Local Oversight by State Audit

The relationship between state and local governments stands at a crossroads. In recent years, state legislatures across the country have intervened aggressively in local affairs, part of a broader wave of preemption that has upended traditional norms of local autonomy. At the same time, legislatures have disregarded other areas of local regulation—including areas where state intervention might be welcomed by local residents—and are frequently inattentive to existential challenges affecting local governments. Cities and counties face intersecting resource, capacity, and turnover crises. They struggle to raise revenue, retain employees, and provide bare services. And they operate in an environment of heightened institutional mistrust. Against this backdrop, local communities veer between seeking support and fearing retribution from their state governments.

Yet this narrative tells only part of a larger story. State governments are diffuse institutions, and other state-level actors have quietly come to play increasingly influential roles in the subfederal system. One such actor is the state auditor, an independent executive official who has assumed a position of relative trust at a time of widespread institutional suspicion. State auditors are granted vast powers to interrogate local-government affairs. Through a particular type of audit—performance audits, which examine the effectiveness of local practice—the state auditor can pull back the veil of local administration by reviewing local policies, scrutinizing local decisions, and suggesting governance reforms to cities, counties, and local agencies.

In this manner, performance audits are conduits of state-local policymaking that differ in important ways from traditional modes of state oversight. In contrast with legislative preemption, performance audits enable individualized state interventions into the weeds of local governance. They are, perhaps, just another threat to local autonomy. Or perhaps they represent something entirely different: a more nuanced, targeted method for state and local officials to communicate, a mechanism by which state auditors—who promise the transparency, vision, and expertise that local bodies often lack—assist those struggling local governments so often ignored by other state actors.

This Article is the first to explore the local-audit regime that operates across the United States today. Drawing upon an original dataset of hundreds of audit documents, it argues that performance audits may offer a profitable balance between the virtues and vices of localism, thus forging a system by which states can meaningfully shape local policy without infringing upon local democracy. Yet audits are more impactful in some communities than they are in others, a reminder that governance problems do not afflict local institutions equally and that one-size-fits-all solutions might neglect realities on the ground.

The Article concludes with concrete suggestions for reform, each drawn from an approach already tested elsewhere in the audit ecosystem. In doing so, it calls for deeper engagement with public auditing regimes—an opportunity, more broadly, to explore diverse local entities and the heterogeneous world of state oversight they inhabit.

The appendix for this Article is available here.