Sweeping $771M Under The Rug
It’s a neat trick if you can pull it off, which is apparently what the North Carolina Department of the State Treasurer did, according to a recently released report by the state auditor’s office. This from Forbes:
In the report, the auditor states that State Treasurer Janet Cowell’s office failed to report $771 million in losses on the fair value of cash collateral received from securities lending activities. The Treasurer’s office also failed to report $108 million in gains on investments made with securities lending collateral.
“The net impact of not reporting the investment transactions in the 2009 fiscal year resulted in the Investment Pool’s June 2009 net assets being overstated by approximately $663 million,” the auditor’s report stated. The transactions were ultimately reflected in the Treasurer’s June 2010 financial statements, in the fiscal year after they occurred. When questioned about the failure to disclose the securities lending loss, the Treasurer’s office was less than forthcoming, in the view of state auditors.
…
The North Carolina treasurer’s failure to report its jumbo-sized loss raises fresh questions about the ability of state and local governments to safeguard the vast sums of public money entrusted to them. Those concerns are growing amid mounting accusations that the banks and brokerages which handle their securities transactions have been over-charging corporations and public entities for various services, including securities lending and foreign exchange conversions.
If burying $771 million in some black hole isn’t bad enough, the state auditor’s report also determines that the treasurer “had exceeded its statutory limits on investments in hedge fund and other alternative assets.
A government agency exceeding its limits? Imagine that.
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