A WyoFile story by Mike Koshmrl
JACKSON HOLE, Wyo. — State Treasurer Curt Meier’s office has repeatedly failed to produce legally mandated financial reports on time, raising transparency concerns, threatening the state’s creditworthiness and inhibiting the work of budgeters and state agencies. Now, frustrated lawmakers are trying to legislate a solution.
Sen. Mike Gierau (D-Jackson) illustrated his concerns to fellow senators by asking how much was in their bank accounts.
“How much money do you have?” Gierau asked on the chamber floor in support of Senate File 111 – Wyoming financial transparency act. “I bet y’all know, approximately.”
The inference of the Teton County senator’s question was that Wyoming, which possesses one of the 30 largest government-owned sovereign wealth funds in the world, can’t, at the moment, answer the question for itself.
Wyoming’s finances might be straight, Gierau said, adding there’s no reason to believe the treasurer’s books are cooked or inaccurate.
“But the question remains. We don’t know that,” Gierau said. “The treasurer doesn’t know that. No one knows that. That’s why I bring this bill, to shine a light on that.”
The legislation at issue, SF 111, reflects frustrations among Wyoming’s bean counters, lawmakers and others. The state audit has been late for three straight years, causing some officials to worry about potential effects on the state’s bond rating and even its eligibility for federal funding.
The treasurer’s office has experienced “a breakdown in financial accounting processes and systems,” starting in mid 2019 — shortly after Meier assumed office — according to an independent consultant’s review of the agency’s performance.
“Many of the causes of the breakdown persist today and present potential for additional problems in the future,” the same consultants wrote in their February 2021 report. Minneapolis-based accountancy firm Clifton Larson Allen LLP produced the audit for the Wyoming State Loan and Investment Board, with a goal of providing recommendations to improve the state treasurer’s investment and financial accounting divisions.
Meier, who served 24 years as a Republican member of the Wyoming Senate before being elected treasurer, agreed that timeliness in producing financial reports needs improvement. In an interview with WyoFile, Meier graded his office’s accounting performance as subpar.
“Disappointing. A C-minus. Some people might think we’re lower,” Meier said. “I’m transparent. It’s not as good as we would like.”
Self-critique
Meier pinned that barely passing grade on himself. He contended there are situational and resource-related reasons for his tardiness: convoluted transactions, outdated tracking software and an accounting staff that’s too small and was poorly equipped for the task.
“We started with folks that didn’t necessarily have degrees in accounting,” said Meier, whose own degree from the University of Wyoming is in animal science. “Essentially all of our new hires have degrees in finance or accounting. We’ve increased the capacity of the office substantially, so I can’t throw my employees under the bus.”
Much of the language found in SF 111, which is sponsored by Gierau, is repeated in the footnotes of the Wyoming Legislature’s general budget bill. If requirements in the standalone legislation survive, however, they will have more staying power than those in the budget, which will expire in two years.
The legislation would reinforce existing monthly reporting requirements, calling for monthly dissemination of the status of all state-fund distributions and transfers, plus all investment earnings, interest, dividends and realized/unrealized gains and losses for each investment pool under Meier’s oversight. The same batch of reports would be required separately for each investment manager under contract with the state treasury.
The bill would also require the treasurer’s office to report to lawmakers annually about steps taken in response to the 2021 consultant’s report recommendations. Additionally, the bill mandates the treasurer’s office to provide an accounting of all cash and investment earnings from all transactions to two legislative committees within 90 days of each quarter.
The quarterly reporting demand would be “impossible” to achieve, Deputy Treasurer Dawn Williams told WyoFile.
“The requirement implies that we are somehow withholding the report, and that is not the case,” Williams said. “It’s because of the nature of investments and when we receive the reporting.”
Williams cited accounting-staff shortages as a source of the agency’s struggles with meeting deadlines, an assertion that the February 2021 agency audit supports.
The state treasurer’s office financial accounting division has 13 full-time employees, according to the current organizational chart. An industry standard is to employ 2.5 back-of-the-house accountants for every investor, according to the consultants, but there are now 10 investors calling the shots with the $20-plus billion under Meier’s oversight. That means the Wyoming office’s current ratio of accountants to investors is 1.3-to-1.
“There are economies of scale and we are not recommending a doubling of Financial Accounting Division personnel, but clearly, an increase above current levels is required,” the consultants wrote.
Staffing woes
Funds to hire five more accountants and an additional oversight position are tentatively being allocated, Joint Appropriations Committee Chairman Drew Perkins (R-Casper) told the Senate while introducing the budget bill.
Gierau, also a member of the JAC, said the state treasurer’s office has the resources coming it needs to right its ship.
“Everything that helps the back of the house, including a chief operating officer, we gave them,” he said.
Katie Smith, who oversees the treasurer’s financial accounting division, said having a deeper staff would be “fantastic,” but won’t fix the office’s issues overnight.
It’ll take a “couple years,” to start seeing results, she said.
The proposed new chief operating officer position would bring external oversight to Meier’s office. The executive would be hired by, and answer to, another agency according to the budget bill. That new post, which costs $651,000 in the two-year budget, will be based at the state treasurer’s office, but be under the purview of the State Loan and Investments Board.
Deputy Treasurer Williams wasn’t welcoming of the outside assistance: “That’s problematic for us,” she said.
The Wyoming GOP is also pushing back on the concept of external oversight at the treasurer’s office, although the party mistakenly described the new post as coming from an amendment.
“Why is the Wyoming Legislature trying to sneak an amendment into the budget bill to tie the hands of the State Treasurer so he cannot hire or fire his own staff?” the party wrote to members in a Tuesday “special update” email.
Even legislators were perplexed by the high-dollar quasi-staff addition.
“Honestly, I thought that’s what the state treasurer was elected to do,” Sen. Dan Furphy (R-Laramie) remarked as the budget was being introduced.
Perkins responded: “If you can vote, you can run for any of the elected offices,” he said. “So that expertise doesn’t always necessarily rest in the treasurer’s office.”
Meier, who succeeded now-Gov. Mark Gordon as treasurer, said he plans to push for more resources. He’s seeking an addition of $1 million to his office’s $84 million budget allocation to build an “in-house continuous audit structure.”
Asked of financial reporting delays, Meier responded that resources added to the treasurer’s office during his tenure have been concentrated on the investment side. He touted his agency’s performance on that front, grading its improvements in returns an “A-plus.” But meanwhile the accounting side of the office was being “shortchanged,” he said.
“When I came into the office,” Meier said, “the accounting system was totally non-functional.”
During Gordon’s seven-year run as treasurer, the agency did not experience the same financial reporting hiccups, spokesman Michael Pearlman wrote in an email.
“The annual audit was completed in a timely manner when Governor Gordon served as state treasurer,” Pearlman said. “While the governor served as treasurer, the office reconciled all investment managers on a monthly basis without fail.”
Good governance bottleneck
The missing treasurer’s data hinders other offices.
The state auditor’s office has lacked the information needed to complete Wyoming’s annual comprehensive financial report, State Auditor Kristi Racines told WyoFile. The latest completed report only covers the period through fiscal year 2020 — now 18 months past.
“COVID has not helped,” Racines said. But the “most substantial” reason for the delay, she added, is that her office has not received finalized financial data from the treasurer’s office.
“The bottom line is they haven’t been able to reconcile cash and income,” Racines said. “That’s what they’re working towards and that’s what has taken a long time.”
Delays emanating from the treasurer’s office could potentially lead to other consequences for Wyoming. Not having an up-to-date annual comprehensive financial report, Racines said, could theoretically affect the state’s eligibility for federal funds. There’s nearly $2 billion of federal funds in the budget, and that doesn’t count all federal contributions to Wyoming.
“The feds aren’t just going to say, ‘Oh, we’re just going to stop sending you any federal funding. It doesn’t really work that way,’” Racines said. “But we’ve also never been this late, so we’re kind of in a little bit of unknown territory.”
There’s also a potential that delays could affect Wyoming’s bond rating, essentially the state’s creditworthiness. Bond rating agencies, she said, need to have assurances that the numbers they’re basing their ratings on are accurate.
S&P Global Ratings last awarded Wyoming a “AA” rating, two notches down from the state’s rating in 2016. Racines wouldn’t go so far as to say another downgrade is likely.
“But if external auditors were unable to complete an audit, that is a risk,” she said.
Ahead of SF 111’s introductory vote on Friday, Gierau wasn’t particularly confident it was going anywhere. The senator was forthcoming about his intent in copying and pasting some provisions from the budget bill into standalone legislation. He sought publicity.
“If [Senate President Dan Dockstader] doesn’t bring it up, I’m going to go out onto the steps of the capitol and start screaming until somebody asks what’s up,” Gierau said.
Dockstader did bring it up.
Senate File 111 gained unanimous favor, passing 29 to 0. It’s slated to get worked through the Senate Corporations, Elections and Political Subdivisions Committee, and is on the agenda for 7 a.m. Thursday.
