Photo courtesy of W.Va. Legislative Services The State Capitol in Charleston can be seen in this file photo.
CHARLESTON – Lawmakers are potentially missing millions of additional dollars for the state budget and other appropriations due to lack of limits for special revenue funds, auditors say.
Members of the post-audit subcommittee heard a report Monday afternoon examining the state’s use of special revenue funds. The report found that of the 741 special income funds examined, 94% did not have clear fund balance limits. Of the 741 special income funds, 705 funds had no set limit and 36 funds had vague fund limits and legislative auditors could not determine what those limits were.
“The majority of the special income funds examined did not have a clearly defined fund balance limit in the code,” Auditor Ashley Edmonds said. “This potentially allows balances to grow beyond what was expected and makes it difficult to determine excess fund balances, if they can be determined at all.”
Using several different metrics to compare the closing balances of 11 special income funds with vague balance limits with historical expenses, the auditors determined that the total exceeding the historical trend ranged from $ 34 million to $ 26.5 million. of dollars. Using the most conservative method, the auditors determined that 134 funds exceeded historical spending by $ 166 million.
As defined by the state’s comprehensive annual financial report, special revenue funds are set up for specific uses that cannot be re-appropriated or hindered in any way.
These funds come from permits, licenses and other fees established by public bodies or certain non-governmental entities.
The earmarked special revenue funds are earmarked by the West Virginia legislature and are included in the annual general revenue budget. Although the expenditure of the earmarked special revenue funds is limited exclusively to the earmarked amount, any funds carried over to the following year may be earmarked by lawmakers. Unallocated special income funds are not subject to legislative appropriation. Most of the special funds are unaffected.
Legislative auditors have said that having vague or non-existent definitions of what is considered a special income fund balance limit causes fund balances to increase beyond the expected fund limits.
The auditors also found that 10 of the special income funds they examined had clear limits on how much those funds were allowed to raise, but they still had balances in excess of code limits. The 10 funds combined held more than $ 5 million in excess of what they were allowed to raise.
“Special income funds with clearly defined limits increase the ability to determine and identify excess fund balances, as determined with all 10 fund balances exceeding their defined limits of $ 5 million,” said Edmonds. In addition, funds established by law can be in effect for decades and, as circumstances change, the limits on these funds help ensure that the intent is clear and that these funds are properly managed throughout. of the life of the funds. “
The Office of the Legislative Auditor recommends that lawmakers set clear limits for the balance of funds in the state code. Raleigh County Republican MP Brandon Steele, co-chair of the legislative rule-making committee, said he sees the problem arise when reviewing the agency’s rules.
“You see all these different agencies showing up year after year and continually asking for more money, so one of the things we’ve developed is a requirement to show us the previous five years of your income and expenses when you come in and request a increased fees, ”Steele said. “We determined that in our case there was $ 50 million in excess funds at a wide variety of agencies. “
Steele said the legislative rule-making committee can begin to review these specialized fees and recommend agency and board scans to the joint government and finance committee to capture those excess funds when they can be determined.
