Legislative Joint Auditing-Educational Institutions

straggler to come in. But welcome members and and crowd which. Thank you for being here. Okay item be adoption of the minutes of October thirteenth two thousand twenty two meeting. I have a. Ladies may I have a motion. A motion and second all those in favor say aye. Oppose motion carried. Review reports. Mr faint if you have a have those to share with us police. Thank you Mr chair in good afternoon today we have ten educational reports to review seven of these reports were for the fiscal year twenty twenty one and three reports for for for fiscal year twenty twenty two one report that will be reviewed today was the oral school district and it was classified as fiscal distress. and there were three reports with findings so we will begin with the AS you system which had one finding that was referred to the prosecuting attorney. Arkansas state university Newport internal controls failed to detect a fraudulent email received during July twenty twenty two and payroll staff subsequent subsequently modified in employees bank information resulting in a loss of almost fourteen hundred dollars as of October thirty first twenty twenty two the funds had not been recovered and that concludes the findings for Arkansas state. University system. Identify yourself for the record please and proceed with. Thank you Mr chairman Chuck Welch president the Arkansas state university system this was a situation where we had historically had a direct deposit change form that was online it had been taken off line and an individual called and said I can't find the form anymore could you send it to me an employee did subsequently it changed the direct deposit and we've learned it was fraudulent we have now changed it you have to come in person now to make a direct deposit change so that was the that's what happened we changed that policy wouldn't anticipate this happening again chair. Are there any questions the committee members. Mr chairman I might I just want to I want to thank our team and many of them are here they came that work so hard we didn't have a single Henderson state finding this year so if we're gonna celebrate some will do that today but a Henderson team at Arkansas state system team they're all here and and I just so appreciate the great work that they do just want to say that I appreciate you allowing me to thank you and we the Committee welcomes you here today. Any other questions for me if not the entertain a motion to file this report. Motion and set second all those in favor the most say aye. Apposed motion carry. Mister banks. Okay the next report to review is south Arkansas community college which had one finding that was a repeat finding. I'm not going to read the entire finding but as you can see on the synopsis there were various accounting errors and miss classifications noted that impacted financial reporting on the statement of net position the statement of revenues expenses and changes in that position the statement of cash flows and the notes to the financial statements the financial statements were subsequently corrected by college personnel during audit fieldwork and as stated in the finding we have noted similar findings in the previous six audits and that concludes the summary for south Arkansas community college. Okay is there anyone present. Okay just take a seated in the table indemnify yourself for the record and per State. Thank you Mr chairman committee my name is Bentley Wallace and I'm the president of south Arkansas community college. Good afternoon my name is Michael Armstrong I'm vice president of finance and administration at south Arkansas community college. Okay if you have presentation. Go ahead then thank you thank you Mr chair when we got through with our audit for the fiscal twenty year which was my first few months of the South Park we recognized that we had a serious longstanding situation with our financial reporting the good news on that it was that there was no malfeasance there was no fraud the the receipts and expenditures raw actor with no findings around those the issues that have compounded over time or miss classifications basically errors and incompetence within the staff who was handling that and just recording things in the wrong places and as we work through that twenty year we had a few things happen that actually turned out to be pretty good for us in the end because if forced us to be better and to change our CFO took another job with another college in the summer of twenty our financial accounting manager retired our controller who had been there just a year at that point she returned to the private sector and so on a matter about four months we lost the top three people in accounting at the college and that was the summer of twenty one we kept that controller on a part time contractors to finish up our twenty one books as she was on her way out but we found ourselves without those folks who have been with those books for those five or six years that these repeat findings represent but we're also tasked with replacing all those positions we immediately launched searches for all of them we found a new financial accounting manager we struggled to find a CFO and we struggle to find a controller as we finished up the audit process for twenty last a year ago we we recognize that we couldn't continue in that same path we had to up the standards for that controller position and so when we advertise for route we required a CPA for the first time for that position and we were able to hire somebody from the private sector a CPA. Hey who also is a certified government financial manager and has two masters degrees one in accounting and one in public administration so that was a an excellent higher to get us on a path with somebody with experience in the CPA we continued on that path we didn't have a CFO last fall so we brought in a a retired of the a recent retired CFO from you a Monticello he had just retired it came recommended to us and we brought him on as a consultant to guide our controller while we were still in the search for a CFO and we went through a third round of search for CFO through last winter and identified Michael who has been CFO and CEO in the private sector in the banking industry and also CFO in education and so with those three new people in place finally after a almost a year of being short handed in that area we launched into this audit a process and it continued to tell the story that we were not doing a very good job with classifying and recording financials at the college glad to say that we were able to correct those through the audit process with the great help of audit staff they did a great job we we've been fortunate to have the same auditors for several years of guided that and now we've got staff in place along with plans for remediation and plans to be better we've already started that we've got specific training happening with our new folks we continue to use outside consultants and resources within the state of other CFO's who even though we're not part of a system the system folks are helping to guide as we got great close relationships with them so um do we anticipate having clean audits in the future we do are the the challenges that led up to this the folks who are handling before and are no longer involved they're not and so our hope is that that that period has passed and and will not have those classification that errors in the. In the future again it is really important to know that our receivables are in good shape our student accounts are in good shape for expenditures are all court recorded accurately this really is just making heirs in terms of debits and credits and where things should be recorded in that that's the bulk of the findings one last thing even though it does say that the findings are six years in a row that we've had the same finding the heirs have not been the same six years in a row it's just that the heirs we've had all fall under the miss classification heading and so the yes it's six years of miss classification findings not the same air six years in a row that doesn't make it any better but it is a slight distinction. Well it sounds as though you've covered a lot of ground and and working on your issues but we're we're working hard to get better quick. What cut what size budget do you have are you doing operating budget is right at twelve million dollars with the okay. Are there any questions the committee. This was McKenzie. Thank you Mr chair so it's six years in a row what is that rice or different errors but they're all classification errors it sounds like for those six years was that was the cause every time help lack of help that you're short handed I. Not necessarily short handed but maybe personnel that One. Up to speed on fund accounting I'm trying to walk a fine line they're not throw anybody under the bus but one of the things that we had was an antiquated recording system we had an awful lot of our finance reporting was being done manually within excel spreadsheets that had formulaic heirs built into them and they would recycle those same spreadsheet year after year and so problems would compound one of our mitigation strategies as we're working with our ERP provider to move more and more of our financial reporting into an automated set we already on the system we've just never used it adequately and so we're moving away from manual entry we're moving away from spreadsheets relying more on the system and we have a contract with the ERP company now to provide guidance on how to do that we've we've already had our first meetings with them we've got through the spring more meeting scheduled and just the fact that we're gonna get the the opportunity for human hair out of a bunch of that process will make us better thank you. Thank you for the question. Any further questions the committee. If not entertain a motion to file this report. Motion made. And needs a second second okay motion made second all those in favor of the motion say aye. Opposed motion carried thank you Mr. Thank you. Thank you the final report with findings of none of which were repeat and they were not referred to the PA is kipp delta public schools and they had several findings out I will not read each one that I will provide a summary Four of the findings were related to payroll federal compliance issues mainly in the title one program one finding also noted similar issues in the education stabilization fund the payroll issues were mainly due to the charter school not having proper documentation related to time certifications and or proper sought supporting documentation for salaries and wages in accordance with federal regulations the other finding which was also in the title one program was for purchase orders not being completed prior to purchases being made and that concludes the summary for kipp delta public schools. Is there anyone here. With a school district. Okay. Any questions of the committee members. Any further comments on it. Sir. If not the new train motion to. File this report motion made and and second all those in favor of the motion say aye. Opposed motion carried. Okay Mister Frank the remaining seven reports which are listed on the last page of the synopsis consist of audits with no findings included in this list is oral school school school districts use me which is classified as fiscal distress staff recommends that these reports be filed in mass. Okay take a look at those vers any of them that you. One of. Discuss otherwise we'll just match the. Bachem altogether. Motion. And second to file reports all those in favor say aye. Opposed motion carried. Of that concludes our business okay. Any questions. All right well thank you for being here. Mr mackenzie's. You won't be with us next time and we appreciate you you're with attendant send your comments and we'll Michelle so. If no other ninety other business come for the the committee of this committee is adjourned thank you.