Legislative Joint Auditing-State Agencies
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Stacy Dallby
Unverified
0:00
Members would like to call to order Standing Committee on State Agencies for Thursday, September 24th. Everyone should have received a copy of the minutes from July 11th, 2024 meeting. If I can get a motion to adopt those minutes. Got a motion and a second. All approved, please say aye. okay uh members we're going to take the agenda out of order a little bit we got a member that
needs to get to another meeting so without objection i'd like to move the um severe county medical center a special report to the top of the line
Senator Joshua Bryant
Unverified
0:40
and with that i'll ask mr charlie camp to please give that report.
Speaker 3
0:49
Thank you, Mr. Chair. This report is a review of
Speaker 4
0:54
selected policies, procedures, and transactions for the Sophia County Medical Center for the period December 1st, 2022 through December 31st, 2023.
This report was issued in response to a legislative request approved by the Legislative Joint Auditing Committee for legislative audit to conduct a limited review of the financial records of the Superior County Medical Center relating to the $6.25 million in ARPA funds the center received. Objectives of this review were determined if ARPA funds were expended for the purposes approved in the center's beneficiary agreement with DF&A and approved by the General Assembly, the status of the center's beneficiary agreement with DF&A,
and the status of any financial audits for the center. At least he's got a good taste in music. In May of 2019, the county's only hospital closed after falling into financial distress. County voters approved a 1% sales and use tax to fund $24.25 million in bonds to acquire land for and construct, furnish, and equip a new hospital facility. During 2020, land was purchased, the bonds were issued, and construction of the center began.
Due to several factors, construction costs exceeded initial estimates and the bonds did not provide sufficient funding. Sevier County expended an additional $2,555,000 in ARPA funding for construction $621,000 and operations equipment and supplies of $1.9 million related to the center as shown in Exhibit 1 on page 2 of the report. the center is a 42 000 square foot acute care hospital with 15 inpatient beds it offers services
related to physical therapy occupational therapy speech pathology imaging respiratory care and behavioral health some of which are available on an outpatient basis additionally the center operates a 10-bed emergency department which functions 24 hours a day 365 days a year and provide simple laboratory exams and procedures allowed under food and drug administration regulations. Patient service statistics for the first year of the center's operation
are provided in Appendix A. The center was licensed by the Arkansas Department of Health in December of 22 and began operating in January of 23. A timeline of relevant center events from May 2019 through April of 2024 is provided in Appendix B. In 22, the Legislative Council of the General Assembly approved and DFA dispersed $6.25 million in ARPA fund to the center as
noted in Appendix C. As of report date, the center had remitted documentation to DFA tolling $6,172,000 in support of ARPA funds expended. A summary by major vendor is provided in Exhibit 2 on page 4 of the report. Legislative audit examined disbursements made during the review period and at least one invoice from each vendor to assess propriety and reasonableness resulting in review of approximately 67% of expended funds. Based on documentation provided
by the center legislative audit determined the funds were spent in accordance with their approved beneficiary agreement and ARPA requirements. No funds were noted as being spent for construction costs. The center's beneficiary agreement with DFA dated December 20th, 2022 states the center may use funds for the purposes stated in the agreement for expenditures incurred between March 3rd 2021 and December 31st 2024 as long as the funds were
obligated by December 31st 2024 and expended by December 31st 2026. The agreement also stipulates the center must return to DFA any funds not obligated by December 31st 2024 and funds obligated but not expended, must be returned to DF&A by December 31st, 2026. As previously mentioned, the center provided documentation to DFA for $6,172,000 expenditures as of the report date. According to DFA representatives, the center had not submitted
a final expenditure report as of August 14th, 2024. According to the grant agreement, the grant period does not expire until december 31st of 26. however grant funds were designated for startup costs since the center has been open for one year dfa maintains that the period for which the grant was approved by the legislature has passed and has requested return of 77 228 in unexpended award funds
on march 19th of 24 the center signed an engagement letter with a profit cpa firm for an audit of its financial statements, which will include a federal compliance audit. As of the report date, the audit had not commenced. Management's response to the report has been provided in its entirety in Appendix D. Mr. Chair,
Stacy Dallby
Unverified
6:20
this concludes my report. Thank you, Mr. Camp, for that report. Members, we've heard the report. This was a request by Senator Hickey, so if he doesn't mind, I'd like him to maybe restate
the concerns and then we also have members
Senator Joshua Bryant
Unverified
6:35
from uh severe county hospital here willing to answer any questions should the should the committee have any questions well thank you mr
Senator Jimmy Hickey, Jr
Unverified
6:42
chair for putting this towards the front because i do have another meeting that i'm supposed to attend i'm not well thank you for this but uh just to kind of give the members here an update what had happened uh over in severe county they had had a hospital and that hospital had actually went under and uh they're here to answer these questions but i believe at that particular time
the uh the gentleman that owned it he may be uh got a conviction and possibly serving time now if i remember correctly so what happened after that is the community had stepped forward because they knew that they had to have a hospital in that area and what they did is they passed a bond issue that is structured where they have to pay all of the indebtedness on the thing. The state had stepped forward with the ARPA funds. This had happened during COVID and also
the inflationary time while they were trying to build the hospital and they had actually struggled some with the construction because of that. A lot of the people were on the board, you know, this was their first round at trying to run a hospital. So they got a little behind with that and then some of our other legislators at least two senators they had some vendors in the construction process that were slow to get being paid and in discussing it with those
senators you know the the people that Sevier County of course I trust them but this is old saying about trust but verify we wanted to make a hundred percent sure that the money that the stated had given was all spent properly and as you have heard it has been so that's why we're here today is because we just wanted to make sure that since state funds had been expended there were some parameters on the way that was supposed to be done we wanted to verify and prove that that had been done which it has so with that Mr. Chair I hope that explains it absolutely
Stacy Dallby
Unverified
8:40
Thank you, Senator Hickey. Does any member have any questions on the report or for Sevier County? They drove up here to visit with us. Anybody have any questions? With that, Senator Rice has questions. If you could get some members from the Sevier County Hospital to come up and just introduce yourself. Hi. My name is Stacy Dallby, and I'm here to be on a seat. You go ahead and have a seat, and we'll turn on your mic. Hello, everyone.
Stacey Dowdy
Unverified
9:14
My name is Stacey Dowdy, and I am the CEO of Sevier County Medical Center. And
Speaker 23
9:20
I'm Greg Rebels, and I'm the chairman of the board for Sevier County Medical Center.
Stacy Dallby
Unverified
9:25
All right. Thank you both for being here.
Senator Terry Rice
Unverified
9:29
Senator Rice, you're recognized. Thank you all for being here today. Just touching on the vendors, has that been cleared up, all the
vendors have been paid? That is not true. We are in the process of dealing with that currently and hope to have that resolved.
It's $77,000 that the DFA is asking back for. That's those vendors that cannot be used for any outstanding.
Speaker 23
9:59
The money from the ARPA funds could be used for supplies and equipment only, not for construction costs or anything. And that was one of the confusing things about actually when Senator Hickey asked for the audit was that, you know, we could not use
Senator Terry Rice
Unverified
10:18
any of those ARPA funds for that.
But you used it for all that you could, but these funds have been
Senator Terry Rice
Unverified
10:31
returned. We're in the process of talking to DF&A. We actually, our accountants had, we're talking to them this morning about getting everything rectified and getting that done. Okay, do
you have, it may be beyond our scope, but do you have agreements with your vendors that
have outstanding balances? We, at this point in time, no.
Senator Joshua Bryant
Unverified
10:56
Okay, Mr. Chair, thank you. Thank you. Does any other
Representative Robin Lundstrum
Unverified
11:07
member have any questions? Representative Lundstrom. Just to
follow up, you said those vendors haven't been paid. What's the time lapse on
Speaker 23
11:16
that, three months, one month? How long has it been since they haven't been paid? Since they completed the job. All of the vendors that I assume that he's referring to are construction vendors, and so that's been – we opened the hospital in January of 2023,
And so, and there are some vendors that, for various reasons, there's a lot of different reasons. And, you know, without going over each one of them individually, they're, you know, to be totally truthful, some of them, we just owe the money and we haven't been able to pay them yet. but some of them have some things that we need to deal with them to get fixed that, you know,
as happens with any new constructions, there are things that happen and we have to do that. And we are in, NAB Holtz was our general contractor and they are, we are in the process, we're in talks with them at the current time and hope to get all that stuff resolved
Representative Robin Lundstrum
Unverified
12:29
really soon. And my understanding, if it's not resolved, that $77,228 is then returned to DF&A,
Speaker 23
12:35
and y'all are still on the hook for those bills? Yes. The $77,000 to the DF&A and the construction debt are separate issues. The $77,000 were for startup expenses, part of the $6.2 million. We didn't use all those. So, you know, through our, I mean, we still have to discuss that with the DF&A. We have not done that. We are in the process of doing that.
Our accountants were today as we were driving up here. And, you know, so we've got to get that taken care of. As per the report, we have until December 31, 2026 to repay those funds. Okay. All right. Thank you. Senator Hickey, did you
Representative Robin Lundstrum
Unverified
13:23
have an additional question? I can expand on that, and that
Senator Jimmy Hickey, Jr
Unverified
13:26
is a great question. That was actually the reason that this report was done, because we knew that since they were in the construction and the ARPA funds could not be used for it,
which is the leftover $77,000, we wanted to make sure that those did not get co-mingled because we understood that they were struggling on the construction project, which everybody here doesn't like, they don't like. I will say this, and I want you all to correct me if I'm wrong, because I've talked with the bond, the way that the original bond was structured also, although this is not a substitute that they need to get that paid, the original bond was also structured that I believe that any and all indebtedness will have to be paid.
So that bond issue that the community did, even if the hospital were to go totally under, which we're not looking for, I mean, they're going to come out of this, so I don't want to say that. But it's my understanding that the way it's structured, that the community, through that issue, would still have to have all indebtedness paid. So there is another avenue, although it's not the best
Speaker 23
14:37
avenue, but it is within there. That's correct. The bond that we passed in the sales tax issue that we passed in Sevier County is going to be collected
until all debts of the hospital are paid if we're not open, if that's what you were saying. I think that's what you were
Senator Jimmy Hickey, Jr
Unverified
14:56
saying. It is. And even if they are open, of course, those funds are coming in. Yeah. One of the other things in talking with, and this has been going on now for a while, But also the way that they had structured their hospital and did this, I believe that, unknowing to them, that their reimbursement payments actually, because they restructured the hospital a certain way, they had to wait on getting their reimbursement payments, and that's caused a huge issue with their cash flow, which they are going to get back.
It's just a time thing. And if I
Speaker 23
15:29
may expand on that just a little bit, I told them I wasn't going to say anything, but I want to make sure you all understand, is the fact that, you know, one of the things about Sevier County Medical Center, it's the first hospital built in Arkansas in over 40 years. And I'm talking about new hospital, or at least that's my understanding. You know, there's been new buildings built, but not new hospitals.
And when you do that, several things come up that I think even based on my experience now, the so-called experts weren't even aware of. And so those things have been really challenging as we begin the process of a new hospital and in a rural setting and, you know, all the regular challenges you face anyway. You know, for example, and I'll give you one really quick example.
You know, when we opened the hospital, we had to have a certain number, and Stacey, you can speak to this better than I can, we had to have a certain number of people stay in the hospital before we could even bill anybody. And that took, what,
Speaker 46
16:47
three, four weeks? At least. And so that's four weeks without any income. Right. I mean, if you want
Stacey Dowdy
Unverified
16:55
to speak to it. Well, and the state agency comes in first to do our survey to let us know we're able to operate and take care of patients.
However, we also had to have another survey with our credentialing agency. Ours just happened to be DMV. You may have heard of other ones, Joint Commission and things like that. They had to come in and do their survey as well. And so it was in June or July before they were able to do that. Well, we were not able to bill insurance until that survey come through. And then also, all this time, we also had to work to get into contract with the different insurance companies, entities.
And those take quite a bit of
Senator Terry Rice
Unverified
17:42
time as well. Yeah, one of the biggest ones took until December 15th of
Senator Joshua Bryant
Unverified
17:49
right. I'm sorry. No worries. We appreciate the context and the struggles. Is there
Stacy Dallby
Unverified
17:54
any other member that has any questions? All right. Seeing none, I want to thank you both very much for coming and testifying on this issue. And without objection, we will file this special report and move back to the top of the agenda.
Speaker 23
18:10
And Mr. Bullington, if you would. May I say one more thing, please? Yes, sir. You're recognized. I just wanted to tell y'all in the state of Arkansas, thank you. We would not have a hospital if it wasn't for those ARPA funds, and we appreciate it. And we're doing everything we can to make it work and to get everything done correctly, and we hope this audit was part of that process and you see that.
Senator Joshua Bryant
Unverified
18:34
Thank you. Yes, sir. We appreciate it and appreciate you doing it right. Thank you.
Speaker 53
18:41
Thank you, Mr. Chair. Back to the top of our agenda, we've got two reports that we're presenting today that also have findings, and we have two additional special reports we're going to present. But we also have
Speaker 56
18:53
two reports without findings that are listed on page one of
Stacy Dallby
Unverified
18:58
your synopsis. And with that objection, we will file those reports without findings and move into the Department of Commerce. Okay.
Speaker 53
19:05
The first report, as you mentioned, is the Department of Commerce, and this is their June 30, 2023 report, and it's got one finding.
While completing DFA's year-in-closing books, the agency makes accounting entries for various purposes, such as the accrual of receivables or payables, estimations of allowance for doubtful accounts, and correction of errors noted in the year. Our audit procedure detected deficiencies in the following accounting entries. Our recalculation of DWS's estimate for uncollectible accounts receivable revealed errors in the agency's calculations. As a result of these miscalculations, net claimant benefit overpayments receivable were overstated by $14.7 million,
and net claimant benefit overpayments receivable that are due back to the federal government were likewise overstated by $8.7 million. A similar issue was also noted in the prior year. Our recalculation of DWS's estimate of unemployment insurance benefits payable revealed errors in the agency's calculations that resulted in the accrued
Speaker 57
20:04
liability being understated by just over $1 million. Mr. Chair, that concludes the finding for Department of
Stacy Dallby
Unverified
20:10
Commerce. Thank you so much. We've got members of the department here, Secretary McDonald and maybe Ms. Williams.
If you would, just state your name and role and give us a brief synopsis of your response. Sure. My
Speaker 58
20:34
name is Hugh McDonald, Secretary of Commerce. and
Hugh Mcdonald
Unverified
20:40
I am Kristen Rhodes the director of the division
of re-employment otherwise known as unemployment insurance that's correct uh so let me let me go ahead and uh sort of summarize the first and second bullets and uh Ms. Rhodes can get into some details that uh I most likely uh
she can handle better than I can. The first bullet is essentially an issue with the projection of what we believe that we would collect in overpayments of unemployment insurance benefits in future years. It was not actual dollars, so it was an estimate of dollars. And this process was completed using Excel spreadsheets, hand-keyed formulas, which, frankly, are prone to human
error, which we recognize. It's been corrected within the system, or it will be corrected in the system to automatically make the calculations going forward, and which will then also be compared to manual calculations to verify the automated calculation. And we expect that that will be completed no later than March of 2025. The second bullet is similar, but it was an issue
with regard to the projection of what we believed we would pay benefits or payables to claimants in the future. It also was not cash, but it was just not actual dollars. So on this one, and I would say that on the first bullet and the second bullet, we added sort of another layer of review, where we've moved UI accounting under the UI program area to do a process improvement
and improved communication between program staff as well as accounting staff. So it's allowed us to better understand the full process from end to end and, you know, the importance of the process to make sure we're working together better internally. Um, there are also on the, on the second bullet, there's also additional checks we've put in place, um, to use, utilize the federal program staff and additional staff at calculating the numbers independently to verify, um, the calculation.
Stacy Dallby
Unverified
23:30
Hope that was helpful. I will start us off just to make sure I understand. And so on really both these, that was not actual cash going out to our workforce. So we didn't overpay $14,670,000, and we're going to look for it back. That's just something we estimated. And we just, human error, key entry. And then I noticed it said similar issue noted in the prior year. Yep.
Hugh Mcdonald
Unverified
24:00
And the way we're addressing that is we're really looking at it's an area where, and feel free to jump in, Kristen, but there's heavy turnover in this particular area. and really looking at kind of redesigning and upgrading some positions in this particular area, having fewer FTEs at the end of the day,
but upgrading the talent to minimize the turnover, increase the accuracy, and do it more efficiently at the end of the day. so is it safe to
Senator Joshua Bryant
Unverified
24:43
assume because this is a report ending june 30th of 2023 you probably just
Stacy Dallby
Unverified
24:48
got finished with audits currently we'll see this at least one more time before the corrections take effect um our
Representative Justin Gonzales
Unverified
24:57
hope is that we have this uh corrected not the automated process but those
additional roles of verification um so this is actually in the process of being calculated now Our leg audit has just began about two weeks ago, so we're working on getting this information to them soon, and we are double and triple checking our numbers.
Stacy Dallby
Unverified
25:18
Yes, sir. Okay, excellent. Thank you. Does any other member have any questions for Commerce? None. All right, seeing none, thank you. Oh, I'm
Chair
Unverified
25:30
sorry. Representative Gonzalez, you're recognized. Thank you, Mr. Chair. So what were the actual, it says these overpayments for receivals were overstated by $14.6 million.
What was the actual number? Because I ask that because $14.6 is a big number. It seems like you could almost glance at that and say, no, we did this wrong. That can't be right.
Representative Justin Gonzales
Unverified
25:55
The number should actually be. Yeah, and I understand that. And if I didn't work in unemployment, I would think the exact same thing that you thought. But for an example, in fiscal year 23, we set up $40,415,597.61 of overpayments.
Because keep in mind, we are still working on setting up pandemic-related fraud overpayments, which are included in this number. So if you look at the total number of overpayments that we have on our books that we're actively trying to collect, it's $353,081,714.56. So while that $14,000 number is sizable out of the whole year, and that's from 1983 through 2023, that $14 million is a rather small portion of the much
larger $353 million. What happened is we have to calculate each year individually, and then some those in one year was was left off so unfortunately we through through human error we just in that excel formula missed that that that one year yes sir thank you all
Representative Robin Lundstrum
Unverified
27:09
right representative lundstrom you're recognized okay just for my own edification um so that that's overpayments that's
not an estimation that's money that went out
Representative Justin Gonzales
Unverified
27:19
the door that shouldn't have gone out the door okay So the $14 million is an estimate of what we expect to recoup in future years of the balances that we are currently collecting on. So that could be from balances from 1983 all the way up to 2023. So you are correct. The $353 million is amounts that were paid out over the last 40 years in benefits incorrectly who we are trying to actively collect on.
And then that amount that is due back to the state was overestimated by $14 million. It's a lot of money,
Representative Robin Lundstrum
Unverified
27:54
I understand. Yeah, $353 million is a lot of money to say bye-bye to and then go back and get it back.
Representative Justin Gonzales
Unverified
28:01
I agree. I agree. And trust me, that is not our goal. We have had a historically low improper payment rate over the last two years. I believe the last time I ran it, which was about two months ago, We were at less than 5%, which was the fourth in the nation for the lowest improper payment rate.
These numbers are all very inflated when you look at pandemic periods because we were paying out so much and there was so much fraud. If you remember, we had removed all of those restrictions that are part of our huge integrity checks. Remember, we couldn't check IDs. That was against the federal law at that point. We had removed the waiting week, which allowed employers to not have to respond before we paid individuals. And so we're doing our very best to create all the overpayments so we can, in fact, collect on them.
And that is part of the reason why those numbers
Representative Robin Lundstrum
Unverified
28:53
are so very high. Okay. I'd like to meet with you offline at some point. Maybe not today, but
Senator Jim Dotson
Unverified
29:05
thank you. Yes, ma'am. Thank you. Senator Dotson, you're recognized. Thank you, Mr. Chair. Of that $353 million roughly, what percentage of that was during
Hugh Mcdonald
Unverified
29:12
the pandemic? I don't have that percentage handy. I can sure respond
Senator Jim Dotson
Unverified
29:15
back with that. I mean, it's not necessarily the exact amount. I mean, is it $50 million or $200 of that $350 million?
Representative Justin Gonzales
Unverified
29:21
Yes, sir. So if I look at 2020, it was $4.5 million. 2021, it was $47.5 million. 2022 is $35.8 million. And 2023, it was $40.4 million. and those are state fiscal years. So almost a third of the last 40
Senator Jim Dotson
Unverified
29:36
years was in a three-year time period? Yes, sir. Okay, thank you. Thank you, Senator
Stacy Dallby
Unverified
29:45
Dotson. And just not to get too far in the weeds, but this is money collected
Senator Joshua Bryant
Unverified
29:50
from employers and employees that contribute into payroll contributions towards unemployment insurance, correct?
Representative Justin Gonzales
Unverified
29:55
It is collected only from employers, yes, sir. Only from employers. Only from employers through the rating process and when they file their quarterly reports
Senator Joshua Bryant
Unverified
30:03
to us, yes, sir. And so the performa of calculation of how much of an employer would owe for the employees is based in part with
these type of errors that are overpayments that are made? Yes,
Representative Justin Gonzales
Unverified
30:16
except there is a caveat to that. So know that if it was deemed fraud, the charge was not passed on to the employer as part of the rate.
That's an automatic process. So if it was deemed fraud, so say, for example, I'm a claimant and I was working at Walmart and I was also claiming unemployment insurance benefits, well, that would be deemed fraud if it's over that certain dollar threshold. And so, of course, then that would not, the charge of that would not pass on to that employer. So the trust fund does take the hit, but the employer specifically does not. And
Senator Joshua Bryant
Unverified
30:49
what percentage would you say of overpayment is typically a fraud-related case? I hate to give you just
Representative Justin Gonzales
Unverified
30:54
an arbitrary percentage, but if I just had to ballpark it, it would be
somewhere around 12%. I can sure get back with you with more detailed numbers. Of course, it was much larger than that when we were dealing with pandemic where all those restrictions had been removed. But our improper payment rate, which is the official DOL answer, is of the amount of benefits that we pay out, less than 5% are considered improper. But then of the amount of that 5% that is deemed improper, I would say it's about 12% of that is fraud. The legislative body actually passed a law this last session that said that any overpayment amount that is over $1,000
that is deemed fraud, a claimant would not be eligible to receive benefits ever again until that is paid. And then also they would have to have had that paid for 10 years to be able to receive benefits. So there have been big legislative changes that I think we're going to be able to see the difference in coming years as well for this. Okay, thank you. Thank you so much for that. Does
Stacy Dallby
Unverified
31:54
any other member have any other questions? All right, seeing none, we will file this report. Thank you both for being
Senator Joshua Bryant
Unverified
32:01
here. Okay, our next report findings is the Department
Speaker 53
32:09
of Agriculture, and it's their June 30, 2023 report as well, and this report also contains one finding. The Monroe County Conservation District, which receives funding from the Department of Agriculture, notified the department of questionable payroll disbursements and engaged a certified public accountant to investigate these matters. The investigation revealed that the district office manager issued 14 unauthorized payroll checks, totaling over $14,000 to herself, over a three-year period, ended December 31, 2023.
Speaker 57
32:39
The office manager resigned on April 2nd, 2024, and this finding was also referred to the prosecuting attorney and the attorney
Stacy Dallby
Unverified
32:51
general. That concludes the finding. Thank you. Is there anybody here? I see Secretary Ward back there, but maybe somebody from the NRCS or from the local conservation district.
If you would, just state your name and title, and provide a response to the finding, please. My name is
Senator Joshua Bryant
Unverified
33:27
Doug Ney. If you would, just hit your mic button so
Speaker 86
33:32
we can catch you up. Got it? Doug Mahoney, Chairman of the Board. And Todd Smith, a board member.
Stacy Dallby
Unverified
33:39
All right, if you would, would you please just give us a brief synopsis of how you found it? And, of
Senator Joshua Bryant
Unverified
33:48
course, we read the report that you reported the findings, but what you've done to ensure
Speaker 86
33:57
accurate payroll in the future. Well, going into the office and asking for reports a couple of times and not getting them sent off a red flag. So I got with another board member.
We went to the bank and requested six months and then went back for two years on the financials with the bank. Looking at it, we thought there was reason to have an auditor to come in and check, and she did, and that was the findings. And since then, we have started back with our meetings every month. Each board member will sign off on the bank statements.
We've hired a new person. She resigned, as you'd stated earlier. And with new computer work, software, we're getting back on our feet. Okay. Thank
Speaker 18
34:58
you. Representative Lundstrom, you got a question? First of all,
Representative Robin Lundstrum
Unverified
35:01
I commend you for taking the extra effort and going to the bank and jumping the line, so to speak, and solving the problem. Have you turned this over? I know you've turned it over to audit, but did you at the time turn it over for prosecution?
I mean, she obviously stole $14,000 and change. Yes.
Speaker 86
35:21
After we got the audit, we turned it over to the prosecuting attorney, and a couple of us have been interviewed by the state police, and they're going to turn their findings over. They should have everything. So is the prosecuting attorney pursuing this? We're
Representative Robin Lundstrum
Unverified
35:36
waiting to hear from him. Okay. All right. I'd like to hear back on that when you get a chance, just to keep us informed. Okay.
Chair
Unverified
35:47
Thank you. Representative Gonzalez. Thank you, Mr. Chair. So while only three years, is that as far as the audit went back? Was this lady only there for that amount of
Speaker 99
36:00
time? That was as far as the audit went back, yes. So there's potential
Speaker 86
36:05
this could have been going on for a lot longer? The year prior to that that I looked at myself, no, I did not see it. But she
Speaker 95
36:15
didn't look at it. She stopped at three years.
Speaker 103
36:20
We think it kind of was taken advantage of during the pandemic where we weren't having meetings as often and such like that. Okay. I just think through the investigation, maybe you ought to look past the three
Chair
Unverified
36:36
years, get, you know, some more eyes on that just to make sure. Can
Stacy Dallby
Unverified
36:45
you tell us how long the director was with your commission or the district office manager?
Speaker 86
36:56
How long was she with the department? I honestly can't tell you right now, but probably six years would be a good guess. Does anybody else,
Stacy Dallby
Unverified
37:12
any other member, have any other questions? All right. Well, seeing none, we appreciate you both for making the trip and discussing this with us, and we will, without objection, follow this report. Thank you, gentlemen.
Thank you. and members with that we've got two more special reports mr josh davis will go over each of these and then we'll open it up for any any questions thank you mr
Speaker 108
37:49
chair this report reviews law enforcement agencies compliance with the asset seizure and forfeiture requirements of the uniform controlled substances act for the year end of december 31 2023 23. Asset forfeiture has been used since 1971 to help prevent vehicles and other property
of drug traffickers from being used in the commission of subsequent offenses. During the late 90s, legislators became concerned that a lack of uniformity and accountability in forfeiture procedures across the state was undermining confidence in the process. During the 99 meeting of the Arkansas General Assembly, Act 1120 was enacted to address these concerns through the amendment of the uniform controlled substance act the forfeiture process is shown on an exhibit three on page three of the report Arkansas code provides that within
48 hours of an asset seizure the seizing officer shall file an original confiscation report with the seizing law enforcement agency for maintenance in a separate file within three days of receiving the report the seizing agency shall forward a copy of the report to the prosecuting attorney for the district in which the property was seized and the arkansas drug director for entry into the asset seizure tracking system in turn the prosecuting attorney has 60 days to file a complaint in circuit court listing the seized property schedule one on page four of the report
shows a summary of seized assets for county year 2023 by judicial district for example in the second judicial district on your report nearly 239 000 20 automobiles 54 firearms and three incidences of other assets were seized in 2023 for the entire state approximately 3.6 million dollars 347 automobiles 692 firearms and 49 incidences of other items were seized over the past 10 years
55.6 million dollars over 4 300 vehicles 50 100 firearms and 771 incidences of other items have been seized the bottom of schedule one provides a description of what is considered an incident of other items the map on exhibit one on page two of the report shows the seven judicial districts selected for testing to conduct a review two seizure incidences in each district were chosen from the asset seizure tracking system legislative audit staff trades seized assets recorded in the
asset seizure tracking system to the supporting confiscation report and verified required procedures had been followed in the disposition of the seized asset additionally one confiscation report was randomly selected from the agency's files and traced to the asset seizure tracking system to test that all seized assets had been properly reported finally one seized asset was randomly selected from the agency's evidence room and traced to the entity's confiscated asset inventory records all material assets selected for testing were accounted for however
exceptions and record keeping were noted in four of the 13 agencies as noted on page three of the report the first judicious district drug task force the sebastian county sheriff's office and the force city force city police department did not maintain a separate file of original confiscation reports also the four city police department did not obtain and maintain a proper transfer of property receipt the sherwood police department did not forward the confiscation report to the drug director within the three business days that are required in consideration
Speaker 106
41:15
of time the presence of agency officials was not requested today but i'll be happy to
Stacy Dallby
Unverified
41:24
answer any questions you may have thank you mr chair
Representative Matthew J. Shepherd
Unverified
41:30
thank you looks like uh speaker shepherd you have a question. Yeah, I have a question. Maybe it's something
that staff could reach out. I don't know if it's who it'd be directed to, if it's the drug director or maybe prosecutor coordinator's office. But there seem to be some pretty significant disparities, maybe not disparities, but differences
between certain counties and judicial districts that you see, like, I mean, my judicial district, there's 109 firearms and $197,000 that was seized, but then there are more populated counties that have very few firearms, if any, seized. And I'm just curious what the explanation for that is. Is there some that prefer to go that route?
Or is there a decision being made by law enforcement or prosecutors not to avail themselves of the asset forfeiture? And so, you know, I know that's not something y'all can answer. I would just be curious if somebody has an answer you can find out. Josh
Speaker 57
42:34
was just telling me that sometimes those prosecutors will not put it on the confiscation report because they'll take a criminal proceeding instead, so they go that avenue, so it didn't go through this process. Okay. So there
Representative Matthew J. Shepherd
Unverified
42:46
may be other things. so there may be there may be other other items and dollar amounts that have been that have been
seized but because there was ultimately no criminal filing it may not show up so i think typically if
Speaker 108
43:03
there's a large sum of money it's going to go on that civil confiscation report but on the firearm specifically a lot of times they won't put it on that civil forfeiture, they'll seize that criminally because it's usually a fellow that's in possession of that firearm. So I would not see it in this
Speaker 116
43:19
report. That would be under the criminal statute.
Representative Matthew J. Shepherd
Unverified
43:23
But the civil asset forfeiture, does it not? I thought that related back to the criminal activity in the first
place. So I guess maybe I would be interested in an explanation as to how they proceed one way or the other because it just seems like clearly Clearly, there are judicial districts that are seizing a number of firearms and large quantities of cash. But then there are other areas that you would think, just based on the population of these areas,
that there would be some similar ratio. But I realize it's fact-specific. But if y'all could ask about that, I'd love to hear a little more. Yeah, we can sure reach out to the prosecutor coordinators. also if
Speaker 120
44:07
they might have some additional information on that thank you does any
Senator Jim Dotson
Unverified
44:19
other member senator dodson thank you mr. chair yeah just to kind of a follow-up to that if
you look down at the 19th east where there's nothing in Carroll
County that was reported at all is that just a local judicial district decision not to do any civil asset forfeiture whatsoever? Because, I mean, surely over the course of a year they've done something in a county of 30,000 people or however large that is. Yeah, that's kind of tough for me to answer because I just get that
Speaker 107
44:53
database from the drug director, and so anything that's reported to the drug director is what's in that database.
Senator Jim Dotson
Unverified
44:59
so it's it's not you weren't going out to each of these counties to to compile this report this is just information you've compiled from
from them correct on that schedule that's a compilation
Speaker 107
45:11
just from the the database from the drug director okay thank you thank you does any other
Senator Joshua Bryant
Unverified
45:17
member have a question on this report all right
Stacy Dallby
Unverified
45:22
seeing none we'll file that report and i believe we have one
Speaker 108
45:29
more. Go ahead. Thank you, Mr. Chair. This letter reports law enforcement agency's calendar
year 2023 compliance with the asset seizure and forfeiture requirements of Arkansas Code 2657-247. The code provides forfeiture procedures for tobacco products upon which the full amount of excise tax due was not paid or which were possessed or sold by an unlicensed wholesaler or retailer. In addition to property and money used to facilitate a criminal violation of code for the manufacture or distribution of contraband tobacco products may be seized and forfeited to the state. According to Arkansas Tobacco Control, one tobacco-related asset seizure occurred in
calendar year 2023. The agency did not include the mileage on the confiscation report for the vehicle that was seized, which is required by code. The agency was notified of the noncompliance and responded with actions being taken to ensure that all confiscation reports completed in the future will be reviewed for completeness. Additionally, legislative audit staff followed up on one seizure that was outstanding in the prior year to ensure compliance with the code requirements. The seizure occurred on April 8th of 2019 and included $17,361. A delay in a
disposition is typically caused by extenuating circumstances beyond the control of the custodial agency. In this instance, the attorneys for the prosecuting attorney's office who were over the case were allowed to withdraw from the case because they were no longer employed by the prosecuting attorney's office. As of the review day, the cash was being held at the prosecuting attorney's drug task force asset forfeiture holding fund pending the disposition. And that concludes the report. Thank you, Mr. Chair. All right. Thank
Senator Joshua Bryant
Unverified
47:07
you for that report. Does any member have any questions regarding
Stacy Dallby
Unverified
47:11
this report? Seeing none without objection, we will file this report
as well all right members that concludes the meeting the next meeting will be October 10th at 1 30 p.m. without objections meeting stands adjourned
Agenda
THURSDAY, September 12, 2024 1:30 P.M. ROOM 130 – STATE CAPITOL BUILDING LITTLE ROCK, AR
MEMBERS ALTERNATES
Senator Joshua Bryant, Chair Senator Justin Boyd
Senator Jim Dotson, Vice Chair Senator Tyler Dees Senator Clint Penzo Senator Tyler Dees Senator Ronald Caldwell Senator Bart Hester
Senator Terry Rice
Representative Robin Lundstrum, Chair Representative David Whitaker Representative Tony Furman, Vice Chair Representative Rick Beck Representative Matthew Shepherd Representative Jeffrey Wardlaw Representative Justin Gonzales Representative Matt Duffield Representative Milton Nicks, Jr. Representative Jack Ladyman
A. Call to order by Chairman.
B. Adoption of minutes of the July 11, 2024 meeting.
C. Review of reports. (Refer to the Summary)
D. New Business. The next meeting will be held October 10, 2024
E. Adjournment.
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — LEGISLATIVE JOINT AUDITING - STATE AGENCIES, Sep 12, 2024 | Agenda | 2 | Official source ↗ |
Speakers
Stacy Dallby
Unverified
Senator Joshua Bryant
Unverified
Speaker 3
Speaker 4
Senator Jimmy Hickey, Jr
Unverified
Stacey Dowdy
Unverified
Speaker 23
Senator Terry Rice
Unverified
Representative Robin Lundstrum
Unverified
Speaker 46
Speaker 48
Speaker 53
Speaker 56
Speaker 57
Speaker 58
Hugh Mcdonald
Unverified
Representative Justin Gonzales
Unverified
Chair
Unverified
Senator Jim Dotson
Unverified
Speaker 86
Speaker 18
Speaker 99
Speaker 95
Speaker 103
Speaker 108
Speaker 106
Representative Matthew J. Shepherd
Unverified
Speaker 116
Speaker 120
Speaker 107