BOISE -- Idaho State Treasurer Ron Crane rejected state auditors conclusions he heaped risk on Idaho's taxpayers when he transferred tens of millions worth of troubled mortgage-backed securities to state accounts.

However, the Associated Press reports the four-term treasurer conceded Monday his office six years ago lacked adequate controls, leaving too much power with individuals.

Friday, Idaho Legislative Services auditors criticized Crane's office, saying he overrode internal controls meant to protect Idaho from losing money.

Idaho has already lost $10 million, and faces more than $14-million in unrealized losses, from those transactions, according to the report.

Crane now says he's bolstered the team that shepherds money and insists inadequate controls are a thing of the past.

Crane and the Senate finance chair spoke with KTVB one-on-one Monday afternoon to explain their sides of the issue.

Senate Finance Committee Chair: Why did the taxpayers bear the brunt of the total losses?

Senate Finance Chair Dean Cameron (R-Rupert) says the audit uncovered some concerns with how Crane's office handled investments during the economic downturn in two funds: One for local governments, one for the state. Cameron said when the economy sank, securities also sank in value, and securities were transferred from the local government fund pool to the state government fund pool.

Those are two separate accounts, but rather than riding in out in both accounts, [Crane s office] transferred the assets or those securities from one account [the local pool] to the other account [the state pool], at face value. So not at the market value that they were at the time, Cameron told KTVB Monday evening. They transferred them at face value of what they were purchased. So in essence, taxpayers paid $10 million more for those securities to transfer over here [to the state fund] and bear the risk, bear the brunt.

Cameron says the issue isn t the investments themselves, but rather the process of making a transfer of this nature from a local fund to a state fund.

What we were looking for is why did you make that transfer? What was the logical reason? They had protocols in place to protect that money and those investment strategies. Why did they override those protocols? Cameron said. A single person, either Ron [Crane] or the person just directly underneath him, made the decision to override those protocols. Why did you override the protocols? Why did you make those transfers? That's what we're looking for. Because in essence while it kept the local government pool protected, it caused the taxpayers to lose almost $11 million, and we'll potentially lose more as the rest of those securities mature.

Cameron questioned Crane during a Joint Finance-Appropriations Committee meeting Monday morning, but says he didn t get the explanation he was hoping for.

No... we're still working on that. So we can't really come up with a solution until we know where the problem completely existed, Cameron said.

Treasurer Crane: Audit was unfounded and shows a general misunderstanding

Crane told KTVB the investments were sound and said he doesn't believe the audit numbers assessing potential losses up to $27 million are accurate.

Of course I don't. What they're dealing with is potential losses, and of course what we have to deal with is actual losses, Crane said. When you look back in hindsight, which is always 20/20, you can say, well he shouldn't have invested in those types of securities, but at that time when we purchased those securities or had them in our portfolio, they were performing wonderfully and we thought they were great. Then of course the economy tanked.

Crane equated the investments and outcome with how the general public has been impacted by the downturn, saying anyone who s invested has seen what can happen. Further, he says what s considered a loss isn t really a loss overall, but a loss of opportunity money.

It's easy to look back and criticize those investments, but the reality is our gains and interest earnings outnumbered our losses, and we were able to wash most of those securities (we had 7 of them in the portfolio), we have eliminated five of them out of the portfolio and still showed a net gain for the state of Idaho, Crane said.

As for the question of the transfer, Crane says the investments of the two portfolios in question are linked together and complicated.

For securities lending purposes, those are commingled like every other state that is in securities lending, and so the transactions that were made in and out of the lending portfolio were not actual trades. That is hard to explain and very difficult to understand, Crane said.

Cameron: We're still looking for some answers

Cameron says the issue at this point is more protocol than investment strategy. He says the funds are separate and he doesn t know what Crane s motive was to transfer, but explains a potential reduced investment-safety rating on the local governments account may play in. He explained the treasurer s office was contacted when the securities dropped and was told the total fund rating for the local government pool would drop as well.

They then made the decision to move it to avoid that rating, which I think is the mistake. That's the problem we really see as being the issue. They should not have moved that and sort of swept it under the carpet. They should have left it in that separate pool, Cameron said.

At risk, explained Cameron, was a loss in investors.

They wanted to guard the rating because local units of governments have the right to invest money in there, and if that rating was to go down, then local governments wouldn't want to give the state treasurer their money to invest, Cameron said. So he shifted those local government monies, those securities he purchased with local government monies, over to the state side, paid the local government at the top dollar they were purchased at, and the state got to bear the brunt of those losses.

Is this election year politics at play?

Crane believes some of the criticism may be political as he plans his campaign for his fifth term.

I would like to not think that's the case, but it does appear to have some political ramifications of course, Crane said. For example the [$17 million] that was speculated that might be a potential loss, that's a security that was under water but it is still paying, and the value of that security today is $14 million, so it's gained $3 million. Are we going to sell while the security is down? No. We're going to hang onto it.

But Cameron says these audits are standard, not political. When asked about the suggestion politics might be the underlying reason for the audit and analysis, Cameron said it's absolutely not the case.

We do audits all the time. I have to approve audits all the time. I've campaigned for Treasurer Crane. I've helped him out in numerous cases. [A political motive] couldn't be further from the truth. I know of no political motive whatsoever, Cameron said.

Crane: We have nothing to hide. We are part of the team here.

Cameron is calling for answers from the treasurer s office and says until lawmakers know more, specific proposals for change can t be known. Cameron says a discussion of exactly who can make decisions like this one, and if more people should be involved, may come up. He welcomed Crane to request his own audit.

Tough decisions get made, and there should be ownership on tough decisions as to why you made those decisions, Cameron said. Our auditors are professional. They do a great job. He is certainly welcome to ask for an outside audit if he wants to, but our auditors are there to protect the taxpayer. And they audit all kinds of agencies, and we don't have problems like this.

Crane says he has invited all members of JFAC to come sit down with him to discuss the intricacies of securities investments. So far, he says no one has taken him up on it, though he imagines some lawmakers will. Crane told KTVB he welcomes Cameron s questions following the audit.

He has that right to do that. That's JFAC. They're very concerned about finances, and I'm happy to answer those questions, Crane said. We have nothing to hide. We are part of the team here. We want everybody to be knowing what we're doing, but we would like a chance to explain that, and it's a difficult subject to explain.

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