Photo Courtesy of W.Va. Legislative Services The State Capitol in Charleston is seen in this file photo.

CHARLESTON — Lawmakers are potentially missing out millions of additional dollars for the state budget and other appropriations because of lack of limits for special revenue funds according to auditors.

Members of the Post Audits Subcommittee heard a report Monday afternoon reviewing the use of special revenue funds by the state. The report found that out of the 741 special revenue funds reviewed, 94% lacked clear fund balance limits. Of the 741 special revenue funds, 705 funds had no defined limit and 36 funds had vague fund limits and legislative auditors could not determine what those limits were.

“The majority of special revenue funds reviewed did not have a clearly defined fund balance limit in code,” said Auditor Ashley Edmonds. “This potentially allows the balances to grow beyond what was intended and makes determining excess fund balances difficult, if they can be determined at all.”

Using several different metrics to compare ending balances of 11 special revenue funds with vague balance limits with historical expenditures, auditors determined that the total exceeding historical trend ranged from $34 million to $26.5 million. Using the most conservative method, auditors determined that 134 funds exceed historical expenditures by $166 million.

As defined by the state Comprehensive Annual Financial Report, special revenue funds are set up for specific uses that cannot be re-appropriated or otherwise interfered with.

These funds come from permits, licenses, and other established fees by state agencies or certain non-governmental entities.

Appropriated special revenue funds are appropriated by the West Virginia Legislature and are included in the annual general revenue budget. Though spending of appropriated special revenue funds is limited exclusively to the amount appropriated, any carryover funds into the next fiscal year can be appropriated by lawmakers. Non-appropriated special revenue funds are not subject to legislative appropriation. Most special revenue funds are non-appropriated.

Legislative auditors stated that having vague or no definitions of what is considered a special revenue fund balance limit results in fund balances growing beyond the intended limits of the funds.

Auditors also found that 10 of the special revenue funds they reviewed had clear limitations on how much those funds were allowed to collect, yet they still had balances exceeding limitations in code. The 10 funds combined had more than $5 million beyond what they were allowed to collect.

“Special revenue funds with clearly defined limits increases the ability to make the determination and identify excess fund balances as was determined with the 10 fund balances exceeding their defined limits by $5 million,” Edmonds said. “Further, funds established in statute may be in effect for decades and as circumstances change, limits on these funds help ensure the intent is clear and those funds are properly managed throughout the life of the funds.”

The Legislative Auditor’s Office recommends that lawmakers establish clear fund balance limits in State Code. Raleigh County Republican Del. Brandon Steele, co-chairman of the Legislative Rule-Making Committee, said he sees the issue come up during reviews of agency rules.

“You see all of these different agencies come forth year after year and continually ask for more money, so one of the things we have developed is a requirement to show us the prior five years of your revenues and expenditures when you come and ask for a fee increase,” Steele said. “We determined on our one there was $50 million in excess funds across a wide variety of agencies.”

Steele said the Legislative Rule-Making Committee can start looking at these specialty fees and recommend sweeps of agencies and boards to the Joint Committee on Government and Finance to capture these excess funds when they can be determined.