Legislative Joint Auditing-State Agencies
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Representative Steve Unger
Unverified
0:00
minutes. Thank you. All four? Aye. Aye. All opposed? Any opposed? Thank you that passed. I'd like to recognize Mr. Bullington at this time. Okay. Thank you, Mr. Chair.
Speaker 4
0:15
Today we're presenting three reports with findings, and we also have
Speaker 5
0:19
seven reports without findings, and these are listed on page one of the
Representative Steve Unger
Unverified
0:29
audit summary. Without objection, we will file these reports.
Speaker 3
0:33
Okay. All right. The first report with findings is the Department of Agriculture FY24 report, which contains one
Speaker 4
0:41
finding. The department discovered an erroneous, unauthorized payroll disbursement of $1,240 resulting from an employee's paycheck being deposited into an incorrect bank account. Further review revealed that the employee's direct deposit account information was changed without the employee's authorization by an individual who gained access to the employee's email. The department was unable to recover the funds and additionally the department failed to
notify us as required by Arkansas code. This finding was referred to the prosecuting attorney and the attorney general.
Speaker 9
1:09
Let me make sure that concludes the findings for the Department
Speaker 10
1:18
of Agriculture. Are there any members of the agency here that would like to come
Representative Steve Unger
Unverified
1:25
to the table? Thank you. Once you're in place, would you please identify yourself for the record?
Speaker 14
1:44
Department of Agriculture, Inu Sazaki, Chief Fiscal Officer. Fred
Speaker 15
1:50
Wiedor, I'm his deputy with the Department of Agriculture. Thank you.
Representative Steve Unger
Unverified
2:00
do gentlemen have a statement about this
Speaker 21
2:04
yes sir uh thank you again mr chairman members uh the department agrees uh with the finding and we've implemented uh controls in place
uh to ensure that this does not happen going forward and in the controls that we have in place Uh, going forward, uh, in case, uh, of, uh, a payroll change or a direct deposit change request from, uh, employees now we'll, uh, we'll be contacting the employee himself, making the request, uh, in addition to contacting the employee will also be requesting, uh,
that they verify the date of birth, their Social Security personnel number, home address, phone number, and also their bank account number. Members,
Speaker 23
3:01
do you have any questions? I see Senator
Representative Steve Unger
Unverified
3:08
Payton. Thank you, Mr. Chair. So was
Senator John Payton
Unverified
3:16
there any way to track the funds and who the culprit was and be able to make sure that that person didn't say,
hey, it worked one time, now I can do it ten times to a different
Speaker 21
3:36
agency or something? I mean, have we been able to track that? So since it happened, our HR department reached out to OPM to report the issue And also our CIO, the chief information officer, was also involved and coordinated also with the Office of State Technology.
And I believe an identity theft report was filed by the chief information officer with the Little Rock Police Department. Uh, no report as of yet on the, uh, uh, from the Little Rock Police Department. So as far as you know, the investigation's underway, but they have not identified
Senator John Payton
Unverified
4:21
the culprit to the best of my knowledge. Yes. Okay. Thank you.
Representative Steve Unger
Unverified
4:31
Are there any other questions? Yes, sir. Go
Speaker 32
4:38
ahead. Thank you, Mr. Chair. Uh, and this may be more of a comment than a question, But, you know, I know that I've been seeing a lot of uptick in wire fraud, which is kind of the same sort of thing, where someone intercepts an email, they send wiring instructions, goes to a bank account. But one thing I've seen has changed here recently is now the scammers are, in addition to personating the email, they will then hijack the phone numbers so that when you call to verify, you're actually talking to the scammer.
And so just have a thought of, instead of verifying, you know, having a call on the employee, verifying social security number and birth date, which obviously since Equifax and things is already out there. I mean, essentially your information is everywhere now. Maybe one way to resolve the problem is, like, we will not make payroll deposit changes unless you actually physically come into the office and hand us the piece of paper with the information. Just maybe a thought. I know that my day job, I'm
Speaker 34
5:27
seeing this, it's getting a lot more sophisticated out there with these hijackings.
Representative Steve Unger
Unverified
5:31
Members, are there any other questions? Senator Payton. Thank
Senator John Payton
Unverified
5:40
you. And I guess that kind of goes back to my question. Maybe do you know if it was a sophisticated hijacking by some foreign actor like that, or could it have
Speaker 16
5:54
just been a relative or an angry spouse or something? The
Speaker 21
6:00
e-mail request came from a .gov, the employee's actual e-mail address.
Okay. So there's no telling who's actually initiated that request. Okay, thank you. Are there any other questions? Without objection, we
Representative Steve Unger
Unverified
6:20
will file this report. Thank you, gentlemen. all right the next
Speaker 9
6:34
report we have with findings is the department of education fy 24 report
Speaker 4
6:39
and this report contains four findings the first finding according to the learns act the division of elementary and secondary education shall administer the arkansas children's educational freedom account program educational freedom accounts are state funded accounts used to cover approved educational expenses, including private school tuition, curriculum, tutoring, etc. During our review, we discovered that the EAC did not have controls in place to review students with EFAs for duplicate enrollment in a public school. Based on analysis of EFAs that disbursed
funds to EFA providers in State Physical Year 24, we identified 239 students with potential duplicate enrollment in a public school during the 23-24 school year, which could result in duplicate funding to either the public school or to the EFA provider. A test of 34 of the 239 students revealed 28 instances of duplicate enrollment. The second finding, the Arkansas Constitution states in part that no money shall be paid out of the Treasury until the same shall
have been appropriated by law, and then only in a course with said appropriation. Act 572 of the 23 regular session authorized a $10 million appropriation for the merit teacher incentive grants to local education agencies. In addition to the $10 million that was dispersed from the Merit Teacher Incentive Appropriation, the agency used almost $2 million in unexpended funds appropriated for the National Board of Professional Teaching Standards financial incentives to pay the remaining Merit Teacher Incentives on June 21, 2024. The initial appropriation of $10 million
was an estimated amount and did not include fringe benefits. Appropriations are established so that funds can be used for authorized purposes. These funds were appropriated for one purpose but used for another in violation of the Constitution. The third finding, ADE rules govern National Board for Professional Teaching Standards incentive payments based on teacher certification dates and school poverty levels. Annual incentive payments may be $2,500, $5,000, or $10,000.
Specifically, ADE rules allow for a teacher who is working full-time in a public school that is not a high-poverty school or a high-poverty charter school to receive a yearly incentive payment of $2,500 for no more than five school years. A review of 48 incentive payments identified one instance where an eligible recipient that was not in a high-poverty school was paid $5,000 rather than $2,500, which resulted in an overpayment of $2,500. And the fourth finding, the Board of Trustees for the Arkansas Schools for the Blind and Deaf
was informed on July 18, 2023 that one Gator utility vehicle valued at about $10,000 was stolen. The AC notified law enforcement of the incident but did not report the theft to the Chief Fiscal
Speaker 9
9:26
Officer or to Arkansas Legislative Audit as required. Let me make sure that concludes the findings for the Department
Representative Steve Unger
Unverified
9:34
of Education. Thank you. Would the agency representatives please come to the table and identify yourselves for the record?
Speaker 45
9:46
Courtney Salas-Ford, Chief of Staff, Department of
Representative Steve Unger
Unverified
9:59
Ed. Greg Rogers, Department of Ed. Good afternoon.
Speaker 48
10:02
Do you have any statements to make? Yes, sir. On the first finding, this was the first year of the EFA. Kind of looking at it now, we do have standard operations procedures in place now. We are looking at enrollment more often.
I think we're doing it quarterly now. We are checking those through TRYAND. We're going through each one of them that may come up as showing as duplicate, working with the private school or the public school. Sometimes it's a public school that's coding them as a resident attendee when they shouldn't be in because they're only taking some of the classes there, so we're working with that. We're also making sure that each student has a unique identifier number so we can compare that quicker in trying to make sure that we are catching these difficulties on the front end now.
We've also, after this, we've partnered with, we've asked OIG to come in and just do an overall look at the entire program to help us identify any additional weaknesses or any ways we can make this program stronger and making sure we are tracking and figuring out how these are duplicates being put into the system. On the next one, the Merit Teacher Bay, we did meet all the obligations for the National Board. That was a teacher incentive program, so we used any excess appropriation we had there
to make sure that we were making sure all the teacher merit payments went out to those teachers at that time. We've fixed that also now. We've gone through, and we've got a federal appropriation we're using right now, as well as if we ever need any additional appropriation. Our appropriation bill act allows us to have two appropriation transfers throughout the year, or if we're in a fiscal session, we'll take care of it that way. So we've got things in place to make sure we have the appropriation in that line item now.
The third one, which was the teacher, that was just a mistake that was made. They keyed it in as eligible for the $5,000 when it wasn't. We went back and checked all the other ones that received $5,000, didn't find any additional errors on that. We've also added a statement of assurance from the superintendents, making sure they know what's going on with that, and we are working with that teacher to make sure that we get the $2,500 back. And then on the last one, there was a piece of equipment on the deaf school that was stolen.
It was reported to the board for the deaf and blind. We've gone back and retrained our people that when is something that's stolen out of place, the board is required to be filed, and that's necessary even before you take it to your board. We've also added additional security out at the blind and deaf school campus now, And so we've gone through, retrained, and added more security to make sure that doesn't happen anymore. And I'd be happy to answer any questions. Thank you. Members, do you have any questions?
Speaker 31
13:06
Representative Brown. Thank you, Mr. Chair. Regarding finding number
Speaker 32
13:09
one on the overpayments for the students that were enrolled in two different schools, is that something that y'all are able to recruit by others? Can you just take that money out of the next payments, or how does that
Speaker 48
13:20
work? If it actually was an overpayment, but just because it was a duplicate in this first year doesn't actually mean it was an overpayment. If they were registered to take an EFA, they went to the private school in the first part of the year, but for whatever reason that wasn't working out and they went back to the public school.
Since we were pulling the records on the back end, it would show as a duplicate, but they were actually in that private school at that time, then they went back to their public school. So there's instances that happened, but if there was an overpayment, then yes, we are able to go back in and access that. members do you
Representative Steve Unger
Unverified
14:05
have any other questions seeing none without objection we will file this report thank you
Speaker 4
14:08
okay our last report with findings today is the department of health fy 21 fy 24 report and this report contains three findings. The first finding, while performing bank reconciliation testing, we found two instances in which the bank reconciliation did not agree with the book or bank balance, even though they were reviewed and approved by supervisors. These instances revealed that employees did not follow established internal controls. After we questioned the agency, correct reconciliations were produced,
but the new reconciliation did not include timely silence or dates. The second finding, according to the Department of Health internal audit, an employee falsified or altered travel receipts from July 1, 2023 through June 19, 2024 for meals and lodging, resulting in fraudulent overpayments of about $1,500. This amount includes charges for alcohol that were reimbursed in full or in part with 34 meals. The employee resigned from the Department of Health on June 20, 2024.
This finding was referred to the Project Attorney and the Attorney General, and it was also certified to the bond board. The third finding, according to Arkansas Code, contracts exceeding an estimated purchase price of $75,000 shall be awarded by competitive sealed bidding unless a determination is made in writing by the agency procurement official or the state procurement director that this method is not practicable and advantageous and specifically states the reasons. While conducting capital asset additions testing, we noted one item costing approximately $117,000
that was not awarded by competitive sealed bidding. According to agency staff,
Speaker 9
15:45
evidence of proper purchase does not exist. Mr. Chair, that concludes the findings for the Department of Health. Thank you. Would the members of the
Representative Steve Unger
Unverified
15:53
agency come forward and have a seat and identify yourselves for the record, please? Don Adams, Chief of Staff, Health Department.
Matt Gilmore, Department of Health. Thank you. I actually have a
question on finding number three, last paragraph, last sentence. According to the agency staff, evidence of proper purchase does not exist. Could you explain exactly
Don Adams
Unverified
16:33
what you mean by that? Yes, sir. That was at the time when the auditors found this particular issue, this finding. We did not have the appropriate paperwork to show that we had gone through the sealed bid competitive process.
We have subsequently found where we did post an invitation for bid as required on our website for the public. We have found a bid response sheet, but we were missing some paperwork in this process. so that's what that is referring to. Thank you.
Speaker 10
17:05
Members, do you have any questions? Senator Payton. Thank
Senator John Payton
Unverified
17:11
you, Mr. Chair. So you almost answered my question, but what was the piece of equipment,
and who had to sign off on that purchase? Wouldn't they have needed to have seen the
Don Adams
Unverified
17:26
documentation? It was a steam sterilizer for our public health lab. It was a $117,000 purchase. I'm not sure I understand the last part of your question. We did do an invitation for bid, which is what is required by procurement law. We did have a vendor submit a bid, and we completed a response packet on that bid.
What we do not have is the tabulation sheet. So there's some indication that we only had one bidder, but we can't prove that for sure, and that's the problem with the paperwork being incomplete. But the solicitation was
done correctly, but we did not have all the paperwork that we needed to have. Well, I guess
Senator John Payton
Unverified
18:10
that explains why somebody would have signed off on it. I don't know how your agency works, but, you know, somebody had to write a check or sign off on an electronic transfer or something in order to pay for it.
And I would think that the person with that responsibility would want to see the documentation.
Don Adams
Unverified
18:31
Yes, sir. The purchase order that we created had the bid response sheet on it of the vendor. So we did have that and what their
bid was, and they were the awarded vendor. We just didn't have the documentation to show if there were other vendors that also bid. Okay. Thank you. Members, are there any other questions?
Representative Steve Unger
Unverified
19:01
Seeing none without objection, we will file this report. Moving on to new business, the next meeting will be held on November 13, 2025. And we are adjourned.
Agenda
A. Call to order by Chairman.
B. Adoption of minutes of the September 11, 2025 meeting.
C. Review of reports. (Refer to the Summary)
D. New Business. The next meeting will be held November 13, 2025
E. Adjournment.
500 WOODLANE STREET, SUITE 172 • LITTLE ROCK, ARKANSAS 72201-1099 • PHONE: (501) 683-8600 • FAX: (501) 683-8605 www.arklegaudit.gov
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — LEGISLATIVE JOINT AUDITING - STATE AGENCIES, Oct 9, 2025 | Agenda | 2 | Official source ↗ |
Speakers
Representative Steve Unger
Unverified
Speaker 4
Speaker 5
Speaker 3
Speaker 9
Speaker 10
Speaker 14
Speaker 15
Speaker 21
Speaker 23
Senator John Payton
Unverified
Speaker 32
Speaker 34
Speaker 16
Speaker 45
Speaker 48
Speaker 31
Don Adams
Unverified