- The Washington Times - Friday, December 19, 2003

ANNAPOLIS — A recently released legislative audit shows serious flaws in the state’s accounting procedures, finding the State Treasurer’s Office has not been balancing its main accounts over the past decade and spent $1.6 million on an automated-bookkeeping system that was not properly installed.

The audit, more thorough than the regular reviews conducted of state agencies, was requested by state Treasurer Nancy Kopp when she took office in February 2002, said Charles G. Williams, chief deputy treasurer. The audit reviewed records from October 2000 to October 2002 but uncovered longtime problems, Mr. Williams said.

Mrs. Kopp released a statement Thursday saying the problems were caused by “outmoded and cumbersome accounting and reporting procedures,” and that 12 of the 16 recommendations for changes will be completed by the end of the year. Her department has made major progress on the other four, she said.

Specifically, the audit by the Department of Legislative Services found the state treasurer was using an outdated system of bookkeeping that didn’t properly catalog deposits made by each of the state’s 120 agencies. The cataloging is crucial, because all deposits were made to the state’s main, central bank account.

“This is an essential statewide internal control procedure,” wrote auditor Bruce Myers.

The treasury handles about $90 billion, in the form of 5 million transactions, every year.

But each agency had its own process for making deposits, on its own timetable, creating confusion when the state tried to balance its books.

That problem is nearly resolved, Mr. Williams said.

A new automated system assigns each agency its own subaccount and tags each deposit with that number, said Gregory Saba, director of banking services at the treasury. Instead of making deposits to one state account, money will go into new subaccounts and be tracked more easily.

The audit found the state treasury had bought an automated system in 1997, but it never worked properly and managers ran into “unanticipated difficulties” getting it to function. By September 2001, it still was not operational and was scrapped.

By that time, it had cost the department about $1.6 million — money that can’t be reclaimed, the audit reported. The new system cost $228,000.

“We knew we had some weaknesses,” Mr. Williams said. “We have been working to come up with a long-term solution, not a quick fix.”

Because of the accounting problems, auditors said they couldn’t determine how much cash was in the state’s main bank accounts. The accounts didn’t match what the books showed, according to the report.

Treasury staffers now are using the new procedures to reprocess past reports and make sure they’re accurate. But officials said no money is missing.

“Nothing’s been spent that wasn’t appropriated,” said Howard Freedlander, deputy treasurer for external affairs.

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