NEWS

Moody’s: State financial report errors not a credit concern

Lisa Baumann

HELENA (AP) – A credit rating agency official says the major problems found in a recent audit of Montana’s 2014 finances are unlikely to affect the state’s bond rating.

Legislative audit officials told lawmakers last week the problems had the potential to downgrade Montana’s high rating. A downgrade would make it more expensive to borrow money.

But Moody’s Investors Service senior vice president Ken Kurtz said in a statement to The Associated Press Tuesday that although the weaknesses in the state’s internal controls is a concern, there is no indication that Montana’s financial condition has worsened.

The audit of last year’s finances submitted by the state Department of Administration revealed 125 errors in the form of misstatements and omissions, including a $1 billion overstatement of how much infrastructure had depreciated.

Kurtz said that kind of information is not a factor in their analysis.

“The misstatement of depreciation, for example, is not a credit concern,” he said.

Montana’s current bond rating from Moody’s is Aa1 stable, its second-highest rating.

Gov. Steve Bullock in a statement Tuesday called the problems revealed by the audit unacceptable.

“The process that unfolded in the state’s audit is completely unacceptable to me,” he said in a statement to reporters. “My administration understands very clearly that my No. 1 priority is to keep our fiscal strength the envy of the rest of the country. We have put steps in place to ensure that remains the case.”

State officials declined to say whether anyone had been fired over the audit’s findings. Documents show Financial Services Division state accountant Julie Feldman stepped down in either late April or early May and that she has taken a job with the Montana Board of Investments. Feldman was a recipient in 2013 along with 150 other state employees of the governor’s award for excellence in performance.

State legislative auditor Tori Hunthausen has said the problem with the reporting is bigger than one person and that all areas of financial reporting, from preparation to internal controls, need improvement.

Department of Administration director Sheila Hogan said one of the issues was a lack of experience due to a 100 percent turnover rate of the six-person accounting staff during the time last year’s financial report was compiled.

Hogan said Cody Pearce is the new state accountant and in a letter to Bullock on Tuesday said Pearce previously worked on four successful annual financial reports.

Hogan also said her department has added more internal review layers to the process and will also contract with an outside accounting firm to test and evaluate their procedures.

“I’ve guaranteed the governor that this will not happen again,” Hogan said.