to the Legislature or to a member.

The objectives of this type emphasize completeness and accuracy of information. They require some analysis, but may not require the application of standards to the facts in order to draw conclusions about the need for or the value of the object of research.

This objective describes basic factual information, but may include simple analysis or interpretation. The report may include descriptive statistics such as the mean or median, maximum or minimum or total and may include charts, graphs, or maps. The report contains no findings or recommendations, usually results from a specific request from a legislator, and addresses a single issue of law or policy. PEER bases some information summaries on surveys.

Example: In a 1997 memorandum report to a legislator, PEER staff used a survey to determine the number of classrooms that each school district had built since 1981. PEER produced a color-coded map of the school districts with the number of classrooms constructed printed on the map. At the legislator's request, the map and cover memorandum did not contain any analysis or evaluation, nor did they address the question of need for new construction.

In another legislative assistance report, PEER analyzed a particular judge's process for monitoring child-support payments. The memorandum report described the record-keeping and review process in one judicial district, but presented no conclusions about the adequacy or effectiveness of the process.

Upon request from a legislator, PEER or other legislative and executive agencies prepare a fiscal note, which summarizes a specific bill and states its projected financial impact (increase or decrease in expenditures or revenues). Some fiscal notes require simple analysis, while others require extended analysis of legal, financial, and management issues. The Legislature's Joint Rule 20 provides that fiscal notes shall not include any comment regarding the merits of a bill.

Example: PEER staff analyzed S. B. 2218 (Reg. Sess. 1997) which amended Miss. Code Ann. _25-3-31. This code section sets salaries of elected statewide officials. PEER determined that the bill would require $240,300 per year ($120,450 in general funds and $119,850 in special funds) beginning July 1, 1997. The report included a table showing the current and proposed salaries and associated increases for both general and special funds.

An investigation of the background of a person whom the Governor or other authority has appointed to some public office that requires Senate confirmation. PEER staff performs these checks at the request of the Chair of the Senate committee considering the nomination. PEER staff determines if the nominee's record of education, experience, criminal record, and financial history satisfy legal criteria set in the Constitution and state statutes.

Example: PEER staff found that a Governor's appointee to the Commission on Marine Resources did not hold a license as a commercial seafood processor as required by statute.

A systematic review of facts, usually to determine whether a person has violated a law or regulation. Often, investigations focus on allegations of intentional wrongdoing, which may lead to a request for criminal prosecution or civil proceedings for recovery of funds or property. In its broader sense, an investigation may simply respond to some factual question whose answer is obscure.

Example: Investigation of Alleged Fraud by Personnel of the Mississippi Authority for Educational Television and the Foundation for Public Broadcasting (1993). PEER found that the executive director of the Authority for Educational Television (MAET) knowingly approved an invoice for $10,000 in state general funds for services that a contractor had agreed to perform, but had not yet rendered. When the vendor returned the state warrant, another MAET employee deposited the funds into an agency bank account rather than returning the funds to the state treasury. PEER recommended that state and federal prosecutors commence criminal actions for fraud.

In addition to determination of facts, these objectives require use of judgment to determine if the actions of a person, program, or administrative unit adhere to law, rules, and custom. These objectives require judgment about what standards should be applied, but generally do not require development of reporting criteria.

These reviews can include the following:

• Determine if agency management has complied with generally accepted accounting principles, legal, regulatory or other externally-set criteria.
• Determine if an entity's financial statements fairly present its financial condition and adhere to established criteria.
• Determine if the entity has followed specific financial requirements and if it exercises effective internal controls over its assets and financial reporting.

The audit may also review and analyze expenditures. If the auditor finds weaknesses in internal controls, or excessive or questionable expenditures, the auditor may accompany the audit report with a "management letter" which explains the exceptions.10

Example: FY 1996 Financial and Compliance Audit of the Office of the State Auditor (1996). The Legislature audits the office of the State Auditor once every four years. PEER employed a private accounting firm to conduct the audit. The report contains the following findings:

Compliance

• Deposits not made timely. In violation of state law, the auditor had not deposited collections exceeding $1,000 in the state treasury on the day collected.
• Audit costs not collected. In violation of state law, the auditor had not collected audit costs and interest on investigations resulting in collections.
• Employees' travel expenditures not approved in advance. In violation of state law, the auditor reimbursed employee travel expenses without requiring advance approval of employee travel.
• Inaccurate general ledger. The agency had not reconciled the general ledger to accounts at the Department of Finance and Administration, making the general ledger inaccurate and unusable.

Internal controls

• Weak controls over clearing account. The Auditor allowed field auditors to initiate and settle claims in the field, without a proper segregation of duties. In some cases, auditors made tardy deposits of collections. The agency did not reconcile its collection account to the bank statement.
• Incorrect financial statement balances. The Auditor had recorded encumbrances as accounts payable and interest payments on a lease-purchase as fixed assets.
• Inadequate segregation of duties. In-house reviewers of contract auditors had authority to bill the contracting accounting firms for Audit Department supervision. The reviewer performed the review, prepared the invoices and received the remittances directly.

Management issues

• Travel expenses authorized for commuting. The department authorized travel reimbursement for commuting for some employees, without reporting the reimbursements as income. The department reimbursed one employee for more than 5,000 miles per month.
• Employees' payroll elections not properly recorded. The department had withheld more in payroll deductions than employees had authorized.

Many legislatures regularly and formally review administrative rules and compare their effects to legislative intent as a means of compliance review. In some states rules cannot become effective until the Legislature has reviewed them, and in other states, the Legislature may exercise veto power over administrative rules. In some states, courts have held that veto of rules violates the separation of powers clause of the state constitution. The Mississippi Legislature does not review administrative rules on a structured basis.

A special variety of compliance audit is the "Budget Indicators Performance Assessment," which verifies managers' budget performance reports by comparing program outputs or outcomes to those reported by program managers in budget requests. PEER does not presently conduct these.

Determine if managers use resources prudently. This review may compare inputs to program outputs. For example, the reviewer may look at procurement practices, protection of resources, duplication of effort, unproductive activities, and overstaffing. The review may address whether the program uses the optimum level of resources for delivering a service.11

Example: An Expenditure Review of the Mississippi Military Department's Timber Fund (1996). PEER found that although the Legislature had earmarked proceeds from timber sales at Camp Shelby for capital improvements at the camp, the Military Department had used the money for items such as Civil War artwork, video equipment, barbecue grills, and golf caps. PEER recommended that the Legislature require an annual audit of the fund by the State Auditor, and require the department to make an annual report of expenditures to the Legislative Budget Committee.

The objective of this final group is to determine if the subject of the evaluation (a government program) has value according to needs-based criteria. Judgment is required to develop ad hoc criteria (characteristics of value) and standards (measurable expressions of the criteria) based on need. Usually, no previously established standard will assist the reviewer.

"Review conformity of programs to Legislative intent." -Miss. Code Ann. _5-3-53. Determine if managers adequately plan, organize, direct, and control the program.12

Example: A Review of the Mississippi Housing Finance Corporation (1987). PEER found that the corporation made loans to higher-income borrowers than intended by the Legislature, and understated their financial status. More than half of its borrowers could have qualified for conventional financing. The corporation permitted low-income borrowers with high net worth to receive "low-income" loans. PEER also found that the corporation hired five consultants at about $1 million each without using requests for proposals. For five bond closings in New York City, the corporation paid travel expenses for an average of 15 people for each trip.

Determine if managers keep accurate records or can provide sufficient valid information on a program's processes, outputs, and outcomes. Determine if program managers use data to improve the program, and if records will support an efficient external evaluation.

Example: An Accountability Assessment of the Mississippi Department of Rehabilitation Services (1996). PEER attempted to conduct a program evaluation of the department's rehabilitation program, but found that the agency could not provide accurate information on its activities or effectiveness. The agency recorded case-related data in a computer file, but did not store the data in a usable format. The agency did not collect some critical elements of data, and used poor data collection methods for others. The agency could not reliably report its effectiveness on its cases. No practical method of obtaining case data from another source existed. PEER reported that neither the agency nor any outside evaluator could accurately measure the program's effectiveness.

Determination, prior to the fiscal year, of data that an agency will collect for later measurement of the program's success. Typically, the reviewer looks for outcome data, not output data. The Legislative Budget Office, not PEER, performs this type of oversight.

Determine whether a program or activity has value because it effectively meets a social need. Program evaluation is outcome oriented. Most social needs are easy to identify, but determining which social needs the government will address, and with what priority, is a complex political process which can result in creation of government programs. Program evaluation provides information on those programs' value after implementation. A program evaluation will identify side effects and hidden costs of a program, and determine whether the program's total cost exceeds its benefit. Sunset review is a type of program evaluation, often with a policy analysis component added.13

Example: An Evaluation of Mississippi's Assistant Reading Instructor Program (1994). PEER examined three criteria (standardized test scores, retention rates, and dropout rates) and determined that the reading assistant program did not effectively meet statutory objectives, nor did it effectively improve basic skills. As a side effect of the program, many school districts used the assistant reading instructors as substitute teachers. The program costs about $50 million per year in state funds. The report presents four policy options: (1) Require all parties to comply with the law in an effort to make the program effective; (2) Convert the program to a teacher's aide program; (3) Divert the money used to other educational programs; or (4) Abolish the program and use the money for other programs or to reduce taxes.

11. Policy analysis.

Policy analysis evaluates a proposed or existing program or activity or a modification to determine its soundness and responsiveness to policy assumptions. The analysis considers needs, side effects, and alternatives. The analysis predicts effects, in terms of costs and benefits, of a range of policy alternatives.

Example: A Policy Analysis of the Workers' Compensation Rates of Mississippi's Logging Industry (1989). This report considers ways for the state to minimize workers' compensation payroll taxes for pulpwood haulers. The report presents four options, including restructuring the job classifications, establishing new job classifications, making special rules for independent contractors, and increasing the number of workers covered by workers' compensation. This report also recommends a mandatory worker education program. The report does not include predicted fiscal impacts of the various options.

Example: A Policy Analysis of the State Medical Examiner Program (1988). This report presents five ways for the Legislature to structure the state's death investigations, and shows the potential annual cost for each option: (1) Continue the current system, $369,976; (2) Eliminate the State Medical Examiner's Office, which would save the $369,976 but cost local governments at least $63,000; (3) Upgrade the duties and powers of the State Medical Examiner, $497,000 in one-time costs and $583,000 per year; (4) Reduce duties of medical examiner, $369,976; and (5) Create a fully centralized system of death investigation, which would save county governments at least $830,000, and cost the state about $530,000.

Conclusion: Understanding the Need for Oversight

Legislative oversight reports have primary value only if they meet the various information needs of the Legislature. For oversight reports, the end product comes in three very general report categories: description, compliance reviews, and evaluation reports. The staff gathers raw information and adds value (analysis, synthesis, and evaluation), according to the research objectives defined above. The staff can better respond to information needs by classifying requests according to a lexicon of research objectives, and by clearly articulating its own research plans.

A legislature's information needs vary from year to year and from decade to decade. The needs seem to have evolved from investigative, through audit, and into evaluation. That clearly happened in Mississippi. The Legislature's need for investigative reports may decrease because accounting controls and other preventative mechanisms have improved. At the same time, governing has become much more complex. By using the lexicon, the staff can better assess which legislative information needs it can address competently, and determine which staff products best serve the needs of the legislative institution. It can also identify ways to address the unmet needs. Generally, the implication for staffing is the requirement to hire staff who can exercise the best possible judgment.

Even if the Legislature has established an office or committee specifically to perform oversight, every committee and office of the Legislature engages in some oversight. Definition of reporting objectives may enhance the quality of legislative oversight by making it easier for legislators and their staff to propose, plan, and report on oversight projects in response to the needs of the Legislature.

1 Miss. Const. (1890) __1-2.

2 Miss. Const. (1890) _60.

4 Ibid.

7 Guiding Principles for Evaluators, American Evaluation Association, 1994.

9 Government Auditing Standards, United States Accounting Office, 1994.

10 See: Gov. Aud. Stds. 2.4 & 2.5

11 See: Miss. Code Ann. _5-3-53 and Gov. Aud. Stds. 2.8.

12 See: Miss. Code Ann. _5-3-53.

13 See: Miss. Code Ann. _5-3-53 and Gov. Aud. Stds. 2.9.

For more information about ASLCS, write or call:

Sally Kittredge
National Conference of State Legislatures
1560 Broadway, Suite 700
Denver, CO 80202
Phone: 303/364-7700
FAX: 303/863-8003
E-mail: sally.kittredge@ncsl.org