Legislative Joint Auditing-State Agencies
Video
Transcript
1 document
Machine transcript
May contain errors. Verify important quotations against the official video.
About transcript accuracy
- Source
- SliQ live captions
- Model
- SliQ live ASR
- Processing date
- October 2, 2026
Senator Matt McKee
Unverified
0:10
State agencies to order. Thank everybody for being here. Uh, be sure to sign in if you haven't signed in, please. First meeting. I want to remind everybody. Um need a motion to adopt the minutes from our December 5th meeting. Motion And a second in the discussion. Hearing none, all those in favor of the motion, say aye. All those opposed say no. I just have it. All right, we'll move to uh review of reports.
Speaker 4
0:44
we're presenting 5 reports that have findings, and we also have 19 reports without findings, and these are listed starting on page one of your audit summary. Included in these 19 reports is the letter for the Treasurer of State's office transition from Treasurer Walther to Treasure Thurston. Also included is the rural services block grant dispersement report for fiscal year 24 that was provided by the Department of Commerce in accordance with special language in their Appropriation Act. Um
Senator Matt McKee
Unverified
1:12
Without objection, we'll file those reports. Hearing none. Those reports are filed. The
Speaker 10
1:16
first report we have today with findings is the Department of Corrections FY23 report, and
Speaker 4
1:24
this report contains two findings. The first finding, the state financial management guide provides agencies a framework to assist in designing an adequate internal control structure. Around cash receipts to include that duty should be properly segregated so that no one person is collecting recording, depositing, and reconciling cash receipts.
Additionally, the policy requires cash receipts to be balanced daily by comparing the total of cash received to the pre-number receipts. We tested 70 receipts issued by counting Shared Services and noted the following exceptions. 3 segregation of duty duties issues as the same individual collected funds and recorded the amounts in ACEs. And there were 2 instances in which the receipt issue did not agree with the amount deposited and recorded. Through additional procedures, we determined that no funds were unaccounted for. However, the source documentation did not support the transaction that occurred.
The second finding for Department of Corrections AC internal control procedures relate to jail reimbursements to local governments included comparing the certified invoices approved by the local governments to the database that maintains this information. We tested 25 jail reimbursements to verify that this procedure was being performed by the agency. The agency could not provide documentation supporting the internal control for 13 of these payments with one resulting in an overpayment to a county of $372. Mr. Chair, that concludes the findings for the Department of Corrections.
Senator Matt McKee
Unverified
2:48
OK, are there any questions or discussion on that report? Would the department like to come up? And address anything OK. Committee have I will Without
objection, we'll file that report. Hearing done that report is
Speaker 4
3:12
filed. OK. The next report with findings is the Department of Finance Administration FY23 report, which contains 5 findings.
First two findings are also included in the audit of the state's annual comprehensive financial report, which will, which will be presented in tomorrow's meeting. The first finding DFA notified us that more than 1500 tax refunds totaling almost $1.5 million were dispersed in 2024 based on fraudulent information. Refunds were issued through bank debit cards, state warrants to other state agencies to be applied to taxpayer debt or were applied to prior tax debt. If I notified notified law enforcement agency of the
fraudulent activity. As of our report date, the total amount recovered by DFA was about $340,000 leaving over $1.1 million still outstanding. This finding was referred to the prosecuting attorney and the attorney general. The second finding, DFA also notified us in February 2024 of a loss of public funds. On January 22, 24, DFA inadvertently issued 620 refunds totaling about $362,000. Following a programming change
to the Arkansas Integrated Revenue System or Airs. In prior years, DFA converted its tax processing software from information management system to airs. Which resulted in converted bounce mismatches. From approximately 4500 taxpayer accounts for the 2006 through 2009 tax years. To correct the errors that resulted in these mismatches, the ACA programming changes. These changes were tested. However, when the program changes were implemented on January 19th, 24, and air in the program went undetected.
On January 25th, 24, the income tax division began receiving calls from taxpayers regarding refund warrants. And it was determined at that point that the program changes cause refunds to be inadvertently mailed to taxpayers. As of January 7th of this year, the AC had recovered over $3,019,000 leaving about $43,000 still outstanding. This finding was also referred to the prosecuting attorney and the attorney general. The 3rd finding DFA notified us in June of 23 of a loss of public funds.
Inadequate controls over the disbursement of federal grants resulted in duplicate grant payments totaling about $12,000 to the Committee Against spouse abuse, Women's shelter in Pine Bluff. The women's shelters submitted for reimbursement from two different DFA grants for services rendered by the same employee for the same period and receive payments from DFA from both grants. To reimburse the duplicate payments, the women's shelter agreed in November of 24 to pay DFA about $1500 a month for 8 months beginning in January of this year and ending in August. This finding was referred to the
prosecuting attorney and the attorney general as well. The 4th finding, our review of travel expenditure revealed unallowable reimbursements noted in the bullets of this finding, telling $1100 to an employee who traveled to a conference out of state. The employee's office was notified of the overpayment in October 23. However, the employee did not reimburse the agency until we identified the discrepancy and questioned the AC in March of 24. This finding was also referred to the prosecuting attorney and the attorney general. And the 5th finding, the FAA
notified us of the falling loss of public funds at revenue offices throughout the state. On July 20th, 23, the Mountain Home Revenue Office reported that that an iPhone stamps and cash valued $590 had been misappropriated by the cleaning staff. This individual was not a revenue Office employee and was later arrested for the alleged theft. And on July 10th, 2024, almost $1500 in cash was missing from a daily deposit at the guard revenue Office. The former employee responsible for deposits resigned from
employment and left the revenue office location before being questioned by DFA staff. In January of this year, the former employee entered a negotiated plea of guilty to felony theft of property, was sentenced to 36 months probation and was ordered to pay full restitution and $2200 in fines, fees, and court costs. This finding was referred to the prosecuting attorney and the attorney general, and it was also certified to the bond board. Mr.
Speaker 13
7:17
Chair, that concludes the findings for the Department of Finance Administration. Any questions or discussion on this report. Brown.
Representative Matt Brown
Unverified
7:29
Thank you, Mr. Chair. Um, I just want to understand this, um, findings that are being referred to the prosecuting attorney, are they? To recover from the people who received the money that should not have received it. I mean, who's who's in trouble here? That's what I'm trying to figure out when there's
Speaker 4
7:46
any case of unallowed unallowed, unauthorized dispersants are unaccounted for funds. We're required by statute to report that to the prosecutor attorney and the attorney general. It's completely up to the prosecutor to decide whether there's a prosecutable offense and whether
there's any criminal criminal intent at that point and they will determine whether or not the restitution is needed or the as it goes to the courts if they choose to do
Speaker 20
8:09
that route. So DNA is not in trouble. And or am I misinterpreting what you just said. I
Speaker 4
8:16
mean, I'm just curious there's a breakdown of controls that resulted in these findings. So from that perspective,
Speaker 23
8:21
they're required to notify the prosecutor and the attorney general, but that doesn't mean prosecution. Thank you
Senator Matt McKee
Unverified
8:32
And if DFNA wants to come up and make a statement or answer any questions, you're welcome to. Is anybody on the committee have any questions? No comments. Without objection, we will file
Speaker 4
8:49
that report. report is filed. Our next report with findings is the governor's mansion and Mansion commission, FY23 report, and this report contains two findings. The first finding In accordance with Arkansas code upon termination resignation, retirement, death, or other
action by which a person ceases to be an active employee, the amount due to the employee, including any any accrued and unpaid annual holy should be included in the final pay to the employee. I review a leaf payout to 9 employees revealed that 2 employees received annual and holidayly payouts totaling over $6200 in the pay period preceding the final pay period of their employment. And the second finding Money's appropriated by the General Assembly for the maintenance and operation of the office should be expended only for official state business in accordance with the public
purpose doctrine. Review of 45 transactions revealed that it revealed that expenditures tolling almost $5100 were incurred for social events held by the governor's mansion and did not serve a public purpose. $4200 was for catered meals for staff appreciation event attended by staff members and guests held on May 24, 2023. And 900 whisper inflatable slides for the staff appreciation event. Held on May 24th and a private event held on June 10th, 2023.
After our inquiry, the governor reimbursed the state almost $300 on August 5, 2024 for the inflatable slides for the June 10th private event. This finding was referred to the prosecuting attorney and the attorney general. Mr. Chair, that concludes the findings
Speaker 24
10:17
on the governor's mansion. Questions or comments on
Senator Matt McKee
Unverified
10:20
this report. Discussion Senate Representative Gazaway. So I, I guess I'm
Representative Jimmy Gazaway
Unverified
10:27
just trying to figure out exactly what the issue is, is it? Based on public purpose, uh, that, that there was not a
public purpose is that the finding? I believe that's correct, Representative Casway. OK. But, but
we are Oh. We we are talking about the governor's mansion here, which is the people's house. Uh, one
that this legislature typically appropriates money for annually. Is that correct? Yes, sir. OK. All right. Is there a
Anyone here from maybe the governor's office has a response to this, but they might want to share. OK. Ms. Kennedy.
Senator Matt McKee
Unverified
11:15
If you would recognize yourself and you're free to make a statement if you like to take questions. Courtney Kennedy,
Speaker 38
11:24
chief legal counsel, Office of the governor, also representing the governor's mansion, uh, I don't have a statement, but happy to take any questions. Representative Gassway. Well, I think the concern I have
Representative Jimmy Gazaway
Unverified
11:37
is there's a finding that somehow this violates the public purpose doctrine, but The governor's mansion is uh you know, certainly. Building public building that we appropriate funds for annually, um. It's the people's house, the people of Arkansas are welcome there, uh, what's the issue?
Speaker 38
11:58
Thank you for the question and as you see in our our management response representative we do agree with your assessment that
this is the people's house that the very intent and the purpose of the governor's mansion is to throw events like the one mentioned in this report, the governor's mansion has an appropriation, has funding to throw events, be the staff party events mentioned here are not the only events of this type thrown by the mansion and we do believe it was an appropriate.
Speaker 39
12:30
use of the funding and did serve a public purpose and that this finding is, uh, not accurate.
Representative Jimmy Gazaway
Unverified
12:40
You have anything further? I do. And so to be clear, I mean, I'm just, I'm just looking here when we talk about the funds that the legislature appropriates and that are. Given to the governor's mansions, those include funds to pay all expenses for the operation of the mansion, is that correct? That is correct. And that would include things like food and miscellaneous items, uh, of a minor nature which would be the type of items it seems to me that are mentioned in this report. That's correct, and food is specifically enumerated in the
statute as an allowable expense. My understanding is that. When these public purpose doctrine questions are analyzed by a court, typically what they look at is, um, they give great deference to the legislature. And the legislatures, uh. What the legislature has deemed to be a public purpose and certainly when we appropriate. Money toward a public building and include in the statute that that can include food and other uh. Minor expenses associated with
events that certainly would seem like it would fall in line with the public purpose doctrine,
Speaker 38
13:51
wouldn't you agree? I agree and I've read over 20 attorney general's opinions that also flesh out the public purpose doctrine, and I did not find any that would indicate. That the governor's mansion was in violation of the public purpose doctrine and in fact, the Attorney General's opinions seem to support the proposition that this was a uh inappropriate expenditure. All right, fair enough. Thank you. Thank you, Representative Casway.
Senator Matt McKee
Unverified
14:16
Any other questions for Ms. Kennedy? Hearing none Thank you very much. Thank you. Any other questions or comments on this report? Seeing none without objection, we will file the report. The report is filed.
Speaker 4
14:39
The next report with findings is the Department of Health FY23 report, and this report contains two findings. The first finding as required by
Executive Order 9804. Employees must disclose all relationships to vendors and grantees to identify potential conflicts of interest. The director of the minority Health Commission currently serves as the vice chair of a nonprofit organization that received over $1 million from various divisions of the agency. AC staff were unable to provide a disclosure of this related party. And the second finding, Arkansas code states that any contract under which a state agency retains day to day managerial control over the person performing the services or in which the relationship between the contractor and the state agency is that of employer and
employee is not a professional services contract and it's prohibited. We identified an instance of a memorandum of a memorandum of understanding used to employ an individual without using an appropriated position. This individual was paid over $18,000 throughout the year in hourly wages to distribute face masks and hand sanitizer and perform other duties as assigned by management of the minority Health Commission. Mr. Chair, that concludes the findings for the Department of Health. Are there any questions or discussion on this report.
Senator Matt McKee
Unverified
15:50
Seeing none if there is no objection or without objection the report will be filed. The report
Speaker 4
15:59
is filed. OK. Our last report today with findings is the Department of Transformation Shared Services FY23 report, and this report contains 4 findings. The first finding on April 15th, 2024, the Department of Transformation Shared Services reported to us that on June 13th, 23, cameras and other communications equipment valued at over $11,000 were discovered missing.
After the AC conducted an internal investigation, the matter was turned over to Arkansas State Police. A former employee admitted to law enforcement that he took the equipment, sold it, and replaced it with similar items to conceal the theft. He pleaded guilty to a felony theft of property, was sentenced to 36 months supervised probation and paid restitution to the AC for the full amount. This finding was referred to the prosecuting attorney, and the attorney general, and it was also certified to the bond board. The second finding during our review of sickly payouts, we discovered two divisions of
information systems employees who had accumulated 51 and 55 sick days respectively, and we're therefore entitled to payment for 50% of the number of accrued sick days multiplied by 50% of their daily salary. The employees were paid an amount equal to 100% of the number of crude sick days resulting in overpayments totaling about $6100. The 3rd finding, DFA's financial management guide requires bank reconciliation to be performed by the 15th day after the end of the statement period. EBD did not perform monthly
regulations of the Arkansas State employee. Or the public school employee bank accounts accurately and timely, largely due to personnel turnover. And the 4th finding EBD made two accounting errors during fiscal year 23. Patient centered outcome research institute fees for both the ASC and the PSC plans were paid out of the ASC fund. The then arosely transferred PSE fees of almost $282,000 from the ASC fund to the PSE fund, which was backwards. Therefore
duplicating the erroneous erroneous entry amount. As a result, ASC expenditures were overstated by 564,000 and PSE expenditures were understated by the same amount. It also resulted in ASC's fundal being understated and the PSE fund balance is being overstated by the same amount. The second item was expected contributions could not be reconciled to actual contributions recorded in ACEs for both the ASC and the PSE funds. Mr. Chair, that concludes the findings for
Speaker 13
18:18
Department of Transformation Shared Services. Are there any questions or any
Senator Matt McKee
Unverified
18:22
discussion on these reports? Seeing none without objection, the report will be filed. The report is filed. We're going to move to new business. Our next meeting will be held on July 10th. And that is all We are adjourned.
Agenda
A. Call to order by Chairman.
B. Adoption of minutes of the December 5, 2024 meeting.
C. Review of reports. (Refer to the Summary)
D. New Business. The next meeting will be held July 10, 2025
E. Adjournment.
LEGISLATIVE JOINT AUDITING COMMITTEE ARKANSAS LEGISLATIVE AUDIT JUNE 5, 2025 STANDING COMMITTEE ON STATE AGENCIES
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — LEGISLATIVE JOINT AUDITING - STATE AGENCIES, Jun 5, 2025 | Agenda | 2 | Official source ↗ |
Speakers
Senator Matt McKee
Unverified
Speaker 3
Speaker 4
Speaker 10
Speaker 13
Representative Matt Brown
Unverified
Speaker 20
Speaker 23
Speaker 24
Representative Jimmy Gazaway
Unverified
Speaker 38
Speaker 39