Legislative Joint Auditing

Corn. And we're now called order. Our first item on the agenda is the adoption of the minutes of the february nine twenty twenty four and twenty in april sixteenth twenty twenty four meetings. Do I have a motion. Have a motion to have a second. I have a second on a favorite eye in the opposite eye. These have been approved. Next adam is the adoption reports of the executive and the standing committees and executive committee will be read by a representative or mac thank you mister chair the executive committee met thursday june thirteenth two thousand twenty four staff reported to the committee that audit special investigative and shortage reports scheduled to be presented to the standing committees and the four legislative joint auditing committee this month. In new business the committee approved three motions for staff to audit the beatsville school district west memphis school district and procurement process used by the board of corrections to enter into a contract for legal services with an attorney including compliance or state laws and regulations but excluding any and all issues actively and litigation. In other new business the committee deferred two requests for staff to conduct reviews of the arguments all for roll board and university of arkansas little rock donaldson program. In other business the committee approved emotion to accept staff's review of attorney general's opinion two o two three dash zero seven six relating to the get volunteer jeep volunteer fire department with no additional business to discuss the meeting was adjourned the next meeting of the committee is scheduled for thursday july eleventh two thousand twenty four or at the call of the chair mister chair a mover at option of this report. It members I have a motion do I have a second I have a second all in favor say I in the opposed they need. Then has a britain approved moving on. Next is standing committee on the countries and ministeries and representative right so you are recognized. Their members were having a liberal of the technical problem appeared okay now we've got it representative ray recognizer thank you thank you server. Yesterday the committee adopted the minutes of the maiden hail favorite a two thousand twenty four the committee considered request from the cities of madison internal to repay less than ten percent of general revenues for amounts old to the street finance requirement so cold annotated twenty seven seventy two seven the committee approved the request from curled and repay five percent of general revenues mostly and declined madison request to repay one hundred dollars mostly the city of matters in the patient invited to attend the july meeting to address their request staff informed the committee that the city of gold has made improvements to account in records is now a substantial compliance with the minismal accounting law the tony twenty three gulf financial and complies report was among the force filed in the meeting staff plans to perform the twenty twenty four engagement in early twenty twenty five to continue to monitor the monitor the city's financial record keeping. The commercial was informed that the prosperity attorney is still in best scheme the city of good status as a partial street and a speed trail the committee requested that stray off continue to upgrade to him on this on this adam the committee reviewed one deferred report and two hundred and ninety seven current report officials from six energies were present to address repeat findings one previously deferred report was filed one of two hundred and ninety seven current reports reviewed two were certified to the governmental bond board and toyota for or were referred to the prosecution attorneys and the general the committee foul two hundred and ninety. Current report and defer seven to allow officials to answer questions at a future made in. Pursuant to a motion pay us at the february a two thousand twenty four made in the barks out myer was invited to the meeting to follow up on the submission of audit reports by private accounting firm and answered further questions. Say the attorney richard madison appeared and provided copies of delinquent private audit reports the committee discourse the failure of the mayor to appear after being invited to a t and two medians to answer committee questions the committee voted to recommend the full committee request at the legislative auditor issue of subpoena for the mayor's appearance at a july twelfth full committee meeting. Mister chair I moved for the doction. The. Members I have a motion to adopt to I have a second I had a second with that soon to look you recognized. Thank you mister chair just just a couple of things in through the chair to to check our representative rather represent of rag did you say the city of good in regards to the speed trap or did you say the city of grave. Yeah because I just wanted to make the clarification is not the city of gold for the speed trap is a city of grainy. So just if if you if either if you mistake it there are just wanted for the record but it's the city of google is the city of grady for speed trap not city a goal. You're about to I believe this a misfrance okay our report but you just want yeah I just want to clarification for the record no you're your exactly right because our member that happened okay if in the second thing mister chair I just wanted to make a food note here in regards to. The fact that the county of lona was before us. And I know that they're going through some and some issues there are nearest then someone arrested but I think I want to make a but not here to say there are before we move on with the car and would that report there we have to have some accountability down there and loan up county because there is a mess when I when actually we did not ask but a few questions and and that was our understand that. But when we did asked a question what were when I was allowed to ask a question in regard to just the process of protecting the citizen taxpayer money. And deplication of payments it saying that the answer just made it worse. In so I just want to make sure that we're keeping that out on their situation down in lower county because I tell you I got a couple of calls after the meeting in this thing like it it something that's going on there that we need to keep it out so. I just want to put that on the record because I don't think i'm amazed that when pays right there. So. Thank you for the comment and if we can just get the record corrected so it could be the city of graving instead of the city ago I think i'm fine thank you center lost mess message. Could I please make a motion for that we need to make the correction ribs in right if I need to recognize fewer the folks on come back to me later yes since johnson you reckon assert thank you miss chairman and thank you sooner low for pouring that out I was in the chair at the moment that is she came up related to a long out county we're aware that there is some criminal investigations going on and at the advice of staff I limited the committees questioning of of the officials to make sure that we weren't doing anything it's prejudicial for any a litigation neither against the proscator or against anyone that might be a potential defendant so that was the the reason that we're held a whole lot we did and and soon love very correctly requested that the county judge in the administration the county ask if they were implementing procedures to avoid the it the original issue that was before us and he made clear that they they were working to do that we had both the county current county attorney and the former county attorney who now is ironically the county judge of farter county so we feel like that they adequately responded to the narrow scope of the questions that it said her love I ask obviously the community is not going to quit looking and I appreciate the fact that sooner love is pointed out to our full committee that we must while we have to pull back and let the process play out we're not ignoring any potential problem in that or any other county so thank you sir for bringing that up and miss chairman I just want to clarify that so members of the full committee would understand what happened they thank you since johnson. In ribbons right you are recognizer. Yes sure we would ask for emotions are only used but we do need to make sure that we could. The name on this is not good. Out I am going to members I want to take that as a motion to include in amendment but that I now have emotion do I have a second I have a second on favor say I in the opposed. See none this has been approved. Moving on to the standing committee on educational institutions representative hodges sir you recognized they can instruct her. The committee reviewed one hundred and thirty two auto reports consisting of school districts educational cooperatives and charter schools for the year ended june thirtieth twenty twenty three representatives from strong had excluded district and aa eeable present and answered questions from the committee related to two repeat findings in the districts art report. The other report of the cleve and county school district was certified to the governmental bonding board as well as referred to the applicable prosecuting attorney and attorney general. The other reports for mainer school district equipment school district and star city school district contained findings which were referred to the respective prosecuting attorney and the attorney general the committee made emotion that lgac and a letter to the senate and house insurance and commerce committees recommending a review of a current fraudulent banking transactions in public school districts including any necessary joint organizational meetings with relevant stay called to explore potential policies that may be needed to safeguard school district bank accounts. The committee filed one hundred thirty two auto reports that were brought before it mister chair I move adoption of this report. And members are here they motion do I have a second. I have a second in with that on favoritely I in your pole say nay. It has been approved. The. Members are next report is on the standing committee of state agencies the representative ferment. Sir you recognize. The. Thank you mister chair. Eleven reports around the committee's agenda yesterday two current reports with findings were presented along with the special report. The department of corrections reported a missing deposit. Had internal control issues over cash receiving. Had inconsistencies and their audits of firearms and ammunition among the various divisions. Overestimated proceeds due to do from crop sales were caused assets to be overstated and didn't properly value inventory. The department public safety reported an instance of theft of property. The special report on the hairs and house of hope noted issues with conflicts of interest. Board composition and approval of pay rates. Various agency staff members were present to report on how the agencies intended to address the article findings and answer committee questions. During the meeting the committee filed ten of the reports the committee to referred three findings finished one two and four for the department of corrections to the july meeting so that the agency could obtain additional details on corrective actions to the findings. Mr chair moved to adopt this report thank you repeated firm and members I have a motion do I have a second I have a second on in favor say I any opposed they need. The. It members it has been approved and with that. Members will go take a just a few minutes and we're going to recognize some special folks and i'm going to turn this over to mr white kidnapping here sitting beside me thank you senator so I like to let this committee know that there are two individuals and with legislative audit today here with us that this is going to be their last legislative joint audit committee meeting and they have sat through and been a part of many of these committee meetings the first person i'd like to recognize his forty two years of service with a state of arkansas with legislative article she has served as the assistant legislative auditor most recently yeah she's a license cpa certified fraud examiner financial forensics she is a lot of sort of occasions she's been involved in many many outside associations from state society and cpas ncsl and certified fraud examiner associations but forty two years of experience just cannot be understated of the time that she has committed to the state of arkansas to the legislature into the people and I just wanted to take the opportunity to recognize ken williams for her last day and last meeting with us. Now as I mention there are two of us with us today that this is their last committee meeting and here at the end of june we are going to have eighty nine years of experience at legislative audit walking out the door so the next person I would like to recognize has even more than forty two years of experience with us he has forty seven years with arkansas legislative audit that's mr roger norman the legislative auditor in our could go through a lot of. A lot of the air you know things that he's done for legislative audit there is senate resolution that went through that you know listed a lot of those as well as he had recognition on the house floor I would just like to state to roger you know it has been a true honor a blessing in a challenge. Serving with roger norman spent an hour and at the interior and honesty in the grit to do the right thing at all times it's been a pleasure to be a part of the team that he has lead for 47 years. At the same time it's been a blessing and that the last year and a half I have had working with him he has been able to come part that knowledge that information to me as he's prepared me to take his role but at the same time what he is set up for me is much of a challenge. In that I am looking to follow on the foot steps of a man with forty seven years of experience as a true pole walter he has set the bar extremely high for me to leap over and down just want to you know congratulate roger norman let the committee speak at will you know members. The. That's a lot of experience leaving at I told roger a couple weeks ago that in the same thing applies to kim that. We can allow them to return because the state can't afford the retirement checks that we're going to have to send to. Just really good people the state and all of us have been blessed. To have them in our presence and were there we've got a little token at room and present okay i'm going to recognize a few more people first that we're going to buy personal adam to. A roger and with that I recognize my co chair representative will make thank you mister chair. Lot of a product over I had the extreme honor and a pleasure to chair this committee for three terms and so i'll work very closely with roger norman and and in that time. I said publicly several times if all the state government ran the way that this this agency wrongs. It would be a totally different scenario arkansas in good shape but but the people of argus are in greek shape with with the leadership that that roger provided here he's uniquely gifted for that role in you know a lot of thanks kevin said or things apparent i've grabbed up here this morning you know the bar is half unthankful haven't a tran reached that instead of me roger is there's just not enough good to say about the work that he did. And how uniquely gifted and qualified he is for the position and and the word integrity that kevin uses was the one that I kept coming back to and I think the staff when you see that work in relationship on the inside. It it's obvious then and so roger up consider your friend and the. On behalf of the people that I work for thank you for your your work in your honors honest honestly in your integrity fulfilling that that role and I know you took it serious and i'm thankful to have this experience to work with you representative spring. Good morning thank you mister chair I would just like to say that I heard the name of mister roger norman before I even became a member of this body so you are well known the state of arkansas that not you probably have been working long with not long and then my each year or so anyway just a joke but anyway I congratulate you on your retirement thank you. In central chesterfield ma'am you're recognized thank you so much mr chair rodger thank you so much for your integrity. You've been a great general. But I want to say cam thank you for making him look better than he deserved haha. We we often only think of the person at the top. The person at the top is only as good as the individuals who work with him every day. And we have a great staff. And that is attributed to you roger because you had to make you have to have a judgment. In order to accrue the kind of staff that we enjoy here. At the. Or committee. When we get all faced in we don't agree with what the audit reports there's and sometimes i. What I have found is that the findings that come from order and I predicated. But they are objective. And their predicated on the information that is before these individuals would come to us once a month to present to us what is going on in the state what we can do better. And i'm leaving with you. And I want to say how much I do appreciate you and I appreciate up as well. Members anybody else. See none we're going to make a presentation. You know may I say something censor chesterfield hit it right on the. It's it's the staff and the people that i've had the opportunity to work with in its it's just been our desire to. Fulfill our obligation to the citizens into the general and to the committee to provide accurate information and for yale to make your policy decisions and it is truly an honor to have been able to serve the citizens thank you members one more thing all of us representative centers we all work with a lot of folks up here we all work the love agencies we should always remember. There's two organizations. There are our organizations they are part of our team. They don't but they're not below anybody else. Legislative audit. In a bureau of legislative research it memory. We should always charge them. And we should always remember. They're one of us. And with that will get back to work. The. Okay the next adam is review of reports and with that we're going to talk about the state of arkansas annual comprehensive financial report in mrperiod wells are if you will not do something. Thank you mister chair I will do my best to follow up this presentation covers the audit of the state's annual comprehensive. Financial report or actress for the end of june thirty twenty twenty three. The article was included by the staff. The deadline for following the twenty twenty three actor was december thirty first point twenty three this report was completed and dated december twenty two of twenty twenty three. And early released on january twenty four of twenty twenty four. We issued two reports for the audit of the state's financial statements. The first is the act for which includes all the financial statements in notes the financial statements for the state of arkansas as well as our independent origins report. The second is the report on internal control over finance reporting. This report includes any findings related to the state's financial statements in federal binator assistance which may doser will cover next. I act for his financial statements which were prepared by the department of financial history include the following entities. All the state agencies across the state. The far retirement systems the hard education institutions and the three component units which include the arkansas development financial. Development finance authority the university work is off foundation. In the university of arkansas campus found. The. Less later on issued on more fat or clean opinions on the state's one twenty three. He already all the financial statements included within the act for except for the following entities which were audit by private counting firm. The three component units which are mentioned on the previous slad. The universe university of arkansas medical sites are you america. And the revolving long funds. There was one reportable finding considered to be a significant deficit safe for the twenty twenty three audit. Founding twenty twenty three days usual one is included in the single audit reporting package as a financial statement founding in the scheduled findings and question costs six. The founding was the result of numerous account airs identified where we're viewing the year and a cruel entries performance vision of work for services. These entries are required by the department finance in administration to a sits in the preparation of the actor. Audit procedures identified airs in the year and estimate for the net climate benefit over payments receivable. These errors resulted in the receipt will be an overstate about fourteen and a half million. And the amount do back to the federal government being overstated by over eight and a half minutes. The same issue was noted as a finding in the per year. The. Yeah. Additional calculation airs are also noted in the preparation of the year and unemployment insurance benefits payable or cruel estimate. The airs caused the cruel accrued liability to be understandable over one. Upon notification of these misstatements. They buy office of accounting made the correcting the injuries into asus. Our recommendation includes strengthening the controls over documentation and related calculations will acquired for year and accounting. Entries. The next six slides will show some financial halloween related to the primary government of the state the financial information on these last does not include the state retarian system. Then information will be included later in the presentation. The. A shown on page twenty other report. The statehead total assessor june thirty twenty twenty three of approximately thirty eight billion. The. The two major categories include cash investments. In over fourteen billion and capital assets at around nineteen. Network siebels and other assets make up the other four point two. The state's liabilities told or twelve billion is shown on page twenty one of the report. The man major categories. Of the state's liabilities include. Bonds notes and installment agreements payable we're just down to three and a half billion. That pension liability increase significantly to two point four billion. An operate and amount to do the other governments remain somewhat cost at one point five billion and one point one billion respectable. Yeah. This chart shows trans regarding the state's assets and liabilities over the past five fiscal years. The majority of the increase in assets from physical years two thousand nineteen to two thousand twenty two was in cash in the investments to the due to the coroner virus aid relief and economic security. Also known as curse. An american rescue plan act also known as arp. The two point five billion increase in assets for fiscal year twenty twenty three was largely due to a one point six billion increase in investments. Overall liabilities have fluctuated previous years due to various factors. In fiscal year twenty twenty two the decrease was significantly related to the decrease in that pension in or publicities. In fiscal year twenty point three the increase in liabilities was due to one point six billion increase in that pension liberties. The state had total revenues. Of over thirty million thirty and a half billion song paid twenty four and twenty five of the report. The major paragraphs of the states revenues include grants and contributions such as federal rants were thirteen point seven billion taxes. Such as any common sales were around ten and a half billion and charges for services will just over family. The state's toll expenses were just under twenty eight billion twenty seven point seven b. The major functions or programs. We're how the human services at twelve point four billion cardusing universities were close to five billion. Education was over four and a half billion and transportation as well as long justice and public safety were around one with. This chart shows the trend of the state's revenues and expenses over the past five percent. The increases in both revenues and expenditures. For twenty years twenty nineteen twenty twenty two where the result of the covid night teen pandemic and the fare of funny and associated with the pandemic. The one point one billion increase in revenue in fiscal you're twenty twenty three was mainly the result of their returns on investments from the previous year as well as additional funding from the medicaid cluster and how we planning to construction programs. The one point eight million increase in expenditures of the past year was in large part due to increase in refunds to taxpayers though as well as a rasid expensive for the federal programs just mentioned. Now the next fireflowers will provide financial information regarding the states retirement systems. A shannon page thirty seven of the report. The state's return systems had assets at june thirty twenty three toll in thirty four and a half billion. The major categories of these assets were cash in cash equivalents. And eight her ninety four million. Investments were over thirty two band. And collateral received from security lining transactions with just over one billion. The returning systems had liabilities told one point three million which is also shown on page thirty seven. And the majority of this summer was the obligations under security landing agreements for both the public employee and teacher returned systems. The. This chart shows the trend of the return systems assets and liabilities over the past five fifty years. The variation and asserts were due to large fluctuations in the rates of return in the financial market. For stocks and other investments over the past five fifty four years. With an increase of over seven billion in twenty twenty one. A three and a half beginned decrease in twenty twenty two. And then another increase of one point four big in the twenty twenty three. Loud buildings for the return assistance experience slight fluctuations over the past five years. And any significant changes the current usually depend on the volume of security lane agreements in place during that particular fiscal year. The retirement systems had told distance of almost four big and is shown page thirty eight. Contributions from employees remain cost. At just over one billion net investment income made up the majority of the overall toleditions coming in at two point seven billion. Told a deductions. Were over two billion with benefits paid me in the main component. This last chart shows the trend of the retirement systems additions and deductions over the past file fiscal years. The primary reason for the variation in additions or revenues. Over this period was the fluctuation in the market value of investments from year to year. In fiscal you're twenty twenty one. There was a eight and a half billion increase in investment income. Subsequently in fiscal year twenty point two there was a decline in investment income of almost two and a half billion. And then and in twenty point three another increase in this income and almost three billion. The the deductions for the retirement systems were steady over this time period and consisted primarily a benefit payment. Yeah. The. Mr chair this includes my presentation. The if I represent this are here to answer any questions. The. Members are there any questions. Seen under a healing. Motion to approve. I have emotion I have a second or in favor say I any opposite. Okay this has been reviewed moving on. Stay of arkansas single audit. Mister mam you are recognized. Yeah. The. The. Thank you mister chair. This presentation covers the state of arkansas single item report for the year ended june thirty twenty twenty three. The staff have legislated by it completed the state wide federal project which was finalized and submitted to the federal government on march twenty seven twenty tw. The single audit act requires that the idea of the state be conducted to meet for have objectives. First is to determine if the financial statements of the state are fairly presented mr well to address this objective during his presentation. Second is to determine yet the schedule of expenditure is a federal awards or cifa is fairly presented. We determined that the twenty twenty three safer is really presented and is located on pages one or five three one forty six of the report though it is to determine if the state has complied with laws regulations contracts and grand agreements that may have a direct and material effect on federal awards. Fourth is to obtain understanding of internal controls over federal programs. Compare this to plan and perform testing of the internal control over compliance for a major program. State agencies and states supported institutions of higher education disposed federal phones told him thirteen point seven billion from four hundred and sixty seven federal war programs during the twenty twenty three fiscal year. This was their decrease of approximately sixty million dollars from twenty twenty two largely due to a decrease and finding related to covered nineteen. This. Based on criteria astablished by federal regulations nineteen major programs were reviewed for twenty twenty three. These programs represented eighty five percent of the state's total federal expenditu. The state departments shown on this lad expended the federal awards received by the state the department of human services expended sixty six percent. Fall about the department of education at ten percent the department of transportation at seven percent the university of arkansas system at six percent. The department of commerce at three percent and other state departments at eight percent. The state received federal awards from thirty one different federal agencies. As shown on the slad the federal departments of health and human services education agriculture and transportation provided ninety five percent of those awards. The. It is the responsibility of our federal the wording agencies to review and provide resolution for for all item findings as well as determined if question costs identify by the auditors require recoup meant or other adjustment. I shown on page seven of the report and on the slot twelve point two million in question cause remained outstanding as of june thirty twenty twenty three pages two nine five three three of six of the report provide the results of our follow up procedures regarding the uncorrected prior added findings. The item a fiscal year twenty twenty three resulted in thirty three findings for eleven federal programs. Sixteen findings are forty eight percent were repeat findings. These included eleven repeat findings for the department human services and three for arkansas economic development commission. Non question calls are reported in nineteen findings and total two hundred and eighty six point six million dollars. It should be noted that approximately ninety percent of the questioning costs resulted from reporting errors and will not be subject to recognition. Question cost are defined by federal regulations and are identified by the auditor because of the finding that resulted from a violation of a regulation including phones used to meet fatal award federal awards a lack of adequate supporting documentation or cost that appeared and reasonable. Question cost are not considered in proper payments until their reviewed and confirm to be in proper by the federal awarding agency. The. As auditors are responsibility is to express an opinion on compliance. For each major program based on the results of the article. Although several findings for reporting we issued an unmarried bad or clean opinion almost to the major programs. A qualified opinion this issue if an art it finding results in an instance of non compliance. That is determined to be material either individually or when aggregated with other non compliance findings. In relation to the major program as a whole. For the twenty twenty three fiscal year I qualified opinion was issued for findings representing the covered nineteen corona virus state and local fiscal recovery phone. Covered nineteen elementary and secondary school emergency really fine. Covered nineteen american rescue plan elementary and secondary school and branch a relief program. Children's health insurance program commonly referred to his chip and medicaid. These findings are identified on pages twenty one through one of four of the report and will be discussed on the slides that follow. Yeah. Three findings were issued regarding the corona virus state and local physical recovery find. These findings are based on review of projects and ministered at the arkansas economic development commission. All three or refeat findings and one contributed to the qualified opinion no question calls totaled over six hundred and twenty five thousand dollars. Review of two programs within the education stabilization fine resulted in three findings. These programs are administered at the architectural department of education and are the elementary and secondary school emergency really fine and american rescue plan elementary and secondary school emergency relief. Are three findings contributed to the qualified opinion. For the annual performance report clerical errors remain resulting in over statement of expenditures for certain categories of cost additionally accounting records were not sufficient to support reported amounts for a specific plan item on the annual report. Resulting in an under statement. Question calls total two hundred and fifty two million but do not represent unallowable or inappropriate uses of federal things. Far findings affected both the chip and medicaid programs with our favor being repeat. Three findings contributed to the qualified opinion. Question cars total approximately twenty six million dollars the majority of this amount relates to inadequate documentation available to support phones used to match ver. Were issued for chip. With all four being repeat findings and wine contributing to the qualified opinion. Question calls total over forty six thousand dollars. An additional four findings apply only to the medicaid program. Two or repeat findings and won't find in contributed to the qualified opinion. Question calls totaled over in eighteen thousand. Mr chair this concludes my presentation agency representatives are present to answer community questions thank you mem. Members are there any questions. Senator hammer sir you are recognized. Thank you miss chair questions can be on page sixty nine the report involves dhs can I have stayed for you on her dhs come the table. Do we have that members of the date your staff here. The. Insure if you would please stand up on us where you end. Ma'am how are you doing today. Please state your name employer and position. And i'm going to ask you to raise your out here. Do you some swear or a firm that the test model you're about to give will be the truth the whole truth and nothing but the truth. The. Please state your name. Sir hayes cheap deputy council department union services thank you please ever see. Morning and a and paid sixty one I just need explanation or understand about a statement that's in there under the medicaid condition and context. It states that the match required from the seven days selected total forty one million plus and of this round la staff were able to confirm allowable funding sources for seventeen. The plus million but were unable to confirm allowable funding sources for the bounce totalling twenty three million plus could you give me an understanding of that statement from your perspective and then i'll have a file of question sooner hammer can you confirm the funding number is believe this is twenty twenty three dash o two one there should be a family number yes twenty twenty three dash zero two one okay yes so. Fort for this audit finding what legislative audit is looking at is to ensure that we have enough state phones to match the federal phones that we are drawing down. And as. Medicaid finance is a quite complex process with us making a significant number of draws during the course of a month it can be very difficult to make a want a dollar to dollar match for that the state of federal fines. So what we've been doing over the past year is making improvements to our general ledger system to better identify the source of those state and other non federal phones. And. This is something that we've been working with with c and s we have this finding. Typically every year just because of the the nature of being difficult to confirm the source of the phones that legislative audit is looking at. This is this is one that we've always had caused out with them with no return in question costs. Because cms will look at. The source of the phones that were using and though it confirmed that it's appropriate. At what point would you know then if you're. Using funds from one source that may be aren't supposed to be used to take care of that need versus the other. I'm just trying to get my mind around based on what you just said. Short were all match funds you'll know in the response we have a response that all match funds are drawn from an account that is funded with only statutory allowed revenues allowed for match for medicaid. Okay then the money if you don't mind miss share one other circle hidden so on finding continued. Over two. And at least our book you guys have a dispute with the finding. On their page of funds used as match for administration program expensive for allowable funding sources. And then. It might understand it with the programs that you are implementing that you hope to get a more my terminology real time. Instead of being spread out so far away from the point yes that's our goal we've we've been working to update our general ledger system to better identify those phones more specifically so that so that we can confirm that there is a state dollar for every federal dollar when you interest paid that would be. It's ongoing. Is that always going to be on going to reserve a date certain in the future that you feel you'll get there. We were always fine ways to improve on that. It's not not a date certain but we're going to continue every time there's a discrepancy that is. Identify we're going to continue make adjustments in our ledger system okay then I guess less than a descendant when you when you come before us and need more money or we take a look at the medicaid trust fund balance the numbers that you use when you come before us or the numbers that are used in medicaid trust fund balance how would they how would they relate to this finding and the lag time of of the funding source. Versus what what is actually needed to be spent how to publish tied together do they at all thank mischero stop there. Thank you sir. But i'd like to hear that answer you know that. I'm going to ask a debit secretary man or ubank's to come up in. Address that specifically. And ladies and months were you in as well. I would ask you state your name you employee. In your position go ahead. The. Jane at me and or can tell dhs deputy secretary of programs and medicaid director. Mr ubank's arkansas department and human services deputy secretary for operations and budget thank you do you saw this where or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth. Thank you and you may have a seat. Good morning send famous i'll try to answer your question and I have to ask you for pieces of parts so every week medicaid pays claims and want that for financial cycle is produced then a payout is calculated with state and federal match. That is what is used to draw that is then handled by managerial accounting for separation of duties to actually make the drawer but in in coordination with also the money in our current bank account and are drawl and pay out process over I believe it's it. Thirteen fourteen day process of funding we will not draw every dollar for that day we will draw it based on that fourteen day pattern in our and our agreement so we will pay the bills we will match it and then it will go to out to the providers and pay our bills. I'm hoping I answered your question. He did an i'm going back to your kinest you are you done with me go reserve thank you. I'm going back to previous conversation we had last year and i'm trying to tie this together where I asked you if we was there anyway to get a real time snapshot of what's owed at one particular time. And. Based on what I remember about that conversation has been well over a year ago and what's in this report when i'm when i'm understanding is. No you can't. Or as the system improves you're going to get closer to yes you can as far as the money that's being transferred or into the medicaid trust fund. Yes so that is correct it is very hard for a point in time amount that is owed we we do. A lot of reconciliation process with and without the auditors when they are present to maintain that balance to know what's what's in this accounts. Okay all right thing is cheerful to do stuff though thank you thank you sir dreamer. Members are there any other questions. See none do I have a motion to approve. Have emotion I have a second one in favor say I oppose. Say none this is an approved thank you all precious permit here. Our next adam i'm sorry i'm would be recognized by mister white side me up yes sir I would thank you chair for the opportunity to speak for a sec what I want to mention to the committee as a whole something that's not necessarily stated in the presentation but you know these three inches of reports that are in front of you take a lot of work of legislative audit in getting those prepared and at the same time it's in great partnership with the executive branch with dfa as well with the institutions of her education in getting the act for none as well as the second one which is the cifa which are the federal expenditures and coordination with a lot of these agencies they spend a lot of time helping us get these reports already as well on these audits done and we're appreciative of that but as well as the importance of these two reports you know the first one related to the art for is one of the most important documents issued annually for bond ratings very important in that aspect and it's us expressing an opinion on those numbers that bond rating is utilized and then on the second one as well with the c four in the federal expenditures this is a requirement for the state of arkansas to get the federal dollars then it gets this audit must be completed so I just wanted to take an opportunity to young thank the staff for all the work as well as the great partnership with dfa the executive branch all those here today thank you thank you sir members are next adam is special report is review of selected financial records and transactions for the city of augusta. And miss lori comes common ma'am you are recognized. The. Thank you mr chair this report is issued in response to a request from this committee for legislative audit to review selected financial records and transactions for the city of a guest at the committee requested the review after learning that the city had not obtained required in your audit since twenty sixteen and receiving allegations of imperpriting. The objectives of this review were to review selected disparsements and transactions for a propriety and compliance with applicable arkansas laws determined if city officials obtained required articles. Disclose information about other issues discovered during this review and discussed and elject meetings. The. Located and window of county augusta operates under a mayor council form of gave a remember with eight member city council. The council governs a city and it's utility department which provides water so were electricity and gas services to approx them only thirteen hundred customers. The current mayor took office in twenty nineteen. Our review revealed the city did not have a documented policy or approval process for adjustments and write offs to utility customer accounts. The mayor was the only official who authorized these adjustments and reasons for the adjustments were not always provided. Based on normal practice the utility clark printed the current bill for the customer wrote off the adjustment authorized by the mayor on the bill and forward the adjustment request to the bookkeeper who made the change in the computer system. Likewise the city did not have a documented policy or approval process for writing off utility customer accounts. The bookkeeper indicated these write offs involved printing final bills for the link when it can't and placing the prenate carpies in a bounder at the end of each calendar year the bookkeeper writes off our final bills in the bander. Our review revealed adjustments and write off totalling approximately a hundred and sixty eight thousand dollars will reveal. Were made to utility customer accounts during the review period as shown and exhibit win on page to the report and on the slide. Ever the thirty adjustments or radars we reviewed for per priority thirteen or forty three percent where authorized by the mayor without a reason provided. These thirteen adjustments are write off totaled almost fifteen thousand and included accounts for the mayor's daughter two council members and the mayor. Additionally are review of the utility billing cycle ending december tenth twenty twenty three revealed the mayor authorized payment extensions totalling over fifty five thousand on the link what a counts to be a shut off of utilities for these customers the accounts grain it extensions included the mayor's daughter to city employees and one counts or member. As a layout about our consult code the council adopted an ordinance authorizing the mayor to approve purchases less than ten thousand. Without engaging in competitive bidding our review of fourteen dispersements over ten thousand dollars revealed the beards were not solicited or a waived for ten purchases totally three hundred and thirty five thousand. These purchases included over two hundred and fifty two thousand for tree and debris removal pay to seven separate vendors over a two year period. Forty five thousand four court room flooding repairs approximately twenty two thousand for a recycling center concrete project and over fifteen thousand for engine replacement in city owned equipment. The city possessed one bank issued credit account. Which separate cards are found to the mayor in personnel as well as three vendor credit accounts used by the mayor city clerk and heads of certain departments within city government. Our review of one credit card statement per year from each of the four credit accounts and other selected credit card purchases revealed approximately fifteen thousand and charges which are business purposes could not be determined as shown in exhibit two on page four. These charges included five thousand for larging forty five hundred to restaurants including thirty seven hundred to a restaurant in the city. Nearly two thousand for food nine seventy one for clothing nine hundred and fifteen to paypal six hundred and sixty nine to convenience stores and twelve handered through miscellaneous items including an air pure fire vacuum cleaner deep friend and television. Specific addons purchased using paypal and they are convenient stores could not be identified due to lack of documentation. Additionally the individuals responsible for over five thousand five hundred of the total charges could not be determined. I've selected dispersements revealed eight hundred and eight dollars in reimbursements to city officials without an apparent business purpose including five hundred and sixty two pay to the city clark for clothing decorations and hotel expanditures in two hundred and forty six pay to the mayor for meals. Additionally checks totalling over a nine thousand five hundred were issued to officials employees and individuals without documentation or with inadequate documentation therefore the validity of these dispersements could not be determined. Review of bank statements revealed the city page seven hundred and twenty eight dollars in bank fees due to insufficient phones it should be noted that checks contained the two required signatures and bank statements were reviewed and reconciled monthly. The city paid a total of over six thousand six hundred dollars in excess of approved salary to the mayor over a three year period. In twenty twenty two the assessment to the mayor slash city clark was paid over forty two hundred then they appropriated amount. During comparison of budgeted salary amounts to amounts paid we noted the council did not add after cities operating budget by ordinance or resolution for the three years covered in the review period in non compliance with arkansas code. The council did not tally select an accounting firm to complete the financial audits of the city for the six calendar years and the december thirty thousand twenty twenty two. The city also did not obtain any audits or aup's within one year of the fiscal year end for its water and sewer system as required about arkansas code. The financial audit for calendar years twenty sixteen and twenty seventeen contained nine foundings in ten bondings respectively both audits included the water and sewer system. Financial articles for calendar years twenty eight thirty twenty twenty two we're being connected by cpa firm as of the report that. We examined other issues discussed on pages five and sixth of the record. First we compared utility customer account collections with bank deposits for a three randomly selected maths. Based on this comparison it appears that all collections intervene the computer system were properly deposited. Second a request for citi records was made in may of last year under the freedom of information at. According to the requester the documentation provided by the city was in complete in subsequent requests for the remaining records were ignored. The requester filed a civil case in woodruff county circuit court in june twenty twenty three. Subsequently the parties agreed to settle the case which was dismissed in september twenty twenty third. We are so reviewed three issues discussed at aldrex meetings. First according to council member financial information had extort systemically not being provided to council members at monthly meetings however for the meetings we reviewed financial information was provided based on documentation provided by the city. Second we reviewed the cities purchase of an executive chair allegedly costing over twelve hundred dollars. Review of the relevant credit card statement and invoice rebuild the six chairs were purchased at approximately two hundred dollars each based on our starting of the six chairs the purchase appears reasonable. Third the city paid approximately six thousand dollars over a two year period to an employee spouse were cleaning services without an ordinance in conflict with arkansas code. According to city personnel the cleaning services were completed by the city employee not the spouse and due to federal income restrictions over the employee in rs form ten ninety nine was issued to the spouse in twenty twenty one. To gain a better understanding of city fiscal matters let us light of audit recommends the mayor city officials and council review applicable arkansas laws and insurer adherence to these laws specifically purchases over ten thousand should be subject to competitive bidding or bidding should be white if a clickable. Credit card charges should be supported with adequate documentation including an automated invoice in a business purpose. Furthermore the city should develop a policy regarding the use of credit cards all either dispersements should be supported with adequate documentation including an animals invoice and a business purpose individuals should not be paid for services not render. Additionally the council should have standard a written documented policy regarding extensions of adjustments to and rather utility customer accounts. And adopt an annual operating bit budget for the city by ordinance or resolution to avoid salary over payments or spending about authorized amounts the budget should periodically be reviewed and a mandate as necessary. The council should also select an accounting firm to conduct a financial audit of the city each year to include the water and sewer system and develop a policy to determine information to be distributed to council members at meetings. Thank you mr chair this concludes my presentation this report has been forwarded to the first judicial district prosecuting attorney and the attorney general management response is provided in its entirely charity in appendix b of the report in officials from the city are presented. Are a president to respond to committee questions. Thank you ma'am. Yeah. Members are there any questions. Center johnson sir you are recognized thank you miss chairman. Members this was really great contentious review in in cannyminist penalty committee. Act as you say there's. Yeah. Numerous problems that were were intermined by staff. And before I going further on what a staff the status of this report with the first district proskin attorney and the attorney general. I recognize. Mr kevin whites in himself. Thank you senator as mentioned this item has been referred to the prosecutor in the attorney general we respectfully asked to not answer that question and answer either way could harm their harm their relationships we have with law enforcement in the community and that we just not establish a president of answering that question on a regular basis but it has been forwarded to them and they could provide any statements if necessary then in that case mr chairman I would respectfully request that we are. Hold off on any action on this because it's a similar to the situation that did I discussed earlier with the another city that we. Uh had an issue with yesterday we don't want to prejudice anything one direction or the other related to the law enforcement doing their job but I reserve the right in the future I have a whole lot more questions that have come up even since i've hearing in the in our committee last fall. And senator johnson if you want to ask questions of the energy you're welcome to ask questions and then. Oh other staff or a have representatives from. Who do we have here from august. Yes you're of the city officials okay. Or the representatives from the city of augusta here. The. There's two some folks back here I can't see all of them because of the car all right we could have them come and i'll ask mr why it to keep me between the ditches on what will be an appropriate question should you just and we have a the mayor mister collins city clerk missus nichols. So the treasure miser waters and. Mister david chapel and if you all would come up. Yet I will be swearing you in i'm going to ask you to state your name employer in position. If you will do that please. Said your name. The. Help among shorter rates you're right here. Do you some is where or a firm that the testimony you are about to give will be the truth the whole truth and nothing but the truth. Thank you. The. Please ever see. Miss chairman I would be willing to allow the mayor and see clerk with the other people too if they had a statement before I ask a question. Mister mayor your staff would you all like to make a statement. The. Yes i'd like to say that we have since we have finally started receiving some auditing and we know what we have to correct now the obviously seen a lot of things that it went wrong and. And I will take. Most responsibility for the not having the clerical work done at a lot of work. Things that we just didn't have to document document things I will say that since i've been in office and in twenty minutes here we had no minded ask I had no way to ask what was going on and a lot of things you see to brace that place over during the time we could we don't have meetings we didn't we had meeting over telephone we didn't know what we were doing as a city and from the spending that that went on from there and got we're doing we can to try to make this like this right make this work I do appreciate that I wish the state had been involved in the whole time when I was on the council we asked for that we never received it that there ability right there. If every mayor had that something to look back and in the work with I think a lot of our cities in town would be a lot better. Ah. This is not the city of just his fault that were in this position with our article it was it's something that happened in laugh with david and this is this is where we were at and i'd loved answer questions about i'll try my birthday doing that not can I say I want to thank the the state for coming in order to what they did and they don't have a lot of stuff that we know we have to correct and that's what's what we're here. Where to crack it and move. Thank you mister mayor. And representative jean is i'm i'm sorry mister chairman I go hit do and play activity put me back in the key then and it let me know useful hit now. Through to my friend representing all right and then our company should come back to me we'll put your back in the user. Representative jean representative representative later. I don't spoil two but it's representative to price there you are I got one quick question all you northeast fell as look like a lot of would go there for anyway i've been listening now there's and and I understand that the this were referred to the prosecuting attorney and I understand that my question is. Do we know if the prosecuting attorney has asked for a remesigation from the long enforcement particularly made a formal required to the state police to pursue this matter to we know if that has taken place or not and I would for their question to mister white. Yes. Okay that's others one make sure because these moneys its missing rises to a level that I think that definitely needs to make sure that that is me and conduct it thank you representative. It seemed to hammer you recognize her. Thank miss chair mr chief you don't mind i'm or yield to center johnson first not coming behind him because I know he was queued up and if the adult drop back in the queue after he gets done yes sir since johnson you recognize her. Thank you mister chairman thank you sender hammer do same for you. Where there's I don't know where to begin a lot of these things but there's one thing that. Probably bothered me more than anything else i'll go to hairs I mean is what you tilt not just wire sue or you have electric gas. And when it seems that in the art report that you are latterly forgave or adjusted billings to different people which smacked a favoritism are all that i'm not accusing your exonerating you i'm just saying this is what the auto reports there. Has the city amp's instituted a policy probably by resolution or maybe ordinance that would. Spell out the criteria in circumstance and documentation whereby you or even the council or some other official would be able to adjust or waive any of those bills because these are hard costs these are in case of electricity the you know assuming purchase from entry or some other wholesale supplier these are real hard costs that if someone is not paying it. Then another consumer is basically banking out to difference is there anything that has been done officially in in a solid manner where this won't happen again. The council has not adopted anything and we have we have completely stop doing any adjustment or anything like that. Ah. There is the rate of the wrong word we don't have a radol. We. At the end of the year somebody had that passed away your left town left as an outstanding we always put into a package it's very for an outstanding debt that is not written off there there's no money that well respectfully where that was at the specific question I was asking about look at I did understand that in there when someone basically just leaves and and the meters there and you can't collect on that's a different matter but in a case where some kind of a waiver consideration was given by you I was just asking if there had been a either you or your city attorney or someone else had promulgated a policy that the council had adopted officially that would spell out the limited circumstance where either you or some other official could make some canava of a billing adjustment had to procedurally that's what i'm asking about going forward II could know we do not have a procedure now look at would you seriously consider doing something like that so there would be no question about reasons or documentation in the likely event unlikely event doesn't matter which that there were some reason for example someone had a broken meter and they got bill more than they should have then certainly you are somewhat works for the city should have a bill take to make that hole for the citizen but just it for it be arbitrarian in it without any documentation that's what i'm hoping you would consider the city adopting some kind of formal policy in dealing with there. Yes are we in and it was discussed in our last council and we're we're going to process the trying to come up with something it'll let me encourage you to do something and i'll save all my other questions for later mischairman thank you. Thank you since the johnson. Search a hammer you are now recognized that commissioner mayor want to go back to a comment you made a while ago just gives clarifications I think you said that you'd ask for help which you don't get any would you be a little more specific on per once you asked him. What help you to get that you thought you needed help with that with your and covered I didn't know who to ask. How long you been mayor sir. How long have I been mayor yesterday since twenty nineteen okay did you ever have any contact with the municipal league when you became mayor or did you know that their source where you can get your questions answered if you have any yes we work close with many. Okay. Even during the time of which. I mean from the time you took office's mayor how soon were you in contact with minister believe in order gift guidance. Um. With regards to the questions and issues you had. I can't recall how many times. Personally I was in contact with them but we we reached out to the amount of numerous occasions. Okay now we still do. I'm sorry we still reach out to okay and then as far as the time frame of which all these events occurred you were mayor during these times is that correct yes or and could we just go down the line which everybody. Affiliated with the city at that time that these events took place and i'm i'm not sure of everybody else's name and almost waters but i'm not sure the other two hundred for. You okay. Okay which all do me a favor push that mike button so we could have that on recording if you would please. Okay we all were your in your official capacity during the time which has happened. And sir on the end. I don't really i'm not really a city. But i'm sure you are ultimately what I understood II am assisting the city with the. So you're the private auditor or. I'm not there's actually another audit or optus. Help announces okay or. And then the young lady in the middle there i'm sorry yes ma'am were you an employee during this time yes sir. Okay and when he first start with the city as mayor. The young man on the end my chapel was added with highland in noise. Okay. So gentlemen on the and two thousand sixteen but you had told us you would do our artists. Up through two thousand ninety. Okay I do what will shop there to let me they may get into areas and need to go into a back and forth all right miss chairman year but amount while you're back in the mike after anybody else thank you yes sir. Rips that is hardest your recognizer thank you chair. Oh. Mayor I believe I when you are in the committee being last year there was a discussion about your your pay as mayor and you receiving over payments. And that you stated and committed that you you would pay that money back and that your seller would be adjusted back to where it was before has that money been paid back and is your salary been adjusted since then we haven't done in. And what were the other payments returned to the city. The council agreed from our payments in twenty three percent right and the. Bonus. And twenty nineteen twenty. But there was a disagreement about an overpayment that you had received if I remember correctly. That you have said what you'd be that you would pay back to the city. And when I come to the fifteen hundred dollars they said I was over radio that was reimbursement for I had took money to go to the conference but never spend it in. The. Okay. And then there were some city contracts I believe mine dealt with a flight or water and issue in city hall. You recall that we had a flood and we there was no repairer I called the campaign we had a roof glass you're in a store and the coming to council members came in and they were not asked and we need to do something and they were called in a disaster. And it was the tax between out of time we came into that with their fault amazing great restoration out gone with. They're the ones who receive the car track to do the repair and was that were done. Yeah yes it was one job they came in. Okay thank you thank you. Yeah. Members or there in other questions. Seeing none. I need a motion. That we have adopted a motion that we adopt this report. Do I have a motion I have a motion do I have a second chance of rain cohesion my culture we don't need to to adopt this report yet louis until. It members this report has been stated early referred to the local prosecutor and the attorney joe's office we have the option of adopting this report as it is. Or we can hold in advance and we can we can hold it in a bands so we have those two options. With that I am now asking for okay since joseph you recognize. The. Mr chairman I withdraw my motion for the tamber. Our assert. The. Most of the diversion. If it would be it would be emotion to differ. Mr hour move that we defer action on this this. I'll give members we have a motion. You might want. And and i'm seeing there we have a motion to defer do I have a second. I have a second. And without all in favor I opposed. Okay this issue has been deferred thank you and thank you mayor in in your staff for being here thank you so much. Oh instead of hammers are you a recognized this can be directed to the chair if you don't mind please yes sir go ahead. Could could stay off monitor this one as far as activity by the prosecuted attorney and be prepared come back at the next meeting and give us a report as far as. Where it is and in the process and communicate with prosecutors much as they can and just bring a report back to us as a committee. Yes certainly can't they will okay and is this going to the local prosecutor or a don't have it right back and forth is going to local prosecutors are going a little higher than that. I know school on the. Prosecutor in the county. Going to higher level senator understandings it's been referred to a special prosecutor special prosecutor okay that's while I need you thank you. Number. Mr mayor you and your staff are dismissed thank you sir for being here male thank you. Yeah. Member were moving on to other business the next meeting of the lead slip joint audit committee will be held thursday july eleventh and friday to allow the twelfth or at a calls of the chair. The. The. Is there any new business. With that I need a motion for us to be adjourned have a motion I have a second. In members we are adjourned thank you all for being here. The.