The State Auditor’s Office has put a disclaimer on Nebraska’s end-of-the-year financial report for a second straight year after finding errors totaling $10.5 billion.

The office issued the “disclaimer of opinion” after concluding that the number and size of the errors put the report’s accuracy in question, according to a recently released letter addressed to the governor and the speaker of the Legislature.

In the letter, Assistant Deputy State Auditor Kris Kucera said auditors had proposed more than 110 adjustments to the Annual Comprehensive Financial Report for the fiscal year that ended June 30, 2021. She said state officials made the majority of the proposed adjustments.

But the letter said the state could not show that its accounting and oversight processes were good enough to ensure that other major errors had been caught and that the rest of the financial report was accurate.

“We conclude that the possible effects on the financial statements of undetected misstatements, could be both material and pervasive,” Kucera said. However, the errors involved accounting problems, not mismanagement or loss of funds.

The auditors made similar comments in the financial report itself and in a management letter concerning the Department of Administrative Services and its accounting division, which is responsible for putting together the annual financial reports.

The financial report was released April 28. The management letter, although dated April 28, was not released until June 1 and the letter to the governor and speaker of the Legislature, also dated April 28, was not released until last week. Auditing standards allow for those letters to be issued up to 60 days after the report itself.

According to the management letter, the accounting division made major errors in financial statement entries, footnote disclosures and other documents supporting the financial report. The letter summarized more than $4.3 billion worth of errors, requiring 115 adjustments. It said there were another $6.2 billion in errors that did not require formal adjustments, bringing the total to more than $10.5 billion.

Similar findings led to a disclaimer on Nebraska’s financial report for the previous year. An accompanying management letter concerning DAS listed 52 errors that year worth more than $21 billion.

In a written response this year, DAS officials said the state had “reduced the reported error amount by 51%” compared to the previous year.

They also said key staff turnover and the amount of time needed to manage federal COVID aid had “undermined State Accounting’s ability to ensure accurate and timely preparation” of the financial report.

To improve next year’s report, DAS said it is correcting a problem that accounts for $5 billion of the error total and creating a new deputy accounting administrator position. The position has been filled by a person with 20 years of state audit experience. In addition, the department will do pre-audit reviews of state agencies and work with the agencies where significant errors occurred.

The auditor’s office had raised particular concerns about the unemployment insurance fund and about numerous Department of Health and Human Services accounts.

The management letter also noted that DAS had not provided the information needed to complete the financial report by the deadline set in state law. The report is to be done 20 days before the start of the legislative session, which made the deadline Dec. 16 for the 2020-21 report.

To meet the deadline, the auditors had asked for a number of items. Of those, 187 were submitted late, with the last item not delivered until April 27, or 132 days after the financial report was due.