Harford Partners With Chamber On County Business “Meet & Greet”

On September 28, the Harford County Department of Procurement, in partnership with the Harford County Chamber of Commerce, hosted its second annual “Meet & Greet” for local businesses to learn about doing business with Harford County government.

Procurement Director Karen Myers led the discussion on topics including insurance and other requirements, the meaning of “best and final offer,” and the importance of achieving “best value.” Director Myers told the audience of more than 40 attendees that fair competition and best value are key to all public procurements.

Moving forward, Harford County will continue to follow best practices in procurement as it strives to ensure maximum value for taxpayer dollars.

Legislative Auditor: Counties Counting Just Fine

Pursuant to Maryland statute, the State Department of Legislative Services Office of Legislative Audits (OLA) has completed its annual desk review of each local government’s annual auditing report – and counties fared well.

Pursuant to Maryland statute, all local governments, including counties, municipalities, and 17 special taxing districts, have to file regular audit reports with the State, including financial statements, accompanying notes, and auditors’ reports on opinions about the presentation of the financial statements. Financial statements must comply with generally accepted accounting principles, and audits must comply with generally accepted auditing standards. According to the report, OLA completes each desk review of the audits to:

  • Identify areas of noncompliance with our audit guidelines and certain
    accounting and auditing standards pertaining to the presentation of the
    financial statements and auditors’ reports.
  • Identify any instances of noncompliance with certain provisions of State law
    (for example, collateral for bank deposits, timely filing of audit reports).
  • Identify local governments with potential financial problems relating to deficit
    fund balances or unfavorable trends and ratios, based on analyses of financial
    data over the most recent five-year period (July 1, 2011 through June 30,
    2016).

The report identifies a handful of counties with audit reports containing disclosures that cash deposits were not fully collateralized or otherwise insured. It identifies an adverse opinion against Baltimore City, which resulted from the Baltimore City Public School System failing to book its pension liabilities on its own statements as required under GASB  – an issue which the school system has since corrected.

All counties filed their reports in a timely manner and complied with relevant provisions of state law, and that no counties displayed signs of deficit fund balances or “unfavorable trends” or “ratios.” Legislative Auditor Thomas J. Barnickel III reports that

most of the financial statements filed by the local governments for the fiscal year ended June 30, 2016, along with the related independent auditors’ reports, complied with the accounting and auditing standards that we assessed.

At today’s hearing of the Joint Committee on the Management of Public Funds, Bob Garman, Assistant Director of Quality Assurance for OLA testified that while they found more local governments noncompliant than the previous year – about one third of all 203 local governments audited – most areas of noncompliance were relatively minor.

MDOT Restructures Procurement Upon Discovering Poor Contracting Practices

The Maryland Department of Transportation (MDOT) Secretary’s Office is taking over procurement for the Maryland Transit Administration (MTA), reports The Daily Record. The move comes months after MDOT Secretary Pete Rahn replaced former MTA Administrator Paul Comfort after concerns about the agency’s procurement of office furniture surfaced.

MDOT indicates that about $15 million has been paid to as many as 31 vendors without proper contract authority – including $5 million to seven vendors without any contracts at all.

In addition to centralizing MTA’s procurement within MDOT, the department also plans to hire an inventory control officer who will report to MDOT’s chief procurement officer, install new software to track contracts and payments and provide additional training to MTA employees.

The Daily Record quotes Lt. Governor Boyd Rutherford’s comments to MDOT Deputy Secretary Jim Ports at today’s Board of Public Works meeting:

It’s sloppiness. This stuff is in the bowels of the organization and it takes time from the leadership, I know. I can fuss at you and fuss at the secretary but it means you’ve got to tell your people to burrow down into the bowels, the basement of your organization, and let them know. I truthfully don’t think it’s corruption. I think it’s sloppiness. I think it’s lack of education and I think it’s not looking out for the taxpayers’ dollars. The people who are doing these things don’t realize they are working with taxpayer dollars.

Lunch & Learn: Strategic Sourcing Summit, October 10 in Dorchester County

US Communities, working with MACo, is offering a complimentary event for public sector purchasers and decision makers — to learn how to save time and money through the U.S. Communities program.

Network, enjoy lunch, ask questions and share feedback. Don’t miss the opportunity to:

  • Learn about new solutions and the latest innovations in procurement
  • Network with other local agencies using cooperative purchasing and hear what is working for their agency
  • Connect with U.S. Communities’ suppliers to receive their lowest overall government pricing
  • There is no cost to attend and lunch will be provided. For more info, contact Matt East.

    Register now for the Strategic Sourcing Summit!

    Procuring Advice On Upgrading Procurement? Governing’s Got You

    Looking to bring your procurement processes into the 21st century? Governing has made available for download the sponsored publication, Procurement Automation: The Cornerstone of Modernizing Public Sector Purchasing

    Here’s what the magazine has to say about it:

    State and local governments across the country realize legacy procurement operations, often dominated by paper-based processes, must transform to meet the demands of modern government. With a comprehensive plan that also covers process reengineering and new training for procurement staff, state and local governments can create a foundation for ongoing improvements that turns procurement into a cost-effective strategic resource.

    What’s Going On With Tax Reform? Part 3

    Yesterday, Steven M. Rosenthal of the Tax Policy Center opined on a potential element of tax reform that understandably has received less attention from local government advocates than elimination of the deductibility of state and local taxes (SALT) and the tax exemption for municipal bonds. Yet, White House National Economic Council Director Gary Cohn has argued that this element of tax reform will most benefit “the policemen … the firemen and the teachers.”

    What is it? Is this true? And as employers of the policemen, the firemen and the teachers, should local governments care?

    Cohn was referring to potential tax relief to U.S. corporations for reincorporating their off-shore earnings into the U.S. tax system. This provision would allow corporations holding off-shore profits to repatriate previously untaxed foreign earnings with a U.S.-based parent firm at a special low rate. Cohn argued that this tax relief would benefit the “biggest owners of equities in the world,” the “biggest public pension funds” – and, therefore, the beneficiaries of those pension funds, like public safety officers and teachers.

    But, Rosenthal says this isn’t actually the case:

    Now for some pension background: There are two basic forms of retirement plans—defined benefit (DB) plans which are typically thought of as traditional pensions and defined contribution (DC) plans, which include 401(k) plans and IRAs.  Defined benefit plans pay annuities to retired workers but these payments are promised by employers and based on years of work and earnings – they do not depend on the returns on assets held by the plan or by the employer directly.  (However, the windfall from a reduced tax rate on accumulated offshore earnings might increase the likelihood that employers meet their promised retirement obligations to their employees). By contrast, the returns on assets held in DC plans and IRAs flow directly to the beneficiaries.

    At one time, private and public employers mostly provided defined benefit plans, but now most DB plans are provided by public employers for public servants, like those police officers, fire fighters, and teachers.  ….

    A retroactive tax cut for U.S. corporations goes solely to existing shareholders. The Tax Policy Center estimates that 76 percent of the benefits, including the benefits through retirement plans, of a retroactive cut in corporate taxes would go to people in the top fifth of the income distribution (those with annual incomes above $150,000) and 40 percent to the top 1 percent (above $725,000).

    Cohn is correct when he says retirement plans would benefit from a lower tax rate applied to accumulated foreign earnings, since they hold a large share of stock in US corporations. But, the DB plans do not pass additional returns through to police officers, fire fighters, and teachers. Only DC plans pass additional returns through to beneficiaries.

    Bottom line: this tax break could potentially help counties meet their retirement obligations. But, according to Rosenthal, our retired police officers, firefighters and teachers with traditional pensions shouldn’t start spending all their nest eggs quite yet.

    Governor Announces Plans To Widen I-270, I-495, MD 295

    Today Governor Hogan announced a plan to add four new lanes to I-270, the Capital Beltway (I-495), and the Baltimore-Washington Parkway (MD 295). The anticipated $9 billion “Traffic Relief Plan” for these three major state highways is touted to reduce congestion for millions of drivers.

    The MD 295 project involves selling the road to the Maryland Transportation Authority (MdTA), which primarily operates toll facilities and does not generally use any gas tax revenues for its projects. Parts of MD 295 are owned by the U.S. Department of the Interior, and the Governor indicated that he has entered into talks with the Department Secretary about the transfer. Baltimore City also owns the part of MD 295 that runs through the city boundaries, and it is unclear whether MdTA would take over ownership of that portion, as well.

    The state plans to widen I-495 and I-270 by entering into a public-private partnership (P3), through which the private entity would design, build, finance, operate, and maintain new lanes on I-495 between the American Legion Bridge and the Woodrow Wilson Bridge and on I-270 between I-495 and I-70.  That project is also anticipated to include express toll lanes. According to the Request for Information (RFI) MDOT released today, MDOT does not intend to use Transportation Trust Fund dollars for these projects, either.

    From the Governor’s release:

    The first step to build new express toll lanes on MD 295 will begin with the transfer of MD 295 from the U.S. Department of the Interior to the Maryland Transportation Authority. Governor Hogan has already personally started this process during a recent meeting with Interior Secretary Ryan Zinke and has directed MDOT officials to move forward with the transfer negotiations. Following the transfer, the Maryland Transportation Authority would then build, operate, and maintain the new lanes and maintain existing lanes between Baltimore and Washington, D.C. …

    In making this announcement today, Governor Hogan has directed MDOT to issue the Request for Information [(RFI)] to the P3 industry and continue the transfer process with the U.S. Department of the Interior.

    MDOT issued the RFI today. From the document:

    In lieu of an availability payment structure, MDOT is considering offering a toll
    concession to developers for added capacity the developers provide to I-495 or I-270.
    Under a toll concession for additional capacity, current capacity on I-495 and on I-
    270 shall remain free. Only users of the additional capacity would pay user fees. The
    desire of MDOT would be that any private agreement not require a financial
    contribution directly from the Maryland Transportation Trust Fund and that the
    agreement would provide a concession payment to MDOT upon financial close.
    Assistance through federal funding resources and programs such as the
    Transportation Infrastructure Finance and Innovation Act (TIFIA) would be
    supported and pursued.

    MACo OPEB Trust Gains Over $3 Million For Participants

    money-2696228_960_720The MACo OPEB Trust – an investment pool for counties and other governments with long-term retiree health care obligations – has already delivered on its promise to member counties. In less than three years of operation, the Trust has reported gains of more than $3 million from growth in assets, plus interest and dividends.

    Under Maryland law, OPEB assets must be separated into a Trust in order to be invested with long-term strategies, including stocks and bonds. MACo developed the OPEB Trust as a ready-to-go option for counties, municipalities, community colleges, and libraries to use — allowing a member-guided investment strategy while sharing the various overhead costs of operating a guiding organization. The results have proven very beneficial for the ten Trust members — the investments have kept pace with market forces, while limiting investment risk, and have reached substantial gains unreachable without the Trust structure.

    The following summary comments were assembled by the Trust’s investment advisors, GYL Financial Synergies:

    • The MACo OPEB Trust was initially funded in April 2015 and charged with the task of providing participating entities with returns consistent with the target allocation while taking lower levels of risk.

    • The Trust had a market value of $28.8 million as of August 31st, and returned 5.9% since the inception date of April, 2015. The custom benchmark returned 6.1% over the same time period.

    • The target asset allocation is 65% equities, of which 38% is currently invested in index funds, and 35% fixed income

    • Given the large relative cash flows since inception, Trust funds are being methodically invested (dollar-cost averaged) into the markets. Consequently, while the OPEB Trust has matched its custom benchmark since inception, it has done so while experiencing approximately 27% less volatility as measured by the Beta statistic.

    • Over the past two years and five months, the Trust has appreciated by $3.2m through a combination of realized and unrealized gains plus interest and dividends.

    • The Trust returned 2.1% for the past three months, with the custom benchmark returning 2.3%. For the year to date, the returns are 8.6% and 9.0% respectively.

    Learn more about the MACo OPEB Trust by contacting MACo Executive director Michael Sanderson, who sits as an ex-officio Trustee.

    Auditors: Social Services Department Overspent, Mishandled Contracts

    The state’s auditors just completed a report on the Maryland Department of Human Services (DHS), and the results are not squeaky clean.

    DHS overspent $4 million on an information technology contract as a result of inadequate contract administration, according to the report released yesterday by the State’s Office of Legislative Audits (OLA), covering the period beginning in August 2012 and ending in August 2015.signature-contract-2654081_1920

    In addition, DHS paid $8.4 million over and above its authorized contract approval amount and $4.5 million above the department’s appropriation, without seeking Board of Public Works (BPW) approval, as required under State procurement regulations. The report indicates that DHS failed to disclose the unfunded liability to the Comptroller’s Office, as required.

    The report indicates that DHS overpaid two legal firms by $616,000, by entering in emergency contracts with them guaranteeing minimum compensation amounts.

    Finally, the report indicates that DHS failed to properly store and protect “sensitive personally identifiable information.”

    While DHS did not contest most of the OLA findings and recommendations, the department did disagree with the auditors’ findings regarding the legal firms’ contracts. From the department’s response:

    After DHS failed to obtain the approval of the [Children In Need of Assistance, or] CINA contracts by the Board of Public Works in August 2013, BPW directed the Department to enter into emergency contracts. DHS senior management engaged in negotiations in order to obtain the emergency contracts, which resulted in continuation of legal services for children with no disruption in services. The two contractors provided legal services for several thousand children under the emergency contracts.

    Maintaining stability was of paramount importance to the Department and a failure to reach an agreement with the seven vendors would have resulted in upheaval for approximately 16,364 children and the risk of children losing statutorily mandated counsel. ….

    DHS also believes that the OLA analysis is incorrect. ….  [T]he contractors provided high quality representation for the children at a reasonable rate.

    Nevertheless, DHS indicated that its current legal services contracts do not include guaranteed minimums.

    The report, which includes DHS’ responses, is available here.

    The Baltimore Sun covers the story here.

     

    Learn All Things Public Finance With MDGFOA

    The Maryland Government Finance Officers Association (MDGFOA) has announced their fall educational offerings.

    The MDGFOA Fall Conference takes places on October 27, 2017 at the BWI Marriott in Linthicum. Presentations include:

    • The Latest in Government Fraud, with Adam Lippe, State’s Attorney’s Office, Baltimore County;
    • Continuity of Operations Planning (COOP) Overview, with Eric Oddo, Continuity Program Director, University of Maryland Center for Health and Homeland Security;
    • Maryland’s Fiscal Health, with Eileen Norcross, Senior Research Fellow, Mercatus Center at George Mason University;
    • Maryland Revenue Update, with Andrew M. Schaufele, Director, Bureau of Revenue Estimates;
    • GASB Update and Actuary Insights, with Jennifer Diercksen, First Vice President, Davenport & Company LLC, and David Boomershine, EA, MAAA, FCA, MSPA, President, Boomershine Consulting Group; and
    • Best Practices- Risk-Based Reserve Policy, with Bob Cenname, Deputy Budget Director, City of Baltimore. 

    Registration is available on MDGFOA’s website.

    In addition, MDGFOA is offering a Review of the Government Accounting, Auditing & Financial Reporting Exam on November 2-3, 2017, and an Intermediate Governmental Accounting Seminar (IGAS) November 8-10, 2017.

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