Alex Partners: $1.8 billion accounting discrepancy traced to conversion errors; recommends independent monitor

The Senate Finance Committee on Tuesday heard a forensic accounting report from Alex Partners that traced $1.8 billion in unreconciled balances within the state's accounting system to errors made during a multi-year conversion from the old STARS ledger to the current SKI(S) system.

Alex Partners' Susan Markle, a managing director, told senators the firm was hired after responding to an RFP from the Department of Administration under proviso 93.19 and was asked to investigate the $1.8 billion matter and a $3.5 billion restatement in the 2022 Annual Comprehensive Financial Report (ACFR). "We responded to an RFP that the admin department put out earlier in the summer, in response to a proviso 93.19," Markle said.

The firm said its scope included tracing cash and investments in the state treasury, reconciling SKI(S) general ledger accounts, and reviewing historical ACFR presentations. "The $1,800,000,000 that we talk about ... it wasn't something that came about as a result of a particular organization," Alex Partners' David Bly said, describing the discrepancy as the product of multiple offices and conversion activities rather than a single actor.

Why it matters

Alex Partners told the committee its work indicates roughly $1.607 billion of the $1.8 billion balance does not represent actual cash balances in treasurer-controlled bank accounts; instead, those amounts resulted from accounting entries tied to the conversion process and to how certain accounts were classified in the ACFR restatement. The firm said about $245 million does represent cash that remains to be properly classified.

Key findings and recommended fixes

- Conversion mechanics: The report traces the problem to…