Disability administration officials ask to revamp accounting system to cure spending ills

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By Megan Poinski

Health department officials testify at Senate hearing. From left: Inspector General Tom Russell, Secretary Joshua Sharfstein, Deputy Secretary Thomas Kim, DDA Director Frank Kirkland

Health department officials testify at Senate hearing in November. From left: Inspector General Tom Russell, Secretary Joshua Sharfstein, Deputy Secretary Thomas Kim, DDA Director Frank Kirkland

A flawed, outdated and ineffective method of accounting is the reason why the Developmental Disabilities Administration discovered a startling $33 million in unspent funds, and Health and Mental Hygiene Secretary Joshua Sharfstein said that the agency is committed to fixing those problems.

Testifying Tuesday afternoon 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 internally to correct the problems.

Sharfstein accepted criticism from legislators for the large amount of funds that had been unspent, as well as the picture of dwindling finances and a massive waiting list painted during the last session, when a new 3% 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, referring to the agency. “We have a fundamental weakness in accounting in DDA.”

Annual $800 million budget serves 25,000

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 accounting system and processes for the agency are nowhere close to where Sharfstein 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 pay outs as the year is closing.

The problem surfaced as agency staff was closing out the fiscal year 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.

New budget may offer solutions

Sharfstein said there are so many problems with the old system, the only way to fix it is to rebuild from the inside out.

Throughout the hearing, he hinted to delegates that there is a strong solution that is proposed as part of Gov. Martin O’Malley’s FY 2013 budget. However, since Sharfstein was talking a day before O’Malley presents his budget to the General Assembly, he did not give out any details.

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 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 is also 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 that the General Assembly will receive periodic reports about how the agency is changing and functioning.

As far as the unspent funds, 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.

Breach of trust

While department officials tried hard to convince lawmakers that they are correcting problems, many were upset that the funds 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.

About The Author

Len Lazarick


Len Lazarick was the founding editor and publisher of MarylandReporter.com and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.

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