For State Auditor Doug Hoffer, a 2022 midsummer Vermont Supreme Court decision was an existential threat to his office’s ability to fulfill its watchdog role. So he moved quickly to work with state lawmakers on a legislative solution.
In late June, the state’s highest court ruled that Hoffer’s office had no legal basis to force the accountable care organization OneCare Vermont to turn over its payroll records. But the repercussions went much further than that case.
“The state of Vermont, like every other state in the country, does a huge amount of business on behalf of taxpayers through private contractors, hundreds of millions of dollars a year,” Hoffer said in an interview.
Hoffer raised the alarm with state legislators, which led to the quick filing last week of H.24. One of the first proposals of the new legislative biennium, the bill would explicitly give the state auditor the right to examine the accounting records of private contractors doing business with the state. It was read into the record for the first time on Friday and referred to the House Committee on Government Operations and Military Affairs.
“A lot of people thought (the decision) was only related to OneCare,” Hoffer said. “It’s certainly much broader than that, which is why I was so anxious to start the conversation earlier in the winter and not wait.”
The Agency of Administration provides public access to data on state agency contracts. In fiscal year 2021, new contracts for services totaled over $1 billion.
“We really believe in responsible monitoring of expenses submitted by contractors,” said Rep. Larry Labor, R-Morgan, who co-sponsored the bill along with Rep. Woodman Page, R-Newport. “It doesn’t matter if it’s health care or building and grounds.”
The bill would require the secretary of administration to add terms in all state contracts that authorize the state auditor “to examine the records, accounts, books, papers, reports and returns in all formats of any contractor that provides services to the State.” It adds the same language to the state law that lists the state auditor’s duties, specifying that “the examination … shall be limited to those that are relevant to the contract with the state.”
Chair Mike McCarthy, D-St. Albans, said the House government operations committee is not likely to take up the bill immediately. His committee was starting a sprint this week to reauthorize remote public meetings and provide municipalities guidance around the requirements for Town Meeting, which is set for early March.
But McCarthy expected to spend time soon studying what he thought might raise jurisdictional questions. “It will take a lot of testimony to get a lot of people, including me, up to speed,” he said.
The case that prompted the bill started out as a request from Hoffer’s office to OneCare to examine its salary and benefits records, after the organization reported a large jump in payroll expenses — from $8.7 million to $11.8 million — from fiscal years 2019 to 2020. OneCare, which contracts with the Department of Vermont Health Access to provide health care to Medicaid recipients, explained the increase, but would not release the records.
Hoffer’s office filed a breach of contract case. The state Supreme Court upheld a lower court decision that found the state auditor was not specifically listed as “an authorized representative of the state” in the contract, nor was the authority to investigate contractors given to the auditor in statute.
“Nothing in these provisions authorizes the Auditor to audit private nongovernmental entities,” the Supreme Court said in its decision. Both of the specific statutory clauses referred to are amended in the new bill.
Prior to the OneCare case, Hoffer had successfully requested contractors’ records multiple times without any resistance. Records related to performance and project budgets are not always entirely contained within the files of the contracting agency, he said.
More broadly, it is sometimes difficult for a state agency with a longstanding and ongoing relationship with a contractor to ask tough questions, Hoffer said. “There is always room for a truly independent and objective third party to review performance,” he said.