Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

How many audits are enough?

with 4 comments

It is a commonplace notion that any public sector operation is necessarily inefficient. It is an idea that is constantly repeated by right wing pundits and politicians. It is also not true. Any more than every private sector business is efficient because it has to compete in the market place. Transit in Greater Vancouver has long been under this assault. Today the Globe and Mail reveals that the Board of Translink now agrees with the Mayors that another audit is needed, it is just not sure exactly what needs to be audited. I found this quotation to be especially worthy of note:

TransLink has already had two performance reviews done since 2008, one by KPMG that it initiated itself and which Mr. Fassbender said cost about $500,000, and another one ordered by the province through the comptroller-general’s office. In addition, there is another one under way as the province’s transportation commissioner assesses whether TransLink should be able to impose a 12.5.-per-cent fare increase.

Audits do not come cheap, and there has to be a point at which one doubts their value for money – if you take the results of the first two seriously (and Translink did - cutting “$60-million in spending after the KPMG review”).

The Mayors have been annoyed for a while now – quite rightly – first for being shut out of much of decision making by the creation of  the “professional” (unelected) Board, and secondly for having a new level of auditing imposed on them by the Province. As Gatean Royer used to point out when he was City Manager at Port Moody, municipalities have been very good at getting good value for money for the services they deliver. The Province, of course, has a much shakier record – which was one reason why steps were taken to move operations like BC Ferries away from political influences. The current state of BC Hydro is also one that shows how political considerations can play havoc with an enterprise’s bottom line. Initially, the Mayor’s said that the new municipal auditor ought to have oversight over Translink too (presumably forgetting the role of the comptroller general and the transit commissioner) but the province said that the new office would be too  busy.

Ms. Watts has targeted specific spending on items such as studying whether to build a gondola on Burnaby Mountain or offering key stakeholders in the region a donation of $100 to the charity of their choice for filling out surveys.

Except that the study showed that a gondola would actually be a good investment – as long as you ignore the arbitrary 25 year life imposed and use something more realistic like 30 years. Market research firms typically offer extremely small incentives for filling out surveys – especially on line, where often it is some nebulous “chance to win” something more attractive, also popular with charities.

Ms. Jackson has been quoted as saying TransLink spends money “like drunken sailors.”

With nothing added by the article to actually back up that claim.

Translink has not always made good spending decisions – the Golden Ears Bridge being one of the worst in recent years. But a lot of the bad decisions stem from the provincial government and its frankly biased promotion of P3s. The Canada Line decision making was driven by the Olympics – and the airport. The fare gates would not be going in if the Province and the feds had not put up a lot of the money. But there are also day to day operational decisions that everyone sees and have the knowledge and experience to recognize as wasteful.

#6 Banana Service

This is the terminus of a frequent service in downtown. The layover exceeds the service interval by a considerable margin – and, it could be argued, that is needed to make service reliable when buses have no priority in traffic and have to deal with congestion – in this case along Robson Street which has only one moving lane in each direction, severely hampered by turning movements and cars parking and uparking. But as Transport Action BC points out in its submission to the Transit Commissioner layovers “should not be used as a scheduling convenience or as a de facto method of providing Operator breaks to avoid the rigours of contractual negotiations…”

This is the point where an audit could actually go badly wrong. Auditors tend to be accountants – and they have a tendency to believe that their “usual principles” have universal application. There may well be some money to be saved by cutting the number of vehicles on a route – but if service becomes unreliable it starts losing patronage very quickly. Much of the decline in public transport use in my lifetime occurred as service was cut and reliance on private cars increased – and while that seemed to make sense at the time, the decline of the quality of life in urban areas, and impossibility of accommodating increased urban vehicle traffic through road building, meant those decisions had to be reversed.

It may actually not be possible to get enough transit priority on the street to cut service costs – especially downtown. It may actually not be very clever to re-open negotiations with the union if things are going to get heated again. The last transit strike lasted four months and achieved precisely  nothing – other than a token acknowledgement that Translink did have the right to contract out its services, it just did not dare use that right with the main bus services.

There is a reason why some services are not operated exclusively by the private sector. That can be simply stated as the need to recognize that there are worthwhile objectives that cannot be easily translated into financial considerations. Or where financial considerations are contrary to the general well being. Education and health are the most obvious examples – though the private sector keeps pushing hard for a bigger share, it has generally been resisted, not least on the evidence of its own performance. I would say that the removal of public sector provision has been disastrous in Canadian housing – and the way that private sector prisons work in the United States is appalling.  Transit used to be a business – but businesses generally gave up when they could not compete with the private car even when they had considerable protection from regulation. The privatization of public transport in Britain is an object lesson in untended consequences – and is being slowly but surely rolled back. The key to privatization being, of course, the very narrow focus on balance sheets – and the loss of a range of social and environmental benefits.

I am going to leave the last word to Gordon Price: he was talking about fare evasion but the point is the same

It’s just another indicator of how the relentless discrediting of government results in worse policy decisions when politicians have no choice but to respond to the individual stories that start with an assumption of incompetence – and don’t want facts or trade-offs to get in the way.

Written by Stephen Rees

February 13, 2012 at 11:10 am

4 Responses

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  2. My experience with audits is that if all the money spent during a year can be justified by all sorts of documents (invoices for goods and services purchased, copies of staff pay stubs– plus random staff checks to prove that staff are actual working in the firm and not just names on paper–etc. ) the auditors are satisfied.
    To make an audit proving that the money was spent on something (supplies, repairs, machines etc. ) that should not have been bought, or done etc. is much more difficult so it would be hard to do and likely costly.

    At work a laundry audit by outside auditors found out, after a couple of weeks of auditing that our laundry was not efficient as they only washed/ dried/ folded X hundred pounds per person per shift, much less than facilities A, B and C.

    I then did my own totally different audit, based on how many pounds of soiled laundry came down each day versus how many pounds of clean laundry went up to the residential floors, the SAME DAY.
    The average was just over 90%. We did some tweaking with the staffing and were able to send back 100% of what came down.
    The number of pounds of laundry treated by other facilities AND our own was depending on the needs of the medical staff and residents.
    Comparing different facilities was asinine.

    I keep reading in our free local papers in Coquitlam that TransLink should take clues from Tokyo and other big major towns…This is absolutely ridiculous.
    The greater Tokyo has more inhabitants than the whole of Canada! The greater Osaka region has over 20 million people! the regions centering on Paris and London each have about 12 million people! They— along with smaller Euro towns the size of Metro Vancouver—all have a level of steady financing than TransLink can only dream off..
    But then all these other cities have municipal, regional and national governments that do take transit very seriously.

    Red frog

    February 14, 2012 at 11:41 pm

  3. I’ve been wondering abut something for a long time and this is a good post to ask,I think. I’ve visited some countries where transit is privately run. It seems to work well. I’m not sure how routes are divided but it looks as if some routes have individual operators, larger companies, or co-ops. Late night service is tough, but in the day it’s always easy to get a bus in the city. You just walk out of the airport, go to a bus stop, and never look back.

    How impossible would that be for here, and why? Any insights?

    Rob

    February 22, 2012 at 5:00 pm

  4. You criticise the province for its promotion of P3s. P3s are something that I’ve spent some time thinking about since they’re such a hot-button issue in BC. Certainly, some public-private partnerships have the potential to raise costs over what could have been achieved by government alone (we think of government’s decision to eschew a P3 for the Port Mann bridge, for instance). However, P3s do avoid boondoggles such as the Olympic Village or the Vancouver Convention Centre. I find it difficult to decide what to conclude – whether to look at the avoidance of worst-case scenarios, or the potential inefficiency if the government project we well-run.

    slantendicular

    February 26, 2012 at 8:06 pm


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