Legislative Joint Auditing

From the December fourth twenty twenty and March tenth two thousand twenty one meetings I think everybody receive those in our emails are there any questions or comments regarding most. All right see and none of without objection those will stand adopted. Our next on the order of business is the adoption of reports of executive and standing committees. US senator Kohl will you're recognized. Thank you Mr. The executive committee met Thursday may thirteenth of twenty twenty one staff reported to the committee the audit special investigative and Shorty reports that you'll to be presented to the standing committees in full Legislative Joint audit auditing committee this month the committee voted to defer to June meeting to requests for staff to one performer financial audit of the Arkansas local police and fire retirement system for the calendar year ended December thirty one twenty twenty one and review certain transactions relating to the potential sale of land by the University of Arkansas that will Pinetree research experimental station in other business a motion was adopted approving the staff request to postpone for this year an annual review of selected school districts not regularly audited by legislative staff. and a member inquired about the status of the committee's referral to the attorney general's office seeking revocation of the town of all ports charter. Staff reporter that the last discussion with the attorney general's office was on April the eighth twenty twenty one and no complaint had been filed at that time with no additional business to discuss the meeting was adjourned the next meeting of the committee is scheduled for Thursday June third twenty twenty one I move for adoption this report. Thank you senator are there any comments or questions on the report. C. N. on may have a second to adopt. We have a second all those in favor say aye All opposed no thank you that will be adopted our next up is a report of the standing committee on counties and municipalities are representive Hillman you're recognized. Thank you Mr chairman. The Legislative Joint auditing committee standing committee of the municipalities and counties met may thirteenth we adopted the minutes from the December third meeting and all the staff reported to the committee that two towns Gilmore and to engrossed for in substantial noncompliance with the municipal accounting law. Motions were made on each of these to make a recommendation to the Legislative Joint Arkan Committee to begin the proceeding a withholding state turned back Arkansas Code fourteen fifty nine one seventeen for the town's of Gilmore to engrossed with the first step being to notify the town officials the committee also reviewed twelve reports differed from the December third meeting for facials were present to address repeat findings from these reports seven previously deferred reports or filed and five were deferred to the June third meeting the committee reviewed two hundred and thirty six current ports of these two were certified to the bond board and eighteen were referred to the prosecuting attorneys ten officials were present to address repeat findings in their current reports the Committee filed two hundred and twenty two current reports and deferred fourteen so that officials could attend the June third meeting to address repeat and other findings Mr chairman I move for adoption this report. Thank you representive are there any questions or comments on that report. I'm I have a second thought we have a second all those in favor say aye All opposed nay. Thank you that will stand adopted. Next up is a report on the standing committee on educational institutions of representative Mayberry you are recognized thank you the Committee reviewed eighty one current school district audit reports sixteen current open enrollment charter school audit reports and seven current educational cooperative audit reports for the year ended June thirtieth twenty twenty the superintendent of the Lee County school district was present and answer questions from the committee concerning repeat findings and the district's audit report as well as the district's fiscal distress status the superintendent of the Ozark mountains school district was present and answer questions from the committee related to repeat finding in the district's audit report an official with the Arkansas Department of Education Division of elementary and secondary education was present and answer questions related to a finding at the Brinkley school district the audit report of the Cabot school district was certified to the governmental bonding board as well as referred to the applicables prosecuting attorney the audit reports of the drew central and Prescott school districts were referred to the respective prosecuting attorney the Committee filed the one hundred and four current audit reports that were brought before it Mister chair I moved for adoption of this report. Thank you representative or any questions or comment on the report. St I have a second. We have a second all those in favor of adopting this reports say aye All opposed nay. All right thank you that was sent out the next on our agenda is a report from the standing committee on state agencies of Senator Solomon you're recognized. Thank you Mr chair twenty seven report ports for on the committee's agenda yesterday three reports with findings were presented the Arkansas public employees retirement system reported over payments to retirees and beneficiaries of over a hundred and sixty thousand dollars the apers member system also applied a six percent Cola to a limited number of retirees monthly benefits resulting in overpayments totaling ten thousand. The Arkansas teacher retirement system invested funds into entities without review from investment consultant and approval by the board in violation of investment policy the Office of the Arkansas lottery paid out lottery winnings on a draw game for the wrong winning numbers which resulted in a net loss to proceeds of two thousand seven hundred dollars various agency staff members were present to report on how the agencies intended to address the audit findings and to answer committee questions during the meeting the committee adopted a motion to file twenty six of the report the Committee differed the Arkansas teacher retirement system report to the June meeting so that the board president could attend to answer committee questions Mister chair I moved to adopt this report. Thank you senator any questions or comments on that report. C. N. number have a second. Thank you all those in favor adopted reports that All opposed nay. Thank you assented often. Our next on the agenda is review over ports but first we have a word from all Mr all of the in. You're recognized. Thank you Mr chairman and committee. Of appreciate you let me make a couple comments I have an employee who is working with us for the last thirteen years who is retiring on June thirtieth he's the administrator for the system ministration of the kafir group and use the ones that then responsible for putting the financial statements of the state together for the last thirteen years saves your question. Gerald the started work for the state as an employee of the legislative audit group and worked there for seventeen years and any work for the Conway school system for five years until we treatment to come and work for us. He's been very valuable asset to us use our technical partner meaning that. Windu gaz be pronouncements came out new things that we needed to do he took the lead in researching those putting the stuff together that we needed to send the state agencies and then working directly with legislative audit to make sure that we did what we needed to do the first time we went through the audit process on those new gas because. Gerald is the. Has an MBA in a BA from the university of central Arkansas Conway and he will be leaving us to spend time with his wife and his daughter and probably work a little on the side as well those people that. Something comes out new he takes it he reads it and any consignors pro at night so he can learn through osmosis. everyone of our training seminars about five years or so ago talk to one of the other people in the. And I said you need to explain the general that it for thirty we've had what we're supposed to have time wise and we don't need for him to start talking to the Speaker in arguing back and forth and keep minutes till five thirty. I'd be happy to give them some money logo however of beer or have a whatever Caulksville they like to and they can spend the time talking but for me being of the student all the way through school not a student I'm tired I'm ready to go home. we've benefited from his enthusiasm is willing to work hard for the last thirteen years and I appreciate your recognized in fiscal. I is my last Act would be in his balls Committee meeting like this if you all have any questions on the care for today he's gonna be allowed to answer those questions. And all I can tell you is it will be a correct answer not something I have made up just to try to get out of here okay. Thank you all very much I thank you Sir thank you for your service. All right next up will be Mr Christie Sanders president of. Thank you Mr chair. This presentation covers the audit of the state of our. The Arkansas comprehensive annual report. Or the annual report for the year ended June thirty twenty twenty. The audit was completed by the staff of legislative audit after an extension was granted to the department of finance and administration the deadline for the filing of the annual report was January thirty first twenty twenty one however the report was dated January fifteenth an early release on January twenty first. We issued two reports for the audit of the state's financial statements the first is the annual report which includes all the financial statements and notes to the financial statements for the state of Arkansas as well as our independent auditors report. The second is the report on internal control over financial reporting this report includes any findings related to the state's financial statements and is included within the single audit report also included in the single audit report of the findings related to the state's federal financial assistance which Tammy shall cover next. The annual reports financial statements which were prepared by the FAA include the following entities All state agencies retirement systems higher education institutions there are also three component units included in the annual report which are the Arkansas development finance authority or absent the U. of a foundation and the you of a state bill campus foundation. We issued an unmodified or clean opinions on the state's twenty twenty in your report. We audited all the financial statements included within the annual report except for the following entities which were audited by private accounting firms. Three component units the University of Arkansas for medical sciences as well as the revolving loan funds the two largest revolving loan funds are the construction assistance revolving loan fund and safe drinking water revolving loan fund. These both these funds are administered by the at the. There was one reportable finding that was considered a significant deficiency related to the annual wrap report. Finding twenty twenty dash zero zero one is included in the single audit reporting package as a financial statement finding and a schedule of findings and questions cost. The committee of sponsoring organizations of the treadway commission or coso framework and internal controls adopted by the State of Arkansas in DFA's financial management guide states that communications related to both operational and financial data are needed at all levels of an agency in a relevant reliable and timely fashion this state did not have the policies and procedures in place to appropriately record the financial effects of the new unemployment insurance pandemic programs authorized under the care is active twenty twenty. As a result we noted the following operating revenues were overstated by fifty two point nine million dollars when a portion of federal grant receipts for and run easily coated to general ledger account related to operating revenues as opposed to the more appropriate general ledger account related to non operating revenues. The state made an attempt to correct this misstatement but the modification was not made for the correct amount nor to the correct general ledger account as a result the correcting injury also caused a nineteen point three million over statement of non operating revenues and a seventy two point two million dollar over statement of operating expenses. Federal receivable of a hundred and seventy point six million dollars related to the new pandemic programs the Federal pandemic unemployment assistance. The pandemic extended unemployment compensation and the pandemic unemployment. Assistance was not recorded. Unemployment benefits payable of two hundred and ninety three point eight million for the new pandemic program programs that were mentioned above was also not recorded until auditors inquired about the lack of such an injury additionally auditors recalculated this pay able to be three hundred three million that's a difference of nine point three million. Lack of appropriate controls over financial reporting could cause financial statements to be misstated upon notifying DFA's external financial reporting section of the potential misstatements an entry was made in aces to correct the amounts listed above. We recommend the state work to improve its controls over financial reporting creating policies and procedures that encourage more accurate reporting of its programs. I will now touch on some of the financial highlights of the state's twenty twenty in a report the next six lights relate to the primary government of the State of Arkansas. The financial information on the six flights does not include the state's retirement system's financial information about the retirement system's is included later in the presentation. As shown on page twenty of this report the state had total assets at June thirty twenty twenty approximately thirty point four billion dollars the major categories in the state's assets include the following capital assets of seventeen point four billion cash and investments of nine point three billion and other assets of three point seven billion which include things as receivables into from other governments. The state's total liabilities were thirteen point one billion as shown on page twenty eight of on page twenty one of the report the major categories of the state's liabilities include the following. Bonds notes and leases payable of three point nine billion net pension liability of two point three billion other post employment benefits obligations or OPEB of two point nine billion and other liabilities for billing in which include things is due to other government claims judgments arbitrage and compensated absences accounts payable Medicaid stable and income refund payable. This shark this chart shows trends regarding the state's assets and liabilities over the past five fiscal years the general increase in assets from two thousand sixteen to two thousand nineteen was primarily due to an increase in the state's capital asset. Mainly infrastructure and construction in progress even though twenty twenty saw an increase in capital assets the majority of the increase was in cash and investments due to the cares Act funding received from the federal government and increase and other assets. The increase in liabilities over the previous periods was due to the increases in the state's Bonds notes and leases payable the net pension liability and the net post employment benefits payable however there was an overall decrease in liabilities in fiscal year nineteen do that again decrease in net pension liability. The increase in fiscal year twenty twenty was due to an increase and post employment benefits payable and other liabilities the increase in other liabilities was an increase in payables related to the new unemployment insurance programs implemented as a result of the increase payments to unemployed individuals this is a result of the pandemic and cares Act funding. There also was an increase in due to other governments which was the result of an accounting entry that has to be recorded fiscal year end for the cares Act funding received in fiscal year twenty but not spend so fiscal year twenty one. This state had total revenues of twenty five point eight billion as shown on pages twenty four twenty five of the report. The major categories of the state's revenues include the following grants and contributions of eleven point seven billion. Taxes of eight point eight billion charges for services a four point four billion and other income of a hundred ninety million. The state's expenses totaled twenty four point eight billion the major categories making up these expenses were as follows health and Human Services nine point six billion colleges and universities four point three billion education three point seven billion division of workforce services one point eight billion. General government of one point seven billion transportation of one point two billion and other expenses of two point five billion. This chart shows the trends of the state's revenues and expenses over the past five fiscal years between two thousand sixteen in nineteen the primary source of the increase in revenues was due to increase in Medicaid funding as well as increase in taxes. Specifically personal and corporate income tax as well as consumer sales and use tax although there was an increase in higher ed for charges for services collected by the colleges and universities. The increase in revenues and twenty twenty is due to the increase in grants and contributions related to the pandemic and in the federal funding receipt through the cares Act in funding related to unemployment. The increase in expenses between two thousand sixteen and nineteen was significantly due to increased spending for health and Human Services and higher it. The increase in twenty twenty was significantly related to the increase in division of workforce services for unemployment related expenditures due to the pandemic there also were smaller increases in expenses related to health and Human Services and transportation. I will now show some of the summary financial information for the state's retirement system's as shown on page thirty seven of the report the state's retirement system's had assets at June thirty twenty twenty totaling twenty eight point nine billion dollars major categories of these assets were as follows Cashin seven hundred thirty million investments of twenty six point nine billion securities lending collateral one point one billion and other assets of one hundred forty million. The retirement system said liabilities totaling one point two billion as also shown on page thirty seven in the report the major categories of these liabilities were as follows. Obligations under securities lending of one point one billion investment principal payable fifty eight million and other liabilities of thirty seven million. This chart shows the trend of the retirement system's assets and liabilities over the past five fiscal years variations in assets over this period generally increasing was due to fluctuations in the financial markets for stocks and other investments with a slight decrease in twenty twenty. Liabilities for the retirement system's had only slight fluctuations in the past in a decrease in twenty twenty as a result of corresponding decrease in assets for the securities lending program. Retirement systems at a total additions of one point two billion as shown on page thirty eight the major categories of the retirement system additions include the following contributions of one billion net investment income of a hundred forty three million in other editions of five million. Retirement systems had deductions totaling two point one billion with benefits paid being the main component. This last chart shows the trend of the retirement system's additions and deductions over the past five fiscal years. I merry reason was for the variation in additions or revenues over this period was the fluctuations in the market value of investments from year to year. Deductions were steady over this time period will primarily benefit payments as previously mentioned. This concludes my presentation DFA representatives are here to answer committee questions thank you Mr. Thank you ma'am. Members do we have any questions or comments. None at all. I thank you that was a great report you answered every possible question in. A okay we will consider that report reviewed thank you of next up will be the save Arkansas single audit report of miss Tammy shall. You make your way up you're recognized to present. Thank you Mr chair. This presentation will cover the state of Arkansas single audit report for the year ended June thirty twenty twenty the staff of legislative audit devoted just under fifteen thousand hours to the state statewide federal project which was finalized and submitted to the federal audit clearinghouse on March the twenty fifth of twenty twenty one. State agencies and state supported institutions of higher education disbursed federal funds totaling eleven point three billion from four hundred and three federal work programs during the twenty twenty fiscal year this was an increase of approximately two billion dollars from twenty nineteen. Largely due to funding related to COVID nineteen. The programs are categorized as either type a or type B. Taipei's are the larger programs each of these programs had expenditures greater than thirty million dollars and twenty twenty all other programs or label type B.. The chart on the left illustrates the breakdown of expenditures for the larger Taipei verses the smaller type B. programs. There were twenty two type a programs with expenditures totaling ten point six billion for the twenty twenty fiscal year. The remaining three hundred and eighty one programs had expenditures totaling six hundred and eighty nine million. Based on risk assessment criteria established by federal regulations also known as uniform guidance thirteen of the Taipei programs in four of the type B. programs were selected as the major programs reviewed for twenty twenty. The seventeen programs represented ten billion dollars or eighty eight percent of the state's total federal expenditures. Uniform guidance requires that at least forty percent of expenditures be selected for audit testing. The five state department shown on this slide expended eighty five percent of the federal awards received by the state. The Department of Human Services the Division of work for services within the department of commerce the department of education the department of transportation in the University of Arkansas at Fayetteville. The state received federal awards from thirty one different federal agencies during the twenty twenty fiscal year the for federal agencies shown on this slide provided ninety percent of those awards health and Human Services labor education and agriculture. The single audit act requires that the audit of the state be conducted to determine for objectives first or the financial statements of the state fairly presented Kristi Sanders addressed this objective during her presentation earlier. Second is the schedule of expenditures of federal awards or C. for a fairly presented the sifa is a listing of all federal programs with reported expenditures we determined that the twenty twenty C. Fite is fairly presented the C. Fite and related notes are located on pages eighty eight through one hundred twenty six of the report. Third has the state complied with laws regulations contracts and grant agreements that may have a direct and material effect on federal awards. Fourth does the state have adequate internal controls in place to ensure compliance with the requirements of various federal awards. Six of the seventeen major programs reviews were not in compliance with certain laws regulations contracts and grant agreements and did not have adequate internal controls over compliance as a result twenty seven findings were issued and are located in the schedule of findings and questions cost on pages nineteen through eighty seven. A summary of the findings will be discussed later in this presentation. As the auditors our responsibility is to express an opinion on compliance for each major program the opinion is based on the results of the audit for the direct in material compliance requirements of each major program although several findings were reported we issued an unmodified or clean opinion on most of the major programs. A qualified opinion is issued if an audit 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 fiscal year a qualified opinion was issued for six findings representing the children's health insurance program commonly referred to as chip and Medicaid those findings are identified on page ten of the report. In accordance with uniform guidance audit findings must include the specific information that is listed on the slide the condition and contacts section includes the details of audit testing and the results of that testing. The question cost section includes cost question by the auditor because of a violation of a regulation a lack of adequate supporting documentation or costs that appear and reasonable. Total question cost for twenty twenty totaled approximately four million dollar. It is the responsibility of all federal awarding agencies to review and provide resolution for all audit findings this includes determining if the question cost identified by the auditor require recruitment. As shown in the chart on page six of the report and summarized on this slide twelve point three million dollars in question cost remained outstanding as of September thirtieth twenty twenty. Of the twenty eight current your findings one is a financial statement finding and the remaining twenty seven or federal compliance findings forty three percent or twelve findings are repeat findings as shown on the slide. A repeat finding indicates that an agency has not taken adequate measures to correct noncompliance and deficiencies in internal control over compliance that has been reported in the previous single audit. Repeat findings were issued for the chip and Medicaid programs. A summary schedule of prior audit findings is located on pages one twenty nine through one ninety of the report the summary schedule is prepared by the department of finance and administration and includes the self reported status of the twenty one findings from fiscal year twenty nineteen as well as the other four findings from previous reports that have not been fully corrected. The audit status for an resolved prior audit findings is located on pages one ninety two through two hundred of the report and gives the results of our follow up procedures regarding the uncorrected prior audit findings. Additional information for the trend of findings is located on page five of the report. As previously mentioned six of the seventeen major programs reviewed in twenty twenty had findings regarding instances of non compliance And deficiencies in internal control those programs or unemployment insurance. Student financial assistance cluster. Higher education emergency relief fund institutional portion also known as her. Adoption assistance chip and Medicaid. Two findings identified overpayments and duplicate payments for the unemployment insurance program that is administered by the division of workforce services question cost total just under one hundred and forty six thousand dollars. Eight findings were issued for the student financial assistance cluster and affected six higher educational institutions question costs totaled almost thirty thousand dollars. The University of Arkansas at Fayetteville Henderson state university Arkansas tech university Arkansas northeastern college in Arkansas state university Three Rivers all had one finding each while there were three findings at southern Arkansas university. Findings for the student financial assistance cluster included institutions not conducting the required risk assessment. Using excess loan funds to pay for prior year charges. Not maintaining proper documentation. And lacking sufficient internal controls to detect students who did not make satisfactory academic progress. There was an additional finding for the perfect program at southern Arkansas university regarding cost incurred outside the period of performance with questions costs totaling approximately two hundred fifty one thousand dollars. For the Department of Human Services the finding for adoption assistance identified subsidy over payments affecting three fiscal years and total just over fourteen thousand dollars. For findings affected both the chip and Medicaid programs. Deficiencies noted in findings twenty twenty dash oh fourteen and twenty twenty dash seventeen are repeat findings with questions costs totaling just under seventy three thousand dollars. The most significant of these deficiencies was finding twenty twenty dash seventeen on page fifty one which were built sufficient appropriate documentation could not be provided auditors and as a result we were unable to perform testing to determine if the statement the required match in accordance with federal regulations. This finding contributed to the qualified opinion issued on page ten of a report. An additional three findings apply only to the chip program all these findings contributed to the qualified opinion issued on page ten of the report with questions costs totaling a little over a hundred fifteen thousand the most significant of these deficiencies were findings twenty twenty dash nineteen and twenty twenty dash oh twenty the findings revealed continued non compliance with provider eligibility requirements regarding fee for service and managed care organizations. The requirements are developed by the agency and maintained in their provider manual the self imposed requirements include maintaining certain forms of documentation to ensure providers eligibility status is appropriately updated and remains current. An additional eight findings apply only to the Medicaid program and all eight are repeat findings the most significant of these deficiencies were findings twenty twenty dash oh twenty six and twenty twenty dash twenty seven which also contributed to the qualified opinion issued on page ten of the report the question costs totaled three point three million dollars. Similar to the chip program findings for provider eligibility these deficiencies revealed continued non compliance with the provider eligibility requirements regarding fee for service and managed care organizations. Mister chair this concludes my presentation agency an institution representatives are present to answer any committee questions thank you shall. A committee to have any questions. Senator Elliot you're recognized. Am I not hearing them I'm. Would I guess this is something audit could do I'm curious about the difference between Material weakness and what was the other one Significant and deficiency of explain those terms to a to me and these are the what what what they mean from the findings if you will please. Yes ma'am does have to do with the deficiencies in internal control so when we evaluate that finding if it meets criteria that elevates it to a serious A more serious deficiency will categorize it as a material weakness the significant deficiency won't be as severe. Okay. and I just like to he per for some of the Some of the deficiencies or noncompliance we heard from some of our higher ed folks if they are here to talk about especially in cases where they had more than one or if there is some kind of through line of what the problem has been with. Maintaining a clean audit of these funds I just like to hear from them about what's what's going on did it come to too much too quickly are there things and there are controls that maybe we will have going forward that we didn't have we got although this funding in the first place. Who's who would like to hear from specifically well seven Arkansas had three at a universe of Arkansas head I don't know maybe to so anybody here from those two Arkansas's represents come forward please. So. I don't generally feel just a state senator just. Sir custom in order to have you guys four million. All right of first gentleman to my left of please state your name employer position. I'm good morning I'm Steve Kroll and sugar from. Thank you Sir would you please raise your right hand. Thank you do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you god thank you Sir next please of state your name employer position. Even tighter and the chief of. Thank you Sir please raise your right hand do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you god thank you thank you Sir. Senate. Well my question is kind of a generalized questions of if there were I think you heard me before just if there were issues that gave you problems and being able to comply with all of that's required in that because the audit findings I just like to hear from you generally what what's going on what happened. Thanks to the issue with the G. LBA findings around financial aid they did not have an effective G. LBA program we revamped that last year and rather controls up to up to par but there was not enough time before audit to get the final risk assessment on the. And and so. There were there was not enough time to get it done between the time you receive the money and the time it was dispensed okay. Thank no I it's the so the risk assessment was done on the the actual process in the system okay of reporting financial aid so they were looking at all of the physical hardware in the security that surrounds that project in protecting that data. So normally so so normally if you don't have an issue protecting that data. But in this case something happened that you didn't you were not able to have a system that protects the data well this is really around documentation and the actual process and procedures there were no we were lacking documentation around G. LBA in there how we do not we do not not use those acronyms and just state G. L. B. A. we need to know those things the Gramm leach barked brightly ACT by the act and that now I know a whole lot more don't I that's not your fault. Back to our program had we had never been audited and in the financial aid office we had controls for security and monitoring things like that but we had we do not have the policies in place and that included the actual risk assessment okay all right okay now I'm I'm getting somewhere hi my understanding all right of anything to add to that is that the same issue with universe of Arkansas. What are also say is that we've been in place and are all sense may and and July respectively here so part of what we've been doing in the other room is actually putting in place a program to address those issues so that's that's the other issue is that I think we've had a fair amount of a leadership transition and recognizing this audit and we've been. We've been moving forward within keeping legislative audit informed of our progress as we've been trying to keep you know that I'm informed as we move forward so as part of the the the issue here also is that I think some of the transitions that we've had have also led to some inconsistencies that were now I know is that the same thing is true SO in Arkansas thank you what I'm Terry American University representing. Okay we'll both and now okay all right right that's all Mr thank you. Thank you senator is there someone here from seven Arkansas. It would money on the board of. We'll go through the same process with you if you stay standing up you have to turn your microphone on there and then please state your name employer and position. Thank you ma'am please raise your right hand. Do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth thank you ma'am. Would you mind dressing senator Elliots question yes or NO nine worst. Let's seven Arkansas university Our office has had a couple of. Positions mid level managers for positions with turnover up during this audit period so in that transition we discovered a lot of policies that were previously put into place I'm probably over twenty years ago you're my closer members are having trouble hearing thank you in Maine in a row what we need to we wanna hear what you're saying we had some policies that were pretty outdated that we addressed and we updated to modify so there can catch some of these efficiency as they occur one of the comments also was in the higher ed relief funds we picked up some expenses and that was just a clerical error that was just right before the weeks prior to the emergency declaration and so those were corrected I'm as a. Senator is that satisfy you we're all right thank you thank you for coming today I appreciate you being here you guys are dismissed from the table of well let me let me ask members is or anybody else as a question specifically for for this group. Senator Garner you have a question. Okay all right thank you you're you're dismissing play appreciate you being. Our next up senator I mean representative Meeks thank your next up thank you Mr question I have is on the significant finding on the up you may I don't know if this is best for staff for the Division of work force the The concern was that the statement quote unquote the state did not have the policies and procedures in place to appropriately record the financial effects of the new unemployment system we know that was actually with the peel away we ask you to build wrong overnight it was a huge undertaking and I guess what I'm asking is for sure Ince's that those policies and procedures are in place and what when they weren't. did that allow fraud or Similar issues to take place and to what extent is it possible to know to what extent that that occurred because the proper procedures were not in place okay looks like we do have a representative from the vision workforce services in attendance today would you mind coming forward. All right unless you guys to do the same thing remain standing when you get your seats and. Let your microphones on force. will start up to my right here. Please state your name employer and position. I'm able styles the program manager for pain. Please raise your right hand. Do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you god I do thank you Sir. Next please of state your name employer position. Yourselfer. Ma'am please raise your right hand. Do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you god. Thank you ma'am. Next up please state your name employer position Chris Jones assistant director for the division of workforce services not rank on else thank you Sir please raise your running. Adeel solemnly swear or affirm the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you god thank you Sir and thank you all for being here and I guess I'll let you guys pick who would like to to address representative makes questions first did you all get the questions are going to repeat it I heard I heard it okay good. yes Sir first I wanted to thank you for acknowledging the the. The challenging year that we've had a herculean task you all had to do yes definitely yes Sir and the as far as the the financial misstatements which was the first part of your question. What what this boiled down to we we needed some extra layers of review it was a handful of entries dealing with a very large number if if our witnesses I'm sorry it's just it's hard hard to hear use not y'all as the Sir audio system apparently if you could kind of. Just give him up in your face is. What we're event we're having yes Sir yes Sir by voice doesn't carry very well either again I I thank I thank you for knowledge and the challenges that we've had and and what you stated on the financial misstatements as far as that goes we were dealing with a handful of entries templates that we use that are accounting staff use to facilitate the entries we just needed an extra layer of review and were implementing a policy where a the assistant controller has control of those templates to make sure that the proper ones or use. A there was also. A piece of that had to do with new ways of calculating because our standard unemployment compensation programs we had. Established procedures and methodologies for making those calculations and a R. I. T. staff knew how to pool the numbers for those programs like disaster unemployment regular you see programs or there are procedures in place for that and as you might expect things were moving so quickly at that time and new programs coming out that. Lasted different periods different eligibility and all of that plays into how those calculations should be made. And so we've also incorporated another level of review that that goes all the way to the assistant director level so basically the leads for the finance department and the you see programs will come together to make sure that we're calculating those correctly because even when we went back and attempted correcting it what we needed some additional help from program staff to make sure we understood how each program operated and how best to estimate those receivables and payables okay the second part of your question was around the fraud and the specifically around P. U. way and I think A. J. a and I have both may be able to answer questions about that I'm more on the fiscal side a day if you don't mind kind of letting them know what we've done on the fraught front for P. UA. So in early July Q. A. began the questing individuals who their applications were flagged as suspicious or and the internal review status to present identification to United they have the options to do this via the EPA dot review email fax or they can go in person to the office to better reinforces in December we switch to a you identify program which scans the barcodes on ID's or the claimant's could also go to the local office as well at that time answer the steps have been taken to better reinforce our identity protection programs okay I followed Mr. so um on the the first issue it sounds like no money what miss saying there was no fraud it was just it was a clerical error that would be kind of a summary of what happened there yes yes Sir it was just the best statement on the financials all right and then on the frog that still an on going on yes Sir all right thank you thank you Mr. Members of the body have any questions for Senator Garner you're recognized. Thank you Mr so on that fraud system I've heard from a number constituents to. For the first time I realized by their sales unemployment during the pandemic who file for unemployment and three year fraud system has been deemed. I had a whole office people in elder radio who guiding is fraudulent activities and had to prove themselves back you that they actually didn't commit fraud even though the office was shut down because the governor literally mandate there off shut down I've had others who said they sent you the paperwork to prove it and yet they still had to pay you your office money in order to do that so how do you how many people who have been doing by that fraud system and what is your procedures make sure that due process is in place for those people who can prove themselves urinate unprecedented pandemic for the first time in our lives being on employment that they're not now have to pay you thousand dollars back pay to make that happen. Thank you are a. We have had to dates will as of may eight. We've had a total reported fraud claims of thirty eight thousand seven hundred and eighty across the state is that are you calling a claim if I can interrupt you Sir you'll have your system being in somebody for review or is it actually been adjudication and some method that they've actually had to go through the process or they paid a fine or they've gone through it those are reported fraud claims if their self reported employer reported or self reported for P. U. way what's self report many people are telling you the breaking the law. Well. Thank you would be something. Yes R. for the self reported individuals as are individuals who contact the agency and report that they have not attempted to file an unemployment claim and so they're saying that someone has committed a fraudulent act on their behalf. How many claims for people who receive the P. U. A. R. traditional unemployment that your system flag is that it should not have gotten that money because either they are working or this as some other kind of status that didn't happen what happens offices the office was forced to shut down by the government. Clearly through a mask to a mandate they worked with before the next week they all fall for unemployment the first time ever. Months later you you sent me a letter saying you fraudulently filed a claim because you are working they had to pay hundreds of dollars back months later even though to them they just did the right thing by foot and now they could with the process of fault that. But they decided they'd rather just pay three four hundred dollars to get away from the headache how many claims are system being to you have of that nature. We have some numbers in front of us again October twenty three may eighth. And we have a we've had ninety four thousand two hundred and sixty seven P. UA claims fall this flag in the system as suspicious eighty four thousand of those are inactive Act enacted due to failure to respond pending identity verification was at ten thousand So that makes up the the ninety four thousand how many people fall for that across the state and how many total number filed for P. right across state. We've had three hundred and four thousand six hundred sixty two applications one third of your the way claims have been detained as being either suspicious or fraudulent. See the issue. Yes I think I do get the nature of the question I think the point that we were trying to make is the. Volume of the system we actually follow a lot of the well guidance on what the flag as potential follow up that's more manual so long as everything checks out the system doesn't flag anything no I'm not the program expert but I've studied the policy I I helped with one of the call center so I got pretty familiar with the program I feel pretty comfortable talking about this piece to appoint the department of labor instructs the state on what we need to take deeper dives on. And so our systems and our flags are built around those and we have limited somewhat but limited control over how we define those things for example one of the things that the department of labor also wrote us up for was not having the match between P. way and United when these programs started self test ation that were pushing self assess that is the case in sorry to to get the programs out as quickly as we could over time. They that stand that line moved point being we we have continuously tried to keep up with what the department of labor is asking us to do in terms of those flags and and things that we just have to use a manual process. Unfortunately it takes time and also unfortunately is not perfect so other than that I think we could we could research a little bit more on the regular United side if you want more information regarding that but a lot of it's driven by what by what we're trying to do to meet the standards that the department of labor is pushing down thank you you're welcome. members with any other questions for this group. representative rabbi you're recognized for a question thank you Mr chairman Sir you saying to the problems that that arose during that situation of maybe a year's period do you think that maybe your April may or June somewhere right in there last year there was an over abundance of claims that were you know applied for and maybe we had an overload and it. Severity for a few more mistakes during the period like that. I would agree with that but the system was built this to handle a certain level of capacity we we far exceeded by. Thank you. Thank you all right anymore questions for this group. C. N. nine thank you for being here I appreciate you going today. looks like representative McKenzie you're recognized. Thank you Mr chairman I think this question really is directed toward the chair the staff if I understand new here on the committee so the obvious if I understand correctly this Your report was looks like finalized is amended March twenty fifth is that correct so what I'm wondering is I just received I guess we all just received this report yesterday was it up somewhere where if I'd known I could look at it because I think I could have done a much better job of driving last night so there about four hundred pages between these two reports. Yes ma'am what when we submit we typically submit this project for this report to the clearing house by March thirty first so it would be you could go to our website on April first every year and this report would be on our website. All right. Thank you thank you for that I guess then the myciti I didn't know that so I know it would be helpful I don't is there a reason why we don't go ahead and just email and I know we are you the members of the legislative audit committee back in January. Okay we it's just not been practice but we can certainly certainly start bona. any other questions or comments on this report. I stand on that will send reviewed. Our next item is other business first of one before you in the still want thank everybody for being here today I appreciate your work The next meeting of Legislative Joint audit will be June third and fourth two thousand twenty one is there any other new business that any member has a nice come before us to the. Well I have I have one question or comment Bills. You're recognized whoever that is he figured out. All thank you recognized thank you Mister chair I will I had a question with respect to the choice Springer I have a question with respect to the single audit report I heard me is such a shall state that there were repeated findings year after year and up I was just wondering if she could provide more explanation as to what those findings were and whether or not any training or. What I would necessary for that not to happen year after year just an explanation for. I don't have a complete list of all of the findings that were repeat findings but I could get that to you in the body of the report starting on page. Starting on page nineteen if you have that in front of you and you could turn to page nineteen I could tell you where would be indicated if it was a repeat finding and then later provide you a complete listing. So on page nineteen you'll see the heading of the finding and the first the first category it'll it'll say repeat finding this one is not applicable so this was not a repeat finding and then if you'll term further backed up Page fifty one would be an example. So you'll see at the top it has the heading it'll indicate the programs the agency and below you'll see under repeat finding It identifies that this was a a prior you're finding and it'll give you that number right. That I can I could be happy to give you a complete listing that way it would be easily easily traced okay thank you I'm I'm just concerned as to if it's repeat what is being done to make sure that doesn't happen again so that's I mean that's the question you find these things but is there someone that you can talk to to have them do whatever is necessary for it not to happen again I guess that's my concern the agency could better answer or other procedures they put in place to address these and then every year when we go back to do the current year we perform follow up procedures to see if if what the agency stated as being their corrective action was actually put into place. So what happens if nobody corrects the finding year after year after year after year. We keep issuing a new finding oh my god thank you. just just for clarity those those repeat findings are always the everybody's concern and it's it's generally up to management of those agencies to know. You know this is our deficiency so it's got to be addressed but thank you for keying in on that because you're you're correct it's always the concern. Sir thank you Mister chair aw Senator Garner. Thank you Mr sconces were done I just this is an incredible amount of work done by our staff two hundred forty five pages one report and two hundred plus another fifteen thousand man hours of thank you said of one that's an incredible feat and we're greatly appreciated the work done is had to say that before we got here today yeah thank you senator Clark of the US senator Chesterfield you're recognized. Thank you Mr chair of. As a follow up to representative Springer if the material finding is such that it indicates an individual has engaged in some on toward activity it can be sent to the prosecuting attorney the difference between this presentation the presentation we get in the individual committees is we have the finding and then we have the response. Of the agency itself or we don't have that in this report because I keep looking for a response what did you do how did it happen. Have we had a response in the past I've been around here a minute and we normally have what the funding needs and the agency's response to the findings. So are we going to do that or. We just want to do it down here so that they come in and tell us verbally rather than putting it writing because I'm one of those persons who believe if it isn't in writing and exits. Yes ma'am there are responses to each one of these findings just because I'm happened to be on page fifty one of the single audit report if you would turn to page fifty one all right. And then if you will turn over to page fifty two at the very end of each finding will be the views of management and it will give you what they're corrective action plan is and then the person responsible for that corrective action or making sure that the corrective action actually is implemented renewing that is helpful because it raises an issue of because DHS disputes in part and concurring in part with the finding which raises the question Mister chair of the agency. and I don't want to keep us here and have people beat me up the H. it says is such a critical part of what we're doing and they continue to have repeat findings what part did they concurring in. it maintain documentation identifying funds but they continue to have findings. So in what area did they disagree with you. A with the findings that they say that they make it clear no it was not clear on this one I will say that this was the only finding that they did dispute in part but they could probably answer that better than I could as to what they disputed. Yeah we had two minutes so I can do that Mr sure sure. I thank I'm assuming. Misty Eubanks that is correct person I know that don't you beat me up I'm on B. I'm I'm of the brave promise. Thank you senator. I can't tell you how long it's gonna take them to answer my questions will be. Yeah if you guys remain standing please of. First miss Eubanks please state your name employer position. It says misty Eubanks the Department of Human Services chief financial officer thank you could. Yeah if you get close to the mark on we're trying to organization or it's alright I'm not at all it's it's the system of please raise your hand Sir do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you god I do thank you ma'am. And please state your name employer position thank you Mr Clark white chief staff and she the Legislative an internal affairs department thank you Sir please raise your right hand. Do you solemnly swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth so help you god I do thank you Sir. I would like to address Senator just build. Yes could you tell me what party in which you don't concur in let me just say this quickly you have material findings in so many areas. What are we doing to make sure that we don't get back here in which what part don't you agree. Sure at answer just feel aggrieved very. Brief description sterling get more into the weeds as as you'd like on this one in particular I think bottom line over the years they played our staff and and legislative audit there's been some disagreement about the degree of specificity on the information that's included in these records I think our folks have based on looking at regulations the thought that the information there was specific enough legislative audit didn't did agree now with that said we are making changes are financial systems and improving our capacity to record this information so I think it going forward we expect this should be resolved as those systems are in place that is awesome that's in process now all state just generally what we do for audit findings as a whole is we have a several years ago secretary les be established new office security compliance we haven't staff in their who their responsibility is to coordinate our response to audit make sure that we're dealing with all the issues identified not and so not only do we develop new procedures employment training take other steps to address those findings as necessary we also have our internal auditors go back and check implants and ensure that we are complying that we've been practice and I think over the last several years I would say I think you'll see an improvement in the number of audit findings from DHS and also note that this is the first year in I don't know how long the question cost would be just findings are less than a million dollars I think that is a city signifies in the improvement we've made over the years. Thank you is just of concern to me that you have findings and go from pages forty one to eighty seven. And I would anticipate that when we come back the next year we won't have to pay findings from pages forty one eighty seven thank you Mr thank you. I would agree with your with your Summary of this just from my short time here I appreciate the work you guys a bill of any other questions or comments. I thank you for being here thank you thank you. Of the next meeting of let's say join or it will be June third and fourth is there any new business any other new business please come before the committee. All right seeing none we will