The agency that runs Maryland’s college savings plans will seek a forensic audit and plans to update its record-keeping procedures following a critical legislative audit released last week.
The audit had a number of findings but was especially critical of how Maryland 529 and its board handled the discovery of a cache of unresolved documents. The legislative auditors recommended a forensic audit to help track what happened.
While meeting with lawmakers on Tuesday, state Treasurer Nancy Kopp, who chairs Maryland 529’s board, said a comprehensive audit of the agency’s books would help detail what happened to those documents and lay the groundwork for a “modern” record-keeping system.
“We believe the board was properly active and on top of things, although what we found in the office was a surprise to everyone,” Kopp told the legislature’s Joint Audit and Evaluation Committee.
Maryland 529 is currently working on a request for proposal to complete the comprehensive audit. It is also crafting a request for proposal for the new record-keeping system to go out after the audit has been completed.
The legislative audit did not take issue with the financial position of Maryland 529.
The main 529 account looked at by the audit was the Maryland Senator Edward J. Kasemeyer College Prepaid Trust, a plan that offers tuition contracts requiring scheduled payments for the future cost of tuition at universities.
The trust has 32,900 tuition contracts for $1.2 billion, with a $432.5 million surplus as of June 30, 2018.
Maryland 529 also includes the Maryland Senator Edward J. Kasemeyer College Investment Plan, college savings portfolios managed by T. Rowe Price, which as of June 30, 2018, had about 199,200 beneficiaries and balances totaling $5.8 billion.
The audit did not look at that plan because it is privately managed.
In 2015, Maryland 529 discovered a cache of documents — including 187 boxes of files that had been retrieved from the state archives — for which action had never been taken, including things such as unresolved checks and unresponded-to requests for refunds. Investigating these issues, Maryland 529 discovered that most had been resolved.
But auditors took issue with the fact that most of the work to identify which documents still needed action was reported to the board orally and without a thorough paper trail.
“This lack of documentation resulted in the recommendation that additional review is necessary,” Michael J. Murdzak, the audit manager, told legislators.
Kopp said the agency’s board has been reconstituted to better respond to such issues. In addition to asking for the more comprehensive audit, the board has added an audit committee.
“I have to say that for a policy board, I think we have set up exactly the right and stronger procedures,” Kopp told the lawmakers.
She also said the agency has changed how it is set up. While previously it had just a chief financial officer, it has now added a chief investment officer position to keep investment and accounting duties separate.