An analysis of Montana's finances last year revealed 125 errors and a lack of internal controls that could have brought the inaccuracies to light earlier.
Tori Hunthausen of the Legislative Audit Division told lawmakers Wednesday that an audit of the Department of Administration found financial misstatements and omissions that have the potential to affect the state's AA+ bond rating.
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"It's a financial preparation, procedures, review and supervision problem," she said.
The errors include an approximately $1 billion overstatement of accumulated depreciation related to infrastructure and in large part the state highway system. Four bond issuances totaling approximately $62 million also were omitted, and transportation expenses were overstated by approximately $220 million.
Rep. Dee Brown, R-Hungry Horse, called the audit findings disturbing and said she hasn't seen a similar report in 14 years on the Legislative Audit Committee.
"This (audit) is 'how is our bookkeeping system working?' and this one says horribly," Brown told The Associated Press.
State budget director Dan Villa said he and Department of Administration director Sheila Hogan have put a team in place, including a new accountant, to address the issue. He described some of the errors as simple, citing a spreadsheet in which the last three zeros had been left off the figures.
"It is a big deal? It's big enough that Sheila and I are all over this," Villa said. "But it's not misappropriating funds or hiding money."
Hunthausen said that part of the audit isn't good, but the state could potentially avoid a drop in its bond rating if officials fix their financial reporting process quickly.
"I know they heard us and I know they're mortified," she said. "Hopefully they'll buckle down in their preparation and review procedures."