State Auditor's Office releases annual audit of the State Treasurer's Office

A new report released today by the Missouri State Auditor's Office finds the Office of Missouri State Treasurer failed to follow state law when it kept approximately $35 million in interest income in two funds created for the I-70 expansion project rather than credit it to the state's General Revenue Fund.  The report also finds the State Treasurer's Office (STO) needs to improve oversight and monitoring procedures for the Missouri Empowerment Scholarship Accounts (MOScholars) Program.

The report details how the General Assembly appropriated money to three new state funds during the 2023 legislative session. The STO credited interest income to these funds during the year ended June 30, 2024, totaling approximately $4,781,000, $364,000, and $34,337,000 for the State Road Fund I-70 Project Bond Proceeds Fund, State Road Fund I-70 Project Fund, and OA I-70 Project Fund respectively. Because there is no law allowing interest to be credited to the State Road Fund I-70 Project fund or the OA I-70 Project Fund, there is no legal basis for these 2 funds retaining or being credited with the interest earned from the investment of each fund's respective balance.

The STO response cites a memorandum of understanding with the Office of Administration, and "contemporaneous communications" with the Governor's Office as justification for the decision to retain interest in these funds. The audit report clearly concludes that state law does not support the STO's retention of interest in these funds. The report recommends the STO work with the General Assembly to ensure all investment interest income is handled in accordance with state law; and unless otherwise provided by law, ensure all interest received from the investment of state moneys is credited by the STO to general revenue.

The audit also finds the STO needs to improve oversight and monitoring procedures for the Missouri Empowerment Scholarship Accounts (MOScholars) Program. State law requires the STO to conduct or contract for annual audits for the program. While the STO performed an internal review of program accounts, it did not conduct an audit that complies with state regulations that require the audit to conform to the standards for auditing of governmental organizations. The report also finds the STO did not have procedures in place to adequately review or monitor annual reports submitted by the Educational Assistance Organizations (EAOs). A review of quarterly and annual reports submitted by the 6 EAOs for the 2022-2023 school year identified a discrepancy in the quarterly and annual reports submitted by one EAO. The report recommends the STO establish procedures to ensure all program reports are reviewed and monitored for accuracy and compliance with program requirements.

The annual report includes a summary of the office's operating financial activity, cash and investment balances, and investment income. The Missouri Constitution establishes the State Treasurer as custodian of all state funds and funds received from the U.S. government.

Due to the fact State Auditor Fitzpatrick served in the role of State Treasurer for the first 6 months and 9 days of the audit period and to avoid the appearance of a conflict of interest, he recused himself from all portions of the audit involving decisions made by the STO pertaining to the year ended June 30, 2023. However, all of the findings in the audit pertain to decisions made by the current administration.