RD97 - Review of Capital Project Cash Flow Requirements Fiscal Year 2016

Executive Summary:

This is the Auditor of Public Accounts’ third annual report to satisfy Chapter 806 of the 2013 Acts of Assembly (Chapter 806) requirement to report on the adherence to the cash flow requirements for each project within Chapter 806 and any deviation in necessary project appropriation and allotment, which creates a delay in the progress of the projects.

The capital project cash flow requirements process is effective. The only project funded by the Central Capital Planning Fund was a Chapter 2 of the 2014 Acts of Assembly (Chapter 2) project, which is outside the scope of our audit; therefore, we did not review its timing. The Department of Planning and Budget’s (Planning and Budget) processing time for CO-2s improved in fiscal year 2016 with only 20 percent of CO-2s taking longer than 60 days, while in fiscal year 2015, 53 percent of CO-2s processed for Chapter 806 projects took longer than 60 days. The Six-Year Capital Outlay Advisory Committee (Advisory Committee) did not meet quarterly during fiscal year 2016; however, there is a process in place to advance projects between meetings that prevented any delays. The Departments of Planning and Budget, General Services, and the Treasury are monitoring the $250 million annual debt limit, and to date Chapter 806 capital project expenditures have not exceeded the limit. The Department of Accounts (Accounts) is transferring planning money from bond funded projects back to the Central Capital Planning Fund timely based on Planning and Budget’s request.

We have the following recommendations:

• To determine if the Central Capital Planning Fund is currently funded at a level that can handle the future volume of capital projects, Planning and Budget should do an analysis of upcoming projects that will need planning funds and their estimated timing to determine if there is adequate funding available within the Central Capital Planning Fund. If the analysis determines funding to be inadequate, Planning and Budget could make a recommendation to the General Assembly for how much the fund needs to prevent delays due to the availability of planning funds.

• Agencies need to ensure that they process the BEX (transaction to execute an appropriation change within the budget and financial systems) to support the CO-2 timely. Because responsibility for these two functions at the agencies often is divided between the budget section and the capital outlay section, proper coordination of the timing of these two forms at the agency level is essential.

The Chapter 806 funding limit of $250 million reached its final step in July of 2016. Therefore, we will consider the reporting on cash flow delays within this Chapter to be complete, and going forward, the Auditor of Public Accounts will begin to report on the funding limit set out within Chapters 759 and 769 of the 2016 Acts of Assembly (hereinafter referred to only as Chapter 769 projects).