Contracts Funded with General Obligation Bond (MCCBL) Proceeds Must be Approved by Board of Public Works Regardless of Amount or Procurement Exemption
ISSUE: November 16, 2016
PURPOSE: This Advisory instructs State agencies on the requirement to obtain Board of Public Works approval of all contracts that are proposed to be funded with general obligation bond proceeds (MCCBL funds) regardless of the contract amount.
- This State Finance Law requirement applies to each agency seeking to expend general obligation bond proceeds even if an agency is exempt from the State Procurement Law.
- A contract that is within an agency’s own procurement authority or delegated procurement authority must be submitted for Board approval if the contract is to be funded with MCCBL proceeds.
- No agency or contract is exempt from the State Finance Law when using MCCBL funds.
Enabling Acts that authorize State debt and the sale of State bonds state: “The cash proceeds of the sale of the bonds shall be . . . expended on approval by the Board of Public Works . . . .”
- STATE FINANCE & PROCUREMENT ARTICLE, § 8-117(c)(3);
see also annual MCCBL at section 1(3).
Further, “a contract to spend the proceeds of a general obligation loan that has been authorized by any act of the General Assembly may not be executed until the Board of Public Works approves the contract.”
- STATE FINANCE & PROCUREMENT ARTICLE, § 8-301(a)
Note: The State Finance Law is DIVISION I of the ANNOTATED CODE OF MARYLAND’s STATE FINANCE & PROCUREMENT ARTICLE. The State Procurement Law is DIVISION II.
THE MARYLAND CONSOLIDATED CAPITAL BOND LOAN (MCCBL):
Annually, the General Assembly enacts the Maryland Consolidated Capital Bond Loan bill (MCCBL) which authorizes the Board of Public Works to create State debt and specifies the State projects that are to be funded by that debt.
The shorthand reference to that annual bill is MCCBL of [Year enacted by General Assembly]; the bill takes effect 1 June of that year. For example, the MCCBL of 2016 took effect June 1, 2016 for fiscal year 2017.
WHAT IS REQUIRED of STATE AGENCIES:
1. A State agency proposing to award a contract – regardless of amount – funded in any part by general obligation bond proceeds must receive approval from the Board of Public Works before entering into the contract. “Contract” includes all agreements to expend funds, including grant agreements.
2. Most MCCBL-funded contracts are contracts that are required under the State Procurement Law (and regulations) to be presented to the Board of Public Works for approval. The Board’s approval of a procurement contract on an Action Agenda Item that contains a Fund Source field identifying MCCBL funds satisfies the State Finance Law requirement.
3. However, some MCCBL-funded contracts are either not subject to the State Procurement Law (because the agency or activity is exempt) or are within an agency’s delegated procurement authority. Those contracts – like all MCCBL-funded contracts – must be presented to the Board of Public Works for approval under the State Finance Law.
4. When an Action Agenda Item identifies a specific MCCBL in the Fund Source field, subsequent modifications and task orders that draw funds from the specified MCCBL may be processed without returning to the Board for permission to use that specified MCCBL.
PRACTICE NOTE: Remember, however, that the modifications and task orders may be subject to Board review under State Procurement regulations.
5. When an Action Agenda Item does not identify a specific MCCBL, a State agency must return to the Board with a further Action Agenda Item if the agency subsequently proposes to expend MCCBL funds on the contract. Approval of an Action Agenda Item that lists various fund sources but does not specifically list an MCCBL does not satisfy the requirements of the State Finance Article.
PRACTICE NOTE: BPW Advisory 2004-3 (Correcting Agenda Items)
states, “The following corrections may be accomplished only through an Action Agenda Item: Adding or substituting a general-obligation bond source that was not previously approved for that project.”
6. When a State agency seeks to enter into a contract to be funded with current MCCBL proceeds and with future (“pre-authorized”) MCCBL proceeds, the Action Agenda Item may list the pre-authorized amount as a Fund Source. However, the agency may not spend under that contract beyond the current MCCBL proceeds, and the agency must return to the Board with an Action Agenda Item proposing to actually use those preauthorized funds once they have been appropriated and that future MCCBL has taken effect.