Fiduciary Responsibility

I always assumed that being on the Board of the District meant I had a fiduciary duty to the citizens of the District (whether they voted for me or not).  Maybe I am wrong and there is no such obligation.  Certainly, some of my fellow Board members act as if there is no reason to exercise utmost care in spending money or evaluating new investments.  I mean when Director Battani can chastise me publicly for caring whether the District will be in violation of loan covenants or get upset that I ask too many questions about the budget, then clearly, (just my opinion) fiduciary responsibility is not at the top of her priority list. 

Nonetheless, I boil down my approach to evaluating investments to 3 questions:

1.  Do I trust that execution will be successful?  This encompasses an evaluation of the credibility and competence of the team charged with overseeing the investment project.  I look at track record (has this management team met budgets in the past?  have other projects been completed in a timely manner?  have commitments made in the past been met?).  The Board majority apparently answers these questions affirmatively for the current management team although I look at the near constant losses, the missed dates on the wound care project, the loss of the Kaiser contract, and the seismic retrofit debacle (I could actually go on, but I think this is sufficient) and cannot fathom my fellow Board members' thinking.

2.  Is the analysis thorough and accurate?  Bland reassurances with spreadsheets that have no backup and are not provided on a timely basis are hardly confidence building.  The amount of analysis should be proportional to the size of investment.  Any numbers should have justification and backup that can be readily referenced in real time.  Putting the package together for evaluation should be considered a project and if deadlines are missed or the information presented has obvious flaws then that should be a huge flag.  Of course, if the team presenting the information has shown themselves to be willing to lie, fib, or shade the truth (just different degrees of dishonesty) in the past when doing analysis then there is little reason to proceed.  A very smart blogger, d-squared, had this to say in another context:

Fibbers' forecasts are worthless. Case after miserable case after bloody case we went through, I tell you, all of which had this moral. Not only that people who want a project will tend to make innaccurate projections about the possible outcomes of that project, but about the futility of attempts to "shade" downward a fundamentally dishonest set of predictions. If you have doubts about the integrity of a forecaster, you can't use their forecasts at all. Not even as a "starting point".

 (Actually the original context was investment.  He translated this lesson to politics.  Since District Board membership has both a political and fiduciary element, it applies doubly.)

3.  Have the costs, benefits, and risks been presented?  It's fine to talk about the wonderful things that a project will yield.  The analysis may show that the investment has a great return, but unless you factor in risks, then the job is less than half done.  After all, a lottery ticket pays off millions for just a dollar investment, but the probability of winning is very small.  Every project has risks and the individual elements within a project has risks too.  An analysis might have zero spread in the anticipated revenues, but huge variations in the anticipated expenses for example.  If the analysis is presented without a discussion of risk and, preferably, a sensitivity analysis of the relevant elements then it is incomplete.

People who would never make a personal investment or act in their job while ignoring these principles are quite happy to throw them out the window when it comes to the Hospital.