January The Honorable Barbara A Hoffman Chairman Senate Budget by icecube

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									                                           January 31, 2002



The Honorable Barbara A. Hoffman, Chairman, Senate Budget and Taxation Committee
The Honorable Howard P. Rawlings, Chairman, House Appropriations Committee
Annapolis, Maryland


Dear Senator Hoffman and Delegate Rawlings:


        The April 2001 Joint Chairmen’s Report instructed the Maryland Department of Planning to
submit a mid-year report to the budget committees detailing the Department’s progress in addressing its
special and reimbursable fund deficits and any issues that the Department finds in performing its fiscal
year 2001 budget closeout. The Report further instructed the Office of Legislative Audits to review the
Department’s report for accuracy and report the results of its review to the budget committees. The
purpose of this letter is to report the results of our review of the Department’s mid-year report.

         The Department’s mid-year report dated November 15, 2001 was silent as to the progress made
in addressing special and reimbursable fund deficits and did not disclose any issues encountered in
performing the fiscal year 2001 budget closeout. When we advised the Department that its mid-year
report did not adequately comply with the Joint Chairmen’s Report instructions, the Department
submitted an addendum to its mid-year report dated December 20, 2001. In its addendum, the
Department reported the four strategies that it used to eliminate its special and reimbursable fund
deficits. The addendum did not disclose any issues related to the fiscal year 2001 budget closeout.

         We determined that the Department, in conjunction with the Department of Budget and
Management, recorded certain year-end transactions to eliminate its special and reimbursable fund
deficit balances, which totaled $5.8 million. Although the deficits have been eliminated, based on our
review and discussions with legal counsel to the Maryland General Assembly, the methods used
circumvented budget procedures and violated the intent of State budgetary law.

        Although not requested by the Joint Chairmen’s Report, the Department’s mid-year report
included information on signed agreements with clients (that is, State agencies and private entities) and
collections for its special and reimbursable fund programs for the period from July 1, 2001 to November
8, 2001. Reported information was found to be reasonably accurate but a few reporting errors were
noted. For example, collections reported by the Department were understated by $33,926.
The Honorable Barbara A. Hoffman, Chairman         -2-                                January 31, 2002
The Honorable Howard P. Rawlings, Chairman


       The scope of our work consisted of determining the status of the Department’s special and
reimbursable fund deficits as of June 30, 2001 and reviewing the deficit elimination strategies developed
by the Department in conjunction with the Department of Budget and Management. We also reviewed
the mid-year report to verify that the Department had reported all reimbursable and special fund
program agreements, that signed written agreements with clients for goods or services of $2,000 or
more were on file, and that collections reported by the Department were accurately recorded and
properly supported.

       Our detailed findings are as follows:

   1. To address its special and reimbursable fund deficits, the Department advised that it imposed a
      hiring freeze and implemented other cost containment measures to minimize fiscal year 2001
      expenditures. Additionally, the Department of Budget and Management identified eight State
      agencies with available funding that it believed in some manner relied on the Department of
      Planning’s data and planning services. The Department of Planning then billed these State
      agencies, which in turn, transferred a total of $1.6 million to the Department during June 2001.
      Based on our inquiries, there were no specific goods or services provided by the Department of
      Planning related to these billings; rather, this was a mechanism to transfer surplus funds from
      other agencies to the Department.

       Despite these efforts, the Department’s reimbursable and special fund deficits increased
       approximately $1.2 million during fiscal year 2001 and totaled approximately $4.2 million as of
       June 30, 2001. To eliminate the Department’s deficits, the Comptroller of the Treasury -
       General Accounting Division, with the concurrence of the Department of Budget and
       Management, transferred a total of $4.2 million in unappropriated General funds to the
       Department during the fiscal year 2001 budget closeout. Specifically, the Division transferred
       $2.4 million from a General fund allowance for doubtful accounts and $1.8 million from General
       fund surplus. The allowance for doubtful accounts was originally established by the Division in
       October 1998 to offset differences in accounts receivable or payable balances that could
       potentially have resulted from the conversion to a new State accounting system. The planned
       use of the Division’s allowance for doubtful accounts and General fund revenue to eliminate the
       Department’s deficits was reported to the budget committees by the Department of Budget and
       Management in June 2001.

       Based on our review and discussions with legal counsel to the Maryland General Assembly, the
       methods used to eliminate these deficits circumvented State budgetary procedures and violated
       the intent of State budgetary law. In this regard, funds generally cannot be transferred between
       State agencies, and State funds can be disbursed only on appropriation by an appropriation act.


   2. The following chart contains the information the Department reported as its reimbursable and
      special fund activity for the period July 1, 2001 to November 8, 2001. (For purposes of our
      review, we added the “number of agreements” column.)
The Honorable Barbara A. Hoffman, Chairman                 -3-                                      January 31, 2002
The Honorable Howard P. Rawlings, Chairman



                                                                               Signed
                                      Funding             Number of           Agreement           Amount
            Program                    Source             Agreements           Amount             Collected
       Administration               Reimbursable              5                  $154,360           $77,062
       Planning Data                Reimbursable              0                         0                   0
       Local Planning               Reimbursable              2                   128,513                   0
       Comprehensive                Reimbursable              2                   829,730           282,806
       Parcel Mapping               Reimbursable              12                  226,620           157,620
       Administration                 Special*                0                         0             80,000
       Planning Data                  Special*                0                         0              2,668
       Parcel Mapping                 Special*                0                         0           136,214
              Total                                           21               $1,339,223          $736,370

  *       Auditor’s note: Special Fund collections reported by the Department exceeded the reported signed agreement
          amounts. This occurred primarily as a result of royalty payments received from vendors. The Department has
          licensed certain vendors to sell copyrighted property maps to the public and receives a royalty payment for each
          map sold. These agreements are executed with the vendors, but total value is not stipulated because it varies
          according to sales. Additionally, in fiscal year 2002, the Department received an $80,000 award (in the
          Administration Program) from a national nonprofit organization for work the Department had performed
          relating to the Governor’s Smart Growth initiative. The Department informed us that they will process a
          budget amendment to retain these funds and that such funds will be used for future Smart Growth initiatives.

      Our review of the Department’s reimbursable and special fund activity disclosed the following:

      • The Department reported certain activity (such as amounts collected) for each of its
        reimbursable and special fund programs. However, the Department did not report amounts
        billed or accounts receivable balances. We recommended to the Department that this
        information be reported to the budget committees and Department management personnel
        agreed to do so beginning with the report for the period ending December 31, 2001.
        According to the Department’s records, the accounts receivable balance as of November 8,
        2001 was $94,244.

      •    As of November 8, 2001, 21 agreements for goods or services of $2,000 or more were
           negotiated and signed agreements were on file in each instance. The total amount of signed
           agreements reported by the Department ($1,339,223) was overstated by $610.

      •    Collections reported by the Department were generally properly recorded and supported.
           However, collections reported in the November 8, 2001 report ($736,370) were understated
           by $33,926.
The Honorable Barbara A. Hoffman, Chairman         -4-    January 31, 2002
The Honorable Howard P. Rawlings, Chairman



      If you have any questions concerning our review, please do not hesitate to contact me.



                                           Sincerely,




                                           Bruce A. Myers, CPA
                                           Legislative Auditor

								
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