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Audit: State agencies rush to spend money as budgets expire

SALEM — At anywhere from $30 to $40 a pop, Hydro Flasks are an outdoorsy status marker, the Patagonia vest of thermoses.

The Oregon Department of Corrections bought 33 of them just days before its budget expired in June 2017. The flasks cost about $1,400, state data show.

That purchase could be emblematic of a trend state auditors have found.

The state should be more transparent when it comes to spending money, according to a report released last week by Secretary of State Bev Clarno.

And auditors found evidence that several state agencies rush to spend money to clear out unspent funds before the end of the budget cycle.

The money is allocated by the Legislature, and agency leaders fear that leaving money behind might lead to lower allocations the next time around.

The two-year budget period ends June 30 of each odd-numbered year — 2015, 2017, 2019, and so on.

Some state agencies’ spending jumps as the end of that two-year period arrives, auditors said.

The Secretary of State’s office provided the Oregon Capital Bureau with the detailed spending data for June of 2017 for the Corrections Department and the Oregon Health Authority.

Auditors used a broader set of data that included the June 2017 transactions to assess overall sums and spending trends over time.

They didn’t examine individual transactions — such as the Hydro Flasks that the Oregon Capital Bureau found — to check whether they were wasteful or low quality.

But previous studies have found that increased end-of-budget cycle spending has significant implications, auditors said.

“Prior studies and academic studies suggest heightened end of budget cycle spending may obscure agencies’ resource needs, hinder oversight, or have the potential to be low priority, low quality or wasteful,” auditors wrote.

For example, the state’s Chief Information Office routinely gets overwhelmed with requests to buy new technology at the end of the budget.

That means that state agencies may not be getting the best pricing.

“This rush undermines the ability of staff to adequately review IT investments and evaluate the potential for reduced costs or efficiencies for multiple agencies,” auditors wrote. “(The office of the Chief Information Officer) also told us this rush stymied their ability to do adequate market research for alternatives, perform robust quality assurance and limited their ability to identify and mitigate risks.”

The jump in spending can distort what state agencies need in the next two years as lawmakers allocate public money for agency work.

Auditors said that current state budget policies encourage that rush of spending at the end of every two years.

Some money that agencies don’t spend by the end of the budget cycle is reverted to the state general fund.

“Some agency budget managers told the audit team they were concerned that high reversion amounts would result in cuts to subsequent budgets,” auditors wrote.

Over the years, policies have been put in place intended to encourage state employees and agencies to find ways to save money, but many of those laws have not been implemented, auditors found.

For example, 30 years ago, lawmakers created a special fund that allowed the Department of Administrative Services to reward agencies that improve productivity. Auditors found no evidence that any such money has been awarded to agencies, and no accounts related to the fund.

Auditors recommended 16 measures the state could take to be more transparent about its budget.

While the Department of Administrative Services agreed with 12 of the auditors’ recommendations, it was less direct about the four others.

It said it only “partially agreed” with auditors’ recommendations to work with the Legislature to enact policies to prevent end-of-biennium spending spikes and include fields in the agency’s new human resources software to track what are called double fills — when the agency uses more than one employee to fill a position.

While double-fills are sometimes warranted, in order to manage short-term workload increases, or ensuring a smooth transition when an employee retires, for example, auditors said that doing so can obscure an agency’s true budget needs.

And the agency said it “neither agreed nor disagreed” with auditors’ recommendations to request that lawmakers remove a limitation on spending more state money to improve the state’s budget transparency website, and work with the Legislative Fiscal Office and the Transparency Oregon Advisory Commission to “encourage consistent meetings” and to release a report every two years, in accordance with state statutes.

The agency’s response, which also asserted that a revision of the transparency website was underway, prompted auditors to write back with a rebuttal — a rare occurrence.

Auditors said they wrote the rebuttal “to clarify the audit findings and provide additional information to citizens and stakeholders.”

Reporter Claire Withycombe: cwithycombe@eomediagroup.com or 971-304-4148.