Report: State Agencies Rushed Spending at End of 2010, 11

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JEFFERSON CITY - State auditor Tom Schweich released a report Wednesday that said some state agencies rushed to spend money at the end of the last two budget years. The report finds the Missouri Department of Corrections to be the leading end-of-year spender, followed by other agencies including the Office of Administration, Office of State Courts Administrator, Department of Mental Health, and Department of Revenue.

Spending near the end of the fiscal year can sometimes raise red flags as agencies sometimes make wasteful expenditures to justify their budgets. However, Schweich clarified in the report that "the audit did not identify instances of wasteful spending," although it did find some larger than normal inventories.

The audit identified end of year purchases that: 

  1. Were expedited and paid before due
  2. Resulted in higher than normal inventory levels
  3. Were charged to the state's General Revenue Fund instead of agency controlled dedicated funds
  4. Were not placed into service in a timely manner

According to the report, the Department of Corrections spent $313,198 on handheld radios and accessories on June 23, 2011, but by Nov. 4 of that year, the radios were not in use yet "because the necessary programming services had not yet been procured."

The audit counted June 30, of both 2010 and 2011, as the end of the fiscal year. The department spent $193,925 on June 26, 2011 to purchase a new washer extractor. Seven months later, the new extractor had not been installed "because its installation required building modifications."

The department also spend nearly half a million dollars from the General Revenue Fund to pay for various Missouri Corrections Integrated System (MOCIS) expenses because the project cost more than expected.

The Department of Corrections also spent over $2 million total on supplies and clothing across May and June 2010 and 2011, which resulted in "higher than normal inventory levels."

The Office of Administration wrote a fiscal year 2010 check for $45,625 on June 23, 2010, but held the check for nearly three months because the project was not finished. "An OA employee e-mailed the vendor stating, 'As we are at the end of the fiscal year, we need to issue a check for this project to ensure that we don't lapse the funding,'" the report said.

"'We will hold this check in our safe until the project is complete,'" the e-mail mentioned in the report said.

The term "lapse" refers to the practice of taking money agencies did not spend that fiscal year, and putting it into a general revenue pool to be spent by the state in the next year.

"The Code of State Regulation does not allow advance payment of goods or services not yet received," the report said.  The code also states that "services provided in the next fiscal year cannot be charged to the prior year appropriation."  

The OA also used General Revenue Fund money to make an advance payment of $288,000 on the State Data Center lease, "which should have been made form a dedicated fund." The office also transferred payments of approximately $1.6 million for a unified communications system from a dedicated fund to the General Revenue Fund.

The Office of Administration also spent $393,000 in June 2010 from the General Revenue Fund for telephones and network components. The telephones "were not installed until September/October in fiscal year 2011."

The OA and Department of Corrections both paid off leases early using General Revenue Fund. The department paid off five leases early, saving the state $12,600 in interest by paying off four but the state didn't save money when the fifth was paid off. The OA paid off a lease early "because General Revenue Fund monies were available; the state realized no interest savings in doing so."

The report noted that the state "does not have specific laws, rules, policies or procedures directly related to year end spending, but the federal government adopted the 'bona fide needs' rule." The federal rule says states appropriations can only be used to "meet legitimate needs arising during the appropriations' fiscal year."