We’ve known Kathleen Patterson, the auditor of Washington D.C. for a long time now and she’s never been one to mince words.

Even with that in mind, her recent “Auditude” blog post seemed worthy of note, given the extreme concerns she voices about the financial status of the nation’s capital. Decades ago, we wrote an article called “The Capital of Bad Management,” which resulted in our giving congressional testimony about the fiscal status of D.C. to a roomful of U.S. Representatives.

In the early 1990s, we were hardly alone in observing a passel of poor fiscal management habits in the district. As Patterson writes of that period, “the District’s elected and appointed officials ran roughshod over the norms of city finance.”

In reaction, a number of solid practices were put in place, including the independent office of the Chief Financial Officer (CFO) and the introduction of an Inspector General to manage the annual audit.

Since then, there have been ups and downs in efforts to harness the city’s fiscal controls over the years – and other positive actions have been taken – but Patterson’s observations depict fiscal practices that are currently sliding downhill dramatically.

Her comments were inspired by her recent report that “the District failed to follow accounting rules in describing the D.C. Housing Authority in the FY2022 Annual Comprehensive Financial Report (ACFR).”

As in other cities, the ACFR is the most important fiscal document published each year. (Not to be confused with the budget, which may or may not relate to the reality of spending in the year ahead). 

Patterson’s concerns about the Housing Authority provoked her to ask, “What other financial rules are being ignored and who is paying attention?”

Agency Overspending

In the move to fix D.C. overspending in the past, Patterson points out that the CFO created a “financial review process” that required agencies to report – and deal with -- mid-year overspending. This meant establishing a written gap closing plan to keep spending in line with budget.

That process is still in place – on paper, but it is no longer effectively enforced.

For example, as she writes, “The July 31, 2023, FRP (the Financial Review Process) from the Metropolitan Police Department reported a projected deficit in excess of $100 million based on current spending. The detailed gap-closing plan proposed by the department, signed off on by the Chief and subsequently accepted by the (Office of the Chief Financial Officer), states ‘supplemental funding needed to close this spending pressure.’

“That was the entire plan.

“Executive branch agencies overspend their budgets each year and the overspending stands until after the end of the fiscal year, when appropriations are shifted around to cover overspending that has already occurred. Thriftier agencies lose budgeted funds that are not spent. . .”

Here’s the good news in what otherwise would be a negative story: Auditors like Patterson are out there fighting the good fight and trying to bring truth to the light.

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