Audit of state treasurer's office finds failures in banking oversight

Agencies failed to ensure that all accounts maintained by state agencies were properly authorized; treasurer says problems are being addressed

November 05, 2010|By Nick Madigan, The Baltimore Sun

The state treasurer's office, which monitors how state agencies handle taxpayer money, has failed to properly oversee some agency banking procedures, according to a state audit released Friday.

The review from the nonpartisan Office of Legislative Audits, covering a three-year period ending on June 30, 2009, found that the treasurer's office failed to ensure that all bank accounts maintained by state agencies were authorized and in banks that had proper contracts. Agencies held at least 22 accounts at five unapproved banks at the end of the monitoring period, according to the audit. In addition, the treasurer's office did not ensure that the banks held enough assets as collateral to cover agency funds.

A summary of the audit's findings described a variety of shortcomings in the monitoring procedures of the treasurer's office, which is responsible for financial services for state agencies and overseeing state borrowing. Among other findings, the report noted that claims services provided by the state Injured Workers Insurance Fund, which handles compensation claims, had not been competitively bid for 19 years.

Bruce A. Myers, who directs the auditors' office, said Friday that the findings were not "end-of-the-world kind of stuff" and should result in oversight improvements without much difficulty. The findings, he said, were not as serious as those disclosed in the previous three-year auditing period, when auditors found "millions of dollars" missing as a result of reconciliation problems — money recorded as having gone into agency accounts but with little or no sign of where it ultimately went. Additional reconciliation problems were noted in the most recent review.

"The issues we have here are relatively minor," Myers said, although he lamented that of the 19 problems raised in the previous audit, eight were not fixed and had to be repeated in the new audit's report. "I was a little disappointed that those weren't addressed," he said.

Howard S. Freedlander, a spokesman for Nancy K. Kopp, who has been Maryland's treasurer since 2002, said Friday that in "most of those instances, we've already taken action to rectify or remediate those concerns" and that the treasurer's office is "very confident that we're doing our job well."

In a letter to Myers on Oct. 22, Kopp said her office had made "significant progress" in addressing the auditors' complaints, particularly the reconciliation problems, which became her "number one priority."

Referring to the 22 unapproved bank accounts mentioned in the new review, Kopp's office said in a written response that 20 of those accounts "were in various stages of closing prior to the audit and all have now been closed," and that according to a legal ruling the other two accounts could remain as they are.

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