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Our Opinion: Profligate or prudent spending by agencies?

Our Opinion: Profligate or prudent spending by agencies?

June 8th, 2012 in News

Is spending by state agencies as the end of a budget year approaches profligate or prudent?

Recent audits of five state agencies by Missouri Auditor Tom Schweich show spending increased as annual budgets drew to a close. The state's fiscal year ends June 30.

This is not a new phenomenon - in either the public or private sector. It also does not necessarily indicate wanton spending.

First, no incentive exists for state agencies to end a budget year with a surplus. Unspent funds do not carry over into the agency's next budget year, they "lapse" into a general revenue pool to be redistributed. Consequently, agency A's savings may become agency B's gain.

Second, department officials fear ending a budget year in the black may result in being penalized with lesser allocations in the future. A surplus, they worry, may be interpreted as an overly generous allocation in need of correction.

"We found many examples of agencies sort of rushing to spend money before the end of the fiscal year and before the money lapses," Schweich told The Associated Press. But, he added, "we didn't find examples of just spending money for the sake of spending money - getting useless items."

The failure to uncover "useless" spending is important.

End of the year spending by agencies included amassing postage stamps - now available in "forever" denominations - purchasing computer and radio equipment for future use or making advance payments on leases.

Did some state agencies receive more money than needed? Or did sound money management and frugal spending allow them to plan for the future and avert possible cuts in providing state services?

The auditor recommended the state's Office of Administration (OA) provide more guidance to agencies on year-end spending, to which OA responded: "As noted in the audit, there are legitimate reasons for year-end spending by departments ..."

This chilly exchange indicates business will continue as usual.

Perhaps change isn't necessary.

If, however, it is desirable, a first step may be a mechanism to reward, rather than punish, state agencies that practice fiscal prudence.