Auditors: Agencies rushed to spend rather than return funds

Two major state agencies–including the governor’s budget office–shuffled millions of dollars into projects that wouldn’t begin for another 6 to 18 months to avoid having to return the money to the state’s coffers, according to recent audits covering parts of former Gov. M. Jodi Rell’s administration.

The Department of Transportation released half of its $2.8 million capital account to fund upgrades to the Metro-North commuter rail line on June 26, 2009, just four days before the fiscal year would end, according to one report from Auditors John C. Geragosian and Robert M. Ward.

Twelve months later, $6.5 million, or 83 percent of that year’s Metro-North capital account would be expended by DOT officials on June 29. And several projects received funding even though Metro-North hadn’t yet submitted the formal request for the cash.

Not only was $7.9 million expended within the final days of two consecutive years by the transportation department, but nearly 2.6 million of those funds remained unspent as of Dec. 31, 2010, including nearly $1 million that had been released 18 months prior.

“The advance payments essentially extended the budgeted appropriations beyond the period covering by them,” the auditors wrote. “It is apparent that payments were made to avoid lapsing funds.”

There’s a longstanding tension between the General Assembly, which enacts the annual budget, and the state agencies that allocate the dollars. Though departments are expected to save funds wherever possible, doing so often leads lawmakers to reduce accounts where the savings occurred in the subsequent year.

In addition to releasing rail repair funds in the final days of the fiscal year, the DOT rewrote its books in June 2010, reassigning bills from one account to another, rather than return $1.64 million to a state reserve.

Most bus expenses are paid out of the Special Transportation Fund, with any leftovers moved into reserve at year’s end. But some are paid out of a special account fueled by revenues from  DOT parking garages in Stamford and Bridgeport. That account doesn’t forfeit its funds on June 30, but retains them for the next fiscal year’s use.

Transportation officials learned in June 2010 that $2.2 million in transit bus expenses thought to have been paid out of the Special Transportation Fund, had instead been paid out of the protected account. Rather than allow the STF money to be designated as surplus, transportation officials simply “processed journal entries,” transferring most of the bills–nearly $1.64 million–and matching funds to cover them into the protected account, the auditors wrote.

“We were told that the expenditure transfers were made to avoid lapsing funds,” Geragosian and Ward wrote, adding this shouldn’t have happened.

DOT officials defended some of their budgeting practices in their written response to the auditors.

Most state funds for rail line improvements aren’t spent until the final quarter of the fiscal year when Metro-North determines how much of its own resources it will dedicate for this purpose. DOT officials added that “Metro-North has been less than expedient in administering the projects, incurring the cost and billing (the state) in a timely manner.”

DOT spokesman Kevin Nursick added Tuesday that department officials have been communicating the auditors to resolve concerns about the timeliness of rail capital projects.

Department officials conceded in their written comments that their method of handling the bus appropriation reduced what the agency returned to the state’s coffers.

“We’re not surprised by the auditors’ findings the DOT hasn’t been ready to take on transportation projects,” said Matt O’Connor, spokesman for Local 2001 of the CSEA/SEIU, the union representing about 1,000 transportation professionals. “Short-staffing among the agency’s engineers and planners and road and bridge maintainers has been a chronic problem for more than two decades. That’s left DOT managers to rely on costly consultants whose primary interest is in securing lucrative taxpayer-funded contracts, not rebuilding our state’s crumbling infrastructure.”

O’Connor added that the audit’s findings warrant “a renewed look at how the DOT is being managed. The SEBAC agreement just ratified by our members creates a long-overdue process for transforming state government that we intend to use so that front-line workers lead the charge for change.”

In a separate report, the auditors also raised concerns about $8.6 million that the Office of Policy and Management, the Executive Branch’s chief budget and policy planning agency, spent just before the books were closed in June 2008.

The auditors noted that OPM released funds for 24 projects designed to help municipalities deliver public services on a regional and more cost-efficient scale. But as of February 2010, only three projects had been completed, accounting for about $1 million of the $8.6 million issued.

“There was no evidence that OPM tried to obtain legislative authority to carry these funds over to the next fiscal year,” the auditors added.

OPM declined to comment on the audit. But Benjamin Barnes, Malloy’s choice to head the office, told municipal leaders last week that the administration’s focus later this fall when awarding grants under the Small Town Economic Assistance Program will be to support community projects ready to begin in the near future.

“We need to get the money out the door,” Barnes said at the Connecticut Conference of Municipalities annual convention at the Connecticut Convention Center.

The administration has received applications from communities seeking between $30 million and $40 million in state assistance through the Small Town Economic Assistance Program. But the governor has just $20 million to award later this fall, Barnes said, adding that awarding even $100,000 to a community that will hold the funds in reserve for two or three years as it accumulates other resources potentially blocks those dollars from creating jobs now.

“We’re trying to push for projects that are ready to go,” he said.