AUDIT: $96 Million Needed to Cover Deficits Incurred Through Bad Accounting

Maryland’s legislature will have to approve $96 million dollars in deficiency appropriations this year or additional spending in future years to cover unlawful budget procedures by state agencies.

According to an Office of Legislative Audits review of statebudget closeout transactions for fiscal year 2013, several state agencies closed their 2013 books with non compliant i.e., unlawful transactions totaling $95 million. 

A deficiency appropriation is unexpected state spending, which must be plugged with supplemental appropriations.  According to state budget analysts, deficiencies have averaged $145 million over the last several years.  Governor O’Malley’s budget proposal leaves only $30 million in reserve to cover deficiency appropriations.

The Developmental Disabilities Administration alone owes the federal government $24.1 million due to disallowed claims for residential services and drug rebates.

The glitch ridden Maryland Health Benefit Exchange, illegally retained $1.6 million in general fund appropriations.  Instead of canceling the appropriation, the exchange encumbered the funds to pay contractors for fiscal year 2014, even though, the auditors note, it did not have any approved contracts to support the encumbering those funds.  

The Maryland Department of Education, Department of Human Resources, Department of Aging, and Department of Veterans Affairs, could not affirm their ability to obtain federal grant fund revenues totaling $17 million to cover deficits incurred for program spending. 

These agencies recorded transactions but could not provide adequate documentation verifying the transactions to obtain federal reimbursement.

Auditors also found that five state agencies recorded $34.7 million in accounts payable even though funds were not available for those transactions.