By Tim Berry, Angie Steeno, and Craig Lotz
In a world where communities have resorted to banning future growth (subscription required), it’s clear that bigger isn’t always better when it comes to Economic Development. Growth for its own sake leaves constituents disillusioned and skeptical. Sure, a community may have added jobs, but can the folks with those jobs afford to pay their bills? The newest park may look nice on the website, but do community members use it? New homes and business are springing up all over town, but can infrastructure support increased demand?
Public dollars spent on economic development necessitate leaders not only consider growth for its own sake, but Smart Growth. Smart Growth is a paradigm by which community leaders evaluate what the future of their communities could look like, and how public resources can be leveraged to achieve that goal. It compels leaders to say “no” to investments that aren’t right for their communities so that they can say “yes” to the right opportunities.
Though much of Smart Growth requires the foresight and commitment of elected officials and government employees, Internal Audit can play a key role in helping officials build and maintain a cohesive strategy of Smart Growth. Smart Growth will be as diverse as the communities that employ it, but should share a common foundation including the following:
- It’s strategic. Smart Growth is a derivative of the broader vision of a community. Does a community have a strategic plan? If yes, it is imperative that economic development initiatives are integrated into and serve the short and long-term goals identified in that plan. Goals are the key driver to Smart Growth. Defining development goals builds the criteria by which prospects and opportunities are evaluated. When developing goals, it suggests that officials consider things like quality of place, push factors and pull factors, target wages, and unemployment. Internal auditors can partner with officials to think about the measurability of goals, and how those goals might be evaluated in the future. Additionally, internal auditors can advocate for the community to adopt formal plans and policies to govern economic development decisions.
- It’s sustainable. Most economic development opportunities transcend generations, let alone election cycles; a commitment to sustainability guides leaders to question the long-term effects of decision making. Smart Growth recognizes that change in community seldom comes without externalities, both good and bad. It doesn’t allow community leaders to wait till after economic decisions are made to think about how changes might affect the staples of local government like road conditions, transportation, and public utilities.
- It considers context. Smart Growth does not separate growth opportunities from a community’s context. It considers that economic development initiatives don’t exist in a vacuum, and that what worked for one community may not work in another. Each community has characteristics that hinder or limit its quality of place, and each also has assets that make that community unique. Smart Growth considers both when seeking to move a community forward.
- It balances costs and benefits. There’s no such thing as a free lunch, and economic development comes at a cost. Smart Growth necessitates that both benefits and costs are defined and measurable to determine if economic development leaders made prudent decisions in the past, and to make every effort to make wise decisions for the future. This is a key area where Internal Audit can assist officials by establishing criteria for how benefits and costs are assessed and measured. When considering benefits and costs, be mindful of the beneficiaries and bearers of them. Growth that results in winners and losers leaves constituents cynical and erodes trust in economic development activity.
- It’s transparent. All economic development initiatives are an extension of public dollars, and therefore demand the utmost transparency and accountability. Does the state require a community to report on economic development? Internal Audit can ensure that communities are compliant and even go beyond the requirements to make interpreting economic development goals and results as easy as possible for constituents. Smart Growth clearly articulates the value created from successful endeavors and is just as transparent concerning the costs of opportunities gone wrong.
Chances are government officials or management may have considered some or even all the above considerations for Smart Growth. Internal Auditors can play a crucial role in transforming those thoughts into defined plans and processes. To get started, ask the following questions to kick start the conversation.
- Has our organization adopted a strategic plan?
- What policies govern economic development? How do those policies integrate into our strategic plan?
- How do we determine which economic development opportunities to pursue?
- What measurements do we use to determine if economic development was a win for our community?
- What was our Community’s worst economic development experience? How could that have gone differently?
- Do we keep the public informed on economic development initiatives?
Answers to these questions are just the beginning. Smart Growth does not end with simple answers or even the defined strategy or written plan. Smart Growth also includes ongoing monitoring, testing, and reporting. It includes long-term accountability. Internal auditors are critical to this process. As internal auditors, you should:
- Develop a plan to test/monitor the success of the strategy.
- Determine the appropriate audit cycle for testing the plan (e.g. quarterly, annually, etc.).
- Test for compliance with the written strategic plan and related policies/procedures to support management’s vision.
- Determine how success is measured for the program (wages, jobs, the impacts of land use plans and transportation, etc.).
- Determine if performance metrics exist.
- If not, what recommendations can we suggest?
- If so, analyze metrics for adequacy and determine if the metrics will result in Smart Growth. Test performance of the plan against metrics.
- Determine if all costs have been properly identified and budgeted including the cost of public resources (infrastructure costs, tax abatements, etc.).
Smart Growth is key to thriving communities. It says” no” to decisions that are wrong for a community to say “yes” to opportunities that propel a community forward. Internal auditors can partner with management and government officials to define what Smart Growth looks like in their community. Internal auditors will be key in testing and monitoring results and providing the answer to the question of, “Is it Smart Growth?”
About the Authors
Tim Berry has served for over 4 years as a Managing Director of Crowe LLP’s Public Sector Consulting practice. He is a registered Municipal Advisory Principal with oversight responsibility of local government municipal advisory activities. Previously, Mr. Berry was elected to two terms each as Indiana State Auditor, State Treasurer, and Allen County Treasurer. Mr. Berry holds an MBA from Indiana University and a Bachelor of Science in Business Administration from Bowling Green State University. Mr. Berry was awarded the Jesse Unruh Most Outstanding State Treasurer along with Outstanding Indiana County Treasurer Awards.
Angie Steeno is a Senior Manager in Crowe LLP’s Public Sector Consulting practice, and has consulted a variety of public sector organizations for over 18 years. She specializes in financial and municipal advisory for state and local governments. Angie is a registered Municipal Advisor and specializes in short and long-term financial planning, bond financing, economic development, budgeting, and rate and fee analysis. Angie is responsible for structuring highly complex deals that have made a significant, positive impact on many communities. Ms. Steeno holds a Master of Public Affairs concentrating in Policy Analysis and Public Finance from Indiana University Bloomington and a Bachelor of Arts in Political Science and History from the University of Indianapolis. Ms. Steeno is a member of the Local Government Fiscal Policy Council of the Indy Chamber, Board Member and current Vice-President of the Indiana Chapter of Women in Public Finance, and member of the Government Finance Officers Association (GFOA).
Craig Lotz is a Manager in Crowe LLP’s Public Sector Consulting practice and has consulted a variety of public sector organizations for the past 4 years. Craig is a registered Municipal Advisor and Certified Public Accountant and specializes in bond financing and rate and fee analysis. Mr. Lotz holds a Bachelor of Arts in Accounting and Business-Information Systems from Anderson University.