Business and Efficient Government (Greg Kaza Commentary)

Consultants are playing a greater role in the operation of Arkansas state government. The 10 largest state agencies relying on contract vendors, including consultants, spent $2 billion last year, according to the state site Transparency.Arkansas.gov.

Other taxpayer-funded consultants have also made news. Earlier this year, the state Tax Reform & Relief Legislative Task Force ended a contract with a Pennsylvania consulting firm hired in 2017 to examine Arkansas’ tax structure. Legislators also hired a California firm last year to review procurement laws. The total authorized expenditure of tax dollars for both contracts was up to $649,500.

Privately funded consultants have also been active assisting state government, though their role is overlooked. Private businesses routinely rely on consultants for their expertise, so why shouldn’t the state of Arkansas if it saves tax dollars?

One example is the international consulting firm PricewaterhouseCoopers LLP, retained by our nonprofit in 2016 to help the state Department of Finance & Administration as part of the Efficiency Project announced in late 2015 by Gov. Asa Hutchinson. The PwC team was led by accountant David M. Walker, comptroller general of the United States (1998-2008), and reported its findings to Hutchinson in mid-2016.

PwC’s work, funded by private foundations, has helped DFA reduce its outstanding receivables by $22.1 million, according to a December 2017 report. These savings are likely to increase as “expected collectable Accounts Receivables” — pegged at about $300 million in July testimony to the Transformation Advisory Board — are reduced by an ongoing DFA pilot program.

That’s a far cry from early 2015 when a DFA official advised reducing receivables was akin to “getting blood out of a turnip.” Our nonprofit, using the state Freedom of Information Act, was able to determine the state had $735 million in total receivables.

Other receivable categories include “not currently ready for collection activities,” “under protest,” “uncollectable” and “resulting from estimated assessments issued because taxpayers failed to file tax return,” according to PwC’s “Efficiency Review of Arkansas State Government.”

DFA, to its credit, has made a good faith effort to embrace PwC’s nine recommendations:

1. Develop a statewide strategic framework to align budgets and operations;
2. Develop a centralized risk management function to appropriately identify and manage risk, especially procurement risk;
3. Re-evaluate organizational alignment and functions;
4. Transform the talent of the state through a human resources strategic plan;
5. Modernize the state’s compensation and benefits programs;
6. Conduct deep process analysis to optimize accounting and tax assessment/collection processes necessary to execute the state’s mission;
7. Automate processes to allow the state and customers to use self-service options;
8. Enhance information systems governance and develop a centralized shared services and infrastructure architecture plan; and
9. Enhance innovation and collaboration, focusing on the use of digital technology to increase efficiency.

When government is more efficient, savings can be applied to fiscal goals such as making Arkansas’ tax climate more competitive. That’s an issue of interest to business.

Greg Kaza is executive director of the Arkansas Policy Foundation. Email him at Kaza@ArkansasPolicyFoundation.org.