Overdue and costing you: Indiana's late fees

Sandra Chapman asks Gov. Daniels about the practice.

Taxpayers want their hard-earned money put to good use. 13 Investigates finds Indiana state agencies failing to pay their bills on time, some with mounting overdue fees, costing you millions. What 13 Investigates uncovered has Gov. Mitch Daniels on the defensive.

Bills, bills and more bills. Nobody likes them. But every 30 days they're due. We're supposed to settle up our accounts and pay on time.

Just like taxpayers, state government is expected to pay its bills on time too.

But 13 Investigates has found a troubling practice: State agencies paying their bills late. As a result, Indiana taxpayers are paying millions of dollars in late fees. (How much? Click here to see.)

It's money that could be used to help Indiana families and save lives.

13 Investigates scoured through spending records for more than 100 state agencies and found paying late is a routine practice for more than a dozen of them.

One of the biggest offenders is the Indiana Department of Transportation..

INDOT is staring down the tracks as one of the worst states in the nation for railroad crossing crashes. There were 116 collisions last year and 10 people died. Indiana is now second only to Texas, a much bigger state.

It's bad news for Operation Lifesaver.

"We really need to take this seriously," said Jessica Feder the Executive Director of Operation Life Saver.

INDOT says there isn't enough money to fix the significant backlog of 3,000 crossings statewide in need of better warning devices.

Since 2008, the agency has been under a federal Rail Crossing Safety Improvement Plan to make critical upgrades.

13 investigates has learned over the last two years, when INDOT said it didn't have enough money for crossing improvements, it paid hundreds of thousands of dollars in late fees for simply failing to pay its bills on time.

This includes crossings like one we found in Jamestown with no arms, no lights and little warning.

"I don't want nobody else to have suffering," said James Gochenour, with tears welling up in his eyes for his bride of 60 years, Joan.

She's the sole survivor of a train crash at that Jamestown crossing last August. She suffered a traumatic brain injury her two friends were killed.

It turns out the Jamestown crossing was on INDOT's list for improvements in 2010. That year, INDOT payed $340,000 in late fees. But neither INDOT nor Boone or Hendricks Counties, where the crossing is situated, would put up the $250,000 for lights and gates.

Gochenour's daughter, Sheila Scott, says no other family should have to go through this.

"That doesn't seem like a whole lot of money when you consider all of the lives that could be impacted," Scott told 13 Investigates.

In fiscal year 2010, State agencies paid more than a million dollars for untimely payments.

Last year, the amount nearly doubled.

The 3 worst offenders:

The Department of Child Services with more than a half million in late fees

The Indiana Department of Transportation with nearly a half million in late fees

and FSSA Medicaid with more than a quarter of a million dollars in late fees.

The numbers aren't sitting well with Hoosiers including Jenny Rice, a single mom.

"Hundreds of thousands of dollars every year just being paid in late fees. When you hear that, what do you think?" asked 13 Investigates.

"It's frustrating as a parent who has a child on a waiting list, and my child's been on a waiting list since 2008 and to know that my child is probably going to be on that list for another 5, 6, 7 years even," explained Rice, talking about her son Canyon.

Canyon is on the State's Autism Waiver waiting list for services. To help now, Jenny and other families receive $2,000 a year to cover ten hours of specialized care a month for their disabled children. It's something insurance companies won't cover.

"Raising a kid with disabilities is rough and parents need time to recharge," she said.

In 2010, the state abruptly stopped paying.

Last year the funding was cut in half, forcing families like the Rice's to go without, while Indiana's Family and Social Services pays more than a quarter of a million dollars in late fees plus another $180,000 spent to cover overdue bills at the Division of Family Resources and $61,000 paid late at the Division of Disability and Rehabilitation Services.

FSSA and INDOT gave no comment about why they don't pay their bills on time.

We asked the State Auditor to tell us why this is happening. The Auditor's office said, "...We are declining your request for an on camera interview. The Governor's office can answer your questions regarding the individual agencies."

We made an official interview request for Gov. Daniels, weeks in advance. He and his staff would not agree to talk, so we caught up with him after a Statehouse event.

"State agencies aren't necessarily spending the money in what might be considered a frugal way. What types of controls are in place to monitor that?" asked 13 Investigates.

The governor cleared his throat and responded, "You must not have ever covered a bad government."

As the governor tried to walk away, 13 Investigates clarified the question to make sure he understood: "We found that state agencies are late paying their bills to the tune of millions of dollars."

That's when the governor got animated, showing he clearly didn't like questions suggesting mismanagement of taxpayer dollars.

"That's not mismanagement. What mismanagement is, is paying too early. And we probably have a smaller issue than any state in the country. I gave...I gave an order to pay promptly as possible, but not sooner," he said.

While the governor has kept his office late fees down to $155, and the auditor to just 20 cents, "sooner" for many agencies translates to "later."

"They may be a few days late, in which case we pay interest. So no one is injured, but we have saved the taxpayers a lot of money by managing payments," he said in a more calm tone before another strong reaction. "As a percentage of the $14 billion a year, it is infinitesimal percentage," he argued.

The governor says the millions in late fees are insignificant. But what about taxpayers on the losing end?

"We're trying to make sure that we're paying as close to the last appropriate day as possible," the governor finally said.

As for the Gochenours, they are suing the state and seeking up to $700,000 claiming negligence.

They say $250,000 in upgrades at one of the state's dangerous railroad crossings could have made a world of difference.

State government late fees are also hurting non-profits.

In a first ever survey by the National Council of Non-profits in 2009, nearly a third of non-profits here in Indiana said the state's bill-paying had gotten worse.

The practice they say forces them to bankroll the government services they provide, increases the cost of services, and short changes the people who need them most.

Rick Cohen, the Director of Administration and Operations at the National Council of Non-profits says "a new round of research on this subject, in collaboration with the Urban Institute, is underway."

See how different Indiana state agencies stack up when it comes to paying bills late - and how much in late fees they're racking up.

Statement from INDOT:

The Agency receives federal funding each year to help upgrade some of the State's rail crossings.

The federal Section 130 Highway-Rail Grade Crossing Program provides about $7 million in funding to improve an average of 20-25 public rail crossings in Indiana each year. Most Section 130 funds are provided directly to the private railroad companies, which own the right of way at road crossings. The railroads build the improvements and maintain them for the life of the rail line.

The Indiana Department of Transportation administers the Railroad Grade Crossing Fund, which last year provided an additional $580,000 in state funds for rail crossing safety improvements. INDOT is also building dozens of new highway bridges over or under rail lines as part of Major Moves new construction projects. My understanding is the federal Rail Safety Improvement Act of 2008 did not provide the states with any additional funding.

It's important to note that two out of three crashes still occur at crossings with automatic warning devices such as gates or flashing lights.

With regard to late penalties the Auditor's Office pays per state law, INDOT's practice is to contact the companies and ask for the late payments back. INDOT recovered $222,000 in late penalties paid in fiscal year 2011. With this fiscal year nearly completed, INDOT's late payments to date have been about $10,000.

- Will Wingfield, Media Relations, Indiana Department of Transportation

Non-profit survey data

National Council of Non-profits Highlights Government Contracting Problems for Non-profits Across the Country

Survey Results

State by state listing