Auditors: State Treasurer misspent on course

Arkansas State Treasurer Dennis Milligan
Arkansas State Treasurer Dennis Milligan

State Treasurer Dennis Milligan's four-year, $450,000 contract with a company to provide a digital financial literacy course for students in grades four through six in Arkansas schools doesn't appear to be within the scope of his office's duties under the Arkansas Constitution and state law, legislative auditors said this week.

But Milligan said he disagrees with Arkansas Legislative Audit's conclusion regarding his office's contract with Ever Fi Inc. of Washington, D.C.

"The treasury, under my administration, has made great progress and service to our citizens," he told the Legislative Joint Auditing Committee on State Agencies on Thursday.

"However, it is both professionally disappointing [and] frustrating and personally a sad moment for me that this committee hearing has become the venue to spotlight an issue important to me -- an issue that I feel is positively impacting the children of Arkansas and helping teachers in the classroom, and that issue is financial literacy," said Milligan, a Republican from Benton.

He said he promised that he would champion financial literacy during his successful campaign in 2014 and that more than 465,000 Arkansans elected him with that promise, and that he keeps his promises. So far, nearly 10,000 students in 90 schools have participated in the program, according to the treasurer's office.

"Financial literacy is an issue the treasurer's office was engaged, before I took office, in a limited and smaller way," Milligan said.

"As for the critics who seem to want to attack financial literacy or me as its messenger, I turn back to [President Abraham] Lincoln, who said if I were to try to read, much less answer all the attacks made on me, this shop might as well be closed for any other business. I do the very best I know, the very best I can and I mean to keep doing so until the end."

But a Legislative Joint Auditing co-chairman, Sen. Jimmy Hickey, R-Texarkana, asked whether Milligan meant to suggest that "this committee was being used as a venue to attack you."

In response, Milligan said, "I think it's a venue to spotlight an issue that's extremely important to me and certainly very positively impacting the children of Arkansas."

As a retired banker, Hickey said he understood the importance of financial literacy more than most people, "But I am pretty sure that your opening comment was that we were using this committee as a venue to [attack the treasurer], and I promise you that is not the case."

Milligan said that comment "was never directed" at the committee.

Hickey said he and Joint Audit's other co-chairman, Rep. Mary Broadaway, D-Paragould, have done everything in their power to keep the committee nonpartisan.

"We have made both sides agitated because of things that we would not audit. We have kept the politics out, I am going to venture to say, as good as anybody could. ... I understood you to say it that way and that was kind of an insult to not only me, but this committee," Hickey said.

Then, Sen. Eddie Cheatham, D-Crossett, told Milligan: "I don't want you leaving here thinking that we are singling you out, that I'm singling you out. It kind of hurts me a little bit that you would say that."

But Jason Brady, who is Milligan's chief deputy, said he thought the treasurer's comments were taken out of context.

"Sir, I know what the treasurer just said because I helped him make these comments. That comment was not about this committee nor this committee attacking the treasurer," Brady said. "I do think it is extremely important for the senator to hear that this wasn't a personal attack."

Cheatham said he appreciates Brady's remarks, but he and Hickey "evidently heard the same thing."

"All I can say is I'm not that dumb to try to get the committee all bent out of shape and upset. I don't think that was my intention at all, and again I certainly offer that apology," Milligan said.

"It was the actions of the people within the treasurer's office that did not use the appropriation authority correctly that brought this finding before the Legislative Audit Committee," Sen. Missy Irvin, R-Mountain View, told Milligan. "It is our job to have oversight over the money and how it's spent."

Deputy Legislative Auditor Jon Moore said the treasurer's office entered into its four-year contract totaling $450,000 with Ever Fi. Inc. on Aug. 7, 2015, and $75,000 of the $450,000 was paid in fiscal 2016, which ended June 30.

Although the treasurer's office sought advice from Republican Attorney General Leslie Rutledge's office before entering into the contract, "we do not know whether the treasurer received advice concerning his authority to enter into this contract," Moore said.

"We subsequently requested an attorney general's opinion on the legal authority of the treasurer to enter into the contract," he said. "The attorney general ... did not definitively answer this question, but did note the legislative auditor's authority" under Arkansas Code Annotated 10-4-407 (3) to call "attention to any funds which, in his or her opinion, have not been expended in accordance with the law, appropriation, ordinance, regulation, or other legal requirement."

It appears the purpose of the contract isn't within the scope of the treasurer's duties under Article 6, Section 22, of the Arkansas Constitution and a review of applicable law, Moore said. It also appears that the payment of $75,000 from the office's Act 743 of 2015 appropriation line-item for data processing system and services was not within the purpose of the appropriation, he said.

"We recommend that the treasurer obtain legislative authorization for this activity and any related expenditures," Moore said.

Grant Wallace, Milligan's chief deputy treasurer, said the office has a section for about $900,000 in its appropriation for data processing and "it [is] used all across the board for computers and other data processes.

"There was a thought when the $75,000 was expended out of that, that because this was a computer software program, that that's where it correlated," Wallace said. "Unfortunately, that was misunderstood and we have corrected that problem. In the future, that would no longer occur."

Moore said a former state treasurer, Newport Democrat Martha Shoffner, had a $5,000 payment for an educational program called Financial Football for the schools.

"That did not rise to our attention during the audit, but that would have been the same issue," Moore said.

Rep. Kim Hammer, R-Benton, said, "This is another example where maybe legislatively we need to put a fix in the next time around so we can clear it up."

Metro on 10/15/2016

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