Mississippi State Auditor Stacey Pickering said Wednesday that his office is quickly preparing for the $2.8 billion in federal stimulus money headed soon to the Magnolia State.

Pickering said the 19 state agencies expected to receive the funds have been audited prior to the arrival of the money.

“That way we know where we’re starting from and what we need to fix before the money gets here,” he said. “We’re also teaching them the latest rules and regulations. This could throw cities, counties and school districts into turmoil if not done correctly. We want to protect our reputation on the front end because this will be the biggest issue over the next two to three years.”

Pickering said one of the challenges Mississippi faces is that the federal government is still formulating how the money should be spent. “They’re building the plane while we’re flying it,” he said. “16th Avenue was the first highway project to receive stimulus money that was completed in the nation. But, OMB (the Office of Management and Budget) will not have their report until this time next year.”

Pickering said that Mississippi following Hurricane Katrina was considered a case study on how to handle federal money. He said the state received $24 billion following the storm

“They predicted 17 percent fraud, but we only had less than 1/2 of a percent,” he said. “Governor Barbour, the Mississippi Legislature and local elected officials worked together to create a funnel for the money to be poured in. There was a very narrow window for the money to go out so we could detect fraud before ever paying the first dollar.”

While there’s a sizable difference between $2.8 billion and $24 billion, Pickering said the federal government has “thrown out our funnel and replaced it with a colander. We don’t know when the money is coming until it’s already been spent.”

Pickering said Mississippi was also provided with no accountability money to protect against fraud. “Oklahoma and Mississippi are the only two states where to governor set aside some of the discretionary money so we can watch out for the money,” he said.

Pickering briefly touched on a number of current cases the Auditor’s Office is investigating throughout Mississippi, including Jones County.

He joked that his office is now “the largest cigarette distributor in the state of Mississippi” after a recent seizure of more than 955,900 cartons of cigarettes. The cigarettes were imported illegally and stashed at various warehouses in Mississippi, Kentucky and South Carolina.

Pickering commended local elected officials in working together in other investigations where “individuals betrayed the public trust.” One of those is a case against a former Jones County Deputy Clerk, who is accused of embezzling nearly $220,000 over a three-year period.

In his talk, Pickering also addressed the current economic climate. He noted that his department has already taken a 7 percent budget cut, and could take another 5 percent cut by September.

“For July, we were $25 million under our projected revenue for the year,” he said. “August is on the same track which means we’ll finish $50 million under projected revenue. At that point, the governor will have to come in and balance the budget which means cuts.”

Pickering also discussed a recent meeting he had with the U.S. Government Accountability Office (GAO).

“According to the GAO, revenue streams are on the decline and are not projected to rise to a surplus level period,” he said. “We’ll never get a surplus under our current economic structure.”

Pickering said the debt load by 2010 will be 67.7 percent of the GDP, and increase to 100 percent by 2014.

“It’s never been above 100 percent except for one year, 1946 when we ramped up to fight in World War II,” he said. “There are some real issues we are going to have to deal with. It’s time elected officials checked their hat at the door and do what our mothers taught us growing up. It’s not Republican versus Democrat, it’s right versus wrong.”

Pickering said elected officials can’t do it by themselves, and need the help of community and business leaders.

“We have to do what’s right by our children,” he said. “What kind of world are we giving them? What future are giving these kids? It’s time we all get involved and get the state moving in the right direction.”