Legislative Joint Auditing- State Agenices
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Representative Steve Unger
Unverified
1:15
other as you make your way to your seats.
i call us to order the chair sees a quorum our first action is the adoption of minutes you should have received these via email i need a to accept these i need a motion and a second and a vote got them both thank you all in favor say aye all
opposed nay there are no nays i'd like to turn this over to mr david
gassaway let me back up just a second here i
make a motion that the health department special report be deferred at the request of mary Bentley any opposition so moved
Speaker 17
2:42
thank you mr. chair today we are presenting two reports with findings in addition we also have six reports without findings these are listed on page one of the audit summary staff recommendation is to file the reports without findings the first report with findings is the Department of Parks
heritage and tourism FY 25 report which contains two findings finding one the Arkansas Department of Parks heritage and tourism notified us in February 20 26th of an apparent unauthorized disbursement of state funds totaling almost $2,400 from a payroll direct deposit involving impersonation of an employee. A direct deposit bank charge form was received by an Office of Personnel Management Human Resources staff member from what appeared to be a Parks Heritage and Tourism employee's personal email address, and the employee's direct deposit banking information was changed
in the payroll system without verification of the request's authenticity. Before the change was identified as unauthorized, a direct deposit was issued to the new bank account. As of the report date, the funds had not been recovered. This finding was referred to the prosecuting attorney and the attorney general. Finding 2. Arkansas State Board of Finance Rule 2012a states that all cash funds on deposit with a bank or financial institution that exceed FDIC deposit insurance coverage must be collateralized,
and the collateral pledge must be held by an unaffiliated third-party custodian in an amount at least equal to 105% of the cash funds on deposit. During our review of collateral, we noted that just over $100,000 of a bank account's balance of over $350,000 was uninsured and uncollateralized at June 30, 2025. The amount uncollateralized by Rule 2012A was approximately $105,000 or 105% of the amount not covered by FDIC insurance.
The deficiency was caused by an abnormally high amount of War Memorial Stadium funds on deposit at year-end and accounts where the combined balances would typically be lower than the $250,000 FDIC coverage. This concludes the findings for the Department of Parks, Heritage, and Tourism. Agency staff are present to answer committee questions. Agency staff,
Representative Steve Unger
Unverified
5:12
would you come forward, please? and would you please
introduce yourselves Suzanne grab Meyer chief of
Suzanne Grobmyer
Unverified
5:33
staff for the Department of Parks Heritage and Tourism Jamie
Jami Fisher
Unverified
5:37
Fisher CFO for the Department of Parks Heritage and Tourism committee do you have
Representative Steve Unger
Unverified
5:42
any questions on these reports go ahead I'm just wondering
Representative Stephen Meeks
Unverified
5:51
if you can give us an update on that hundred thousand dollars that's not been collateralized as soon as we were
Jami Fisher
Unverified
5:59
notified that it was not collateralized we reached out to the bank and have corrected that and it is now securely collateralized perfect
Speaker 32
6:06
Thank you. Representative Burks. You say in your response that you're going to more periodically check and look for fluctuations, periods where it might be larger. What would be some examples of that? Like you mentioned here, at the end of the year, there was a war
Jami Fisher
Unverified
6:26
memorial collection. Each of our parks have their own individual banks that they make deposits into locally, as you might imagine. And so if there are periods where there's an increase in activity or events, When we're doing those monthly reconciliations, we would take note of that and make sure they're properly collateralized.
Speaker 32
6:41
Okay. And then what period have you increased? Periodically, how have you increased the period of looking at that? Monthly. Monthly, yeah. Yeah, some of these accounts
Jami Fisher
Unverified
6:49
were created prior to our being in the positions, so this was one of those. Gotcha. Thank you. Representative
Speaker 39
6:57
Rose. Thank you, Mr. Chair. I'm over here on your right. Just
Representative Ryan A. Rose
Unverified
7:02
to, and I may have missed it, but it sounded like with the finding one, the payroll that was incorrectly paid to some, if I read it correctly,
somebody that was impersonating an employee, do you know if there's been legal action taken on that or what's
Jami Fisher
Unverified
7:18
transpired? I think an attempt was made by Office of Personnel Management to recall the funds that were deposited to that incorrect, erroneous bank account and were not able to be recovered. And because of the nature of how it was handled, they were unable to prosecute or do any sort of, you know, repercussions because they don't know
Representative Ryan A. Rose
Unverified
7:37
who the bad actor was. So the belief is that it was not somebody inside of, like, not an actual employee, but it was somebody who was impersonating not from the inside but from the outside.
Representative Steve Unger
Unverified
7:49
All right. Thank you. Thank you, Representative Ruff. I do have a question. On page four, bullet point number one, liabilities were understated by a lot of money, and accounting for me was a long time ago. Is this a pen and pencil mistake, or is this a computer program mistake? Oh, I'm sorry. My bad. I have gotten ahead of myself.
Senator Jimmy Hickey, Jr
Unverified
8:22
Committee, do you have any other questions on this? go ahead senator uh yes you know i don't i'm sitting there listening looking at this and hearing what
you're saying about you are going to do periodic checks you know i don't know if that's enough i mean we have a state law that says you're not supposed to exceed it so i don't know that a periodic check and then you all of a sudden say no we are exceeding it is the correct way to do it so i guess from my standpoint you know when i know you know when i was in banking for quite a
few years and of course you know we had to whenever the cities and the counties or the school districts you know pledge those or had those excess funds there you know we had to pledge that collateral so I guess maybe if you don't mind instead of the periodic checks what are you doing to make sure it's not going to happen at all because I like I say I
Jami Fisher
Unverified
9:22
think it's state law yes sir I think it's it's challenging because those balances do fluctuate I think an
analysis of all the accounts and their collateralization is probably you know in order we do we do typically those balances do not exceed the 250,000 FDIC limits so this was kind of a rare
Speaker 53
9:36
occurrence and that they would exceed that amount at these local banks like in this instance so how are we
Senator Jimmy Hickey, Jr
Unverified
9:43
gonna keep it from happening I mean not not however might catch it but how are we going to make a hundred percent sure that it's not that's that's not going to happen i mean i don't know if you get with the bank somehow they code the screen that says you know you only have
available deposits you know up to this before you you know they have to pledge more collateral that's not really the way to do it but like i say i don't i don't know with just a periodic check i don't i don't think that's sufficient so it's you need a you need a procedure and a process in place that does not allow this to happen at all because that's what we're requiring of all of our local you know institutions cities the counties school districts and all you all I don't think can can be above them on that thank you
Representative Stephen Meeks
Unverified
10:37
representative meeks yeah back to me that technology chair so this
impersonation of a state employee was this a cyber breach that they were able to get into the system did someone file false paperwork how did how did how was this false employee even created to get to the direct deposit i think it was
Jami Fisher
Unverified
10:58
an it didn't come to our department it went to office of personnel management with the centralization of HR services. And so it's my understanding that it was an email account that appeared to be similar to the employee's name. They had the correct form that is required for
the submission of a change of a bank account.
Speaker 31
11:15
And so the employee there at OPM felt that that was an accurate request for a bank account
Representative Stephen Meeks
Unverified
11:21
change. That's my understanding. Okay. So somebody who was somewhat knowledgeable about how we operate sent an email in to OPM. OPM didn't check, I guess, and someone got two and a half thousand dollars from us are there procedures do you know i know you're not with opm but um and i don't know maybe we need to have ask opm this but to make sure that
there's checks and balances with y'all to make sure that that doesn't happen again and if you don't know the answer you don't know the answer i'm you know but we
Suzanne Grobmyer
Unverified
11:53
we don't know the exact answer um for their processes but we are meeting with them on a monthly basis to determine how we can continue to work in the transition of this and this was at the beginning of that transition okay all right thank you representative rose
Representative Ryan A. Rose
Unverified
12:12
yes thank you and sorry i kind of stewed on
this i didn't didn't want to say it at first but more i've thought about it um i recognize it looks like back to item one finding one that you guys tried or implementing some safeguards and protections but I guess what just doesn't sit so well with me is that we we had this near $2,400 that was just stolen compromised and there's no repercussions there's no answers and I'm not saying that you're you're nonchalantly just moving past it but I would think we would want to make sure that we we don't let that happen moving forward that it's just not okay well it's done
over said and done with we've reported it and we've done our due diligence
Suzanne Grobmyer
Unverified
12:53
does that make sense absolutely and and we we agree
Representative Steve Unger
Unverified
12:57
all right all right thank you seeing no other questions I make a motion that we defer this report till later and ask you all to come back and answer some of the questions that were ask I meet a motion for that to defer I need a second to defer excuse me I hear
a second all in favor say aye all opposed please come back and see us again
Speaker 17
13:38
thank you thank you The last report with findings is the Treasurer of State FY25 report which contains one finding. We identified that the office did not have the policies and procedures in place to ensure the financial effects of certain fiscal year-end activities were appropriately recorded.
As a result, we noted the following, liabilities were understated by almost $331 million related to changes made by Act 1017 of the 2025 regular session, which required certain treasury investment earnings to be distributed after fiscal year end. Because the activity was authorized and known about prior to year end, a liability should have been recorded. Also, liabilities were understated by $4.2 million related to monies placed in the county aid fund at year end that were not distributed to counties until after fiscal year end. Because the activity was authorized and known
prior to year-end, a liability should have been recorded. The net effect of these misstatements was an understatement of liabilities and an overstatement of fund balance, totaling almost $335 million. Upon notification, the office agreed with the proposed adjustments, which are reflected in the accompanying financial statements. This concludes the finding for Treasurer of State. Office of Treasurer's staff are present to answer committee questions. Representatives,
Representative Steve Unger
Unverified
14:51
would you please, the agency, would you please come forward and identify yourselves?
Speaker 64
14:56
yes Michael Harry chief compliance officer and director of government affairs
Representative Stephen Meeks
Unverified
15:19
committee do you have any questions representative Meeks just verifying that based on your response y'all concurred that they should
have been done it was just a timing error and we're good going forward is that correct that pretty much
Speaker 64
15:35
the story here yes sir it was it was mainly a notation error all the funds were transferred on time as per the law it was just noted it misnoted actually so nothing nothing was delayed as far as funds getting where
Senator Jimmy Hickey, Jr
Unverified
15:57
they need to be senator go ahead just just if you don't mind mr. chair the to staff was that correct in the funds and everything were they were transferred on time that this
was just a failure as far as a bookkeeping that is correct okay the law
Speaker 20
16:11
change changed the date that those funds were supposed to be transferred from the last day of the fiscal year to September 1st the timing in that is what okay required that but the transfers were made on time all right thank you sir thank you yes committee
Representative Steve Unger
Unverified
16:29
do you have any other questions seeing no other questions I move that we accept this report could have a second all in favor say aye all
Speaker 67
16:43
opposed thank you sir thank you mr. chair thank
Representative Steve Unger
Unverified
16:51
you members before I let you go the next meeting is going to be on September 10th and we are adjourned
Agenda
A. Call to order by Chairman.
B. Adoption of minutes of the June 4, 2026 meeting.
C. Review of reports. (Refer to the Summary)
D. New Business. The next meeting will be held September 10, 2026
E. Adjournment.
Documents
No documents posted.
Speakers
Speaker 5
Speaker 6
Speaker 9
Representative Steve Unger
Unverified
Speaker 17
Suzanne Grobmyer
Unverified
Jami Fisher
Unverified
Representative Stephen Meeks
Unverified
Speaker 32
Speaker 39
Representative Ryan A. Rose
Unverified
Senator Jimmy Hickey, Jr
Unverified
Speaker 53
Speaker 31
Speaker 64
Speaker 66
Speaker 20
Speaker 67