An annual audit of the state’s finances found that officials had double-counted over $750 million dollars. And that’s not the first time something like this has happened.
That’s the most striking finding from an audit of the state’s Comprehensive Annual Financial Report, which gives a detailed picture of the state’s fiscal situation, for the fiscal year that ended in mid-2016.
Auditors gave the report a “disclaimer of opinion,” which means there are significant enough problems that they cannot give a valid opinion on the report.
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The report, which was due Feb. 15 but not submitted until mid-June, showed state agencies were reporting money they received from the Land Grant Permanent Fund in their financial statements—which, in addition with the accounting of the fund itself amounting to double-counting hundreds of millions of dollars.
“While many of the accounting conventions used by agencies appear rational at a parochial level, they may not be aligned with the appropriate way of reporting the activity from a statewide perspective,” Department of Finance and Administration Secretary Duffy Rodriguez wrote in a letter attached to the CAFR.
This was changed, according to State Auditor Tim Keller, in late June 2017 when State Controller Ronald C. Spilman decided to account for the Land Grant Permanent Fund “as an asset within a governmental fund in the department level financial statements of the State Investment Council.” At the same time, the controller ordered other agencies to stop reporting the permanent fund as an asset.
“The audit highlights a number of areas in which our state continues to be unable to provide an aggregate financial snapshot to policymakers and the public,” Keller said in a statement. “Specifically, with regard to the double counting of over $750 million by higher education funds and the Land Grant Permanent Fund, our office called on the state to resolve the issue,” he added. “We are encouraged that a plan is in place to properly account for the billions in the Fund moving forward. We will continue to push the state towards achieving a timely and accurate snapshot of finances.”
The audit found three other significant issues, each of which were problems in the previous year’s CAFR, too.
These were weaknesses in accounting for interfund, internal and intraentity balances and transactions, a lack of “a process to ensure the reporting of all receivables and payables between the primary government and component units are accurately reflected in the State’s financials as required” and that internal controls over financial reports “ were not adequate to ensure preparation of financial statements for the State in accordance with generally accepted accounting principles.”
The report also looked at the recent decline in taxes, and largely blamed the drop in energy prices for the lost revenue. Still, natural gas production “remained steady” according to the report, while oil production “surged 3.9 percent.”
Other drops included a 7 percent decline in gross receipts taxes, which make up one-third of the state’s general fund revenue each year. Corporate income taxes also plummeted by 53 percent, contributing to the 9.3 percent drop in income tax revenues. Personal income taxes, which the report calls “a more significant and relatively stable revenue source for the state” when compared to corporate income taxes “were marginally lower” than the previous fiscal year.
Personal income taxes make up about one-fifth of the state’s general fund revenue.
One segment of the state’s tax collection actually increased in revenue—selective sales taxes. These grew because of an increase in insurance coverage and premiums from the Affordable Care Act, including Medicaid expansion. An increase in sales of motor vehicle, which are subject to an excise tax, also increased, which was attributed to low gas prices and low interest rates.