E20B
State Treasurer
Operating Budget Data
($ in Thousands)
FY 07 FY 08 FY 09 FY 08-09 % Change
Actual Working Allowance Change Prior Year
General Fund $4,924 $5,033 $5,186 $153 3.0%
Special Fund 927 1,729 1,595 -134 -7.7%
Reimbursable Fund 32,908 39,737 38,833 -904 -2.3%
Total Funds $38,758 $46,499 $45,614 -$885 -1.9%
• The fiscal 2009 allowance decreases by $885,000 from the current year working
appropriation. However, the underlying fiscal 2009 budget change for this agency, absent
health insurance and Other Post Employment Benefits funding which distorts year-to-year
comparisons, is -$1.1 million, or -2.4%.
Personnel Data
FY 07 FY 08 FY 09 FY 08-09
Actual Working Allowance Change
Regular Positions 58.00 64.00 64.00 0.00
Contractual FTEs 0.00 0.00 0.00 0.00
Total Personnel 58.00 64.00 64.00 0.00
Vacancy Data: Regular Positions
Turnover, Excluding New Positions 2.52 3.93%
Positions Vacant as of 12/31/07 10.00 15.63%
• There is no change in the number of regular positions in the fiscal 2009 allowance.
• Four of the 10 vacant positions as of December 31, 2007, are associated with the new Tort
Litigation Unit created in the current year. Two of these positions were filled in
January 2008, and an offer had been extended to fill a third.
Note: Numbers may not sum to total due to rounding.
For further information contact: Steven D. McCulloch Phone: (410) 946-5530
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Analysis in Brief
Major Trends
Bank Accounts Are Reconciled Timely: Dramatic improvement has occurred since fiscal 2003 in
the average number of days it takes to reconcile the bank accounts administered by the State
Treasurer’s Office (STO).
Claims Are Adjudicated Accurately and Timely: In fiscal 2007, STO reduced the number of open
claims by closing more claims than were opened during the year. STO projects that it will continue
closing as many claims as are opened going forward.
Recommended Actions
1. Concur with Governor’s allowance.
Updates
Tort Litigation Unit Begins Operation: A Tort Litigation Unit was created in STO in fiscal 2008 to
centralize management of tort claims made against the State.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B
State Treasurer
Operating Budget Analysis
Program Description
The State Treasurer is responsible for the management and protection of State funds and
property. To carry out these responsibilities, the State Treasurer selects and manages the depository
facilities for State funds, issues or authorizes agents to issue payments of State funds, invests excess
funds, safeguards all State securities and investments, and provides insurance protection against
damage to State property and liability of State employees. The State Treasurer also administers the
sale of Maryland general obligation bonds and serves as a member of the Board of Public Works
(BPW). The State Treasurer’s Office (STO) consists of four programs: treasury management;
insurance management; insurance coverage; and bond sale expenses.
The goals of the Treasurer’s Office are to:
• accurately reconcile all Treasury State bank accounts;
• maximize investment earnings for the State’s surplus funds in accordance with State law;
• maintain and enhance the information technology capability and infrastructure to meet the
diverse needs of TSO and the agencies it serves; and
• process all agency and third party claims submitted to the Insurance Division.
Performance Analysis: Managing for Results
Bank Accounts Are Reconciled Timely
As shown in Exhibit 1, the number and dollar value of total receipts and disbursements from
the bank accounts administered by STO have increased since fiscal 2003. Since 2003, there has been
dramatic improvement in the length of time it takes to reconcile all accounts dropping from over
60 days on average in fiscal 2003 to under 5 days in fiscal 2007.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Exhibit 1
Total Receipts and Disbursements and Days to Reconcile All Accounts
Fiscal 2003-2009
Average Days to Reconcile All Accounts
>60 >30 >10 <6 <5 <4 <4
20 $250
18
Total Receipts and Disbursements
16 $200
Total Transactions (Millions)
14
($ in Billions)
12 $150
10
8 $100
6
4 $50
2
0 $0
2003 2004 2005 2006 2007 2008 2009
Est. Est.
Total Receipt and Disbursement Transactions Receipts and Disbursements
Source: Governor’s Budget Books, Fiscal 2009
Investment Earnings Are Maximized
STO is responsible for maximizing investment earnings for the State’s surplus funds. It is
limited by law in the types of investments it may make. Exhibit 2 compares the rate of return on the
State’s investment portfolio compared with the average 90-day U.S. Treasury Bill rate. In fiscal 2007
the average return on the State’s investment portfolio exceeded the average 90-day Treasury rate by
50 basis points. In the preceding two fiscal years the State’s return equaled or was just under the
Treasury rate.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Exhibit 2
Comparison of State’s Investment Portfolio and 90-day U.S. Treasury Bill Rates
Fiscal 2003-2009
6%
5%
4%
Interest Rate
3%
2%
1%
0%
2003 2004 2005 2006 2007 2008 2009
Est. Est.
Avg. Rate of Return on Investment Avg. 90-day Treasury Bill Rate
Source: Governor’s Budget Books, Fiscal 2009
Claims Are Adjusted Accurately and Timely
STO is responsible for the efficient and cost-effective administration of the State Insurance
Program that includes self-insurance and procurement of commercial insurance. Exhibit 3 compares
the number of new claims received with the number of claims closed. At the end of fiscal 2005, there
were 825 open claims. The number of open claims dropped to 497 by the end of fiscal 2007, and
STO anticipates end-of-year open claims to remain at this level by closing as many cases as are
opened each year.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Exhibit 3
New Claims v. Claims Closed
Fiscal 2003-2009
5,000
4,000
3,000
2,000
1,000
0
2003 2004 2005 2006 2007 2008 2009
Est Est
New Claims Claims Closed
Source: Governor’s Budget Books, Fiscal 2009
Governor’s Proposed Budget
As shown in Exhibit 4, the STO fiscal 2009 allowance is $885,000 lower than the current
year working appropriation. Insurance coverage purchased for other agencies, bond sale expenses,
and personnel costs account for the majority of change in the allowance.
Impact of Cost Containment
A $51,000 reduction was made to the STO budget in the June 2007 BPW cost containment
action. This represented excess funds for banking services contracts that are estimated on a per
transaction cost basis.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Exhibit 4
Governor’s Proposed Budget
State Treasurer
($ in Thousands)
General Special Reimb.
How Much It Grows: Fund Fund Fund Total
2008 Working Appropriation $5,033 $1,729 $39,737 $46,499
2009 Governor’s Allowance 5,186 1,595 38,833 45,614
Amount Change $153 -$134 -$904 -$885
Percent Change 3.0% -7.7% -2.3% -1.9%
Where It Goes:
Personnel Expenses
Increments and other compensation................................................................................. $259
Health insurance – reduce long-term Other Post Employment Benefits liability............ 201
Annualization of turnover for new fiscal 2008 Tort Unit positions................................. 81
Employee retirement........................................................................................................ 47
Health insurance – pay-as-you-go costs .......................................................................... 34
Fiscal 2008 Budget Section 45 – one-time hiring freeze savings .................................... 8
Increased turnover............................................................................................................ -42
Other fringe benefit adjustments...................................................................................... -4
Operations
Insurance management fiscal and administrative support charges .................................. 82
Check printing supplies – paper, toner, ribbons, etc........................................................ 36
Banking services contract ................................................................................................ 28
Replace two vehicles ....................................................................................................... 21
Other Changes
Insurance coverage purchased for agencies decreases due to policies renewal at lower
cost ($337,000) and fewer losses..................................................................................... -1,407
Bond sale expenses .......................................................................................................... -240
Other...................................................................................................................................... 11
Total -$885
Note: Numbers may not sum to total due to rounding.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Recommended Actions
1. Concur with Governor’s allowance.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Updates
1. Tort Litigation Unit Begins Operation
A Tort Litigation Unit was created in STO in the fiscal 2008 budget. The purpose of the unit
is to centralize tort litigation activities that are currently spread throughout the State’s agencies in
order to develop a more efficient and effective method of managing the settlement or defense of tort
claims filed against the State. The unit, when fully staffed, will consist of four attorneys (including
the manager of the unit), a paralegal, and an administrative/clerical support person. STO believes the
unit will pay for itself through reductions in the number and amount of claims paid.
In the current fiscal year, the tort unit will concentrate its efforts on handling all automobile
liability, premises liability, and highway design defect cases for the following agencies:
• Department of Corrections;
• Department of Human Resources;
• Department of Juvenile Services;
• Department of Natural Resources;
• Maryland Transportation Authority; and
• State Highway Administration.
The unit will soon begin handling medical malpractice cases and will continue coordinating
with Assistant Attorneys General in the remaining State agencies on tort claims.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Appendix 1
Current and Prior Year Budgets
Current and Prior Year Budgets
State Treasurer
($ in Thousands)
General Special Federal Reimb.
Fund Fund Fund Fund Total
Fiscal 2007
Legislative
Appropriation $4,956 $808 $0 $34,606 $40,370
Deficiency
Appropriation 48 115 0 0 163
Budget
Amendments -7 4 0 0 -3
Reversions and
Cancellations -73 0 0 -1,698 -1,771
Actual
Expenditures $4,924 $927 $0 $32,908 $38,758
Fiscal 2008
Legislative
Appropriation $5,045 $1,724 $0 $39,737 $46,506
Cost Containment -51 0 0 0 -51
Budget
Amendments 39 5 0 0 44
Working
Appropriation $5,033 $1,729 $0 $39,737 $46,499
Note: Numbers may not sum to total due to rounding.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Fiscal 2007
The fiscal 2007 budget closed out $1.6 million lower than the legislative appropriation.
Deficiency appropriations approved during the 2007 session added $163,000, and budget
amendments added $33,992 for the general salary increase. These increases were offset by budget
amendments which transferred funds to the Department of Budget and Management to help pay for a
salary study ($406), recognized general administrative savings as part of cost containment efforts
($36,826), and by a general fund reversion of $72,923 and a reimbursable fund cancellation of
$1,698,466. The general fund reversion resulted from lower than projected capital lease payments
and savings from a consultant contract related to the bank accounts reconciliation system, while the
reimbursable fund cancellation reflects lower than expected activity in the State Insurance Trust
Fund.
Fiscal 2008
The fiscal 2008 working appropriation is $6,820 lower than the legislative appropriation. A
cost containment reduction of $51,000 related to banking fees is partially offset by funds added by
budget amendment for the general salary increase ($44,180.)
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Appendix 2
Audit Findings
Audit Period for Last Audit: November 1, 2002 – April 30,2006
Issue Date: July 2007
Number of Findings: 19
Number of Repeat Findings: 9**
% of Repeat Findings: 56%
Rating: (if applicable) n/a
Finding 1: Despite improvement of conditions noted last audit, oversight and control over the
State’s bank reconciliation process could be further strengthened.
Finding 2: Deficiencies were noted in the office’s oversight of certain other aspects of its
banking operations, such as not routinely analyzing existing agency bank
accounts to ensure that they had been authorized.
Finding 3: As of September 2006, all portions of banking contracts had not been finalized even
though the contracts were effective July 1, 2004.
Finding 4: One employee had virtually complete control over the State’s investment activities,
investment brokers were not always approved, and required investment broker
information was not always obtained.
Finding 5: The services provided by the Injured Workers’ Insurance Fund (IWIF) have not been
subject to a competitive bid process, and the appropriateness of making advance
payments to IWIF has not been adequately assessed.
Finding 6: The office did not adequately monitor the agreement to ensure the propriety of
amounts paid to IWIF.
Finding 7: The amount owed to bond holders for unpresented bonds exceeded the cash
balance of the fund by approximately $645,000 and unredeemed bond funds were
not transferred to the Comptroller’s Abandoned Property Fund, as required.
Finding 8: Internal controls over claims paid from the State Insurance Trust Fund were
inadequate.
Finding 9: Commercial insurance policies were procured without publicly advertising
solicitations and publishing contract awards.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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E20B – State Treasurer
Finding 10: The office had not established adequate security over withdrawals from the Local
Government Investment Pool.
Finding 11: Certain unpresented checks were not credited to the Unpresented Check Fund,
and the office could not adequately document that sufficient funds were
transferred from both the Unpresented and Undeliverable Check Funds to the
general fund in accordance with State law.
Finding 12: The firewall used to help secure the office’s network was not properly configured,
administered, or monitored.
Finding 13: Procedures for monitoring security of the minicomputer system need
improvement.
Finding 14: The office’s disaster recovery plan was incomplete and outdated.
Finding 15: Certain fees were retained without authorization.
Finding 16: The office did not advise BPW that an information technology contract also included
$660,000 for consulting services.
Finding 17: The office did not adequately monitor State agency reporting of Cash
Management Improvement Act activity.
Finding 18: An employee independent of the cash receipts function did not account for
pre-numbered cash receipt forms used to record collections.
Finding 19: A potential conflict of interest involving a management official should be submitted to
the State Ethics Commission for re-evaluation.
*Bold denotes item repeated in full or part from preceding audit report.
**Three repeat findings from the previous audit were combined into one finding in this audit.
Analysis of the FY 2009 Maryland Executive Budget, 2008
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Object/Fund Difference Report
State Treasurer
FY08
FY07 Working FY09 FY08-FY09 Percent
Object/Fund Actual Appropriation Allowance Amount Change Change
Positions
01 Regular 58.00 64.00 64.00 0 0%
Analysis of the FY 2009 Maryland Executive Budget, 2008
Total Positions 58.00 64.00 64.00 0 0%
Objects
E20B – State Treasurer
01 Salaries and Wages $ 4,157,070 $ 4,908,340 $ 5,492,960 $ 584,620 11.9%
02 Technical and Spec. Fees 21,296 4,000 5,250 1,250 31.3%
03 Communication 97,760 92,687 96,464 3,777 4.1%
04 Travel 23,790 33,500 35,237 1,737 5.2%
07 Motor Vehicles 28,275 10,769 34,366 23,597 219.1%
08 Contractual Services 3,816,617 4,545,166 4,423,720 -121,446 -2.7%
09 Supplies and Materials 199,805 147,577 186,873 39,296 26.6%
14
10 Equipment – Replacement 42,907 143,660 130,125 -13,535 -9.4%
11 Equipment – Additional 22,550 3,415 6,613 3,198 93.6%
13 Fixed Charges 30,347,803 36,609,895 35,202,498 -1,407,397 -3.8%
Total Objects $ 38,757,873 $ 46,499,009 $ 45,614,106 -$ 884,903 -1.9%
Funds
01 General Fund $ 4,923,670 $ 5,033,092 $ 5,185,870 $ 152,778 3.0%
03 Special Fund 926,591 1,728,599 1,594,782 -133,817 -7.7%
09 Reimbursable Fund 32,907,612 39,737,318 38,833,454 -903,864 -2.3%
Total Funds $ 38,757,873 $ 46,499,009 $ 45,614,106 -$ 884,903 -1.9%
Appendix 3
Note: The fiscal 2008 appropriation does not include deficiencies.
Fiscal Summary
State Treasurer
FY07 FY08 FY09 FY08-FY09
Program/Unit Actual Wrk Approp Allowance Change % Change
01 Treasury Management $ 6,051,202 $ 6,193,652 $ 6,558,186 $ 364,534 5.9%
01 Insurance Management 1,908,137 2,437,884 2,835,777 397,893 16.3%
02 Insurance Coverage 30,313,534 36,582,473 35,175,143 -1,407,330 -3.8%
Analysis of the FY 2009 Maryland Executive Budget, 2008
01 Bond Sale Expenses 485,000 1,285,000 1,045,000 -240,000 -18.7%
Total Expenditures $ 38,757,873 $ 46,499,009 $ 45,614,106 -$ 884,903 -1.9%
General Fund $ 4,923,670 $ 5,033,092 $ 5,185,870 $ 152,778 3.0%
E20B – State Treasurer
Special Fund 926,591 1,728,599 1,594,782 -133,817 -7.7%
Total Appropriations $ 5,850,261 $ 6,761,691 $ 6,780,652 $ 18,961 0.3%
Reimbursable Fund $ 32,907,612 $ 39,737,318 $ 38,833,454 -$ 903,864 -2.3%
15
Total Funds $ 38,757,873 $ 46,499,009 $ 45,614,106 -$ 884,903 -1.9%
Note: The fiscal 2008 appropriation does not include deficiencies.
Appendix 4