The State Auditor’s Office has released its findings in a review of how five state agencies made purchases at the end of fiscal year 2010. The one-time audit included the Departments of Corrections, Mental Health and Revenue, the Office of Administration and the Office of State Courts Administrator.

Deputy State Auditor Harry Otto

Deputy State Auditor Harry Otto explains the goal. “There’s always been a rumor or legend that some agencies might just go ahead and spend money just to spend money and not lose it so that their appropriations don’t lapse.”

The audit didn’t find that money was being wasted, but Otto says some expenditures might be being made earlier than necessary. For example, he says the Department of Revenue stockpiled postage that wasn’t needed immediately.

Otto contrasts it to when a private industry uses “just in time inventory.” “They would only acquire inventory shortly before they needed it. They don’t let it just sit on the shelf. In this case we saw where Revenue did buy a lot of stamps, a lot of postage, towards the end of the year which they didn’t need for a period of time after the end of the year.”

In another instance, the Office of Administration wrote a check for more than $45 thousand in FY 2010 but held it for three months because the project was not finished. Otto says that was to keep the unspent portion of OA’s appropriation from going back into General Revenue with the start of the new fiscal year, July 1 of 2010.

“They may hate to lose money that they didn’t get to spend because the timing wasn’t right, but the state doesn’t allow you to pay for a service until it’s been performed. The question is whether or not they should have paid it in the year in which they paid it.”

View the Auditor’s office’s report.

The Auditor’s office is recommending that the Office of Administration consider legislation, regulations, policies and procedures to guide state agencies in the timing of purchases.

Otto says the agencies are “running a little bit by the seat of their pants as to risking the loss of the appropriation if they don’t spend it now even though they don’t really need it now. They’re in a tough situation as to whether or not they ought to go ahead and spend the money and hope they get it appropriated again or not spend the money and risk not getting it appropriated, then they wouldn’t have the funds to purchase what they truly need.”