Comptroller says late spending bill carries risks for state

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BOSTON, >> With Gov. Charlie Baker's signature newly affixed to a spending bill that closed out accounts for the budget year that ended in June, the state comptroller on Monday politely admonished lawmakers for allowing the process to drag on into November.

Comptroller Thomas Shack said late action on the $326.3 million spending bill made it difficult for his office to meet its statutory obligations to file financial reports reviewed by creditors, and could be looked at negatively by rating agencies that help set the price of borrowing for the state.

After Baker signed the bill Monday, Shack submitted to the governor and legislative leaders a status report in which he indicated that he would file a required financial report that was due by Monday "as soon as practical." He explained that because of his late receipt of the final spending bill he was "compelled to choose completeness over filing expediency."

The report — called the Statutory Basis Financial Report — is due each year on Oct. 31. Because the deadline fell on a Saturday this year the Comptroller's Office technically had until Monday to file.

Shack said his office has closed the books on fiscal 2015 and plans to file the SBFR, and certify the consolidated net surplus, for outside creditors to review once he completes the required transactions.

The deadline for the year-end financial report is historically based on accounts payable and receivable periods ending on Aug. 31, but Shack said that over the past two decades the legislative trend has been to approve final deficiency budgets later in the calendar year.

Between 1995 and 2005, the year-end supplemental budget was enacted in August six times, and never later than Sept. 30. Since 2006, only twice have final budgets been signed in August, and in each of the other eight years final spending numbers weren't solidified until October or, this year, on Nov. 2.

"This is a troubling pattern and puts the accuracy and integrity of the Commonwealth's accounting and audit responsibilities at risk when compressed against strict statutory filing deadlines," Shack wrote in a letter to Baker, Administration and Finance Secretary Kristen Lepore, House Ways and Means Chair Rep. Brian Dempsey, Senate Ways and Means Chair Sen. Karen Spilka and the clerks of both branches.

Dempsey declined, through a spokesman, to comment on the comptroller's concerns, and Spilka could not be reached.

Shack said that dealing with deficient accounts later in the year not only prevents the Comptroller's Office from meeting statutory filing deadlines for annual financial reports, but also to qualify for the Certificate of Excellence in Financial Reporting, which is of interest to rating agencies and the investment community.

Baker's budget team filed the end-of-year budget bill in July, only to see deliberations in the House and Senate drag on for months.

After a weeks-long summer recess, and with few pieces of legislation moving this year, lawmakers treated the supplemental budget as a vehicle to attach many spending and policy priorities unrelated to backfilling deficient accounts like MassHealth or snow and ice removal, complicating negotiations between the branches.

Shack said Massachusetts is now among the "very last" states in the country to close out fiscal 2015.

"While I appreciate that legislative development is challenging, on a going forward basis, I strongly recommend that a greater sense of urgency be brought to the fiscal year-end closing process," Shack wrote, indicating that his office would be developing a recommended timeline for legislative actions.

The comptroller's office is an independent agency in state government and oversees the fiscal operations of about 150 state agencies, focusing on accounting, payroll, human resources, and financial reporting while also working with the state's many private vendors.

"I hope we can all agree that late fiscal year close-out creates conflicting obligations and is not a recommended practice," he said.


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