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State Tries To Balance Checkbook

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Here’s a New Year’s resolution for state government: Balance checkbook.

The Department of Finance and Administration is spending $654,000 on a new effort to make that possible.

The goal is to be able to balance the checkbook on a “go-forward” basis by spring.

How far the state will go back to try to reconcile old checkbook entries and bank transactions remains to be seen.

The problem dates at least to the mid-2000s and is a massive one, with potentially tens of billions of dollars in unreconciled items.

The state needs to balance its checkbook for many of the same reasons your household does: to operate within budget, to know where money goes, to detect unauthorized activity or bank errors, to avoid overdrafts, to ensure money that could be put to better use isn’t sitting idle in a checking account month after month.

In the case of state government, the bank is the State Treasurer’s Office and the checkbook is called a general ledger.

The general ledger is where all credits and all debits are supposed to be recorded. Credits would be things like state tax revenues and federal funds appropriated to the state.

Debits would be things like employee payroll and payments to private vendors.

A study this summer by Deloitte Consulting found $32.5 billion in so-called reconciling items for state fiscal year 2007 through fiscal year 2011.

A reconciling item is a general ledger entry that may or may not have a corresponding bank transaction – or a bank transaction that may or may not have a corresponding general ledger entry.

Just between fiscal year 2010 and fiscal year 2011, there were 1.4 million reconciling items.

At the close of the 2011 fiscal year, the state’s general ledger showed a balance of $2.7 billion more than the Treasurer’s Office reported having on hand.

The state has spent about $2.8 million since 2005 to try to correct the reconciliation problem, according to State Controller Ricky Bejarano. That $2.8 million includes the cost of the computer work now under way by Deloitte Consulting.

Among the causes of the problem, according to Bejarano: Poor implementation in 2006 of government’s $30 million-plus SHARE computer system for money management and other functions, agency modifications to SHARE and incomplete reporting by contractor computer systems.

Bejarano says it’s not only government as a whole that has a cash reconciliation problem; some individual agency accounts and funds within agencies can’t be balanced either.

The goal of the Deloitte work is to have each general ledger entry correspond by number to a Treasurer’s Office transaction. The target date for completion of the work is March 1.

“We want to stop that bleeding,” Bejarano says.

The state will go back to balance old transactions, but Bejarano says, “We can’t afford to go all the way back because these vendors aren’t cheap.”

At a meeting in September, the state Board of Finance approved a $400,000 loan to the Department of Finance and Administration to help pay for the Deloitte work.

Board member Sam Spencer, president and CEO of Lea County State Bank in Hobbs, said it was inexcusable that government couldn’t reconcile its cash.

Hard to imagine any taxpayer would argue with him.

UpFront is a daily front-page news and opinion column. Comment directly to Thom Cole at tcole@abqjournal.com or 505-992-6280 in Santa Fe. Go to www.ABQjournal.com/letters/new to submit a letter to the editor.
— This article appeared on page A1 of the Albuquerque Journal

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