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Audit: Colorado agencies’ out-of-compliance reserves increased $32M

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(The Center Square) – Seven Colorado state government departments had excess uncommitted financial reserves totaling approximately $48.5 million, an increase of $32 million compared to fiscal year 2022, according to the Office of the State Auditor.

The excess cash in funds are included in Taxpayer’s Bill of Rights revenue.

“Because cash fund fees are considered part of TABOR revenue, excess cash reserves contribute to the state potentially exceeding TABOR limits in a given year,” the audit said. “For Fiscal Year 2023, the state was over the TABOR excess revenues cap by $3.6 billion according to the state controller’s Sept. 1 TABOR certification letter.”

The 74-page audit, required by law, reviewed the “Cash Funds Uncommitted Reserves Report” prepared by the state controller. The audit found 18 cash funds within seven departments out of compliance as of June 30. Last year, nine departments and 18 funds were over limits. However, the total excess uncommitted reserves increased by $32 million from the previous fiscal year.

The audit made 18 recommendations and all were agreed to by the seven departments.

“During our review of prior-year audit recommendations, we determined that departments implemented our Fiscal Year 2022 recommendations for 12 cash funds across eight departments, and six cash funds across three departments continued to be out of compliance,” the audit said.

State law limits the amount departments can keep in certain cash funds at the end of a fiscal year. Passed in 1998, the reserve limit for all cash funds can equal 16.5% of total expenditures from the fund during the fiscal year or approximately two months of spending reserve. If a fund’s uncommitted reserve balance exceeds the statutory limit, the agency is required to reduce fees or increase expenditures to reduce the excess.

In 1998, there were 61 cash funds out of compliance with reserves of approximately $34.3 million, according to the audit. The state controller is required to complete a review of the cash funds by Sept. 20 to determine compliance.

The law was changed in 2015 to require only uncommitted reserves with an excess of more than $200,000 to be out of compliance. It also added a provision allowing departments to request from the Joint Budget Committee a waiver of the restriction. Six departments received waivers for 14 funds last year.

The departments out of compliance due to excess funds and the amounts were:

Public Health and Environment: $14,444,220;Judicial: $12,790,045;Revenue: $9,995,810;Regulatory Agencies: $8,437,130;Local Affairs: $1,694,144;Early Childhood: $695,909;Office of the Governor: $288,720

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