The Nebraska State Treasurer’s Office maintained an outside bank account for seven years — worth $2.6 million — that apparently flew under most state accounting radar.
The account wasn’t recorded in the state accounting system or reflected in the state budget or the annual financial report, according to an audit of Treasurer Don Stenberg’s office. It contained fees charged to participants in the Nebraska Educational Savings Plan Trust.
The recent audit identified concerns about the account, held at First National Bank of Omaha, including that it didn’t draw interest and was allegedly used to avoid budgetary limits.
In 2017 alone, the account missed out on an estimated $51,507 in interest.
The authorization of $173,136 in spending directly out of the account during the audit period of July 1, 2016, to Dec. 31, 2017, was also listed as a concern. That spending included program director travel, legal expenses and birthday baby scholarships.
The account had not been disclosed to the Nebraska Investment Council, the audit showed. And because the treasury management program director was unaware of the account, $2.3 million was unprotected from potential loss.
Having more than $2.6 million in the bank account presumably unknown to the Legislature removed the amount from the decision-making process, the auditors said.
Jana Langemach, communications director for the state treasurer’s office, said Stenberg complied with the account contract in the good faith belief that it met legal requirements.
An attorney general’s opinion requested by state Auditor Charlie Janssen and Stenberg said the state treasurer did not have the necessary legal authority to establish, maintain and use the account to hold a portion of assessed administrative fees outside the state treasury and state’s official accounting system.
Janssen contended the fees charged to participants in the savings plan were public funds that must be placed in the state treasury and only spent by an appropriation of the Legislature.
Stenberg said the fees, which are not raised by taxation and which may be used only to pay costs of administering the trust fund, are nonpublic funds that the treasurer may spend for the benefit of the trust and its beneficiaries.
In 2010, treasurer Shane Osborn established the account at First National Bank of Omaha. The treasurer has each year transferred funds from the account to the College Savings Plan Expense Fund to pay fees to the Nebraska Investment Council and to fund the Legislature’s appropriation, Stenberg said. It has paid for legal fees and other fees for operation and promotion of the trust.
On July 23, as a result of the Attorney General opinion, the treasurer transferred the $2.7 million remaining in the account to the Nebraska Educational Savings Trust expense account, and it has been recorded in the state accounting system.
Other audit report findings included:
* 22 of 25 unclaimed property holder reports were not properly recorded, in some cases a year late, which prolonged notification to potential owners past the deadline required by the state;
* 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 before. At that time, Stenberg was the attorney general.