ANNAPOLIS — A flawed, outdated and ineffective method of accounting is why the state Developmental Disabilities Administration discovered $33 million in unspent funds, and Department of Health and Mental Hygiene Secretary Joshua Sharfstein said the agency is committed to fixing those problems.
Testifying Tuesday before the House Appropriations Committee, Sharfstein, whose department oversees the Developmental Disabilities Administration, along with several department officials, assured legislators that they are working hard to correct the problems.
Sharfstein accepted criticism from legislators for the large amount of money that had hadn’t been spent, as well as the picture of dwindling finances and a massive waiting list painted during the last session, when a new 3 percent tax on alcohol was approved to help fund the agency.
“The biggest problem I have is the credibility of numbers,” said Del. Theodore Sophocleus, D-Anne Arundel. “You say you need X amount of dollars. You come to this body, say we should make up this number that you need. Then we find out that wasn’t really credible.”
“I think the start of credibility is being candid about the challenges that DDA faces,” Sharfstein responded. “We have a fundamental weakness in accounting in DDA.”
Sharfstein told the committee that the Developmental Disabilities Administration has an annual budget of $800 million, and provides medical and support services to about 25,000 Marylanders, some so severely handicapped they need round-the-clock care.
Regardless of its big budget and far reach, the agency’s accounting system and processes are nowhere close to where Sharfstein said he thinks they should be. The agency still uses a lot of paper to keep track of information. Waiver processes have not been updated in 20 years. Communication between offices is poor. And the agency makes payments based on estimates at the beginning of the year, reconciling the payouts as the year is closing.
The problem surfaced as agency staff members were closing out the fiscal 2011 budget. Sharfstein immediately asked Tom Russell, inspector general for the department, to investigate what had happened. Russell found no indication of fraud or intentional deception, just deplorable record-keeping.
“This is an $800 million system using things that are maybe 20 years old,” Russell said. “We need to look at the prepayment system. Does it serve DDA’s needs?
“If there is waste here, it is not a lot, but it is too much for the citizens of Maryland,” Russell said.
Sharfstein said there are so many problems with the old system, the only way to fix it is to rebuild from the inside out.
Part of the solution lies in getting a full understanding of the problem, Sharfstein said. Although the agency’s finances have been scrutinized by the inspector general and are the subject of several studies being done by the Department of Legislative Services, Sharfstein said he plans to get a deeper forensic audit done of the department to discover exactly where the problems are.
A new accounting system and methodology that is a better fit for the department are being planned, he said. A contractor is being sought to help design and implement the new system.
The department is completely reworking the items that are measured by the StateStat performance measurement system to better reflect the department’s success in different projects. Everything is under the microscope, including the prepayment system, which may need legislative approval in order to be changed.
Additionally, Sharfstein said the General Assembly will receive periodic reports about how the agency is changing and functioning.
As far as the unspent money, a total of $25.6 million could not be carried over and was sent back to the state’s General Fund. The money that was collected was spread out to help the most critical patients waiting for services, as well as to provide some services to people who are in danger of becoming in critical need.
While department officials tried hard to convince lawmakers that they are correcting problems, many were upset that the money went unspent in the first place.
“In a way, the tragedy is not whatever the mismanagement was,” said Del. Mary-Dulany James, D-Cecil and Harford. “You had money that did not get out the door to help people.”
“At best, this is disturbing,” said Del. Barbara Robinson, D-Baltimore City.