Audit Findings “Significant Deficiency” With State Treasurer’s Office

An audit report issued today by Arkansas Division of Legislative Audit finds that the problems in Democratic State Treasurer Martha Shoffner’s office have continued.  You may remember Shoffner from her declaration during auto-gate that she deserved her state funded car.  By the way, she still has that 2009 Chevrolet Tahoe assigned to her according to the DFA database. It was also reported previously on her cozy relationship with St. Bernard Financial Services in Russellville.

It seems she ignored all the criticism and has continued her misguided practices.

In accounting terminology, auditors found what is know as “significant deficiencies” with her office.  In layman’s term, this means they were not doing their jobs correctly.  Four deficiencies were noted with the biggest item being how they mishandled the sale of several large bond transactions.  From the report…

Subsequent to June 30, 2011, the Treasury sold bonds from its investment portfolio to selected bond brokers before the bonds reached maturity and subsequently purchased similar bonds from the same investment brokers, resulting in a net economic loss of $58,172. This practice differs from the Treasury’s previous practice of holding bonds until maturity.

Legislative Audit issued a separate special report that goes into further detail explaining that the above transaction involved 12 bonds valued at over $240 million.

In my opinion, this $58,172 loss may be the tip of the iceberg.

How can we be sure Shoffner was getting the best rate of her purchases since she had such a cozy relationship with this one bond firm? In addition, many funds are invested for longer than normal periods in a money market account paying 0.01% – an unbelievably low rate even for a money market!  A small change in interest on these bonds can make a huge difference when we are talking about the investment of hundreds of millions of dollars.

When Shoffner did not show up as expected at the Audit Committee meeting this morning, the chairs of the committee – Sen. Bill Pritchard and Rep. Tim Summers – issued a subpoena for her to appear.  They initially set an 11:00 am deadline but pushed this back to 1:00 pm when she still did not show up.  The Arkansas State Police were sent to try and locate Shoffner.

“I just want her to be here to answer some of the questions raised in the audit report,” said Summers. “I don’t think that is too much to ask.”

When 1:00 pm came and went without Shoffner appearing it was clear that she was in contempt of the committee’s subpoena.  According to Frank Arey, Legal Counsel for the Division of Legislative Audit, a contempt citation would have to actually come from a circuit judge at the request of the committee.  At this point, the committee has re-scheduled the hearing for Monday at 2:00 pm and is hopeful she will appear at this time.

Her office tells the AP that she plans to attend on Monday but had “a last minute scheduling conflict that prevented her from appearing” today.  I have asked her office what this scheduling conflict was but have not yet heard back.

It is unclear what will happen and if Shoffner will continue to hold her office, although she has shown no sign she even thinks she did anything wrong.  As I understand it, there are only three ways she could be removed – her resignation, impeachment by the state legislature, or if she is ruled ineligible such as if she is indicted for a crime.  If that were to happen and a vacancy was created, then Gov. Beebe would appoint someone to fill the vacancy for the remaining two years of her term.

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