EDITORIAL: Recent audit gives state a scare

It was a shock to the entire state last month when the Legislative Audit Division reported that it had discovered significant accounting errors in fiscal records kept by Montana’s Department of Administration.

As reported by the Associated Press, the errors include an approximately $1 billion overstatement of accumulated depreciation related to infrastructure and the state highway system. In addition, four bond issuances totaling approximately $62 million were omitted, and transportation expenses were overstated by approximately $220 million.

Sen. Dee Brown adds that capital grants and contributions for the Department of Natural Resources and Conservation were understated by $445 million and transfers of about $47.8 million were omitted entirely.

Brown issued a response to the audit that was highly critical of the officials responsible for the accounting failures, especially Director of Administration Sheila Hogan.

“In my 14 years on the Audit Committee,” wrote Brown, “this is the first time the financials for Montana shout of incompetency within the department. It is especially worrisome when so much money is at stake.”

As Brown rightly pointed out, accountants in the private sector who made mistakes of this magnitude would be looking for work in short order.

Fortunately, there is a new state accountant in place, and we trust that he has already taken steps to make sure that no similar errors will occur in the future.

It is also fortunate that Moody’s Investor Service, the agency that rates states for their credit-worthiness, has indicated that the errors and omissions are unlikely to affect Montana’s excellent credit rating.

Nonetheless, we hope that Gov. Steve Bullock and the rest of his team have taken the audit report as a wake-up call. The governor wisely called the accounting practices previously in place “unacceptable,” and for now we take him at his word that the errors won’t happen again.

If they do, then additional responses will be appropriate, either by the Legislature or the voters.