Mid-Fiscal Year Look at Ohio’s State Finances — and Jumbled Reporting

Six months into the Ohio’s 2007-2008 fiscal year, it seems like a good time to note that the State of Ohio’s overall budgetary situation is okay.

Unfortunately, at the detail level, it’s indecipherable (click on “January 10, 2008″ for the PDF at the link).

The overall situation: General fund tax receipts before transfers have come in $104 million below expectations (up $393 million over last fiscal year), while general fund expenditures before transfers are $70 million below expectations (up $816 million year over year).

That’s a swing in the wrong direction against what was expected of $34 million ($104 mil - $70 mil), which in the grand scheme of things is not too bad. Of course, breaking even against expectations or beating them would be better.

But what’s really frustrating is that the state is at least six months into a conversion involving payroll that remains uncompleted. It continues to make analyzing what is right and wrong on the spending side impossible. It involves what is known as the Ohio Administrative Knowledge System (OAKS).

Here’s what I mean (from Page 21 of the report for December, dated January 10):

Until the $380 million in “Pending Payroll” is charged out to the correct Reporting Categories, we won’t know who is overspending and underspending. It should also be noted that additions to Pending Payroll are occurring faster than the bean-counters are determining where the expenses should be assigned — i.e., the situation is getting worse, not better. In November, Pending Payroll was “only” $296 million, so the new amount of unfinished bookkeeping entries increased by $84 million ($380 minus $296) in December.

Here’s what Page 15 of the December report has to say about this situation:

As a result of the OAKS Financials implementation, there have been inevitable transaction coding issues to resolve in order to have payroll, vouchers and other state expenses post correctly against FY 2007 encumbrances and FY 2008 appropriations. The General Ledger remains open for November and December while state agencies continue to work to resolve a dwindling number of payroll coding issues. As a result, expenses from November and December – most notably, GRF payroll – will still post to the month once correctly coded. Thus, GRF disbursements for November and December will continue to be updated as additional expenses post and will not be final until all ledgers are closed.

I don’t detect a great deal of urgency to catch up here. The growing, not “dwindling,” volume of uncoded transactions is a testament to that. How does one manage a department when accurate budgetary info isn’t available until two months or more after the fact?

That the incomplete accounting situation still exists six months into the fiscal year is incomprehensible. That it’s still getting worse instead of better should be considered intolerable. That Ohio’s press has not, as far as I know, written a word about all of this is inexcusable.