Anne Arundel shuffled casino funds: ...nobody has a sense of financial accountability on this.....

Auditor: Anne Arundel shuffled casino funds
Report shows Neuman, Leopold moved impact money without public input

Posted: Saturday, May 3, 2014

Auditor: Anne Arundel shuffled casino funds

CapitalGazette.com

As the first gush of money from casino revenues started pouring in 2012 and 2013, Anne Arundel County shifted millions of dollars earmarked for communities closest to Maryland Live! to other priorities, an audit released this week shows.

County Auditor Teresa Sutherland reviewed county records for two fiscal years and found that a portion of the $20.8 million promised for items such road improvements and police services either wasn’t spent or was used for other purposes, such as paying interest on school construction bonds or aid to Anne Arundel Community College.


The money was generated by the first 13 months of casino operations under then-County Executive John Leopold. It went into the General Fund where it was mixed with other county revenues.

Sutherland said “more precise” methods were needed to ensure it was spent on communities next to the casino as required by state law.

“We do not express an opinion or any other form of assurance on local impact grant revenues and expenditures or on management’s compliance with state law,” she wrote in the review of her office’s findings.

In fiscal 2014, the county created the Video Lottery Fund to track the county’s 4.5 percent share of revenues from the successful casino. Sutherland was an advocate of the fund to improve transparency and require County Council approval of spending.

“I think it’s a very good internal control over the money,” Sutherland said.

Other findings in her audit found Leopold’s administration did not consult in a meaningful way on plans for the money with the Local Development Council, a group of business owners and executives, area residents and elected officials created by state law to make recommendations on how to spend the money.

The administration then shifted funds or used unanticipated revenue without telling either group, and has yet to develop a long-term plan as required by state law.

County Budget Officer John Hammond said the spending met the state requirement that the money be spent in the “immediate proximity” of the casino, and blamed the failure to consult with the LDC on the removal and replacement of Councilman Daryl Jones in 2012. Jones was later restored to the council.

Hammond also wrote in his official response to the audit that there is nothing in the law that requires the county to consult the local group if more money than anticipated is collected, as it was in both years.

He ended his letter with a warning that the creation of the fund is exactly the type of “Balkanization” of county funds that creators of the County Charter warned would destroy the budget process.

“Timely advice today as it was 50 years ago,” he wrote.

County Executive Laura Neuman has not released her plans for the funds this year, although Hammond estimated there would be $15 million in the fiscal year that starts July 1. State officials have predicted revenue from the casino will decline once the Horseshoe Casino opens in Baltimore and the state’s sixth casino opens in 2016 at National Harbor.

Where did it go?

Sutherland’s audit was intended to determine if the county spent the money as the Leopold administration said it would.

Leopold’s administration said it spent the entire $1.3 million from the casino received in fiscal 2012 on improving fire services at the Harmans-Dorsey, Jessup and Severn fire stations nearest the casino, according to the audit. But Maryland Live! opened one month before the end of the fiscal year, and auditors said the real cost of services at those stations was closer to $750,000.

The 2013 spending plan presented to the local board and the County Council included $3.5 million for expanded police protection around the casino and Arundel Mills mall. Instead, the auditor found the county only spent $2 million.

Police Chief Kevin Davis recently said no additional officers have been added to the area, although Neuman included funds for them in the budget she unveiled Thursday for fiscal 2015.

In some cases, the county spent more on some items than it told the LDC and council about. The $6.8 million the county said it used to buy and staff a new ambulance and pay for fire department operations around the casino later grew to $8.7 million.

In other cases, items in the spending plan received less funding than outlined or none at all.

The Leopold administration said it would spend $1 million on road improvements around the casino in fiscal 2013, but instead spent nothing, the audit found.

Another $250,000 set aside for economic development has yet to be spent, and the $250,000 dedicated to the Anne Arundel Workforce Development Corp. represents 63 percent of all county funds for the agency.

The county allocated $2 million for the AACC campus at Arundel Mills mall in its spending plan, but the budget office said it actually spent $3 million. The auditor found it actually spent $2.5 million.

Another $2.9 million went to pay interest on bonds used to fund county school construction, even though that wasn’t listed as a use in the spending plan and the county never told the local development board or the council.

Jones, the councilman whose district includes the area supposed to benefit from the money, said he was concerned that some spending was not presented to the LDC and council, and was particularly critical of the failure to resurface area roads.

“I think it’s important and concerning that the money for road resurfacing wasn’t used for that purpose,” he said.

Instead, that money was re-allocated to AACC without any documentation on how the college used the extra money, Jones asserts.

Bill Heine, a Republican candidate for council in District 1, expressed similar concern.

“My biggest concern is that it seems nobody has a sense of financial accountability on this,” he said after reviewing a copy of the audit.




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