Former treasurer faces questions

Characterizing the accounting practices of former State Treasurer (now Lt. Gov.) Brian Krolicki as "sloppy," the chairwoman of the Legislature's audit subcommittee said Monday she would forward the results of an audit of the state's College Savings Trust Fund to the attorney general's office.

Assemblywoman Sheila Leslie, D-Reno, declined to say whether she believed the handling of the funds merited criminal charges.

None of the money invested by parents to cover their children's future college tuition is missing, nor was any deposited in the wrong account, according to the auditors. In fact, the investments are flourishing and parents should be pleased with the amount of money the funds are earning, Ms. Leslie said.

Legislative auditors say Mr. Krolicki, a Republican, broke state law by letting $6 million of state funds remain in the control of consulting firms and trust fund managers, instead of depositing that money in state accounts, where it theoretically could have earned $38,000 in interest.

"We followed legal and professional accounting advice every step of the way," Mr. Krolicki replies. "All the monies have been accounted for to the penny."

Mr. Krolicki sees some political motivation behind the current "shocked, shocked" rhetoric in Carson City.

"This is a partisan place, and it's a partisan time," Mr. Krolicki said Tuesday. "I followed every inch of the way the advice provided to me by the accountant types, the lawyers. ... There are still no uniform rules for how these funds are accounted for. This is essentially a mutual fund with 300,000 participants; I would argue it probably doesn't need to be part of the state accounting system. ... That wasn't our money, that money belonged, per contract, to those service providers. The contracts that were lawfully approved in the executive branch of government directed these monies to move outside of the state accounting system."

Determining how contracts that were "legally entered into" led to money being handled in ways contrary to state statute may indeed deserve some further scrutiny. The bottom line here is that -- while it's the job of the state treasurer to be sure such funds are carefully tracked and invested -- there's been no indication of any embezzlement or missing money, while the notion that any of our spendthrift lawmakers are losing sleep over $38,000 in "lost potential interest" at this point in the session pushes the bounds of credulity.

The far larger problem, Mr. Krolicki admits, is that Reno-based Rose-Glenn Advertising appears to have spent $1.33 million more on advertising to promote the college savings program in the three years ending June 30, 2006, than was allowed under state contract.

"That's a real issue," Mr. Krolicki says, even though the funds might have been depositors' money, rather than taxpayer money. "There were two separate advertising contracts. The first was not to exceed $100,000 a year and it didn't. But in a separate contract with the program manager that UPromise (Investments, one of the four mutual fund managers running the state's College Savings Trust Fund) entered into in 2002 ... that million-three came directly from UPromise to Rose-Glenn. ...

"Two months ago was the first time I realized, 'Oh, my goodness, it's the wrong account, it has the state money,' " Mr. Krolicki continued. "So I wrote the letter to the attorney general. The auditors confirmed it was state money being used. From our perspective, it all looked kosher. It all looked like they were doing what they were supposed to do."

The legislative auditors found advertising expenses exceeded the contract limits by $878,705 in the 2005-06 fiscal year alone -- that being the year in which Mr. Krolicki launched his campaign for lieutenant governor.

The reason this resonates with the lieutenant governor's critics is that it's not exactly true that Mr. Krolicki gained nothing for himself from that spending: Television ads that ran at the time showed Mr. Krolicki surrounded by happy children as he touted the benefits of the college savings program.

Everyone understands one of the advantages of incumbency is that the office-holder gets some free media exposure by posing for photos at the occasional ribbon-cutting.

But when an extra million dollars over which the office-holder has supervisory authority mysteriously flows into the budgets to circulate such self-serving "grip-and-grins," Mr. Krolicki should not be surprised to find some more serious questions being asked.