Jun
29
2015

State audit reveals major error in accounting ???

“In my fourteen years on Audit this is the first time the financials for Montana shouts of incompetency within the department.”

Montana Senator Dee Brown

Montana Senator Dee Brown

Guest Articleby Senator Dee Brown, Legislative Audit Committee

The financial audit for the State of Montana revealed some disturbing problems today in front of the Legislative Audit Committee in Helena. The audit detailed that the Department of Administration does not have adequate internal controls to ensure accuracy of our finances, nor are they properly reviewed or issued in a timely fashion.

Some of the examples include: transportation expenses overstated by about $220 million, capital grants and contributions for Natural Resources understated by $445 million and transfers of about $47.8 million which were omitted entirely.

The hundreds of millions of dollars not accounted for properly are huge red flags for anyone reading the audit, but the one that made my eyes bulge was the overstatement of approximately $1 billion of accumulated depreciation related to infrastructure. Yes, that’s with a ‘b’ as in billion.

The errors have been rectified but why did they happen in the first place? An internal set of controls would have shown the weaknesses in the system before the auditors ever knocked on the door.

In my fourteen years on Audit this is the first time the financials for Montana shouts of incompetency within the department. It is especially worrisome when so much money is at stake.

How long would the bean counters in your business last with financial audits revealing these problems? Committee members asked department officials many pointed questions because of our concerns.  Director of Administration, Sheila Hogan, stated, “I am embarrassed.” Even the governor’s budget director, Dan Villa assured us, “This is a fluke, not a pattern.”

The financial audit for the state is a BIG deal. It is the document used by bond raters to give us the best credit rating so that Montana can borrow money at the lowest rate possible. It would be similar to you taking your credit score to your local bank for a loan. The lower the score, the higher the interest.

This report also plays an important part in decisions made by the legislature during session. Without accurate numbers there may be more/less money to use on programs to benefit taxpayers.

How likely are we to stay with an AA+ rating when this report exposes glaring errors in our accounting system? Time will tell on this issue. Budget director Villa assured us that they are ‘taking every needed step, reasonable and unreasonable, to make sure this doesn’t happen again’.

Chairman Randy Brodehl from Kalispell reminded the directors that the ‘trust me’ statement by Director Hogan takes a long time to heal. He encouraged them to bend over backward to again build the trust.

In the meantime, legislative oversight will be in place to assure that we correct the problems. We simply can’t afford to have these ongoing errors when the taxpayers are picking up the bills. They deserve better than this audit shows.

 

Dee Brown, SD2

Hungry Horse, MT

Legislative Audit Committee

Member since 2001

 

Editors note:    When we followed up with Senator Dee Brown, this is also what she provided.

The financial audit last week for the State of Montana was the first time we have heard of such sloppy bookkeeping by the people in charge. The Department of Administration didn’t even correct some of the errors pointed out to them in the draft document. They waited for the final audit and legislative staff to point them out again. This is simply not the way we should be doing business.

This audit is a snapshot of the financial books for Montana on specific times and dates and is often used for answering budgetary questions during session. Our staff (legislative audit) even had problems getting timely responses from the department. Sometimes it took weeks or months for answers to their questions, let alone not being a resource while the legislature was setting the budget this session.

Underwriters and bond counselors were asking for the financial information contained in these statements last fall to set bond rates. They finally had to use the 2013 clean audit to set interest rates for the two issued since January. Will we keep our AA+ rating with this kind of response in the future? I sure hope so, but only time will tell.

 

Also, the following information and more will be in this week’s Yellowstone County News with updates and local State Senator and State Representative responses to the current administration’s officials and their status on the audit.

Here is the link to the whole audit meeting.  The part referencing this audit is at 1:42 into the meeting

 

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