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On multiple occasions between 2013 and 2017, the District government deposited fines it levied against residents into funds created to serve a specific purpose. In fiscal year 2017 alone, those funds totaled nearly $550 million.
The Basic Business License Fund, for example, was supposed to go toward upgrading the Department of Consumer and Regulatory Affairs’ (DCRA) business licensing system and to streamline business license applications.
The Home Purchase Assistance Fund was supposed to help low and moderate income people and D.C. government employees buy homes.
And the Recorder of Deeds Automation and Infrastructure Improvement Fund was supposed to update the office’s automated computer system and pay for staff training.
For some of these “special purpose revenue funds,” if money is left over at the end of a fiscal year, the Council or mayor can use the excess to plug holes elsewhere in the budget.
For another class of these special purpose funds designated as “non-lapsing,” the law says the money can only be used for its designated purpose.
But this is the D.C. government, and rules are meant to be broken.
An analysis by the Office of the D.C. Auditor found 72 instances between 2013 and 2017 where the D.C. government imposed a fine on its residents, designated the money (a total of $142 million) for a specific program or function, then turned around and “swept” the money into use for something else.
Not all 72 sweeps that D.C. Auditor Kathy Patterson identified came from the 75 funds created between 2013 and 2017 as some funds were first established outside of that timeframe.
The auditor’s report, published in late April, suggests that the Council creates special purpose funds too often (the law says the funds can be created from “time to time,” as “necessary for the efficient operation of the government.”), that the CFO creates them illegally (though he disagrees), and that many of the funds are not used the way they’re intended.
D.C. law says these funds must be created by the legislative branch, but the auditor’s report identifies 18 funds created administratively by the CFO. Patterson argues that these funds are created illegally. CFO Jeffrey DeWitt argues the Council gives him implicit authority to create a fund in situations where it imposes a fine or fee but does not create a fund to collect the revenue.
The auditor’s report also shows that elected officials are sweeping these funds more and more, with totals jumping from $0 in Fiscal Year 2013, to $35 million in 2015, to $75 million in 2017.
“If [special purpose revenue funds] are not spending their revenue, those who pay into those Funds may not be benefitting from the programs and services that the Funds are intended to support,” the report says. “Likewise, those who pay into [the funds] may be over-charged if their fees are not being utilized.”
The report also highlights several funds as examples of their inefficiency.
Consider the Recorder of Deeds Automation and Infrastructure Improvement Fund, which the Council established in 1996 and was featured in a blog post on the auditor’s website. The initial legislation authorized a $5 fee for each document filed with the Recorder of Deeds in order to raise $2.5 million over five years.
When the fee legislation expired in 2001, the Council renewed it for another 10 years, and since 2000 the fee brought in $27.5 million. Meanwhile, local officials have swept nearly $7 million from the fund, and the Recorder of Deeds has yet to fully automate its computer system. The CFO’s strategic plan for 2017-2021 has a goal of automating 60 percent of the documents.
In another example, part of the Home Purchase Assistance Fund was used for bus and rail advertisements, to purchase Toyota Corollas for the Department of Housing and Community Development, and to pay one month’s rent—$276,720—for the agency’s headquarters, according to the auditor’s report.
DHCD’s fiscal officer defended the expenses to the auditor saying the law did not expressly prohibit administrative costs, and the Council and mayor had approved such expenses.
In response to the auditor’s report, City Administrator Rashad Young writes in a letter that “these funds can be difficult to manage because the revenues that come in are restricted to very specific purposes and revenues can come in much higher—or lower—than projected.”
In this year’s proposed budget, elected officials are creating eight more special purpose revenue funds, and are sweeping $21.4 million from 33 funds that already exist.