MSU Extension Center for Local Government Finance & Policy

Today we welcome, obviously we are glad to see you all our meeting today. Let me review the agenda quickly. First, we're going to have a presentation from Peter Murphy. And I'll introduce Peter in a moment about some interesting developments in the UK. As you know, we like to bring you information and things going on from my other computers off here from other parts of the world that are the kind of issues that we care about. After that, we'll have time for Peter to talk and then some time for questions and answers and discussion. After that, we're going to have some updates following that. Anything regarding your local distress monitoring systems or any communities that might be in distress? Obviously, there's a lot fewer than there were a number of years ago as some of you know, at least that I've been around a while. This group started during the Detroit bankruptcy back in 2013. Actually, it was really 2014, essentially when we started. We're going into our tenth year, but things have changed a lot in the last ten years of probably less distress today than there was then. Then after that, we'll do some state updates on a couple of specific issues around labor force and regulatory changes. And then we adjourn about 03:30 or maybe even a few minutes earlier. Again, that's agenda. The second thing I wanted to talk to you, we're looking at putting out a survey soon to you. We'd ask for your participation. We're looking at offering continuing education programs, credits for folks in the area of state regulations around local finance. We're interested in getting your input on that and helping us shape that curriculum and what that might look like. We think it would be applicable to people like yourselves, your staff, probably others as well, Even in local government, or even the federal government perhaps. So we'll send that out. It's going to give you some things to think about in terms of what that curriculum would look like and when it would be offered and what formats it would definitely be virtual training, but through Michigan State anyway, some things to think about there. With that, let me go ahead and get started here with Peter. I will pull up his here real quick. Peter has graciously agreed to talk with us. He's on UK time. It's quite a bit later in the day for him. But Peter is the Professor of Public Policy and Management and Director of public Policy and Management Research at Nottingham Business School, part of the Nottingham Trent University in the UK. He specializes in practicum and applied research including performance management, governance, scrutiny, and public assurance arrangements of locally delivered public services. Probably most important to this group perhaps is that prior to joining the school 2000-2009 Senior civil Servant and director of local government practice in Whitehall, he was the lead official looking at a central government interventions in failing local authorities. That's obviously very relevant to our group. Before that, he spent over 20 years in local government. He has a lot of experience. Obviously, the UK has a different system than we do, but there's certainly some similarities as well. We're going to have Peter talk to you about the overall system and also specifically about the City of Birmingham and some of the situations occurring there. And then we'll open it up for discussion. Peter. Thank you very much and thanks for the invite. Ha if I may just go straight in and share my screen. I'm hoping that should come up. Right. Thanks very much for having me, as well as having done this in the early past. I'm currently advising a couple of the cases we have at the moment, both from the local authorities point of view. In one case, which is quite interesting, the government are asking my advice and the local authorities are asking my advice. That's been an interesting case. Mostly I'm just going to try and do this historically chronological, so you can understand the general systems. I know there are quite a lot of Differences between us and the United States. And in fact, I know there's quite a bit of difference between states, but in the UK it's much more centralized. Right. Our government responds to financial service and corporate failings in our local authorities. I'll see if the slide I was beginning to start worrying there. Now, these problems have been around for considerable times. Historically, we've had internal and external and independent auditors. The district audit was established in 18 68 up until the current century. They had public interest reports, we had corporate failures, and near Mrs. over time, we had a capping rebellion in 1985. That consider a number of local boroughs in London and elsewhere decided not to set budgets in protest at the government capping the amount of local rates they could raise in their area. We've had ever whereby the government have the power to say how much local taxes raised. But there was second example I've got there is the London Borough of Hammersmith and Fulham were speculating on the stock market when somebody from America wanted to know who this was. That because in rate swaps at the time, they own something like 5% of the global market. They ran somebody in the National Audit Office over here, I wanted to know who they were. They soon found that they were only betting one way on the market. Namely that there was going to continue to be growth in the market. If there was a downturn in that, they would unmutedly go bust. Eventually it was playing stock market in that way was regarded as ultra vis outside of what they're allowed to do. The other example I've got there is when lots of local authorities invested in the Icelandic banks. I've got that spelling wrong, do beg your pardon. And they lost about 1 billion pounds in 2008. Then the second thing we've had before now, we've had service or corporate scandals that have led to reports and interventions. Her Majesty's Inspectorate of Schools started in 18 39, the police in 18 56, and performance audit much later in 1983. We've had peer reviews. Those are the things that happened, if you like, before the 21st century. This brings us up to date. I want to suggest that there are four periods that have happened since then. I've just described the Pre 97 in 1997, we've got a new labor government, 97-2010 is that period. Now, Pre 97 we had we had those things that I've just mentioned, but they give only partial coverage and they had very weak intervention powers. They could tell people off, or they could put a notice in the paper for schools and social services. The powers were greater, but essentially there was relatively little you could do. Public interest reports were probably the most powerful, and we had quite a few of those in 1997. And particularly after 1999 Cumber Act, there was a new duty placed upon authorities to achieve best value instead of just existing, they had to continuously improve. The whole system was brought together in comprehensive performance assessments and later comprehensive area assessments. These inspections covered all services and activities with the publication of national performance indicators that allowed indications of problems going wrong. After three pilot interventions and the publication of the first national CPA results, there were 13 authorities that were deemed to be poor, and therefore they became cases of direct intervention by government. This regime lasted until 2010. At its height, there were probably about 60 authorities in this particular plight. Some of them cases, they were monitored by central government, some of them, there was direct intervention where you take over the powers. The authority, and it was coordinated by the Audit Commission. In 2010 to 2018, we had a sharp reaction to that. We've had new conservative governments since 2010. The first thing they did within the summer of 2010 was they announced they were abolishing the audit commission. That meant inspections were limited. There central government led initiatives to help local authorities because the local government sector as a whole was thought to be good enough to improve itself. When we came to 2010, all those local authorities that were in intervention or informal monitoring had reached the point where they could be taken out of intervention. The government brought in the sector led improvement. In other words, individual authorities would either help themselves or their peers help them. What we've had since 2010 is a whole series of service scandals Were docs, Rochdale, Birmingham are examples. Birmingham was in there. In each case, it's a service that's given rise to the scandal. Usually social services or education in Birmingham, it was schools. The one that's different is Kensington and Chelsea. I don't know whether you would have seen it over there, but that was the place where the Grenfell Tower disaster happened. The local authorities tried to claim they had no responsibility for the fire itself and the disaster, and they clearly did. They clearly did. What we've got is service scandals, more having to alert central government to something is going wrong in a local authorities. They are all big local authorities. The ones on the screen, they will all have 1 billion pounds as their turnover. That changed again in 2018 where we've got limited inspections, but still had the strong intervention powers. But from 2018, they've been used almost entirely because of financial issues popping up around the country. There is now a very partial and weak evidence base for either service or non financial interventions, although there is a process for financial interventions, that is when a local authority issues 114. Notice again, I've got the number on there. It's Section 114, what you've had since 2018. Basically, an increasing number of authorities are reaching for Section 114 authorities, 14 notices. As the policy of austerity continues since 2010, austerity means reductions in central government grant to local authorities. Legislative basis is quite simple for going in. It was in the 99 Act which gave everybody a duty to meet best value to facilitate continuous improvement. It introduced external independent inspections, overall services, and overall organizations, and interventions following failures. Significant failures were piloted in 2002 and at that time a number was challenged under judicial review. And although all of the challenges fail failed in 2003, they wanted to make sure there was no significant challenge and they hadn't missed anything. They clarified both performance categories and the exercise of powers in relation to performance. All subsequent interventions have been based on the failure to achieve or be failing to achieve best value. It's interesting in July 23, the government issued a consultation, best Value standards and interventions. But essentially that is mostly tidying up new language that has come out since it started. There's not much change to the process or the principles. I'm going to suggest we compare what's going on. Now what I'm going to do is I'm going to explain what the intervention was like when it was set up and I'm going to explain what's happening now. And we'll use the example of Birmingham in case you have any questions, but the early period. As the evidence piled up. And there were 15,000 inspections of individual services in the local authorities, of which there at the time, 358 in England, you were building up a really rigorous and robust evidence base of what was going on. The intervention supported all poor authorities. Poor was the worst performing category. If anybody fell in there, they were supported. The whole process at the time enjoyed all party political support because politicians were equally as guilty as the officers we had to get into the poor category, usually had to have poor officers elected members. There used to be a bad relationship between them and there was usually something abnormal problem that they had. It might be an outsourced company going bankrupt, or it might be something bad in social services that would tip them into this poor category. Because otherwise, the other local authorities could usually rally round and improve the performance of the struggling local authority. It was inherently collaborative. The government saw its part in the local government association, saw its part in neighboring local authorities, or good local authorities were committed to helping poorer local authorities. In practice, between ourselves, larger authorities found it easier to recover than small districts. Okay. And the devolved administrations in Scotland and Wales have continued their response to local authority challenges is generally based on the principles of public value and new public governance. They continued the agenda under CPA. After 2010, the UK government, basically in England, reverted to new public management and attempts to reduce the size of the state. Right now, the nature and philosophy behind the response was about strategic turnaround and recovery. The phrase we used to use is, we will not reward failure. We won't give you the money to bail you out. But if you start doing things correctly, we will support progress and success, which is quite different from the attitude at the present. We needed to deal with both corporate and service inadequacies. We needed to deal with the politicians. We needed to deal with the community leadership inadequacies, the network. But it was done with all party support and party political involvement. And you'll see that the current system still maintains all of those issues. It included formal intervention and more formal, heavy monitoring. Where you did, the government didn't take over the local authority, but it monitored its progress in formal monitoring meetings, both in the local authority and in it in fact, with an excellent and improving evidence base from the Audit Commission of 147 national reports, and over 7,000 inspections, which all became an excellent early warning system over time. And the criteria for coming out of inspection was bespoke to the authority depending on what services it provided. But there were clear benchmarks for all individual cases, and you had to prove that you had a robust trajectory of improvement validated through performance indicators and inspection reports. You had to show you'd improved and you were going to improve further in the future. The approach change since 2010. In 2010, the new government abolished the Audit Commission. It abandoned external assessments and inspections. Although there were still some inspections carried out under other legislation. We continued to inspect education and social services, but other than a lot of services, did not have an inspection regime. Again, a significantly reduced the evidence base available. For instance, the 15,000 individual Inspections of individual authority services. We were not set on the National Archives. There is no repository that can find those inspections. All the local authorities who carry them out have to keep them, but there's no central repository where you can access them. It was a side issue of them going digitizing the national records. The one of the things that happened in the financial and external audit regime that changed again in 2014, where local audit was outsourced, the regime avoided was abolished, and what was audited had a much narrower scope of audit. And the reporting requirements for local public audit were reduced considerably to short term, purely financial reports. Previously, they wanted to know your long term, medium term, and short term plans. They want to know your financial outputs. You want to know what you were doing with your capital money. But they were, they were all abolished and now local authorities just have to publish short term purely financial reports. This lack of oversight led quickly 2014-2019 Things got rapidly so bad that in 2019, Tony Redmond, who was the local government ombudsman, was the former Chairman of the Chartered Institute of Public Finance Accounting and a previous chief executive of at least two local authorities. He was appointed to produce an independent review of the local audit and the transparency of the local authority financial reporting. In other words, the government had seen that the financial regime that they put in place wasn't fit for purpose and that was the phrase they use, it was no longer purpose. By 2018, it's clear that the problem was significant, would continue and there would be more 114 in evidence to the spending review. The controller of National of Public Audit May Morse said that local authorities have basically, there were a growing number of local authorities which had not managed within the service budgets and relied on reserves to balance the book. The reserves were running out and a lot of them were below the financial minimum. These trends were not financially sustainable over the medium term, let alone the long term, that time in 2019. Before they acted on that spending review, we got into 2020 and the pandemic. The Institute of Fiscal Studies brought the analysis up to date by assessing plans for both core funding and top ups for ongoing covid related costs. Although the government had made some extra money available to local authorities, it did not meet the demand on their services that emanated from the pandemic. In simple terms, these sources are all indicating the scale of the problem is significant. The problem will continue to increase, the number of councils under financial stress will almost inevitably rise, and therefore, in the first indications that we got from the local authorities themselves was Northamptonshire County Council that issued the first 114 notices in over 20 years. Now, if 114 notices are the early warning system or more like it, it's the local authorities putting their hands up and admitting they can't live within their means. What are they and what do they do? Well, local authorities in the UK cannot go bankrupt. I know there are some parts of the United States where parts of local authorities can go bankrupt, or local authorities can go bankrupt, but you can't go bankrupt, they can't go bankrupt. Currently, in the UK Section 114, notice indicates that in the opinion of the statutory Section 151 officer, and the 151 officer not only works for the local authority, but has an independent responsibility to be a, to be a whistleblower. These terms. And issue of 114 notice is the 151 officer, who is usually the chief financial officer who has the responsibilities to blow the whistle if in his opinion the council's forecast for income is insufficient to meet its forecast expenditure in the next financial year and has no recourse to get additional income that will meet the gap. The current and forecast allocation for service delivery and other activity must continue to meet the statutory requirements needed to tame best value. They weren't let off having to continuously improve. It was just clear they had not been continuous improving to a significant amount. You tended to find that the earlier in the year that 114 was issued is generally an indication of the level of seriousness emerging. But not all 114 have led to monitoring or intervention. There are times when people have issued a 114, usually been able to get themselves out of the mess there in, usually by selling assets, something that intervention would have made them do anyway. But the 114 had led to monitoring intervention. There's a gap in 2020. In 2021 in 114 because the government provided some temporary additional funding to all local authorities in the UK to mitigate covid related impacts. The notwithstanding that the number of possible rocketed, not surprisingly what happened in B Birmingham. Well, in Birmingham, the long term background you've got to remember is that a real fall in LA spending power 31% due to the reductions in central government grants. There's no argument about that now. We probably would have tried arguing about the government would probably have tried arguing with you up to about three years ago. Now, the situation is such that no political party argues that local authorities are in quite a tragic state. Now, in addition to the losing spending power, they were also having increased demands, particularly on statutory services that got to provide. A lot of this was directly because of austerity, but was also indirectly because of cuts in non local authority services that were putting welfare impacts on transferring indirect impacts onto local authorities. More recently, we've had the significant rises in inflation. All of those things over the last ten years got Birmingham into the situation it's in now. The trigger was on 5 September 2023 when Section 114 notices as the council anticipated gap of 87 million pounds between income and expenditure for the current 23, 24 financial year. In addition to this gap, the council estimated that it would have to pay 650,760 million pounds in backdated equal play claims following a court judgment in 2012. Now the media therefore reported Birmingham as having gone bankrupt. However, as I said, UK's can't go bankrupt. A Section 114 notice simply indicates that the council's forecast income is insufficient to meet its forecast expenditure. That's a quote from the House of Commons. The House of Commons Library. Actually, what is not seen from there is what happened 2012-2023 is that Birmingham actually had a bill for the equal pay of about 10,000 million more. And it has paid that back in the time. But obviously it's weakened it's finances. And many things behind the trigger could have been anything, could have been many other things. It did not have to be, It just happened to be financial in this case and the birming is in such significant y as a result of the things that are at the top rather than the trigger. Section 144 report said that they were of the opinion he was of the opinion that there was a negative general fund position because of the cost of providing for equal pay. Needless to say, a lot of the media focused on the trigger rather than the long term complicated background. He told the Council they were now legally obligated to recognize that this will result in exceeding the financial resources available spend for the period exceeded the resources available to the Council. It has insufficient resources to meet the expenditure and is not currently able to agree a solution that will allow suitable funding or financing to be obtained for this liability, including borrowing from central government or anywhere else for that matter the purpose made clear to elected members whether they like it or not, needless to say they never like it, that immediate steps must be taken to mitigate the financial consequences of equal pay claims. That means agreeing a plan, providing a route to bring in the general fund back to positive. Those are the things that they tried to do immediately, particularly draw attention to the third one, engagement with central government. They in fact had to have a meeting of full council to issue the 114 notice. Say that we try and get out of it within 21 days. The date 5 September that I mentioned earlier is significant. Right? On 15 September, the government decided without recourse to 114 notice. Knowing that 114 notice was on its way, it appointed external commissioners to, sorry, let me get me right to intervene in Birmingham. They weren't going to accept monitoring and there they weren't going to try monitoring. It was two, but it was such a big case, Birmingham's biggest local authority in the UK. And they appointed six commissioners. Usually most local authorities, they will appoint three or four. They appointed six commissioners led by Max Caller who's currently the most experienced at dealing with these cases. He's former local authority chief executive of course, like all of the people they appoint to be the commissioners. And you have a spread of commissioners depending upon the size of the problem, the nature of the problem, and the size of the authority. This is the biggest number of commissioners that's ever been appointed. Max is the most serious senior, most experienced person, has more cases of anyone other than myself. Then in addition, they will be assisted by two political advisers to support Birmingham City Council's leaders as they take difficult decisions. What we had, the response from Birmingham was immediate and before the six commissioners, led by Max Call, they got wind of the idea that 114 would be possibly followed by commissioners and the leader of the council, Councilor Cotton, and the chief executive officer Deborah Cabinet, who had previously worked in Central Government as well as in many local authorities as part of the intervention team, were both relatively new to their positions. So as to the vowed, which was an interesting vowed, interesting word to choose to work constructively and collaboratively with the Commissioners. Now, in my view, the likely response required from BCC if recent cases are to be followed is that there will be a combination of sales of assets. I welcome any questions on each of these responses. There will be sales of assets. The level of counsel text, they can rise. That will be at the cap, whatever the maximum they're allowed to raise from local. There will be reductions in services or the quality of both discretionary and statutory services. There will probably be withdrawal of discretionary services and potential statutory services. There will be dismissal of politicians, of officials. And you can see the new chief exec and leader of the council wanted to make it clear that they were prepared to help if they could. And clearly, people new into the post and helping if they can is more likely to make the turnaround or the recovery of affirming city council that much more quickly. The last resort. And they make it plain in the recent interventions in financially failing authorities, that the last resort will be borrowing from government. You have to commit to all of the things above before they will let you lend money from the Public Public Works Loans Board, which is traditionally available to local authorities for big capital projects. Now it's going to be interested in Birmingham because Birmingham has already outsourced a lot of its services. So, the first thing that happened two days after the the government appointed commissioners was all the people who work with Birmingham in a collective partnership board. And you can see the numbers and the types of things that are covered by these boards. All of them at one time directly provided by Birmingham City Council, but now provided by third parties. Quickly, they quickly put out a joint statement saying that they would support whatever is the strategy to get Birmingham back on its feet. We can talk about the different authorities there, just four or five bits in bits of interest that might be interesting. Austerity has been applied to all local authorities in the UK, but there have been no section one notices in Scotland, Wales, or Northern Ireland. It's bad, but they haven't had to resort to 114 notices in Scotland, Wales, and Northern Ireland. Even for example, in Wales where they have more limited powers than in England for raising income. Both central government income and local government tax, council tax. But Wales is getting topped up. We've just done a 15 year financial analysis of local authority funding in Wales and what we're finding is that they're reaching the flood is rising in Wales. They've just asked this year for more powers to, via funding across all funding streams that are given to Wales specifically because they think they're going to have to bail out local authorities more than they are at the moment. We know that these things are on the way and there's going to be more of them. Secondly, coming back to the Chief Executive and the new leader. The first step in any improvement journey is to cease denying that you have a problem or that the problem is your fault. They'll engage constructively until people accept the problem and accept their role in the. Some people have got out of this problem. The government has insisted upon local government reorganization, bringing authorities together, usually in authorities, to create bigger authorities and take economies of scale from service provision. This is unlikely to be the case in Birmingham, is not going to be open to Birmingham. It's already the biggest local authority in the country. There's not many authorities willing to merge with an authority with the debts that Birmingham is likely to incur is currently incurring. In July 2023, the government announced the establishment of the Office for Local Government, which is a new local government performance body for England. But most of the things what it's going to do in the early days is collect data and collect performance data because they don't have the evidence base anymore that they abolished when they abolished the audit commission as a result of recent cases sector led improvement, which is the regime that follows, CPA and CA is likely to be toughened if not completely replaced. So, that leaves me up to date, Eric, and I'll take any questions you like. Thank you, Peter. Just a couple of clarifications before we open up since I know we both, we both speak English, but British English and American English can be. So when you use the word authority or local authority, that would be equivalent. Would it or would it not to like a city government in the United States? It would, yeah. Okay. The only other question I have in the United States, there's a lot of tension over these policies of intervention because of the notion of The disenfranchisement of local elected officials. Does that kind of thing occur in the UK? And is there any concerns like that or Well, when we did it first in CPA, what the interventions generally followed, things in the local authority area that made the people aware that the the the local authority was in trouble. So it had service reports, it had the media covered, used to cover the publication of the service reports, the corporate reports. I would guarantee that if you got a bad one, you were on the front page. As the chief executive and the leader, you were on the front page of your local newspaper and there would be pictures of that. By the time the government intervened, the general public was generally sick and tired of their local authority not delivering because there were 150, 150 local authorities in the first tranche of CPA and 13 were directly intervened in because they were poor. But that poor performance is so ingrained and so bad, you have to be really bad to get there. The team that looked into intervention, we generally were all at first people who came from local authorities. We came from relatively good local authorities. When we saw the first lot, we couldn't believe that any local authority could get into that state because we generally come from good local authorities. Yeah. We didn't get much pushback on that. And can I Yeah. Can we also just clarify? So chief executive, is that a appointed or some kind of like more like our city manager or is that an elected person or No, the chief executive is a politically neutral appointment. Right. Can't you can't be you can't be a member of the political party. You must be independent and he's the head of paid service, so he heads everything that you manage. The leader is an elected politician, and Birmingham would have 90 elected politicians elected to represent boards. And then they would appoint, they would appoint their leader. I'm deputy leaders, what have you. Okay. Thank you. So they're politicians? Yeah. Yeah. Okay. That's good to know. So, let's open up for questions. You feel free to mute yourself or if you want to type it in the chat box, that's fine, Peter. Eric, I'll jump in. Hi Peter. Thanks for presenting today. I appreciate lots of good information about what's going on overseas. I work for the Commonwealth of Massachusetts. I was curious you talked about this new formation of the Office of Local Government and that they're largely starting with their responsibilities around collecting performance data. I'm curious if they're just in a collection mode or if they're going to be actively grading local authorities based on that data and then presenting that at some point, that's the debate. Obviously, the current Secretary of State is very much along the lines of values. I should have this data and I'll use it to intervene basically the powers that the data that they have. Other than in education where there's still an inspectorate, and in social services where there's an inspectorate, unless there was a big problem there, you wouldn't be able, you wouldn't win a judicial review because Central government do not have the information that's valid enough to intervene. The current Secretary of State Michael Gove, is very much a hawk on these issues. And he would like to intervene not only for political purposes because it would be very popular. But they'll have to start with data collection because they haven't got the data. But we will see another general election, which is due in the next 18 months before Michael Gove gets the powers sets the office up and gets the data to be able to intervene. I know what he could do. I know what he could do to be short term interventions, but I'm not going to tell him. Peter Sac. Other questions? Yeah. Eric, if I could. Yeah. Hi Peter. My name is Andrew Sheaf. I'm from the state of Pennsylvania here. Fantastic presentation. Really appreciate it. Very interesting. I wanted to ask you mentioned the concept of continuous improvement a few times, how that was something that folks were striving towards. And keeping in mind, I was wondering if you could talk about that a little bit more. How it's conceived, your process for implementation and using that. Yeah, that's a great question. Really welcome it because that is the key to the best value regime that it changed from what I'm speaking like I'm still a manager in the past, used to do whatever it was that the politicians wanted and they're elected and you do what they want, whether or not it's good for the area or not, or bad for the area. If it's their say, we've got to do it, we've got to do it. Now, politicians can't get away with not improving their services, services to the public. We have had, we had had national performance indicators for services from 1983. You could see that in some places services were not getting better or financial returns were not getting better and what have you. The continuous improvement, I could bore you with how we measured it and how much it got better, but in financial terms, an example of how it got better. In financial terms, the Treasury in England knocks 2% of what it gives local authority every year because of technological improvements that they don't generate. But they are automatic, right? Traditionally 2% off your budget. Because things were happening that were helping you that we're going to help everybody when they introduced CPA, the amount that the Tech Treasury was able to knock off budgets collectively. In addition to that, 2% went from 2% in the first year to additional percent in the first year to 2.9 to 3.5 to 3.8 to 4.5% That is the level of that was gained over the normal during those years. For instance, in general terms, if you had a national indicator, you used to work on the basis that you're going to need 3% better next year to stay at the same level, and that's how it was done. You can't get away with saying, we say what's best for our citizens. You've got to prove that you're delivering it. If that's a bit of a long answer and but thanks for that question. That really useful. Thank you. Yes, Other questions? The other thing I'd like to say is they abolished the Audit Commission. I should have said it to the earlier question, but the Audit Commission kept all the data on performance indicators and what have you. And it produced national reports, but it also had the data for years going. And therefore, a big thing by the government has been, they've been saying it for 13 years, we're not going to recreate the Audit Commission. But the Audit Commission, one of the things it did, it was a repository for performance data. Off log, is a repository performance data, they're slowly recreating it or they will slowly recreate. They claim not to, but that's what they look, that's the direction it's going in. I guess I'm curious, waiting for other questions. Because a lot of the people in this group work for things like the State Auditor's office. Who is the body that sets like accounting and auditing standards? Is there some body that does that? Did the Audit Commission do that? Does somebody else do it now? Right. In the UK, the Supreme Audit Body is the National Audit Office. Right? And they basically, the National Audit Office was supportive of the establishment of the Audit Commission. The Audit Commission, or at that time, audited all local bodies. Whether it was the local authorities, all the different local authorities. Because the National Audit Office recognized that its job of keeping an eye on central government was big enough. You needed a specialist, but ultimately, both the Audit Commission and the National Audit Office. I might say that the National Audit Office thought the Audit Commission was more innovative, inventive than the National Audit Office itself. They admitted they were doing a better job of developing audit external audit than the national audit. But ultimately, both of them adhere to the international standards auditing standards. Now, because there's no audit commission, it's virtually the NAO who have to do it and set the standards. I think they want to get back to the other items on the agenda. Eric, do have a question that might be interesting for our group. Is it generally true the UK has the US, we have a three tiered system, essentially Federal, state, local. My sense is more of a two tier system. There's maybe there's regional government, but there's not a lot of power or authority at that level. Is that accurate? Or if you'd have asked me that question five years ago, I'd have said, we've got three Ts. But you've forgotten about the European Union. European Union works entirely on regions. We used to have regional government offices. We had to have regional programs, and we used to have a regional infrastructure. We would have had three. In fact, you could say we might have had four because the European Union itself. But we've left the European Union and reduced the number of tiers to two, effectively reduced the number of tier two. There's tiny parishes and town councils for small authorities, of which we've got 10,000 in England alone. But they have hardly any responsibility, footpaths and things like that. They got but realistically, you're right, we have to local government and central. Okay. Before we let them go, any other questions? Hi, Eric. It's Martin. Can you hear me? Yes, he Martin, how are you? Very well. Thank you. It's nice to see you and apologizes for joining late apologies to my colleague Peter. For everyone else, I work with Peter in Nottingham, but fortunately or unfortunately, I've got nine year old twins who are currently on school holidays and we were out for the day and got back. I did manage to hear, I think, half of the presentation. Pete, thank you for that. Eric, your question around audit was interesting because I'm not sure whether your colleagues may be able to add more to this, but I'm not sure whether you're aware in the states that local, the audit of local, local government in the United Kingdom is massively behind your question about who sets the standards. In some senses a little bit moot because some of the local authorities haven't published audited accounts for two years now. I think it is. Pete isn't, there's a huge, huge backlog and it really challenges, I think, the accountability and how externally that is managed. And for sure, Birmingham and others have got their problems, but not only the lack of the CPA, the comprehensive performance assessment regime potentially, but also this lack of this is traditional financial audit, it's nothing overly complicated, It's two years out of date, and there's no real external scrutiny taking place. And I think one of the things that Pete and I and the team are interested in going forward is to try and understand that a little bit better and what impact it might have had. But I think it might be just a point of interest because I'm not sure how that plays out or how that would be regarded with you guys in the States. Yeah, it's interesting, one of the challenges we have probably, and I'm sure people in this group would understand, we have 50 different systems essentially. And certainly in Michigan there are rules about you have to file an audit most places annually, some very small places bi annually, but And if you don't you get in trouble, you get nasty letters, you may have other consequences. I don't certainly not. Filing an auto would be considered a red flag generally. But it would differ by state, obviously to some extent. But yeah, that's interesting. I didn't know for sure how that worked, but we have the line. Please ask any questions. I know it's getting late in the UK, but we appreciate you guys coming on the local audit. Eric, the Government appointed the Tony Redmond to do it. They basically opposed at first almost every recommendation that he came up with, but in the end he had 43 recommendations. But in the end they were forced to accept every one of those recommendations, 43 recommendations. But as Martin says, they haven't implemented or don't propose to implement the outcome of them. They say they are going to implement the outcome of that independent review, but they haven't done it. They've had finished product for over two years and they haven't made any steps to implement it. And that's probably because it's all about control over local authorities. Basically, they think that such a thing as that would be adversely considered in the elections they punted in effect, they've punted the change in local government finance and local audit and financial arrangements into the long grass for after, after the general election. It's disgraceful that the unfiled audits just flooded in the last three years. Does anyone else have a question? I don't want to monopolize the time here. Maybe one final question. I'm just curious. Obviously, here in the United States, we had a huge infusion of federal money into local governments during covid something on the order of $150 billion. It certainly inflated local balance sheets to a large extent, provided stability temporarily. There are concerns there could be an aftermath of problems. I was curious. I know it's happened in some European countries, I wasn't sure about the UK. Did you have anything similar? The returns of the pandemic? Yeah, that's essentially Eric Y. 20.21 were low years for Section 114, but the study I put up, which is the Institute for Fiscal Studies, totally independent study, has just has done a study to say, did the money, the local authorities get cover the costs that they incurred during the pandemic? And the answer was they got a lot of money, but it didn't cover all the costs. There was no infusion of money to help them out. In fact, throughout the pandemic here, the government tried market solutions first. Every time it was when those market solutions failed that they started to give money back to the NHS, Public health in particular, and to local authorities. The first offer was to privatize whatever it was they wanted to do in the pandemic, and then they didn't give local authorities a fair amount to cover the additional costs that were incurred. Basically, the pandemic has added to the deterioration of local authorities. That's the Institute of Fiscal Studies that I quoted on one of the slides. And I think, Pete, correct me if I'm wrong here, but I think there was another impact. There were a lot of funds that weren't for local authorities, they were for the business sector, loans to help them through the pandemicic grants, maybe to offset rates, and taxes, and things like that. But I think they were administered through the local authorities. There was there was an administrative burden. There was often I've got a few friends who were senior finance people and they've bemoaned to me. We couldn't focus on our financial problems because I was having to use my people to administer these loans and things which we then didn't get the money for. There was a cash flow issue. There was a whole other range of problems underneath. I've not looked at them in detail, but there was some other elements to that rather than just the funding coming into local government. Interesting. Well, this has been great gentlemen. Thank you so much. We really appreciate you being here and enlightening us on the issues in the UK. I'm sure you have things to do, but we appreciate your time so much. Thank you. Thanks. Thanks for the invite, Eric. Thank you. Welcome. From there, we'll turn to on this theme of local intervention or state intervention, state monitoring. I'm curious if anyone has any updates, whether it be on your monitoring systems. State intervention policies, which I know has been on a, to an extent recently. If you have any specific communities that you might want to talk about, and I'll just open it up if anybody has anything, we can take a few minutes or 20 minutes. But I'm not sure if there's a lot to talk about here or not. Perhaps, Diane, I can get it started to give you a low update. In Louisiana, we had in our legislative session that ended in June, they passed a resolution for a task force to study. Started off as disillusions and absorptions, now it's changing to a more positive note of how to save these governments. I know it's not unique to Louisiana. A lot of that thing about the crumbling infrastructure and then the water systems not being able to sustain not having enough people, I just did a water rate study for 62 people and their rates increased by 163% And I asked about the demographics of this group, and they said it was a lot of elderly people on fixed incomes. I'm not even sure they will realize the increase. And I said, well, what's going to happen if they can't pay? And they said, well, it's the same thing. And I expected the answer to be, we'll cut off their water. But that doesn't really make for nice headlines to that group when the reason for the increase is that it was a long, long time coming. Also, a law had passed that went into effect this year where our Department of Health actually rates the water systems on seven factors. One of which is financial sustainability, water quality, and things like that, operations and maintenance. If you get a grade of A, D, R and F, then there are some financial constraints. Number one, you can only issue debt to improve your water system and for nothing else, like you build a dog park. And number two, you cannot transfer money out of your water system fund into say, the general fund because it goes both ways. Some transfer from general fund to subsidize the water and have excess water and they subsidize their general government. Those are two recent legislative changes in Louisiana. Well, thank you, Dan. Interesting. Yeah. Hi there. Adam Fuman from the State Controller's Office. We're pretty excited. We recently released our ten year anniversary of our physical stress monitoring system. The results of that overall, only 14 local governments or 1% of the entities scored were designated in some level of physical stress that was pretty much an all time low of the ten years we've been tracking that. Obviously, the influx of federal pandemic relief and local sales tax receipts are pretty strong, bolstered most municipalities in the state. However, we are noticing a problem. It seems to be getting worse each year that local governments are failing to file annual financial reports with our office as required or failing to file reports timely. You just want to make throw out to the group or people contact us in their states. What do they do in order to encourage filing or actions that they take in order to make sure filings are done timely? That would be great to hear. Yeah. Thanks, Adam. Yeah. Guess it's not only the UK. Definitely not. Okay. And I also Sharon, I want to recognize Sharon if it's okay, she is retiring, so we want to congratulate her. This will be her last meeting we've had. Very glad North Carolina has joined. And I certainly hope we'll continue to have someone from your office. But again, congratulations on your upcoming retirement. So go ahead, please. Thank you very much. And I do have two colleagues on the meeting today that probably both of them will continue with the group if that's okay. Absolutely. Be to Moscow. And Kendra Boyle, I wanted to say number one, all of the above. We continue to have a tremendous amount of struggle with units getting their reports done on time. Just to remind everybody, we require gap financial statements and audited statements from everybody. Although in Louisiana might have a bet with a water system for 64 people, but we have some that are just about that small. We have issues with water, sewer infrastructure, of course. Tremendous issues hiring qualified people even to find contract folks. They're getting booked up to the point that that's getting to be a problem. But we do, of course, have the ability to control who gets to issue debt. Here we did this last legislative session, got some of those thresholds reduced for units that are struggling. We have our unit assistance list, which is what we call our distress list. Unlike New York, we have 130 units on it. Right now. I would love to talk to New York to find out what they're doing to get theirs to 14. We had new parameters put in for those units where they have to come to the local government commission for borrowing approval for much lower thresholds than units that are not distressed, then we assume control of finances of really distressed local governments. And we currently have five. I think we had up to seven at one point. And we recently been able to let go of a couple of those we're actively managing for Sharon. And one thank you. We have one that's an inactive town, but they still have money in the bank. So we have the checkbook, but we don't have to do anything with it, and we're actively working to try to get those back. But two of them are. One of those rather has a suspended charter that the general assembly suspended. And then one of the other ones is the sanitary district that can't get anybody to run for the board. Interesting, those have been real challenges because we're used to doing financial things, you know, and we've been put in the situation of having to actually manage a sanitary district and manage a town with the failing sewer system, so it's real educational. I'm curious because I've been wondering about this problem of potentially having boards where there's not people to run them. Do you hire like a firm to do that for you? Do you actually do it yourselves? Like how do you actually manage that situation in the sanitary district, we have hired an operator that is managing the day to day. And it doesn't help. It's on the other side of the state too. It just wouldn't be practical for us to try to manage it. But we have to approve essentially all the decisions and we have to take those to the Commission for their approval since there is no board in the district that would include like, rates and things. Absolutely. The charter curious what does that mean or like what happens? Does that mean they're operating under some different set of rules or how does that work? We wish we knew they didn't really say what suspended charter meant, they just said the charter was suspended. And it's really becoming a challenge as we continue to see more growth in the rural parts of our state. It's finally reaching this one community in small bits, but they haven't had a request for new building permits in years now. All of a sudden we've got somebody that wants to put six homes in this community and there's no board and there's nobody to enforce zoning or anything like that. It's yeah. We're still trying to make our way on that one. Sharon question. If government doesn't file financials with you guys, are they automatically put on that list that you would have to approve their debt or they have to file first and then see evaluate first. Generally speaking, they cannot get any debt approved if they have not if they're not current on their. There are some exceptions, but generally speaking that's the rule. Sharon, we do have the new we actually last legislative session as well. A bill was enacted that allows our local government commission to direct the withholding of a portion of sales tax. Distributions to counties or municipalities that don't file within a year of fiscal year end. That's brand new for us. It just passed and we will be implementing that in the spring. That's going to be interesting to see how that rolls out and gets implemented. Interesting. Not a good word. Yeah, we like boring. Yeah, The general assembly is starting to take some action because it's getting to be such a serious problem when that thing happens. I'm just curious, do municipal association fight that thing? How easy is it to pass something like that in the legislature? It wasn't easy at all. We had to do a lot of the bill ended up not being quite as strong as what we had asked for. And the state auditor was also supporting it. But yeah, we worked a lot with our League of Municipalities and our County Commissioners Association to make sure that it was something that they could live with. And also the Commission has discretion as to who they enforce it on. It's not automatic, which made them feel better. And there was an appeals process. There is an appeal as well, so that those units that are facing that accent. Right. Two big things I guess like Sharon said are the may in the law and as opposed to shall and also the appeals process that once units are notified that they're potentially subject to that action, they have the ability to appeal. So that's sort of a little bit of a safeguard as well. You remind me the Commission is appointed or how is it constituted, ex officio members and five appointed by the Governor or three by the Governor, Debbie, and one each by the Speaker of the House and the President. Senate. Okay. The ex officio or the State Treasurer, State auditor, Secretary of state, and Secretary Revenue. Okay. Interesting. Thank you. Yeah, very interesting. Welcome again. We hope you will continue to participate. We really appreciate it. Thank you. Other states that want to chime in, I can jump in Spencer Clayton, New Jersey. In general, I can echo a lot of what has been said in terms of we just updated our fiscal stress index file about a month ago, and yet overall, we showed a 3.4% average decrease in our municipal fiscal stress, which makes sense because of pandemic funds. Also, in response to a question I was thrown up earlier about how to ensure that we have a high response rate for our annual financial statements. It's one of our required documents. So a municipality in New Jersey cannot adopt their budget without submitting their prior year annual financial statement. Now that being said, at the time that we updated our data, we still were missing four. But we have 564 municipalities in New Jersey. It's not terrible, it's just makes you more want to wonder why those four municipalities still haven't been able to file their budgets yet. How did they get by without their constituency being bothered? But yeah, that's it for us. Theoretically, essentially don't have legal authorization to spend money but have a budget, they Right. Yes, exactly. Now, but again, looking at the four that are missing, a few of them are always stragglers. Unofficially, there are people who are always from our division who have to track them down. I'm from the division of local government services, so we don't want to set our responsible for enforcing a lot of financial regulations in New Jersey. There been any other changes in your area In terms of the regulatory changes, things the legislature has changed or has it been pretty much the same otherwise or It's been pretty much the same. Okay. And what did you call it? The list you said? I'm sorry, Just you said the stress something list. Let's say just that. Yeah. We create a physical stress index that we update every year. And so we categorize municipalities by, it's usually a bunch of indicators that we pull from the annual financial statements. So yeah, but as far as the list, we have some that we have on the list but most distressed. But in general, it's just our financial stress index. Yeah. Got it. Thank you. You're welcome. Other states, Eric, I can give you an update from Indiana. Sure. I'm with the Distress It Appeal Board. Our focus is mostly on school corporations. And we have had two distressed school corporations in our history, and one was Muncy schools, which is already off the books. And the new news is that Gary Schools, who had a state takeover back in 2017, they've had a balanced budget for two years, is what the statute calls for, retaining local control. We've circled July 1 of 2024 on the calendar for them to. To go back to having their own school board. They've had a private consulting firm, basically, their emergency manager, since then. We're in a transition period. We've appointed a new board. They're in the process of selecting a new superintendent. I've got I probably have the number of days circled on my calendar somewhere, but we're taking down until then when the state will walk out the door and the operator will walk out the door, new school board and superintendent will take over. We're excited about that. Are school boards elected in Indiana? We have 290 districts. There are 12 which have some level of appointed officials. Most are elected this particular one because of what's happened in the recent past, we'll have an appointed board for the time being. But in the law it was written that that will be revisited in 2026. The whole governance structure for the time being. There's five appointees, a mix of state and local appointments. Okay, that's good to hear you. And if we do our job, we will never have a state takeover again for monitoring system and all the fiscal indicators that we have. We have a few that we watch a bit more closely than others and help them course correct if needed. But yeah, the whole ideas are no news is good news if we don't have any more state takeovers. I'm curious, what are you seeing? I know schools also got a lot of federal money. I mean, are you seeing kind of not a lot of distress at the moment. We sent a joint memo between our office and the Department of Ed last month, basically reminding folks that the end of 24, if they've built an Ester cliff, they need to be prepared for it. We said it was not a required exercise, but we strongly encouraged. Here's a three year forecast. We really think you should measure your Ester Cliff now. And it's going to be easier to identify what that number is and make those decisions now as opposed to later. It's a little difficult for us. We do have spending plans that they've given to Department of Education, but knowing how much of that is built into operational, where funds would have to be replacement of the source versus just one time. One time button. So we're actively, I mean, that'll probably be our focus for the next year, is trying to get a handle on who's ready and who's not at the end of those funds. Okay. All right. Well, thank you. Thank you. I think, Andrew, I saw you pop on. Did you want to go ahead and Yeah. Thanks Eric. Again, Andrew from Pennsylvania. We do have an early warning system, a financial monitoring system, and the numbers have never looked better than they do currently on that system. I think largely in part with the cheap credit and the Arpa funding, that's the situation we find ourselves in. Our monitoring fiscal distress. Not only are some of the places healthier with better balance sheets in the past, but in our program, they instituted a time frame when folks had to come out of our distressed municipalities program. This is the year when pretty much all of that is happening. At one point, we had maybe 18. By the end of the year, we'll have three left, a huge sea chain in our work in using that specific program for financial distress. We did have one new one come in this year. It was our first one in seven years that completely blind sided us. It didn't show up in our early warning system because we're pretty sure the audits that were filed through it weren't real. Borough of 1,300 people, manager of 25 years managed the borough. And the Water and Sewer Authority was let go in January and there's an investigation ongoing, but they have an extremely unbalanced budget, probably a 50% deficit next year, something we've never quite seen before. But we're currently with them in the middle of budget season trying to help fix that situation. Receivership is also mentioned. Here. We do have a municipality in receivership, it's also in bankruptcy. The City of Chester is outside of Philadelphia. It's actually our oldest city in Pennsylvania. About 30,000 people live there. It really came to a critical point with Covid, Their police pension was extremely underfunded. Had about a month of payments left in the pension system at the time that they went into receivership. Subsequently filed for bankruptcy. They are in the middle of the federal portion. They immediately asked for a mediator to come in in the federal bankruptcy process to help with the conversations and working towards a plan of adjustment. The receiver is now trying to find the number, the operating number necessary to provide adequate services in the city by the end of this year to continue those conversations with hopefully a plan of adjustment in quarter one of next year to continue moving through that process. They're on a state track as well. This ties in with a legislative or update in terms of state policies and laws with financial triage. Have you The receiver has requested from the court system here the ability to remove council members from their administrative positions in the city. This city is a commission form of government, which here means that each council member is in charge of a certain department. You get elected, You now run Public Works. It's been one of the challenges there. We're going to find out if our law allows the receiver to take those powers from elected officials through the court process at the Supreme Court, waiting for a decision here in the state of Pennsylvania. Then, just one more thing, with the auditing boroughs, township cities, we have 2560 local government units. We still have 500 plus audits outstanding last fiscal year. It's a real challenge for us. We had been working with some folks to try to get legislation passed that would allow the state to withhold funding if audits weren't in within a certain time period. But that legislation seems to not be moving forward, we're stuck there. The only other leverage we have to not give grants through our department, but not everybody wants grants through our department. There are other workarounds to get certain things approved sometimes. Yeah. Interesting. Well, we may have a new award for who has the most audit. It keeps getting higher and higher. And I have just a quick question just to confirm it. Only certain communities where an elected official becomes also takes on a city administrator position. It is. Sometime back in the '40s, there was a push for all third class cities be incorporated, what we call commission form of government. There are a few, there's an opportunity to change that in the '70s, and a lot of places went to a strong mayor or council manager or what have you. But if you remain with the commission form of government, and honestly those places are pretty much they're all at the top of the list of experiencing some financial and operational problems. Okay. And then just to clarify, if someone is in a commission form of government is elected and is now running Public Works, for example, is she like the Director of Public Works? She's on the payroll regardless of her background in running Public Works. Yeah. It has nothing to do with past experience. It's an open position. This council member, you know, well, actually they're they're appointed by the by the Mayor. He appoints the council members to to the department that they'll be running. Okay. Oh, okay. Thank you. All right. Now, thank you. Others want to share things about physical distress, regulatory changes. How many audits you have missing? That's always a popular one. Look chime in Marcellus Briscoe. I'm from the State of Colorado with our Department of Local Affairs, Division of Local Government, Our division, a branch for technical assistance for our local governments doing grants, budget, administrating things like that. One thing that we've noticed is a two pronged thing going on. One with our Office of the State auditor, who's in charge of the audit law and does the reviewing of the annual audit. They've been significantly backlogged. On reviewing local government audits in tandem with that, I would say the past, maybe year or maybe I should say strangely with that, like a year, year and a half, two years, local governments are the ones that are required to follow file audits. We have a few exceptions for certain local governments that don't have to file audited financial statements. They have like an exemption audit form that they fill out. But for the ones who do have to file audits, they're having an issue with retaining firms to do the audits for them. I know of several of this year who got dropped from the audit firm like right before the deadlines we do. So I'm if other states are seeing that happen and maybe we're all saying the same thing, people are filing their audit, I'm wondering if other states are experiencing that as well and how that plays into whatever consequences or no consequences in those kind of situations. Yeah, thank yourselves. Yeah, that's a good point. I think it also ties to labor shortages which are impacting the entire economy including audit firm. It's a good point. Others I know we have Tennessee, we have Michigan, we have a couple other states on here that maybe you want to speak? Sure. Is Jessica Thomas, Bureau of Local Government School Services here in Michigan. So we oversee all of the laws that govern local government for auditing financial basement audits, as well as the oversight. Some of the things that we saw. We've had some successes, I would say, regarding some of the transparency and reporting that we've had. For example, we had public back 22 that required the reporting pension systems and their funding status and our funding ratio. From that legislation, we were actually able to get the legislature to appropriate over $750,000,000 to the state to us to administer a grant program to boost up those funding ratios. We recognized that obviously, several years ago, but that was a key driver for some of the distress that we did see. We have some success, I would say in the transition, the transparency and reporting. I would say currently we are experiencing similar concerns as it relates to reporting on time. We are seeing that some of our rural communities are having more challenges with identifying qualified staff or CPAs to perform their financial statement audit. So we are seeing a decline in compliance in that space. We're real time establishing stop gaps or ways that we can offer up technical support in those spaces. But that being said, we don't have funding, we don't have a true funding stream, for lack of better words. To accommodate that, we really are focused on trying to identify a consistent funding stream to take care of some of the technical support that's needed to prop up some of these communities. Thank you, Jessica. Others think we have Connecticut, Tennessee. There's Sheila, you're on mute. Sorry. Very good to see you all. This is Sheila from Tennessee. And I have with me today Steve Osborne and Adam Cheetah from our division of local government finance. Similar issues that we see in Tennessee especially, we can see like a decline in the base of CPA firms out there available to do the audits for municipalities. We have 342 municipalities in Tennessee, and all of those have an audit from an outside CPA firm. All of our county governments are audited except for four audited by staff of the comptroller's office. But for municipalities and utilities, they all utilize CPA firms. So we're still we're okay. But we can sense that that certain CPA firms are you getting out of the business or retiring and we don't see that same amount Jing place. But I did want to share some recent legislative changes that we've made in Tennessee to encourage the more timely audits. One has to do with just in our office a couple of years ago we required every single city and county, really any local government that we Monitor for budget purposes that if their budget is not approved, then they cannot issue debt until they have an approved budget. If you don't have an audit, our analysts, they're not able to adequately review that budget, we will not approve the budget. There's like an impact there for not having an audit is that you will have an approved budget and you cannot issue debt until you have an approved budget. Another thing that we did in 2023, we have an oversight authority for our utilities for any water, sewer, or gas system that has not filed their audit for two consecutive years. They are referred by the Comptroller's Office to that utility board and they're going to fall under their oversight year before last in 2022, our audit division brought to our state legislators a bill that was passed. And I have it here, let me look at it so I get it right. But if the governing body, if they refused to have an audit, the comptroller can actually direct a CPA firm to do the audit at the cost of the local government. We also have some municipalities that they have a CPA firm, but they have they're just lax in getting those records ready for audit. Legislation was passed that awesome says that we can appoint a CPA to go in there and get your records ready for audit. That's it. It's just interesting. I know that Steve and Adam have been chatting a little bit between ourselves is like you just how different, like all states are experiencing similar things with the audits, but it's having a timely audit is so important and a lot of times once they are audited, we have found fraud financial distress. And if we can get ahold of that, we might feel like we're several steps ahead of the game. Yeah, that's interesting. Yeah, this is very interesting. Thank you, Sheila. And welcome, Steve. Adam, I have just a follow up question with that too, just to make sure it so if a local unit does not have an approved budget by your by your division, right? Can that unit you had said they can't issue debt, but can they spend money? They can spend money, yes. Our approval does not, but I I should share this. When we passed that legislation, we did include the ability for our office to waive that restriction in the case of an emergency when they have emergency financing. And so we have been able to give approval for certain issues. The ones that come to mind are utilities for public health and public safety. So we do have the authority to weigh that and they can finance. But there have been some we've said you just wait so that they do feel the consequence. Maybe it's a garbage truck or something that they can wait. Thank you. Thanks. Thanks. She yeah, I think we still have Connecticut, Florida, Virginia, maybe there's others that I'm not seeing. I think Ohio. I think I did see Ashley. Yes. Kimberly, sorry. We lost connectivity here and so I'm just getting back. So I missed a lot of the call out, so I apologize for that. As far as Connecticut is concerned, the labor force updates that you're looking for, we're experiencing definitely a shortfall. I want to say, the accounting in the financial area, not only locally within the state as well as within the industry. Our audit firms are also experiencing a definite need for finance people in those areas, our towns, a lot of turnover and trouble filling the vacancies, that has also led to some delays in our fiscal Year 22 audit reports. We require a state single audit, and within that, they're not able to complete their financial audits in a timely manner. We're coming up to over 18 months beyond the deadline. If we hit December, normally we haven't experienced this kind of volume, but we're up to about 20 reports that could not complete them within 12 months of a fiscal year end close. And we're currently right now, at 14 still to be completed, which is a high number and it's not just at the municipality level as well as with the audit firms. This is a struggle for us. One of the things that we're thinking about in the upcoming legislation is to consider whether we should increase the dollar level of our state single audit from 300,000 if you're receiving state aid, to possibly raising that level not as high as the federal level at 07:50 but possibly to maybe consideration of a $500,000 level. That would then change the need for the accounting side of life for the industry as well as those nonprofits that are receiving that aid and would not have to complete the state single audit. That's one of the things that we are taking into consideration in this upcoming year. Now, I haven't even shared that with my secretary, but I wanted to make sure at least see if anybody else or if you've already reported out on this type of issue. Yeah, it's interesting. I mean, definitely seems to be a common theme across the States. There's a lot of audits, a lot of labor force constraints tied to that. So yeah, I think it's definitely a common theme right now, even in the UK, actually, they're experiencing this, so it's not just the United States, but that's interesting. Yeah. If others want to chime in on this issue related to this, any other legislative changes, anything on monitoring or fiscal distress? I think we have a few states that haven't spoken yet. Eric. I'm happy to jump in. Yeah, like a lot of states, Massachusetts still continues to have a supply and demand problem with the labor. It's a growing issue to be smaller communities, part time roles. It's really evolving into well compensated full time positions in larger communities. And that's becoming a challenge. I just hopped over to our professional association that advertises job openings, and I counted something like 350 senior level positions that are currently open. That's across 351 communities. That just gives you a sense of the extent of the problem. Excuse me. One of the things that we piloted last year and has been renewed this year and we're excited about is that we launched a fellowship program where we connected with, I got some feedback here, 13 community colleges across Massachusetts where we paid 26 students between 2020 $5 an hour as a paid internship for a management training program that we provided through our agency. It was a four week training program. They had a series of courses that they went through where we brought in professionals from the field, speakers from professional associations, as well as folks from our agency itself. And then once they wrapped up that four week training program, they were then placed in a community for the months of July and August to provide work based learning program. Of those 26 students at this, 0.6 have been hired full time. Granted, this is plug in a hole in the dam, so to speak. But at least it's representative of trying to solve the problem in some way and bringing recognition and elevating how we're going to address this. Similarly to that, call it a quasi government partner that we have. The Mass Collins Center has run a similar, albeit much smaller program at the graduate school level that they're running parallel to this, and I know that they've had success with that. There's just some creative looking at how we can address some of this issue that we're having. But the reality is, is six hires out of those 350 is not going to solve the problem. There's some bigger need that we have out there to address this in terms of the regulations. No new advancements at this point in terms of Massachusetts. What we are going through, this administration has launched what they're calling a municipal modernization. Where they have a listening tour that's currently actively going on where there's a group made up of my deputy commissioner, the Lieutenant Governor. They've been crisscrossing different sections of the state and listening to public officials, professional associations, about what challenges are out there, what kind of technical changes there might need to be made to local law, state law regarding how to modernize primarily financial management. But more broadly other aspects too. We're waiting to hear what the results of that will be. But there's going to be the Colin Centers again at Mass is facilitating this. They're going to put together a catalog of what these proposed changes are. We'll then vet that and then make a proposal to our proposal that legislation to our legislature when they are fully baked. There could be some interesting suggestions that get put forward there, but more to come on that in the future. Other than that, one of the things that we're really starting to take advantage of as you know, we don't really have a formal monitoring system. It's more about just transparency in the data and letting communities access, you know, better idea of what financial challenges might be out there. We're starting to really utilize things like Tableau Info Gram to visualize some basic financial indicators that are out there, Debt reserves, et cetera. I'm actually got a presentation tomorrow to our Small Town Administrators Association where I'm going to talk about those tools that are available. We're really just starting to push into that realm of providing them more visual tools around where their financial distress might be. That's all I got. Yeah. Thank you. I know Zach put out a question about the distribution of audit responsibility between the state and the private firms. If you want to go in the chat and make an answer, that'd be great. Sounds like so far, we've got a lot of it has been outsourced to private firms. I know, especially with county governments, there does tend to be more state involvement, probably partly because of the legal nature of county government. But if you want to pop in there, that'd be great. Anyone else want to speak on the issues of giving an update? Regulatory changes, fiscal distress, late audits? Yes, from Utah, the State Auditor's Office in Utah. We don't have any real changes in Utah, no law changes or regulatory changes. We launched our Fiscal Distress Board and stuff to help entities monitors fiscal distress. We haven't gotten any real positive or negative feedback from that, but we have had some interventions with different governmental entities. We don't have a huge problem with late reports. There's always some late reports. But in Utah, entities have 180 days to submit their report after their year end, half a year to submit their audit report. If they don't, then we have a whole process where the state sales tax and property tax funds, they get those funds released as soon as as the reports are submitted. So we have a pretty big stick and people they may go on hold, but within a couple of months they will get their reports in because they want their money. We don't. Compliance is usually, it's just a timing issue. Maybe they'll go a couple of months late, but they will get them in. We have noticed in our monitoring of CPA firms that there are several firms that are getting out of the business of doing audits and we're specializing. I think a lot of that goes back to that 2018 yellowbook standard for independence, and we've made a big push for that. So there's some firms that are saying, hey, we're going to step more'just, preparing audits, drafting financial statements, and not doing audits. And then there are other firms that are specialized in doing those audits. But there is a vacuum there. It's a good time to be going to school, to be an accountant. We've seen some of the audit rates go up with those firms as well. We monitor that we contract with several of them. Audit fees are increasing, which is passed on to those local governments. But with that, it's a supply and demand. We think it's going to sort itself out here in another couple of years. But the ending audit prices are probably going to be five to $10,000 more than they were a couple of years ago really quickly. That's what we've seen. Yeah. Thanks. Anyone else? Make sure we get everyone that wants to speak. A couple of things as we get near the end here. One, we are working with on a new grant to fund in person meeting in the spring of 2024, probably in Chicago, which is a fairly central location for both sides of the country. Seemed to work well last time. We will keep you up to date on that. We may potentially do a virtual meeting before then, maybe February, but we'll let you know for sure if that makes sense or not. Just keep your eye up for that, but we are definitely planning for an in person meeting and the grant would help fund travel costs for folks. We'll get you more details as we know more about that. As I said, we will be sending out a survey about continuing education. If you get a chance to fill that out, that would be great. Another thing we have offered in the past to facilitate peer review, if anyone needs something in their state, looked at by a couple other people from other states to say, yeah, this looks good, here's some recommendations. We're certainly happy to help facilitate those interactions. If anyone needs that thing, our in person meeting will be crafting that agenda. I think labor issues, regulatory policies are certainly going to be at the top of the list. We're in a situation where it seems like universally local governments are in better shape. But the question becomes at some point that probably won't be true. The question now is how do we prepare to be ready for those situations and have the right policies, the right people to manage those successfully with as little hiccups as possible. We've all been through those down times, now we're in a post covid world where things are, the economy is stan. The big issue of course is we've seen interest rates sky rocket faster than we've probably seen since the '70s, early '80s. To be quite frank, it creates a lot of instability in terms of our understanding of where the economy might be going in the next 12 to 24 months. Because everything costs in terms of especially debt, all those interest payments are up and even the federal government is now paying over 600 billion a year in interest. It's hitting all over the place. Of course, there's some positives, Obviously you get a little more money on your savings anyway if there's anyone else that wants to speak. Otherwise we'll probably close it off here at about 03:00 Give you a little bit of time back. Appreciate all your time today and look forward to hearing from you everyone. Have a great holiday season and we will be in touch about 20:24 very soon. Thank you. Thank you all for everything. Yeah, thanks. Thanks everybody. Thank you.