Legislative Joint Auditing

A college meeting to order the first item on the agenda is to adopt minutes from last the meeting. No moved second all in favor say aye. Thank you very much. Minister adopted the next we'll go to the reports of the executive in standing committees and the. Richard Womack. Thank you Mr chair of the executive committee met Thursday April seventh two thousand twenty two staff report of the committee that the audit special investigative and shortage report scheduled to be presented to the standing committees and the full legislative joint auditing committee this month in New business the committee approved a motion for staff to order at the implementation of the governor state employee salary increase that became effective February sixth two thousand twenty to with no additional business to discuss the meeting was adjourned the next meeting of the committee is scheduled for Thursday may twelfth two thousand twenty two Mr chairman for adoption of this report. Second. The questions Senator Dismang. One all right no that's all all right second all in favor the doctor's reports say aye All opposed thank you very much. next will be the standing committee on counties municipalities senator garner. Thank you Mr chairman. The Committee adopt the minutes of the February tenth two thousand twenty two meeting the committee discussed the city of Cotton Plant and they're noncompliance with the municipal accounting law staff reported that the city was attempting to correct repeat findings related to their accounting records and had hired someone to help them but when the city was visit on March tenth two thousand twenty two the findings had not been corrected the committee voted to wait until the may twenty twelve twenty twenty two meeting to see if records or brought in this poll accounting law Committee discussed the city across revealed and the letter received from the city regarding payment of monies owed from the general funds to the street funds the letter was from the city address monies owed and the city's plan to repay consider quested to be allowed or pay two percent of their general revenue rather than ten percent of the general revenue required by Arkansas code annotated twenty seven seven zero two zero seven the committee took no action on this and plans to discuss the committee in the next meeting on may twelfth twenty twenty two. The Committee reviewed six reports differed from February tenth two thousand twenty two meeting officials from two entities were present to address repeat findings from those reports. To pre leader for reports were filed the Committee discussed the Newton County sheriff still had not appear to address a finding in Newton County two thousand nineteen report the request staff they requested staff to send him another letter with reference to the committee's authority to issue a subpoena for his appearance this report and three other referred to may twelfth twenty twenty two meeting I'll go off script here discount explain this a little bit further for the committee the new county sheriff has been asked by this committee multiple times now to appear including sending him a letter to appear before a last meeting he sent us a letter explaining his actions that was not sufficient to committee we voted to still have him here. There is multiple times now he has not shown or been before the committee to answer for this report and as I stated a minute ago staff is an email letter next time to address our ability to subpoena him under Arkansas code as a chair that committee and after having discussions with the committee that if the sheriff does not show at the next meeting I will take full course of action to subpoena him under Arkansas Code have him appear and all the legal ramifications that come with that I just want to say that to the full committee before next meeting to make sure it was said to the public at large I'll continue on with the report the Committee received eighty two current reports of these two were the investigation letters referred to prosecuting attorneys and five or other reports report to put referred to prosecuting attorneys officials from two entities were present to address repeat finance in the car reports committee file seventy six carports in the first sixty so that officials could attend the April seventh two thousand twenty two meeting to address repeat finds Mister chair I move for adoption support if there's no questions. for doctor all in favor say aye. Post thank you thank you senator garner. moving on to standing committee on Education institutions represented very. Thank you Mr chairman. Standing committee on educational institutions met April seventh of twenty twenty two. The Committee reviewed a total of eighty nine current audit reports. Which consist of eighty three school district. For educational cooperative reports and to open enrollment charter school report for the year in June thirty. Twenty twenty one the audit reports of Lamar school district and by all of school districts were referred to the apple prosecuting attorney. The Committee filed eighty nine current audit reports that were brought before. Mr chairman this time uh moved for adoption of this report. Thank you Russian very all in favor say aye. All opposed thank you standing committee on state agencies of Senator Pitsch thank you Mr chairman of the Legislative Joint audit committee of state agencies met yesterday there were five reports without findings on our committee's agenda during the meeting the committee adopted a motion to file the five reports moved to adopt this report. The move in in no one to speak on that subject all in favor say aye. Lobo's thank you very much okay moving on to Additional reporting investigative report. View of selected documents on Buena Vista fire department. The. Mr Jimmy log. We have anyone here from Wayne Vista fire department yes the four presidents you will. Thank you. The prosecuting attorney for the thirteenth judicial district ask us to review disbursements of the Buena Vista. Our department after he received allegations of improper spending by the trigger. Surjective were to determine if selected disbursements were for proper department purposes and if internal controls over the disbursement process where Act adequate. The department is a nonprofit corporation that provides fire rescue and emergency medical services for a rule area of washed out County. Art is governed by a nine member board of directors and they have approximately fourteen volunteer firefighters. Funding consist primarily of state aid a membership dues and a financial records are maintained by the tree. I review revealed improper and undocumented disbursements totaling ninety six thousand seven hundred forty seven dollars this consisted of ninety two thousand three hundred seven dollars an improper payments to the treasure and then there were four thousand four hundred forty dollars in other improper disbursements. Improper payments to the treasure included about sixty eight thousand and Kate spade able to cash that were endorsed by the director but nineteen thousand and transfers to the treasures personal bank accounts about thirty eight hundred and I documented reimbursements to the treasure. And then there was a fifteen hundred dollar payment supposedly to a vendor but the check was endorsed by the creature. I had several internal control deficiencies invoices for smart retained to support disbursements financial duties were not adequately segregated and the board did not provide adequate oversight. One last thing that we just kind of stumbled upon We thank copies of the two thousand sixteen and two thousand seventeen annual expenditure reports that the department submitted to the state in accordance with that they thirty three guidelines. While examining the invoices that were included with these reports we noted that the dates appeared to be altered on several invoices. And further analysis revealed that these invoices had already been reported as ACT eight thirty three spent eight years in prior years so. She was basically just changing the dates and using the same invoices year after year. In summary I review revealed improper disbursements totaling ninety six thousand seven forty seven which included ninety two thousand three oh seven an improper payments to the treasure alter documentation on ACT eight thirty three expenditure report submitted to the state and internal control deficiencies. The board discovered the improper spending and dismissed the treasure in August of two thousand twenty one after she acknowledged misappropriating Department Fund for personal use. As a report data treasure had reimburse the Department just over thirty six hundred dollars and this report has been forwarded to the prosecuting attorney. And that concludes my presentation and the board president is here to answer any questions from committee. Thank you the representative Frank. Granted if you're recognized good morning thank you Mr chair that I understand him to say that there's no one here from one of this stuff that's in Washington County Down in god's country where I'm from so is there anybody here you today get yes ma'am the board president is here. Would you ask them to come I want to know who that is now I grew up down there I just want to know who the board president is from one of this stuff I'm from IBM all you see here. Is he able to turn when you come to the desk come from this please. Maybe a name I remember. Sir if you if you would remain standing please we we're in all of our witnesses before this committee The Washington we're not picking on you would do to everyone. If you would please race right hand the state your name employer position. Okay do you solemnly swear to affirm that the testimony you're about to give will be the truth the whole truth and nothing but truth thank you the CD. If you would turn your microphone own reach of suing if there you go all right now for the record please state your name and positioning in thank my name is Sean rentals on the board president of the universe to fire department okay thank you represents Rainer okay Mr annals I don't recall the name and point of this stuff can you identify some of the other people that are living there that are there now in a point of this stuff Monte hot in it yes that I thought that would who that name only business in benefits the his own by money Han yes anybody else is the on the board he is on the board Jeremy Emerson is the fire chief of the fire department you all still have that one water tower there in Buenavista there is. Our most famous landmark. This is your I don't know that I can ask the treasury is this is not in this report I'm just curious to know if I know that person. Registration you know. There is do you know the previous treasurer what a Debbie brown okay thank you Debbie Debbie brown I don't recall or all right thank you Mr I'm just curious I know that I was going to walk in on the meeting regarding brain of this this morning thank you senator garner. A Mister miss my from Washoe county originally as well So I'm you know obviously I know the area. It seems from two thousand sixteen till one is almost completed in two thousand twenty one this person was misappropriating a substantial amount of funds either from Jamie or from the Shon How much do you all do typically get a year in funding from the various sources that come to this to this department you know off top ahead or do we have any kind of figures on that. I don't know off the top of my head is it you know can you round about it can is it you'll get a hundred thousand dollars you'll get ten thousand dollars. It differs if you include ACT eight thirty three which is where most of our funding comes from. So did not see I guess what I'm getting at is I mean unless I'm misreading this this treasure was sitting there writing cash checks payable sixty thousand or almost sixty thousand dollars is taking money from the bank twenty thousand dollars you just put right into our bank account and then multiple other mean if this was happening in a you know a large class one city you can see where it could happen over and over again without a white picking up on it but in a Department of your size I mean this has to be a substantial amount of the funds that would go to turn back quickly and go back to all that I mean I guess my question is how is this miss by everybody whatever the quicker one there there wouldn't funds being paid. We So for all my part it was missed because we she provided fraudulent reports that were not double checked by the board of directors we took the reports that were basically like an excel file that that look to add up we took those to be correct they were not When we started noticing differences that's what we started asking for audit started asking for help from the the county to try to figure out what was going on she retain control as much of the information as she could just being honest and it was just complete smoke and mirrors. So in the report shows that to where she likely adjusted the files and adjusted the data on that and what what what what tipped you off to suspicion that there's something going wrong. The The the bank account the bank account made no sense the reports when I started looking at what she was giving me the they just did not add up at all I don't know how to go in depth further it just didn't what she told you all the mount was the bank account was much much lower now much different in the report you're showing it we knew because our our bills we we had we I started in two thousand nineteen at the end of two thousand nineteen obviously there and you know corona was a great excuse for not attending meetings we have a monthly meeting and a year can go by fast when you Miss six financial reports in a year Okay thank you Mr chairman. Senator Hammer. Thank you first of all thank you for being here awkward position for you be sitting here in an we want you to know that we appreciate you because sometimes folks don't even show up so you're to be commended for showing up and answering questions thank you with regards you don't know how much specifically ACT eight thirty three money a year you receive do you. Not off the top of my head I know okay and service chair could we get that in the form of a breakout sent up to the committee if you don't mind on this. Okay all right into the thank you. And I notice you've got fourteen your volunteer that's not I don't think he's noted here on this report your volunteer fire department yes okay and you've got fourteen. Okay. And so as far as. Getting people to even fill positions I can assume that it's pretty tough for you to get anybody to fill a position especially board member treasures that a fair statement that is a first step okay and. So the person has taken over the duties of the treasure treasure now what what about that person and what changes have you made to make sure this doesn't I noticed it said sign the check twice but are you gonna be getting regular audits now or what are some of protect protections you put in place now yes Is so so we've ask and account in Camden which is right the closest and munivest we have asked them to start to handling a receipt on accounts they are paying our bills and they are providing a report to the board monthly we have a treasurer in places is watching that but it's just a second check checks and balances for us now that I think we need okay all right well thank you for what you do thank you for your service thank you Mr. Centerton. Thank you I'm right here hi good morning and this. You know I'm I'm sorry for what has happened to you all because of this individual I know that you're sitting here when she should be so I just wanted to say that I appreciate that you came into your volunteer fire department my husband's been a fire department volunteer and when you live in rural Arkansas you have to have one two years to run fire departments because that's the only way you have a fire department so I do appreciate that and I also a poor people like this he take advantage of the limited amount of resources that you have to protect people's properties and rule Arkansas I think that this should rise to the level of a criminal activity that's that's that has more of a severe punishment than what it probably might and I think it needs to be prosecuted to the maximum you're not the only one you're not the only victim this has happened in my area as well with a group of my people that are my friends and in a fire department in my own home County and so I want everyone to committee for coming and taken off the time hope that your work you know is at letting you do that but number two is I feel light and I wanted to get your thought about this because this is been repeated this is not a new story unfortunately I feel like there's got to be some sort of level of support from the counties with your volunteer fire departments when it comes to these types of functions of auditing bookkeeping recordkeeping audits even if it's a quarterly periodical report so we don't get way far down the road could you just give me your thoughts about some sort of level of I don't want to call it oversight but more of support for our our volunteer. Fire departments. Sure so first off the county judge in Washtenaw county has been more than supportive of us and he he's been Grady's work with me he offered to come with me this morning and take time off I ask him not to do that I know he's busy so. He's he's helped us anyway can I don't know that they have the capacity to do that at the at the county but we would welcome. Any form of help an audit to you know put it bluntly these are these are working people on the fire department there's the these are welders and carpenters and full time fireman that volunteer on their time all the we are we are not auditors we're not accountants and that might sound like an excuse but it but it is the. The nature of what we do so we would welcome any help whether it came from the county or the state where that came from them I really think it's at the past time that we really address us and we we've got to create that function of support at some level so I I'll I'll be working on that I'm sure with many my colleagues but at I think I think it's very important thank you for your testimony for me and I'm very sorry that this happened to you guys Thank you Mr. The. I'm sure Hammer will come back to your next line will have to either speak to senator Phil. I'll wait I was gonna moved to adopt the report okay. Representative right. Yes Sir thank you thank you Mr chairman Sir and thank you for being here server something that may help you is before you have ever board meeting and you get a print out of everything that is being spent and all you may want to take a trip by the bank to compare those figures or. That may help you. Thank you senator Hammer. Thank you DO audit that you're getting done you have any idea what is the volunteering that for you are set are you paying for that do you know thank you the audit that you're getting done or you do that the law from the locals you said somebody in Camden are they charging for that or are you compensating it's a monthly fee. You how much is that for the last two hundred dollars a month I think it's well worth it that's what's going to S. that's within your budget as as a fire department to be able to pay for that it's well within our budget and they're also provide the service with the bill pay and and and things like that I think it's well worth so one of the things we've talked around here because as was mentioned Lago This Is Your retiring theme do you think the title line you've got a pretty small fire department your pay two hundred dollars you think it's not aligned if that was required of all volunteer fire departments to provide aid of audit or to have arrangements with somebody locally or what would be your opinion two hundred change for a reasonable but might be more in other places with your thoughts. I think ever departments different of it if it's made up of volunteers some some I might have more capacity to handle that than we do that that would be a hard question to answer for it for us it's right answer for sure okay thank you Mr can I make a request to the chair and and Legarda please. Could could I get a list of the total amount of dollars over the last ten years and how much has been determined to have been embezzled or misappropriated so we could maybe have a ten year snapshot of how many dollars have been lost by volunteer fire department such as what we're dealing with here today if the agency can go back as far as ten years and give us a total dollar value please. Frank will Mrs Knapp several days we'll try to get that information for you thank you know that that may be hard together but we'll try. Thank you. Senator still. The afternoon report Mr all right so moved the your second. Mmhm. Senator. She's. If you motion issues with the motion of the second all in favor say aye All opposed thank you Mr alone thank you on behalf of the committee for being here today more than that we the most of us refer rule Arkansas we know the importance of volunteers and volunteer fire department the server years back at retail yard that to my neighbor called to his grass on fire ended up burning in and I had fourteen fire departments to show up eleven eleven were volunteer and so you work very Preciado we should know that the thank you very much thank you yeah you're cute. Senator Rapert wages but the center. Okay could you interpret. Your. It is for a committee of restaurant Committee and point mansion thank thank you. what senator hammers motion I wanted to ask a question in the discussion part of that which is my privilege to be able to do that. The question was clarification is huge are you is Senator Hammer requesting the funds from ACT eight thirty three or all funds that go to rule fire departments or are there any additional funds beyond ACT eighty three. Despoina clarification because. I know that they do get grants from other sources other than ACT eight thirty three so when a clarification which would have been. Thank you Mr thanx Senator Irvin on the motion what a what I'm asking for maybe I didn't articulated clearly is the total number of dollars that such as this report and I remember there was another one a couple years ago that was like two hundred fifty thousand this is right it's ninety five each ninety two ninety six seven seven a total number of dollars that legislative audit has found to have been misappropriated FOR has have been in the embezzled just so we could get a comprehensive ten year period look back as to the total number I think we're fine as program be million that they have lost dollars that have been embezzled from the citizens and taxpayers to do you know those are paid to direct a thirty three I'm not asking for to be segregated out just a total ten year dollar figure for audit findings and how much it holds up to be thank you thank you thank you senator. Next we'll have the annual finance the financial report on Arkansas teacher retirement system. Call are not related to that I know of. Okay thank you Mr chair. This presentation covers the audit of the Arkansas teacher retirement system for the year ended June thirtieth twenty twenty one. First I will present some summary information for the system. As shown on page eight of the report the system has three hundred and forty two participating employer June third twenty twenty one. Participating employers were propped primarily comprised of. The schools but also include state colleges and universities state agencies and other entities. Also. Membership was over a hundred thirty five thousand members consisted of retirees and beneficiaries receiving benefits to drop participants in active members and both fully vested and unvested active members. Sorry. As discussed on page twenty four the current employer and member contribution rates are fourteen and a half percent in six and a half percent of active payroll respectively. The member and employer rates are scheduled to increase in a quarter percent increments each year through fiscal year twenty twenty three with the maximum employer number rates being fifteen percent and seven percent respectively. Based on these assumptions the pension plan fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. The system's deposit investments are discussed in detail and no one of your report. For the year ended June thirtieth twenty twenty one the annual money weighted returns greater returns for pension plan investments never pension plan investment expense was thirty one point eight two percent. June third twenty twenty one the system's total pension liability as determined by the actuary based on the plans assumptions total twenty four point two billion while the plan that position total twenty one point five billion. Meeting a net pension liability of two point eight billion. Plan that position as a percentage of total pension liability was eighty eight point five eight percent. Now presents on the summary financial information. As shown on page six of the report the system had assets June third twenty twenty one totaling twenty two billion. The major categories of these assets for cash or three hundred thirty three point seven million. Investments of twenty one point one billion. In securities lending collateral four hundred eighty million. System had liabilities totaling totaling five hundred and thirty eight million. The major categories of these liabilities were securities lending of far ninety million. Pending investment trades of thirty four point three million. And accrued investment expenses of thirteen point two million. The system had total additions of five point nine billion as shown on page seven of the report. Major categories of additions included contributions of six hundred forty point seven million. Net investment income of five point two billion. And securities lending income of two point seven million. The system had deductions a one point three billion with benefits being the my main component. R. for contain one finding the system notified legislative audit of an overpayment the member benefits totaling over fifty one thousand. The death of the member that occurred in may of two thousand seventeen was not reported to the agency until twenty twenty one October. Starting in July of twenty twenty the system made multiple attempts to obtain a benefit verification form for this member but received no response however the members benefits were not suspended into October twenty twenty one. Mister chair this concludes my presentation represent represent rent sorry representatives from the teacher retirement system are present to answer committee questions. Okay we have folks come. With Romeo come on up to the table please. If you would raise your right answer. If you would state to your name your employer position. Arkansas teacher retirement system taken care. You so much where to form the testimony you're about to give will be the truth the whole truth and nothing but truth thank you we should. Now for the mark into the microphone to would state your name for the record please. Go. Greater red state yes Clint Rhoden Arkansas teacher retirement system. Thank you are you sitting in senator Elliots the. You're recognized. Thank you Mr I actually don't have a question for this job and I just have a question for staffing was you went over the types of members in it you said it was an active member I just want to know the definition of what an active member. an active member at this point is someone who has not been active for a year in the system so they have worked in the system but they have not been active for years so they go in axles so I guess it may be in our. Somebody I guess who will be paying benefits maybe teachers work for whatever disappear anytime and then that they're not a teacher anymore I'm not trying to. Mr Roney was address that will well I guess I guess you can answer yes yes absolutely so are you referencing the actual overpayment to the non on on anything an act or an office yet I'm just trying to high level of an active member yeah I'm just so essentially that is members that have terminated before they've reached eligibility for retirement essentially before they've reached age sixty if if you terminate mid year you're not going to keep accumulating service obviously you want to wait until your you reach the age requirement for retirement so if if I was to resign today I don't have twenty eight years of service in the system so I would not be able to be eligible for a benefit to like turn age sixty five retired okay that's all I want to know thank you for yes. Any other questions. Anyone. Which room you got off like today all right and I I had like thirty minutes and or in our prepared to talk tell about this of a. I'm still willing. Our church bill you're recognized the measure but please. Let's motion filed for second second all in favor say aye. Motion is adopted the our next meeting of Legislative going on it will be held may the twelfth and thirteenth of twenty twenty two the date on callin be prepared any other new business if not we're Journ.