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On The Money: Tax Agencies Late In Paying Bills

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John Riley finds it ironic.

“The state can be late paying us,” noted the co-owner of Sacramento Technology Group, “but we sure can’t be late paying our employees.”

Riley is one of the lucky ones. His firm just received a $19,458 payment from the Department of Health Care Services for a billing he sent out in five months ago in April.

A CBS13 investigation reveals scores of state agencies are delinquent in paying their vendors -– racking up more than $5 million in late fees, with taxpayers ultimately on the hook.

The biggest offender is the Department of Corrections and Rehabilitation, which paid $2.6 million in late fees for the 2009-10 fiscal year. But the list also includes the Board of Equalization -– the agency that collects California sales tax -– had to pay $64,159 in penalties.

“It’s ironic isn’t it that government is so eager to get taxpayer money,” noted George Runner, an elected official on the Board of Equalization. Runner added, “But yet when we’ve got taxpayer money, sometimes it seems like we hold on too tight.”

California’s other tax agency, the Franchise Tax Board, was also late in paying bills –- forcing taxpayers to shell out $43,338 in penalties last year, according to records On The Money has obtained.

In response, Denise Azimi of the Franchise Tax Board sent CBS13 this statement:

“We take our responsibility to wisely use the funds entrusted to us very seriously. Even though FTB processes and pays almost 7,000 invoices a year, prompt payment penalties are rare. This invoice was associated with a large and complex IT procurement and payment was delayed while FTB worked to secure financing for the project and disputed erroneous sales tax charges. FTB is committed to ensuring similar delays are avoided in the future.”

Why are so many state agencies late in paying their bills? It starts with the California legislature, which has failed to pass an on-time budget 13 times in the past 20 years -– and that creates a domino effect.

Without a budget in place, state agencies have no authority to pay their bills –- to vendors like John Riley.

“And we were paid with IOUs in the last budget round,” Riley said. “And those IOUs were for about half a million dollars.”

“Obviously that’s something that’s very wasteful to the state of California and to the taxpaying public,” said Jon Coupal of the Howard Jarvis Taxpayers Association.

But even the state agency in charge of posting the late penalties is late in doing that task.

“We were short-staffed, we had some vacancies in the office,” said Eric Lamoureux of the Department of General Services. “We’ve got a small unit, our procurement division that’s in charge of posting those penalty reports to the web.”

“They’re also in charge of certifying small businesses to do business with the state of California. And last year when we were short-staffed, we decided to focus our resources on getting small businesses certified.”

Lamoureux stated DGS would be posting a two-year report on the web before the end of the year.

If you find examples of government waste, send an email to onthemoney@kovr.com. You can also follow On The Money stories in progress via Twitter at twitter.com/#!/mikeluery and on Facebook at www.facebook.com/CBS13OnTheMoney.

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