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
- Whisper
- Model
- ggml-large-v3-turbo.bin
- Processing date
- October 6, 2026
Senator Matt McKee
Unverified
0:00
afternoon chair will call this meeting of legislative joint audit state agencies to order thank everybody for being here be sure to sign in if you haven't signed in please first meeting want to remind everybody need a motion to adopt the minutes from our december 5th meeting motion and a second any discussion hearing none all those in favor of the motion say aye All those opposed, say no.
Ayes have it. All right, we'll move to a
Speaker 3
0:37
review of reports. Tom? Okay, thank you, Mr.
Speaker 4
0:39
Chair. Today we're presenting five 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 State's office transition from Treasurer Walther to Treasurer Thurston. Also included is the Rural Services Block Grant Disbursement Report, for fiscal year 24 that was provided by the Department of Commerce in accordance with special language in their Appropriation Act.
Senator Matt McKee
Unverified
1:07
Without objection, we'll file those reports. Hearing none, those reports are filed.
Speaker 10
1:11
The first report we have today with findings is the Department of Corrections FY23 report,
Speaker 4
1:19
and 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 duties 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-numbered receipts. We tested 70 receipts issued by accounting shared services and noted the following exceptions. Three, segregation of duties issues as the same individual collected funds and recorded the amounts in ACES. And there were two 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.
In the second finding for Department of Corrections, agency internal control procedures related 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
2:42
Okay, are there any questions or discussion on that report? Would the department like to come up and address anything? Okay. Committee have a
will. Without objection, we'll file that report. Hearing none,
Speaker 4
3:07
that report is filed. Okay. The next report with findings is the Department of Finance Administration FY23 report, which contains five findings.
The first two findings are also included in the audit of the state's annual comprehensive financial report, which will be presented in tomorrow's meeting. The first finding, DFA notified us that more than 1,500 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. DFA notified law enforcement agencies 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, 2024, 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 balance mismatches from approximately 4,500 taxpayer accounts for the 2006 through 2009 tax years. To correct the errors that resulted in these mismatches, the AAC made programming changes. These changes were tested. However, when the programming changes were implemented on January 19, 24, an error in the program went undetected. On January 25, 24, the Income Tax Division began receiving calls from taxpayers regarding refund warrants,
and it was determined at that point that the programming changes caused refunds to be inadvertently mailed to taxpayers. As of January 7th of this year, the AC had recovered over $319,000, leaving about $43,000 still outstanding. This finding was also referred to the Prosecutor Attorney and the Attorney General. The third 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 shelter submitted for reimbursement from two different DFA grants for services rendered by the same employee for the same period and received payments from DFA from both grants. To reimburse the duplicate payments, the women's shelter agreed in November of 24 to pay DFA about $1,500 a month for eight 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 fourth finding, our review of travel expenditures revealed unallowable reimbursements noted in the bullets of this finding,
totaling $1,100 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 agency in March of 24. This finding was also referred to the prosecuting attorney and the attorney general. And the fifth finding, DFA notified us of the falling losses of public funds at revenue offices throughout the state. On July 20, 23, the Mountain Home Revenue Office reported that an iPhone, stamps, and cash valued at $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 10, 2024, almost $1,500 in cash was missing from a daily deposit at the Stuttgart 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-month probation, and was ordered to pay full restitution and $2,200 in fines, fees, and court costs.
This finding was referred to the prosecuting attorney and the attorney general, and it
Speaker 13
7:12
was also certified to the bond board. Mr. Chair, that concludes the findings for the Department of Finance Administration.
Representative Matt Brown
Unverified
7:23
Any questions or discussion on this report? Representative Brown? Thank you, Mr. Chair. I just want to understand these 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 in trouble here?
Speaker 4
7:40
That's what I'm trying to figure out. When there's any case of unauthorized dispersements or unaccounted for funds, we're required by statute to report that to the prosecuting attorney and attorney general. It's completely up to the prosecutor to decide whether there's a prosecutable offense and whether there's any criminal intent at that point, and they will determine whether or not the restitution is needed as it goes to the courts if they choose to do that route.
Speaker 20
8:04
So DF&A is not in trouble? Or am I misinterpreting what you just said?
Speaker 4
8:10
I mean, I'm just curious. There's a breakdown in controls that resulted in these findings. So from that perspective? They're
Speaker 23
8:16
required to notify the prosecutor and the attorney general, but that doesn't mean prosecution. Thank you. And if D.F.
Senator Matt McKee
Unverified
8:26
and A. wants to come up and make a statement or answer any questions, you're welcome to. Does anybody on the committee have any questions? No comments? Without objection, we will file that report. The report is filed.
Speaker 4
8:44
Okay, 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 accrued and unpaid annual holiday leave, should be included in the final pay to the employee. Our review of leave payouts to nine employees revealed that two employees received annual and holiday leave payouts
totaling over $6,200 in the pay period preceding the final pay period of their employment. And the second finding, moneys appropriated by the General Assembly for the maintenance and operation of the office shall be expended only for official state business in accordance with the public purpose doctrine. Review of 45 transactions revealed that expenditures totaling almost $5,100 were incurred for social events held by the governor's mansion and did not serve a public purpose. $4,200 was for catered meals for a staff appreciation event attended by staff members and guests held on May 24,
2023. $900 was for inflatable slides for the staff appreciation event held on May 24 and a private event held on June 10, 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 Prosecutor Attorney and the Attorney General. Mr. Chair, that
Speaker 24
10:12
concludes the findings on the Governor's Mansion.
Senator Matt McKee
Unverified
10:15
Questions or comments on this report? Discussion?
Representative Jimmy Gazaway
Unverified
10:21
Senator, Representative Gassaway? So I guess I'm just trying to figure out exactly what the issue is. Is it based on public purpose that there was not a public purpose? Is that the
finding? I believe that's correct, Representative Caswell. We are talking about the governor's mansion here, which
is the people's house, one that this legislature typically appropriates money for annually. Is that correct?
Yes, sir. Okay. All right. Is there anyone here from maybe the governor's office has a response to this that they might want to share? Yes.
Senator Matt McKee
Unverified
11:10
Okay. Ms. Kennedy, if you would recognize yourself and you're free to make a statement if you'd like
Speaker 38
11:19
to take questions. Courtney Kennedy, Chief Legal Counsel, Office of the Governor, also representing the governor's mansion.
You're recognized. I don't have a statement, but happy to
Representative Jimmy Gazaway
Unverified
11:27
take any questions. Representative Gasway. Well, I
think the concern I have is that there's a finding that somehow this violates the public purpose doctrine, but the governor's mansion is certainly a public building that we appropriate funds for annually. It's the people's house. The people of Arkansas are welcome there. What's the issue? Thank you for the question.
Speaker 38
11:54
And as you see in 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 use of
Speaker 39
12:25
the funding and did serve a public purpose
and that this finding is not accurate. Do you have
Representative Jimmy Gazaway
Unverified
12:37
anything further? I do. And so to be clear, I mean, 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 of a minor nature,
which would be the type of items, it seems to me,
Speaker 38
13:03
that are mentioned in this report. That's correct. And food is specifically enumerated in the
Representative Jimmy Gazaway
Unverified
13:09
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 they give great deference to the legislature. and 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 minor expenses associated with events, it certainly would seem like it would fall in line with the public purpose doctrine. Wouldn't you
Speaker 38
13:46
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 an inappropriate expenditure. Alright, fair enough. Thank
Senator Matt McKee
Unverified
14:08
you. Thank you Representative Caswell. Any other questions for Ms. Kennedy? Hearing none. Thank you very much. Thank you. Are there any other questions or comments on this report? Seeing none, without objection, we will file the report. The report is filed.
Speaker 4
14:33
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 non-profit organization that received over $1 million from various divisions of the agency. Agency staff were unable to provide a disclosure of this related party. In 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 an employee, is not a professional services contract and is prohibited. We identified an instance 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
15:45
Seeing none, if there is no objection. Or without objection, the report will be filed. The report
Speaker 4
15:54
is filed. Okay. Our last report today with findings is the Department of Transformation and Shared Services FY23 report, and this report contains four findings. The first finding, on April 15, 2024, the Department of Transformation and Shared Services reported to us that on June 13, 2023, cameras and other communications equipment valued at over $11,000 were discovered missing.
After the A.C. 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 pled guilty to felony theft of property, was sentenced to 36 months supervised probation, and paid restitution to the A.C. 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 sick leave payouts, we discovered two Division of Information Systems employees who had accumulated 51 and 55 sick days respectively
and were 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 accrued sick days, resulting in overpayments totaling about $6,100. The third 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 reconciliation of the Arkansas State Employee or the Public School Employee bank accounts accurately and timely, largely due to personnel turnover.
And the fourth finding, EBD made two accounting errors during fiscal year 23. Patient-centered outcome research institute fees for both the ASC and the PSE plans were paid out of the ASC fund. The ASC then erosely transferred PSE fees of almost $282,000 from the ASC fund to the PSE fund, which was backwards, therefore duplicating the 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 ASE's fund balance being understated and the PSE fund balance being overstated by the same amount. And the second item was expected contributions could not be reconciled to actual contributions recorded in ACES for both the ASE and the PSE funds. Make sure that concludes the
Speaker 13
18:13
findings for Department of Transformation and Shared Services. Are there any questions or any discussion on these
Senator Matt McKee
Unverified
18:22
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. Yeah, no kidding.
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