Audit: Treasurer’s office cited for controls

Office agrees with officials’ findings and says changes have been made

The Office of the Treasurer, under a previous administration, failed to properly dispose of unused state property, follow ethics disclosure rules and correctly handle unclaimed property, a new state audit found.

State auditors in their 15-page report called on the office to “improve internal controls.” The office largely agreed in written responses included with the report and said changes have been made to address the problems.

A spokesperson for state Treasurer Erick Russell declined further comment beyond agency responses included with the audit. The period audited, fiscal years 2021 and 2022, was prior to Russell’s tenure, which began in January 2023. Former Treasurer Shawn Wooden, who was in office during the audit period, did not respond to an email seeking comment.

The treasurer’s office is responsible for administering the state’s Unclaimed Property, the Second Injury Fund and the Connecticut Higher Education Trust. The office also administers the state’s pension funds, debt management and cash management.

Surplus property

The audit notes the State Property Control Manual establishes the Department of Administrative Services Surplus Unit as the legally authorized agent for disposal of surplus state property and directs agencies to list those assets on the state’s auction website or receive pre-authorization to dispose of it.

The auditors reviewed 20 assets, totaling $164,373, which were removed from the treasurer’s inventory during the years examined and found that in three of those instances the trea

surer’s office lacked disposal authorization records; four instances in which the office did not have complete disposal authorization records; and 13 instances where the office did not remove assets from its inventory records until one to three years after disposal.

“If the office does not maintain or regularly update property control records, there is increased risk that property could go missing or be improperly disposed,” auditors said.

The finding had been previously reported in the last audit report covering the fiscal years 2019 through 2020.

“The Office of the Treasurer should improve internal controls over the asset disposal process and accuracy of its property control records to ensure compliance with the State Property Control Manual,” auditors recommended.

In response, the treasurer’s office agreed with the finding and provided explanations.

“The Treasurer agrees that certain inventory records were not updated in a timely manner with required documentation for certain items during a large surplus of property necessitated by [the office’s] move to a new building during the fiscal year ended June 30, 2020,” the agency explained.

“Since that time, internal controls over assets disposal have been improved, including staff training, purchase of an iPad for image upload, and a detailed written surplus procedure which is now in effect,” the office said. “This ensures that all supporting documentation is uploaded to State Surplus and Core-CT Asset Management portfolios within 10 days after items are removed.”

Ethics agreements

In another finding, auditors pointed out the state Office of Policy and Management requires all employees participating in a request for proposal (RFP) process to sign an ethics and confidentiality agreement at the start and recertify after the agency receives responses from interested vendors.

Auditors requested ethics and confidentiality agreements for RFP’s between February 2021 and September 2022 and noted the office lacked four certification forms; participants signed 19 of the forms one to four months after the office started the process; and the office did not ensure the RFP participants recertified seven forms.

The office also recertified 15 ethics forms up to five months after the RFP process ended, auditors said.

“The office did not comply with the Office of Policy and Management’s procurement standards,” auditors wrote. “RFP participants that do not review and attest to the ethics and confidentiality agreement during the procurement process may not be as vigilant about the risks of conflicts of interest.”

In response, the agency agreed it should strengthen internal controls to ensure compliance with completion of an Ethics and Confidentiality form.

“[The treasurer’s office] has implemented a version of the OPM procurement standards as part of a comprehensive system of internal controls that includes additional safeguards and has implemented changes to ensure more consistent and timely compliance with the ethics certification standards,” the office said in response.

Unpaid claims

Auditors pointed out the Unclaimed Property Division of the treasurer’s office must follow established guidelines for approving claims prior to payment. The guidelines require final approval from the assistant treasurer or office controller for claims over $250,000.

Unclaimed property is any asset legally obtained and held by the state until the rightful owners are located. Unclaimed assets include savings or checking accounts, uncashed checks, matured certificates of deposit, stocks, bonds or mutual funds, travelers’ checks or money orders and proceeds from life insurance policies. If the rightful owner is located, the asset is returned or “paid” to that person or entity.

The audit found the office reviewed 55 paid unclaimed property claims, totaling $26,631,064, during fiscal years 2021 and 2022 and identified five claims over $250,000 missing final approval from the assistant treasurer or division controller. The five claims totaled $2,326,721.

Auditors also noted one instance, despite proper approval, in which the division lacked supporting documentation for a $254,688 claim.

“Improper approval of claims increases the risk of undetected errors in processing unclaimed property returns,” auditors said. “The Unclaimed Property Division should strengthen internal controls to ensure it follows established claim approval guidelines.”

The agency agreed it should strengthen those controls. But, the office said: “It should be noted, the claims cited in this finding were all valid claims paid in the appropriate amounts and processed in accordance with established procedures.”

The treasurer’s office added: “The claims identified in this audit finding were processed during a period of management transition with the retirement of a long time Assistant Treasurer, in the midst of Covid and extensive staff absences, and the period of time before the hiring of a new Assistant Treasurer. In addition, during this time, there were major system changes underway. The addition of paralegal staff support for the claims review and approval process, that was intended to have higher level approval authority, was not updated in the written policies.”

Since then, the agency said, it has initiated an overhaul of the approval guidelines and has tightened the automatic system controls. “With the addition of new positions and job descriptions within Unclaimed Property, a reassessment of the assignment of appropriate levels of review is also underway,” the office said.