The Colorado State Auditor reported today nine state departments have exceeded the amount of cash revenue from fees that they’re allowed to retain.

These funds, part of the departments’ “uncommitted reserves,” total $16.4 million across 18 separate cash funds.

The auditor’s report was presented Monday morning to the joint Legislative Audit Committee as part of the auditor’s annual performance audit on Cash Funds Uncommitted Reserves for the fiscal year ending June 30, 2022.

Under state law, when departments have excess uncommitted reserves, they’re required to reduce fees or increase expenditures in order to spend down those reserves.

Failure to do so can result in restrictions on spending authority. The state controller is now restricting that authority for cash funds within the Department of Public Health and Environment and the Department of Regulatory Agencies, which both have had cash funds with excess uncommitted reserves for the last four consecutive years. Both agencies had their spending authority for those cash funds restricted in fiscal year 2022 and they will continue to have restricted authority in fiscal year 2023. 

The Department of Personnel and Administration has now hit three consecutive years of excess uncommitted reserves with a supplier fund and the state controller is now restricting their spending authority until those reserves are eliminated. 

The other impact is on TABOR refunds. Gina Faulkner, the legislative audit supervisor, said: “Managing excess revenue in cash funds is important because it can affect whether the State owes refunds to taxpayers under the Taxpayer’s Bill of Rights.” She also noted that excess revenue can indicate that departments should reduce fee amounts being charged for services.

In addition to CDPHE, DORA and DPA, six other departments have excess uncommitted reserves, with four new to the list for fiscal year 2022:

• Department of Agriculture,
• Department of Health Care Policy and Financing,
• Department of Law,
• Department of Local Affairs,
• Department of Public Safety
• Department of Revenue

In 2015, the General Assembly changed the law around excess reserves, stating that agencies would only be out of compliance if they had at least $200,000 in uncommitted reserves. The same legislation allowed agencies to average those reserves over multiple years, although the audit report said none of the agencies out of compliance had asked to do so.

The audit noted that some agencies are regular offenders. The Department of Law, for example, has had a fund that has been out of compliance 11 times out of the last 20 years. DPA’s cash fund has been out of compliance 10 years out of the last 20. A cash fund at DORA has been out of compliance nine years out of the last 20. Those years out of compliance are not necessarily consecutive. 

The fund with the largest balance is the Division of Professions and Occupations Cash Fund within DORA, with an excess balance of almost $3.9 million. DORA is almost entirely funded by the industries and occupations it oversees. Its 2022-23 budget of $116.9 million included $106.1 million in cash funds, generated through fees and fines. 

The Division of Professions and Occupations within DORA was budgeted for $21.2 million in the current fiscal year’s budget, with $20.6 million coming from cash funds. 

The Department of Local Affairs’ Mobile Home Park Act Dispute Resolution and Enforcement fund, created through statute in 2019, which is holding almost $1.2 million in excess reserves. It’s new to the list in 2022, the fund’s first year for compliance was 2022.

The vital records fund of CDPHE — which collects fees for copies of death certificates and birth records — grew from $663,304 in 2021 to $963,899 in 2022.

The most egregious violator of the law appears to be the Medical Marijuana Cash Fund within CDPHE, which has been out of compliance 17 years out of the last 20 and has been under restriction for the past two years by the state controller for four consecutive years out of compliance.  

The Inspection and Consumer Services Cash Fund within the Department of Agriculture collects fees charged for inspection certifications on scales, eggs, meat, fertilizer, feed, grain, and anhydrous ammonia. The fund has been out of compliance seven times since it was created in 2006. The ag department’s Plant, Health, Pest Control and Environmental Protection Fund collects fees for enforcement of environmental provisions such as biological pest control, bee inspections, groundwater protection, and pesticide applicator license and inspections. The fund was created in 2011, and has an excess balance of nearly $800,000. 

The audit made 18 recommendations for improvements, all tied to each of the 18 cash funds that are out of compliance. The agencies all responded that they would comply, but the fact that 15 cash funds had been out of compliance for a year or more indicates agencies have not been successful in reducing those balances. In some cases, spending down those dollars will require additional spending authority or legislation, according to responses from the agencies. 

Crystal Dorsey, the manager for the audit, told Colorado Politics that the restrictions on spending authority apply only to the cash funds that are out of compliance. State law dictates how that works, she explained.

It’s also something of a moving target as the agency will continue to collect cash revenues for those funds.