Who Checks How Public Money Is Spent in California | John Moorlach & Andrew Hamilton

When the state auditor does a report, does anything happen to it? No. Even if you're busted, no one cares, no one steps in. In California, we are spending billions of dollars on public projects. And in some cases, such as the bullet train project, people are wondering whether the money is getting wasted. Recently, there were allegedly reports of misallocations of funds to luxury travel for consultants. And at the same time, there were contracts that were signed. At a certain rate, but the actual rate was tenfold more. A lot of cities just don't seem to make financial reporting a priority. Today we sit down with John Morlock, who's a former California State Senator. We also sit down with Andrew Hamilton, who's a controller auditor of Orange County. And he has also served on multiple water agencies in cities as a financial leader. How does an agency not have a contract to be able to make payment for? That's a red flag. John, it's great to have you back. Welcome back. Thank you, Simak. Always good to be with you. We want to talk to you about accountability in this state, especially now with the high-speed rail. This is a project that a lot of Californians were not super happy about, if I use the right words. It's kind of gone outside of the budget realms. When it was proposed, it was $30 billion. Supposedly, now it's $150, $140 billion. The numbers are getting so big, it's hard to track what's happening with it. And recently, there's allegations that there's been big-time mismanagement in the project. And with the level of discroutiny a project like this has because of the frustration of the public, what do you think is happening there? How do you think that can happen? Well, CMAC high-speed rail never penciled out from the get-go. You are never going to be able to build this high-speed rail and have a ticket. That would pay for the normal costs and then the debt service. And it came out, you know, originally with a ballot measure for a bond, and I think it was about $8 billion to start. And then it just kept going. And we kind of thought once it was finished, they would have to price the ticket at such a level that Southwest Airlines could go to Orange County residents and say, hey, we'll fly you to San Francisco a whole lot less than that train. And you'd be using the train as a novelty kind of a thing. But it just kept going and going. You had to do eminent domain. You had to take farmland from families that had owned it for generations. I mean, it was emotionally charged. And then it just kept going. When I was in the state senate, Governor Jerry Brown gave his final state of the state. And he sort of made a joke about it. He said, well... The high-speed rail went over budget this year by $2.9 billion. And he kind of joked about it, like, yeah, just kind of budget dust. But in Florida, they built a high-speed rail called Brightline, and they built the whole thing for $2.9 billion. It's done, and it's moving and working. Except if you look at Brightline, Florida, because of the regular operational costs, it's having a difficult time. Even when they built it in budget. So we have a new governor, Governor Newsom, in his first state of the state address. He says, he mentions high speed rail and he makes a crack about it. Like, let's be real, he says. And I thought, oh, good. We've got a governor who's going to be serious about this project. No, Gavin Newsom kept funding it year after year after year. So you actually have to drive up. The Central Valley past the grapevine. And you need to look at some of these structures, just these big giant cement structures that are, maybe someday we'll have rail on it. But it's like, what a sad, awkward thing to see in the middle of a beautiful agricultural zone. So yeah, people have a right to be concerned. We're looking right now at a private high-speed rail from the LA Orange County area to Las Vegas. And since they're watching California and they're watching Florida, I think investors are getting a little nervous about whether that's even a viable transportation mode. Now, recently, they come under some scrutiny, and it seems like the consultants were expensing upgrades for planes. They were also, they got some contracts with third parties. Some of them, they were supposed to charge $35 an hour, and then they end up billing $400 plus. How do you think that can happen in a project that's under so much scrutiny? That's something questionable that Californians may want to know. How is that possible? In California, we have a state auditor. It's a small department. In fact, when I was in the Senate, I tried to do a bill to give them more staffing. you know so you got a small crew of auditors and they look at various You know, things, but they can't do everything every year. So you may not get an audit, you know, as a department for five, six years. I can still remember being pulled off the Senate floor because the state auditor had found that one of the Caltrans employees had golfed 100 plus days during the year. And he had two supervisors, and somehow they were both signing off that he'd worked. And so I was asked, how did I, you know, how, what's your reaction, Senator Morlock? And I said, well, there's really nothing for them to do anyway, so why not golf? Because Caltrans is such an overly staffed, inefficient department. And so you can kind of see where the light rail would have the same issues. It's a simple project, but if no one's really glaring. Seriously? Then why worry about what you spend? Why not go to a nicer hotel? Why not get a nicer meal? Why not get a bottle of wine? So it's sort of a mentality that's in government. And it's wrong, but when the state auditor does a report, does anything happen to it? No. Even if you're busted, it's just news for a few months and then it's over. No one cares. No one steps in. I try to do a bill because the governor is so busy, but the governor is supposed to be the CEO. Of the of the state. So I did a bill and said, why don't we have a COO, a chief operating officer, you know, someone that can really monitor each of these departments and make sure that if one is overstaffed, you can move people over to one that's understaffed, as opposed to like Caltrans having 500 employees just sit around at Starbucks all day because there's no work to do. I mean, he said, you know, why don't we. Put them somewhere else. But our state doesn't do that. It's inefficient, it's sad, but when you've got Silicon Valley and you've got all this revenue coming in, you can be sloppy, right? In terms of audits and financial accountability, you're doing rankings. You're ranking different counties and cities, and it's a lot of work, right? You've been doing this project. Yeah, we've got 483 cities, so we've broken it up into nine regions. And so you find out a couple of sad things. One is that a lot of cities just don't seem to make financial reporting a priority. We even have right now four states that have not issued their annual comprehensive financial report for 2025. And then you wonder, well, how do they put together an annual budget if they don't have... A balance sheet and an income statement from the prior year to kind of compare to. So it's a sad testimony. If you're a publicly traded corporation on the New York Stock Exchange, if you don't get your financial audits and posted by a certain date, I mean, there's just severe penalties. It's an indication that. Maybe you're running out of money or you're, you know, there's something is wrong. You're incompetent or there's, you know, all you got to do is have the general ledger ready to go, get the auditors to review it. And the second problem has been that, uh, there, the, the financial statements are not correct. It's, it's amazing to me how many, uh, school districts, for instance, that just prepare and publish incorrect. Audit reports. And you can see it by just reviewing the details. And so the Government Accounting Standards Board can fix the biggest issue, and that is, what is the actual amount for net investment in capital assets? So they should require disclosure. Because if one number on your balance sheet is wrong, then your bottom line is going to be wrong. And if your bottom line is going to be wrong, then my rankings aren't going to be as precise or accurate as they should be. So I've already submitted something to the Government Accounting Standards Board to say, hey, think about this, and I'm waiting for them to get back to me. Now, how do they pass the audits if they have mistakes? How do they do it? Well, I want to be real careful here because I am a certified public accountant by profession. That's how I started my career. I was a partner in a CPA firm. I did audits, and you have to follow all the prescribed pronouncements. The sad story, CMAC, is that residents don't read the financial reports of their school districts, of their cities. That's why we do them. We say, okay, here's your ranking. Costa Mesa, you're in 33rd place out of 34 cities. No wonder you have a tax increase on your ballot. No wonder City of Orange, which is, you know, maybe 30th place. No wonder they're always trying to get a sales tax measure on the ballot. It tells you, it kind of tells you your city is having trouble and that you as a resident need to pay closer attention to who you elect because you need some people that understand math. And then even for school districts, you need business officers that understand accounting. They should be able to spot certain things and say, hey, we can't approve that. It happened to me when I was supervisor. My accounting firm, a large, reputable firm here in California, made a mistake on my annual comprehensive financial report. I was on the audit committee, and I confronted the partner in a meeting of our audit committee. Well, he says, The report is a report of management. We audit it, but we don't check all that kind of stuff. It's your fault because your management prepared it wrong. I thought, oh, isn't that a sweet response? Now, in terms of bringing trust back to the public's accounting, there are a lot of good people in the state that are working in these agencies, and this whole high-speed rail authority, the scrutiny came It came because insiders went to the... to the Inspector General's office and ask for help. How can we bring the trust back? Yeah, you know, I'll give you a little different answer, but a lot of it is based on motives. You know, why are we doing certain things that government shouldn't really be doing? Why is government doing high-speed rail? If it were viable and it were profitable, shouldn't the private sector? A firm or a conglomerate of several firms would be offering to do this, saying, hey, we've done the numbers and we've got investors lined up out the door to build a high-speed rail because it's going to generate. And why the CEO resigned? It's really spit. It's nickel penny stuff when we're talking billions of dollars. I don't know how you rebuild the trust, especially when you're doing things that you should have never been doing. Here in Orange County, I was on the Orange County Transportation Authority Board and they approved a trolley in Santa Ana to Anaheim. I said, Trolley. That's 19th century technology. We need buses. If we ever have an emergency and we need to get people out of the center of Santa Ana, I was only one of two votes opposed to a trolley. It was like, what is everybody thinking? This is not the space we should be in. Oh, but we're getting federal money. But yet it's gone over budget, and it's still not completed. And I was on that board, what, eight, nine years ago. How do you rebuild trust? You know, stick to your knitting. Do what you're supposed to do. Don't overreach and do these, you know, glorious somewhat projects that, you know, at the end of the day, you're already behind the times. It's a great question when it comes to transportation, you know, how to regain trust. That's, you know, I don't know if I have the right answer other than stop it. Get out of this. This is not your field of expertise. Now we go to Andrew Hamilton, who's the controller auditor of Orange County, to find out what kind of checks and balances are there and what his role entails to for local governments. We want to talk to you about public trust. In taxpayer funds, you know, one of the things that has happened recently in California, this is probably something that has built up over decades. But last year, there was a survey of Californians. 91% think that some of their tax money is wasted. And about half of them think that a lot of it, there's a lot of waste. And people work very hard to earn the income and cost of living is very high. You're in a position that you can have some influence over how the public money is spent. You're a county auditor and controller for the County of Orange. In some counties, you guys are elected. In some counties, you're appointed. Can you tell us your thoughts about this? I think it's absolutely true, right? There's so many examples of this. I remember growing up, it was like during the Reagan era, right? And there were all these contracts. There was like a $7,500 coffee machine, you know, a $400 hammer. There were all these examples of just excessive spending. So I'd rather just validate those feelings, right? It's true. How are some checks and balances in the county or other offices in the state? Well, I think it kind of starts with a lot of people have experience with the IRS, right? They've been audited or they've heard about like a shoebox and putting your receipts. So it kind of starts with receipts, right? Like, do you have the receipt? So making sure that you've got some kind of documentation, right? Right. And. When government spends money, we have to, I feel, go above and beyond what's just like the bare minimum, what's required. So it's important for us to have similar checks and balances. Like, for example, we can lock up blank checks at night, right? Making sure no one has access to it. We have access controls in our building, right? So that people just can't come in and... Just wander around. So in terms of checks and balances, how much of checks and balances are there? So let's say somebody contracts with the county or the state. And then from there, how do we ensure that we're getting what's promised and then the payments that come after? How does the process work now? So I think a great example is for publicly traded companies, anyone who has debt or if they have stock, right, that there was so much fraud, maybe even mistakes, any kind of like misstatement in the financials, right, that the Securities and Exchange Commission, right, was created in the 1930s. In the 2000s, SOX, the Sarbanes-Oxley, Enron, there were all sorts of frauds that occurred. And so SOX is like this, you've got to document things, you've got to test it, you've got to do it quarterly. Now government doesn't have that requirement. So if you're for a public company, a company that's public is a non-governmental organization, you have to document everything. And there's regulations on that. But for public entities like counties and government, you don't have those requirements? We don't have those requirements. What I'm doing, we're implementing a new accounting system at the county, and we have Oracle. Fusion, they're the largest ERP or accounting system, and we're having Deloitte help implement it. And so I'm putting some of these extra things in. We're going to rely on automation and modernization to help us monitor some of these items. Like someone's not... Doesn't have unfettered access within the whole system and can do everything, right? That's one thing you want to restrict access in their duties, not concentrate them in just a few or one person. Now, how much requirements are there for you guys in terms of like holding contracts, how you pay or records for the payments? How much requirements is there right now? There are requirements for authorization. Pretty much where it starts, right? Any government who spends money there, it has to be authorized by the governing body. It could be like every meeting, right? They authorize a bunch of checks. It can be a budget, large contracts over a certain dollar threshold. So every expenditure needs to be authorized in some way or another. By an elected official or by a certain department or by? Most often it's like an elected, the board of directors. It can be like a board of supervisors for a county. It can be a city council. Schools have like a trustee board. So whatever that entity is, the top, the highest level, right, of approval, usually it's an elected official too. Once that item is authorized, you've got to have receipts, right? When you're making a payment, you've got to make sure that it's, if there's a contract, it has an adequate scope of work, and what are the terms, are we going to require documentation that the service or product has been either delivered or performed. So there's numerous safeguards and controls so that money just doesn't go flying out the door. And how do you know that the contract is being delivered as promised, and is there any checks and balances? A lot of times it'll be in the contract. It's like a legal section. What kind of responsibilities do they have? Say if it's a building, right? Are we going to have maybe a third party inspect it and say, oh, yes, you're using the right materials. You're building it to the correct building codes. A third party is a best practice. And it could be just like a delivery. You have somebody who receives these goods if you're buying computers. Yes, we received 20 computers, right? It met the specs. They have monitors, right? Or the CPU is a certain size, the RAM, right? So making sure that what you actually purchase, right, or procure is what you actually are receiving. Have you ever faced a situation where you wanted to stop or you stopped a payment because you didn't see the correct contracts? That is a common occurrence throughout my career. I can recall one where a contract wasn't duly authorized by the governing body and someone wanted still payment, right? And you have to have like a real spine, a real sense of like, I've got to stand up for taxpayers. I can't just like... Just let the, you know, the bureaucracy or an attorney or an engineer, right? It doesn't matter who it is. There's pressure all the time to make some kind of payment, right? And it's so important to have a spine, to have like your own code of ethics. And as a certified public accountant, right, I went through all sorts of school, had to take an exam, right, the certified, the CPA exam. I had to gain experience. My license is on the line, right? If I make a mistake, my profession could end. I've said no plenty of times. And sometimes that doesn't go well for me professionally. Someone gets upset. Someone says, oh, this guy has a reputation for just saying no. So I think what is important is not just saying no, but saying, hey, if someone's an honest broker and they just don't understand, right? Hey, let me help you... You need to get a receipt, right? You need to get some kind of documentation. You need to go to get this authorization from a supervisor. You need to go to the board of supervisors to get this authorized. So if there's some type of fraud, then I take a different tactic, and that's a different story. There's 37 counties in California that the controller auditor is elected, and there's 11 of them that are not. Do you feel like you have more authority now that you're elected versus somebody that might be appointed? No, absolutely. When you're in a bureaucracy, right, like a county, we have 19,000 employees, right? If you're an appointed auditor controller, right, you have a boss. My boss is, I have almost 3 point, how many residents are there in Orange County? 3.4 million, right? Those are my bosses, and I report to them. Sometimes the bureaucracy can say, hey, let's go in this direction. Let's maybe go around the hurdle. I'd rather go through the hurdle, right? And make a difference that way. But you have to do it tactfully, right? You can't just ram something down people's throat. I think there's a certain diplomacy that's needed. And what about the audits? Are audits effective? Because we're hearing, you know, there was an audit of the homeless spending in L.A. And you have asked for certain audits of certain departments or certain agencies. in agencies. Are they really effective? I think that they are. I absolutely, if there's one kind of takeaway from this, this conversation, are that audits are crucial, right? And there's all sorts of different flavors of audits. When I was at OCPA, I'm part of the taxpayer oversight committee, measure M2, a half percent sales tax for freeways. And I read the measure and I saw all this verbiage on, hey, we're going to have tough safeguards for taxpayers. We're going to ensure the measure is followed. We're going to have compliance with the measure. We're going to have these additional audits. So It didn't say the two words compliance audit, but everything it's talking about, it's compliance, right? And it's saying audits. So you put those two concepts together and you get a compliance audit. I worked behind the scenes with staff, with my committee, and now we've got three years of compliance audits under our belt. Having somebody outside of an agency, an independent auditor, right, that's going to look at... The measure, this Measure M, where are they spending money? You know, are they spending in an area or on a freeway that voters didn't approve? There could be all different types of things, right? Was it, it could be still on the same area of spending, of approved voter spending, but it could be like some bridge or something that's not exactly like, a lot of times it's the freeway expansion. But maybe it's like some overpass that wasn't part of the measure or a bridge or some kind of signage. I have to certify as part of the measure that the spending by the agency, OCTA, Orange County Transportation Authority, is in compliance with the measure. Now it's a win for taxpayers, right? Having an outside entity go through and spend hundreds, if not a thousand hours going through and making sure that they're doing the proper expenditures. They're putting, they're spending money in the right place. It's duly authorized. All the internal controls, these checks and balances that we talk about to make sure they're in compliance. Now, financial statement audit is different. Financial statement audit will see if the auditor's financial statement is materially correct. And it doesn't mean like, oh, it's not, you know, there's $10 off over here. Thank you. Materiality is the concept. It's really whether the financial statement is accurate as a whole. The contracts. So one of the fears people have is people making contracts with, sometimes it's a one-vendor situation, you know, where you have only one vendor bidding on a project. And how could we assure that we're getting the best deal in these contracts? Generally, it's the governing board who has, like, a certain requirement. They'll say, hey, we want it to be posted on a website for everyone to see. You might want to, this is part of the procurement rules that a government agency would set up. In government, you know, we oftentimes require like thick procurement, like a proposal, right? And so it's just, there's a natural barrier that not every mom and pop business, right, is going to be able to create a thick, you know, proposal. So when we were... Doing a proposal, a request for proposal, that's a document that you issue when you want somebody to bid on a project to submit a proposal. I actually went to one of these trade organizations. It's a... It's called the Government Finance Officers Association. It started talking to each and every one of these vendors. It's called vendor outreach. You want to say, hey, we're going to put a RFP out, right, or request for a proposal. We'd love for you to propose on this. So we actually had 10 proposals that came in for this new accounting system. And we, in essence. Read through all the proposals and then decided to interview five. So I think that was a really strong case for this vendor outreach, making sure you have a lot of options, a qualified pool of potential vendors. And that's what we did on mine. Now, sometimes it can be so specific, right? It's a niche that. There might not really be that many vendors who perform this. So that's sometimes there's rules around sole source, right? If only one vendor does type of service or provide a product. So it's important to have some kind of rule around sole source. One of the key things in California that people are worried about, and we've covered this on the show, it's corruption with nonprofits that do homeless services. And there are some really good people in this business, which we have had them on the show, that they're truly doing the nonprofit work. They're getting some help from government and then going and raising money and also helping the homeless. And they really care about the homeless. And there's another element in this business that are opportunists. They see big dollars coming. And they have gotten into this business. There was an audit of this in LA. And the results was shocking to me. But you're in this position, not having contracts, not having payment records for millions and billions of dollars. Is that normal? It's absolutely not normal. It's so abnormal. You can just smell that. issue from a mile away. My counterpart, Oscar, the auditor controller for LA is the one who did that audit. And some of the things he found were they didn't have contracts, right? They didn't have a list of contracts. I don't know how you make a payment, right? How do you, and I'm just kind of talking in general too. So how does an agency not have a contract to be able to make How do you not have... Financial statements, right? Like, there's some really, like, basic things that are not in place. Do you not have a computer system, right? An accounting system? Are you just kind of doing everything by paper? It's a requirement in the California Government Code to have an annual audit if you're a government agency. So, if you fall behind, right, and you're not getting audited, that's a red flag. Do you have enough staff, right? Are they competent? Are they confident? Do they know debits and credits? Are they properly trained, right? Do they have the requisite experience? If they're not producing annual financial reports, they should be producing like a check register, right? Every month for the board to review and see what kind of checks are being cut. I think there was a problem with advances, right? If you're making an advance to a vendor, I don't think that's a really good idea, right? That kind of means that there's, Thank they don't have like the right cash flow. They could be a nonprofit in infancy or they're expanding so fast. These are all red flags. You have to require some kind of like documentation, right? That, hey, this is the person we helped. You take their name, you get a picture, right? you. If they have an ID so that you kind of know who you're helping. If you're feeding a meal, do you have, like, an expense, a receipt, right, of the food that you purchased, right? You have a kitchen in place. You have all these things, like, that you're doing to prove that you're spending your money accurately. So I think that's an important, like, component of it. And then who's the population? Do you have a check-in list, right, if you're serving meals? Do you have, like, a list of people who came and attended? So you need proof from both, like, the service side, right? Who it is, and then proof on the expenses. Those are things that are important to write into a contract, into a scope of work. If an agency, a public agency, is just saying, hey, just feed people, right? And there's no requirement of this documentation, either from the people that you're serving or, like, the expenses, that's a red flag, right? You've got to require in this scope of work, hey, this is the type of work you're going to do. You're going to go to this location. You're going to feed these amount of people. You're going to take this type of proof. Having a log or a sheet, taking a picture, whatever it is that is required. You're going to have these receipts for the expenses that you incurred. So for an organization like that, that's giving out big contracts, there needs to be a really savvy team that understands all of this, right? Absolutely. Accountants, CPAs, right? That's the foundation of spending in any company, in any government, in any nonprofit. And one other thing is, people are asked to vote for these measures, changes to self-taxes across the state, from the cities, from the counties, to help homelessness, to help different types of causes. How much accountability and review is out there? Who and who's responsible for that? Is it you guys' job to audit these entities or these measures or who looks at them? Where the money comes from and where it goes. That's a great question. So it's all in the measure, right? If the measure creates a new agency and there's a governing board, right? And it doesn't say like what safeguards there are for taxpayers, that doesn't sound like a really, you know, it sounds like a measure that needs a little help. If it goes into an existing agency, say like a county. Where there's a county auditor controller and they do the audits, that's going to be a lot better of a measure, right? Than a new measure or a measure with a new entity doesn't have the experience. Those are safeguards. They have to staff up all this, right? If it goes into an existing agency and it requires audits, it requires all sorts of documentation for receipts, right? For either the expenses or the people being served. Those are, that's going to be a much better measure. So, so if it's a measure written without the audits, then you guys cannot go in and look into them, right? So if somebody is putting a tax measure to help the homeless in a certain county, right, but it's not going through the county, it's like they're going to create a new entity authority. Generally, we do not have the ability to audit the city that's going to be responsible for that. If it's a new entity that's not a special district and it's not part of the county, it's so important, these things. I think it's important to put a compliance audit into these measures, right? That if there's some kind of spending and there's a new measure in place for some kind of new spending, there should be a compliance audit. Audits promote trust to taxpayers. Chapman University does a study of Americans' nationwide fears, right, of all Americans. And number one for, I think, almost 90% of this, and the most recent one, is a fear of government corruption. So we have a really tall hill, right, a tall obstacle to overcome, that people's perception that there's some kind of fraud going on or some funny business in government. I think the best thing to do is to put compliance audits in these types of measures, right, for additional spending. That allows an independent person to come and see, hey, are they spending in accordance with what the voters... But it was promised, because there was something that was promised. Andrew, what you recommend is more audits across the board in California. Is that what you're thinking we should do to bring the trust back? Because there are a lot of people in California that are working for government agencies and are working very hard, and they care. But they're kind of painted among the trust is not 100%. Absolutely. I think audits are such a crucial component to give the public assurance that their money is being spent properly. And I think transparency portals are important too, right? You want to have a portal, which we're doing at the county. We're working on it as part of this new accounting system implementation, right? Hey, do you want to see the checks, all the check registers, right? Do you want to see contracts? Now, there's some, like, that have to be redacted. There's some, you know, we can't publish everything, right? But having a transparency portal, knowing what civil servants make, right? There's a law on that. We should be putting that on our transparency portal. There's all these things that Audits and transparency portals are definitely best practices to give the public assurance that their tax dollars are being spent wisely. And you, did you ever think you'll be in the position you are in growing up? I don't think growing up that I had some grand vision, right, of being in this type of position. But I just, I remember, like I mentioned, some of these 1980s defense contracts, right, the egregious spending. And really, I think that's probably the catalyst to what got me here, right, is that made me upset. A coffee maker for $7,500. Was it made out of gold? I don't know. How would you even, like, spend that much money on it? I mean, it had to be, like, a custom coffee maker or a hammer. Like, hammers back in the 80s, what were they, $5 or $10? I don't even know. Like, let alone a 400 and whatever odd, you know, dollar hammer that they're spending. That's just, that's outrageous. So that, that just, that passion in me in my teenage years, hearing about these kind of like crazy things, probably is like what, what made me, you know, go into accounting, having my two uncles as CPAs. And so that's, that's how I got here. So Andrew, how much vetting does the government do when you guys go out there and get contracts and when the state, is there a lot of vetting happening? Throughout my whole career, right, I've worked at, like, five different government agencies. Typically, you acquire a W-9, right, that gives, like, the vendor information. It says what their tax ID is, what kind of corporate entity, if they're a partnership or a sole proprietor or a corporation. So generally, the vetting that you do of a vendor is minimal at best. I like this train analogy, like the engine, right? You wait until the caboose because you'd send these 1099s to the IRS and there's a process where the IRS will check it and say, hey, you know, the tax ID that this vendor gave me isn't the right tax ID. So this compliance like ends at the very last step and it's done by somebody else, the IRS. And it's only for a fraction of the 1099s you actually issue, right? We're changing this. We're moving this compliance from the caboose on this compliance train. So meaning that these vendors are not legitimate or something is wrong with them, that then the information they give doesn't match. It really is the honor system. If you give us information, we just kind of take it. You perform your good or service. You go through the procurement. And then we allow the IRS to do the vetting at the end to make sure the numbers match. At the very end. For only a few, like a percentage of the vendors that the county actually uses. We're changing this in this new accounting system. We're going to be up front. We're going to be making sure that their tax ID actually is their own tax ID. We're going to actually look at the Secretary of State and make sure they're able legally to do business in California. So those things are not checked before they were not. And probably a lot of people are not checking that. This is a new paradigm. If they're a non-profit, we need to make sure they're actually tax-exempt, right? They're in good standing. There's a requirement for the state of California, the Department of Justice for the state has a charitable registry. We're going to check and see if the federal government... has that on file. We're going to check and see if they're a debarred vendor for the federal government. FAC.gov and SAM.gov, there's a whole list of things that we're going to do. We're actually going to check and make sure that their bank account information matches. Andrew, there's a new transparency law that's going to go into effect not next year, in 2028. And one of the things that we've done, the Puck Times, we actually have John Moorlach who goes and ranks different cities and counties. He does a lot of work into analyzing how they're doing financially. And one of the big pain points is that cities and counties don't publish their financials on time. And sometimes they're four or five years behind. There's a new bill, so this law, it's going to have them publish. their financials within 30 days. Can you tell us more about it and what do you think? Do you think this is going to help? For citizens, for residents, for taxpayers to really understand, right, that annual financials audit, it's called an annual comprehensive financial report. It's so critical, right? The things that the benchmarking that Morlock does is critical. There's no one else doing it. But yeah, I talked to the author, Senator Choi, his staff. Uh, provided, you know, some input on it and like, I didn't want them to water it down, you know, have those teeth that it's, it's, it's absolutely critical. And while the penalty is, is, is pretty minor, right? And it, I just, I can't tell you how important it is, right? For these financial statement audits to be done timely. They can raise issues. These are red flags. It's so important to have your audits done timely. Andrew Hamilton, the controller and auditor for Orange County, it was great to have you on California Insider. Absolutely. Thanks for having me, Sime. Tell us what you think about these conversations and do you think any money is getting misallocated and do you think this money is big? And in your opinion, how can we bring trust back? Make sure to tell us in the comments or email us at siamak at californiansider.com. We read all of your emails and comments. I'm Siamak Kourami. This is California Insider. We'll see you next time.