Legislative Audit casts doubt on personal savings from agency mergers

Tiny ROCK — Arkansas Legislative Audit is questioning a Department of Transformation and Shared Services report that suggests more than $57 million in price personal savings resulted from the merger of 42 government-department condition companies into 15 departments.

The auditors also identified that $6.4 million in transformation-relevant relocation and renovation expenditures have been not bundled in the department’s report.

However, office officials are defending their figures on value personal savings and counter that legislative auditors discounted some savings in a narrowly focused evaluation.

In November, division Secretary Amy Fecher informed lawmakers that the 15 govt-branch departments have saved extra than $57 million as a result of transformation of their functions due to the fact July 1, 2019, beneath Republican Gov. Asa Hutchinson’s reorganization of point out agencies.

In March, Fecher had believed in a report essential underneath Act 565 of 2019 that the overhaul experienced saved $26.7 million.

Arkansas Legislative Audit issued its report over a week back, on Feb. 10.

The audit report focuses on Act 565’s reporting demands concerning in general reductions in common-income expenses.

“Certain things presented in the Act 565 report and the November presentation do not symbolize a reduction in typical earnings expenses, but are presented as discounts by [the transformation section),” according to the audit report.

“Budget reductions in the functionality fund, reallocation of general revenue/ reinvestment savings and transformation transfers/efficiencies do not symbolize a minimize in expenses,” the audit report mentioned.

The transformation department countered that the audit report “dismisses offhandedly” the price range reductions, reallocations and efficiencies “because they do not characterize decreases in expenditures.”

The transformation section reported, “This is a essential misunderstanding on Legislative Audit’s portion,” mainly because Act 565 asks for a in-depth assertion of just about every Cupboard-level department’s plan to cut down basic-earnings expenditures and create effectiveness and establish other prospective cost reductions.

In November, Fecher mentioned state departments reinvested discounts of additional than $18 million, to do more with no asking for a lot more point out money, and saved a lot more than $12 million from 12 departments not needing to tap the state’s performance fund for shell out raises. As a final result, that fund was lower by $10 million.

The departments experienced 1,400 much less filled positions considering the fact that July 1, 2019, and 6 organizations saved $6 million by surrendering 166 positions, she mentioned.

The departments saved $1.4 million by renting about 92,000 less sq. ft, she claimed, and the departments had transformation-relevant efficiencies of far more than $8 million.

In November, some lawmakers questioned Fecher’s figures and maintained that the figures did not reflect bottom-line cost savings for the departments.

Arkansas Legislative Audit’s report explained particular departments have moved several businesses, boards and commissions to central places as part of the transformation process.

The cumulative transformation-similar relocation and renovation costs totaled $6.4 million — between them $3 million by the Department of Instruction $1.4 million by the Division of Transformation and Products and services and $1 million by the Commerce Division, the audit report states.

And these expenses weren’t involved in the April or November reports by the Department of Transformation and Shared Companies, according to Arkansas Legislative Audit.

Transformation section spokeswoman Alex Johnston stated transformation wasn’t the rationale for the $3 million in renovation expenditures reported by the Section of Schooling.

Constructing Expenses

Legislative auditors documented that the departments’ leased amenities elevated by 34,135 square feet with the all round yearly lease price reducing by about $683,359, or about 49% of the reduction claimed by the transformation department in November.

The transformation department explained it stands by its figure of $1.4 million in reduced rental expenses from transformation. Fiscal 2021 finishes June 30 and additional reductions are nevertheless to be realized, the division contended.

The legislative auditors mentioned the state issued bonded personal debt of $43.3 million to obtain and make renovations at the Verizon Developing No. 4 in Small Rock and the previous Timex developing in North Small Rock. The departments will make the personal debt payments commencing at $2.3 million yearly and decreasing to $456,000 over the up coming 30 decades, the auditors reported.

Arkansas Legislative Audit reported, “Since financial development potential clients for Verizon Creating #4 did not materialize, the state retains surplus house.”

Most of the Commerce Department’s divisions have moved there. The Department of Corrections has numerous places of work at the previous Timex creating.

“Two state-owned properties possibly could be offered or leased as agencies are relocated,” according to the audit report.

One of the structures is at #2 Capitol Mall in Little Rock. It is owned and occupied by the Commerce Department’s Division of Workforce Providers, according to auditors.

The division is predicted to transfer into the Verizon creating in June or July, Johnston explained.

The other creating is identified as the Principal Street Shopping mall in Tiny Rock and has been mostly occupied by lesser boards and commissions just before the consolidation of state organizations, in accordance to the state auditors.

“With the consolidation of many boards and commissions inside the 15 departments, the developing could be supplied for sale immediately after all organizations have relocated,” the audit report states.

The Office of Transformation and Shared Services’ Division of Developing Authority has no exceptional credit card debt on the Primary Road Mall and has not appraised the building’s price. Johnston stated marketing the Primary Road Shopping mall is a possible selection numerous decades from now.

The transformation division claimed the purchase of the Timex and Verizon properties happened in 2018 prior to transformation and, if they are to count, they need to be stated as property.

Much less Personnel

Auditors claimed the range of people today utilized inside of the 15 govt-department businesses has lowered by a lot more than 1,400 from fiscal 2019 to fiscal 2020, but wage charges amplified by $13 million.

The transformation office replied that the departments’ income costs have developed at a considerably lesser proportion just about every year under Hutchinson’s administration and by transformation.

Auditors stated 16 vacant senior government-level positions have not been eliminated by the institution of secretary-led departments and stay in the departments’ appropriation acts. Filling these positions would price tag the condition in between $2.7 million and $3.4 million a 12 months.

Sixty-a few of the 166 positions that the Section of Transformation and Shared Companies identified as “surrendered” keep on being in the departments’ appropriation acts for fiscal 2022 and reducing these positions could possibly lower expenditures by $2.5 million to $3.7 million a calendar year, legislative auditors reported.

The initial prospect to surrender positions write-up-transformation is this year’s ongoing frequent session, the transformation section claimed. “Departments can do improved to get the job done with the Legislature on surrendering positions and detailing why certain positions are held.”

Most departments were unable to document personal savings in facts submitted to the transformation section for their Act 565 report in March, according to the auditors.

Some department staff expressed differing definitions of “efficiencies and performance improvements,” ensuing in distinctive responses on studies submitted to the transformation section and problem in identifying real transformation-relevant expense reductions, the auditors explained.

The transformation division countered that these improvements and adjustments might be deemed intangibles when drafting a report with constrained scope for lawmakers, but transformation resulted in modifications that would not have otherwise taken spot.

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