AUGUSTA (AP) – A decision by Maine Auditor Gail Chase to forgo strong censure of the state’s financial statements – including internal accounting practices at the state Department of Human Services – was welcomed as good news Wednesday by the Baldacci administration.

An opinion released by Chase said financial statements for fiscal year 2002 “present fairly, in all material respects” the state’s financial position.

While allowing for a finding of material weakness in internal controls concerning questions about the use of $18.9 million at DHS, the auditor’s opinion spares state government a more severe finding.

Commissioner Rebecca Wyke of the state Department of Administrative and Financial Services said the administration continued to regard the problem at DHS as “significant” and would proceed with a previously announced response, including an outside review by PricewaterhouseCoopers.

The outside accounting firm, according to administration officials, has been asked to identify an audit trail for the federal Temporary Assistance to Needy Families program funds in question.

It has also been asked to provide any adjusting entries that are necessary to correctly record the expenditure of funds and transfers between accounts.

Additionally, PricewaterhouseCoopers has been asked to recommend appropriate internal controls.

The administration separately has proposed a reorganization of the state controller’s office and other financial control provisions in its latest budget measure.

In related action, Wyke and administration Chief of Staff Jane Lincoln have been assigned to oversee a review of audit findings for each state agency going back three years to check responses to identified weaknesses in internal controls.

The administration plans to call on PricewaterhouseCoopers as needed in connection with audit findings for other agencies.

Chase said Wednesday that her formal opinion involved some discretion but was based on applicable accounting standards.

Noting that the funds in question are in the range of 1 percent of the federal funds that the state receives, she said the opinion could have been harsher “had it been a more significant amount of cash.”

Administration officials are hopeful that the limited degree of the auditor’s criticism will moderate any negative reaction on Wall Street.

Gov. John Baldacci has said an immediate concern was to pinpoint any internal DHS problems and lay them out in financial statements being prepared this month for Wall Street rating agencies.

Asked about the desirability of a separate legislative probe, he said: “Whatever the Legislature decides to do, we’re going to work with the Legislature.”

Earlier this month, outlining some of her questions concerning DHS for the Legislature’s Appropriations Committee, Chase said funds in question did not appear to have been misappropriated but “were not used entirely for the TANF grant.”

AP-ES-05-21-03 1654EDT

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