Auditor finds $2.6 million off-the-books in treasurer’s office
The state has audited the Treasurer and discovered an “off the books” account of more than $2.6 million gathered from fees paid by people who have established college savings accounts for loved ones.
State Treasurer Don Stenberg says that one of his predecessors started the account years ago. So, one particular constitutional branch of government has a nest egg while the rest of government is cutting to make ends meet.
Please Don, you served a couple terms as Attorney General and should absolutely know better. It’s taxpayer money accumulated in a fund that is managed by the bank in which the funds are held. You proudly graduated from both law school and business school at Harvard University. Seriously.
For some reason the fox and the hen house keep popping into my head.
Good for State Auditor Charlie Janssen’s office discovering the funds had been building up in an account at First National Bank of Omaha since 2010. The money came from administrative fees paid by people participating in Nebraska’s college savings plans.
According to the audit report, the account earned no interest and was not recorded in the state’s accounting system, included in the state budgeting process or reflected in the state’s comprehensive annual financial report.
The report called it “material noncompliance and a material weakness” in the Treasurer’s Office accounting. Stenberg’s spokeswoman said the fund had been created by former State Treasurer Shane Osborn. She said her boss maintained the account “in the good faith belief that the account met legal requirements.”
Stenberg said his office used $150,000 from the account to provide a financial literacy program free to Nebraska high school students and their families. The audit said the program didn’t fit the purposes for the administrative fee as set out in state law. Stenberg argued that state law allows the fees to be used for advertising and promotion of the savings program and the literacy program had been a successful advertising and promotional activity.
He argued the account was not public because it held fees paid by savings plan participants and he didn’t have to follow the usual requirements governing public money.
Janssen contended it was public money and Stenberg did not have authority to maintain and use such an account. Attorney General Doug Peterson agreed with the auditor and Stenberg closed the account and transferred the money to the state in July.
All well and good, but here’s what’s troubling. Before the routine examination of the Treasurer’s Office finances in April, the account had been little known. The treasury management program director in the State Treasurer’s Office didn’t know about it, and she’s in charge of ensuring that all state bank accounts are protected from loss through a sufficient amount of pledged collateral. No such protection had been arranged.
But wait, there’s more.
The account didn’t earn interest, an estimated $51,507 during 2017 alone. The funds were never reported to the Department of Administrative Services or the State Legislature, a practice the audit said, “not only conflicts with statute but also effectively hinders the full legislative appropriation process.”
In a “highly unusual” procedure, the authorized signature card for the account contained only the names of First National Bank employees, not state employees. Remember, the money was being held in trust on behalf of the state.
Expenditures made from the fund were done outside the budgeting process. Stenberg’s office spent $173,136 from the account in 2017 for a birthday baby scholarship promotion and the college savings program director’s travel.
The audit also found that: 22 of 25 unclaimed property holder reports were not properly recorded, in some cases a year late; the Treasurer failed to deposit $874,349 in unclaimed property receipts for months; he used the services of an outside law firm with an approval by the attorney general that was made 17 years ago. Oh, the attorney general at the time was Stenberg.
Perhaps Don Stenberg is just worn out by politics. He has been Treasurer since 2010. He was Attorney General from 1991 to 2003. He was legal counsel to then - Gov. Charlie Thone from 1979 to 1983. He ran unsuccessfully for: Lieutenant Governor in 1978; Attorney General in 1986; the U.S. Senate in 1996, 2000, 2006 and 2012. I hope he enjoys his retirement.
It’s good to see Janssen carry on the tradition of the State Auditor’s office begun by John Breslow in 1991 when the Auditor became known as the watchdog of state government.
It is encouraging to know that government, in some instances, is capable of keeping itself honest.