Legislative Joint Auditing
Video
Transcript
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
Remembers if you'd have your seats we're gonna get started with the legislative joint auditing committee of Friday June5th. I called
a meeting to order chair sees aorum first item on the agenda is the adoption of the March 13,2026 minutes. have a motion have a second
any discussion all those in favor let it be known by I. any opposed? All right
motion carries. Next up are the adoption of the exec reports of the executive and standing
committees first up my trustee cochair will do the report for the executive committee
Representative Robin Lundstrum
Unverified
6:52
thank you the executive committee met Thursday June4th and adopted the minutes of the meeting held March 12,026 staff reported to the committee the audit and special report scheduled to be presented to the standing committees and the full legislative audit committee this month.taff also noted that one committee requested report that is outstanding and currently in progress in new business the committee approved a request for staff to perform the city of
Horseshoe Brann annual financial audit other business legislative auditor Kevin
White updated the committee regarding the Arkansas legislative audit interngrame. Mr. White informed the committee that this is the 2nd summer of the program and the interns would be attending the standing committees with no additional business to discuss the meeting was adjourned the next meeting of the committee will be scheduled for Thursday august 13,2026 or at the call of the chairs. I move for adoption of this report. Thank you Representative Lundstrom. we have a
motion do we have a second? any discussion
if not all those in favor let it be known by
I. any opposed motion carries. Next up is the standingittee on countunties mun municipalities and Senator Stone is going to read that report the committee
Senator Matt Stone
Unverified
8:15
adopted the minutes of the meeting held March 12,2026. the committee was updated on the
status of December31,2022. delinquent private water and sewver audits. The28 entities turnback funds for reinstated after all required reports were submitted the committee was also updated on the status of December31,2023, delinquent private water and sewer audits of the65 delinquent entities,61 have filed the reports since theljack meeting held on July10,2025. The committee was notified that afterta's follow up visit to the towns of Denning
and Gum Springs, the towns are now in substantial compliance with the with municipal county law officials from the town of Om were present to address substantial noncompliance with municipal county law the committee approved a motion to give officials of the town of Ulm and Fargo60 days to reach compliance with municipal accounting law is required under Arkansas code annotated 1459117. Officials for the towns of Jericho and Haines were present to address questions regarding
failure to meet requirements of their approved plans for repaying misused street funds the committee voted to defer this reports until September Officials for the Pulaski County Regional solid waste Management district were present to address questions regarding a previously deferred special report. The committee voted to defer this report until September the committee reviewed 24 deferred reports,215 current reports officials for six entities were present to address repeated findings
15 previously deferred reports were filed and 9 were deferred of the 215 current reports reviewed 13 were referred to prosecuting attorneys and the attorney general3 were certified to the government bonding boardard and the committee filed 207 current reports and deferred 8 reports to allow officials to answer questions and provide additional information at a future meeting move for the adoption of this report. Thank you Senator Stone you're
welcome we have a motion do we have a second? have a second any discussion if not all those in favor let it be known by a any opposed motion carries Next up is the standing Committee on Educational Institutions and senator dees will be presenting
Senator Tyler Dees
Unverified
10:49
that report Thank you Mr Chair emb ers theducationalstitutionsittee met Thursday June4th,2026 and adopted the minutes from the march meeting 103 education
audits audit reports were included on the committee's agenda for review. There were 89 audit reports with no findings and 14 reports with findings officials from thecamden Fairview school district and forre City school district were present to answer questions from the committee related to the findings and their respective audit reports which were deferred from the previous meetings the audit reports from the conway school district magnolia School District and westside school district of Johnson County contain findings that were certified to the governmental bonding boardard and referred to the applicable
prosecuting attorney and attorney general. The audit report for Boone Boonville school district contained a finding that was also referred to prosecuting attorney and attorney general. the committee filed 103 audit reports that were brought before it. Mr Chair I move for adoption of this report. Thank you Senator deeses. do
we have a second? right. any discussion? if not all those in favor let it be known by a any opposed motion carries next report is the standingittee on state agencies and I believe
Representative Steve Unger
Unverified
12:02
Representative Unger or Representative Brown is going to present that Ports were on the committee's agenda yesterday the following findings related to the department of finance anddministration were presented the agency had a piece of equipment stolen disallowed expenditures of a federal grant awards and un unauthorized bank transactions.arious agency staff members were present to report on how the agencies intended to
address the audit findings and answer the committee's questions. during the meeting the committee filed 13 reports. The committee deferred the report regarding sexual risk avoidance education federal funds at the department of healthalth to the august meeting Mr chairir, I move that we adopt this report thank you Representative unger. do we have a second?
Any discussion if not all those in favor let it be known by I any opposed motion carries all
right, moving right along. next up on the agenda is the review of a couple three reports but a couple of rather lengthy reports and a long after the the agenda was posted we have a two ppage summary provided by DF andA that is up here if
you would like that would go along with with these reports that are the finan financial highlights, but not to distract from the reports at hand we will go ahead and go through with that but they're available here
at the at the desk first up is the state of Arkansas annual comprehensive financial report for the fiscal year ended June30th,2025. it was early released on February3,2026 and to present that is Missrie Sanders. Thank you Mr Chair. This presentation covers the audit
Speaker 25
14:00
of the state of Arkansas's annual comprehensive financial report or ACFA for the year ended June30,2025.
The25 aver was completed by the staff of legislative audit and the deadline for filing the act for was December31st,2025. However, an extension was granted to the department of finance and Administration so the report was dated February 2nd, an early released on February3. legislative audit issued two reports for the audit of the state's financial statements. The first is the afer which includes all of the financial statements and notes to the financial statements for the year as well as our independent auditor's 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 federal financial assistance which Melanie Dozier will cover next. the adverse financial statements which were prepared by DFfa include the following entities all state agencies, retirement systems, higher education institutions and the three component units included in the act for are the Arkansas
Development Finance Authority or ADfa. the UFA Foundation and the UFA Fayetteville Campus Foundation. Legislative audit issued unmodified or clean opinions on the state's 2025 ACTA. we audited all of the financial statements included within the actc for except for the following entities which were audited by private accounting firms. the three component units the u of a medicalicalciences and the revolving loan funds, the two
largest revolving loan funds are the construction assistants and the safe drinking water revolving loan funds. These revolving loan funds are administered by Afa. There were two reportable findings that are considered to be material weaknesses related to the aCA. These findings are included in the single audit reporting package as financial statement findings and in the schedule of findings and question costs and they will be discussed later though in this presentation. First I will touch on some of
the financial highlights of the state's 25 ACA. the next six slides relate to the primary government of the state the financial information on these slides do not include the state retirement systems which are included later in the presentation. as shown on page 18 of the AcA report, the state had total assets at June30,25 of approximately41.9 billion dollars the major categories of these assets include cash and investments of 15.8 billion
capital assets of 22 billion net receivables of2.9 billion and other assets totaling 1.2 billion. the state's total liabilities were 11.1 billion as shown on page nine of the report. the major categories of the state's liabilities include bonds, notes and installment agreement payables of3.3 billion the net pension liability of 2 billion other postemployment benefit
obligations oropEB of1.5 billion and other liabilities of4.3 billion which some of the significant ones are the claims judgements and compensated absences and then accounts payables This chart shows the trends regarding the state's assets and liabilities over the past five fiscal years. The6.4 billion dollar increase in assets from fiscal years 22 to25 was largely due to a3.6 billion dollar increase in investments
also in 25 there was a $1.3 billion increase in construction and progress at the Arkansas Department of Transportation. Overall lux liabilities have fluctuated slightly over the past five years with the main factor for these changes being the decrease and increase in net pension liabilities. the state had total revenues of30.7 billion as shown on pages 22 and23 of the report the major categories of the state's revenues include grants and contributions of 12.9
billion which most of this would be like federal grants taxes of 10.4 billion charges for services of5.5 billion and other income of 1.9 bill the state's total expenses was $28.4 billion and the major functions or programs making up these expenses were health and human services of 11.6 billion colleges and universities5.5 billion. Education4.9 billion
general government 1.6 transportation 1.4 laww, justice and public safety 1.2 billion and other expenses of 2.2 billion. This chart shows the trend of the state's revenues and expenses over the past five fiscal years. the $1.3 billion increase in revenue for fiscal year 25 was mainly the result of better returns on investments, additional federal funding for Medicaid and increased revenue from patient services at UAMS.
the increase in expenditures is due largely to the increase in medicaid funding. The next5 slides provide financial information regarding the state's retirement systems as shown on page 35 of the report the state's retirement systems had assets at June3025 totaling39.9 billion dollars. the major categories of these assets were cash of 800 millionvestments of37.3 billion.
Securities lending collateral 1.6 billion and other assets of 200 million. the retirement systems had liabilities totaling 1.7 billion, which is also shown on page 35 of the report The major categories of these liabilities were obligations under securities lending of 1.6 billion Investment in principal payment of not payable of 90 million and other liabilities of55 million. this chart shows the trend of
the retirement system's assets and liabilities over the past five fiscal years. the change in assets over the past five years was mainly due to changes in investments due to market fluctuations. there has been a steady increase of6.8 billion dollars in investments over the past three fiscal years. liabilities for the retirement systems experienced only slight fluctuations over the past five years. not reflected on this slide is the net pension liability related to these retirement plans
net pension liability is an amount created when the promised retirement benefits owed to employees exceed the current market value of the pension plan's assets. The retirement systems had total additions of4.9 billion dollars as shown on page 36. The major categories of these editions include contributions of 1.3 billion net investment income of3.5 billion Other editions of4 million
deductions totaled $2.5 billion with benefits paid to retirees being the main component. this last chart shows the trend of the retirement systems additions and deductions over the past five fiscal years. the primary reason for the variation in additions or revenues over this period was the fluctuation in the market value of investments from year to year. Investment income increased from 2022 to2024. However, total investment income decreased slightly in fiscal year 25 compared to the prior year
the decreases were at teacher retirement system in state highway employee retirement system. the deductions for the retirement systems were steady over this period and considered consisted primarily of benefit payments. as previously mentioned, we issued two findings first, internal controls at the office of State Technology or OST were found to be insufficient to monitor threats which caused a security risk and made the servers vulnerable to unauthorized access.
Once notified of the deficient internal controls OsT began implementing measures to address security risks. we recommend that OST continue implementation of a logging system and subsequent monitoring for its threats and unauthorized access. the second finding was for the division of workforce Services DWs which changed its methodology for calculating the year end estimates for allowance for uncollectible accounts related to unemployment benefit payments these changes were not justified
nor were they properly filed with DFA Office ofccounting. DWS also failed to maintain the proper documentation used in the preparation of its estimates DWs changed the methodology for its calculations for both the total receivable due back from the overpayments to benefit claimants and the related payable due back to the federal government this change in methodology would have resulted in understatements ranging from anywhere from 12 million to57 million for receivables and from 8 million
to 29 million for payables. an additional allowance for an uncollectible accounts estimate is also prepared to reduce amounts due from judgments and bankruptcy lian against the state's employers. the difference between the two methodologies resulted in the allowance amount being understated by 100,000 which overstated receivables by the same notification of these potential misstatements correcting injuries were made in ACces thus also in the state's ACTA.
we recommend the state work to improve its controls over documentation and related calculations required to book year-end accounting entries. Mr Chair, this concludes my presentation and agency representatives are here to answer committee
questions Thank you Miss Anders. quite a comprehensive report do we I'm gonna, I'm gonna make a call here and let's go through the
next report and then we'll discuss any questions if
that's OK. right. the next report is the state of Arkansasingle audit report for the fiscal year ended December31st or June30th,2025, which was early released on March30th,2026 and Miss Melanie Dozier will be presenting that.
Speaker 32
25:11
Thank you Mr Chair. This presentation covers the state of Arkansas single audit report for the year ended June30,2025. the staff of legislative audit completed the statewide federal project which was finalized and submitted to the federal government by the end of March 2026. the single audit act requires that the audit of the state be conducted to meet ive objectives. First is to determine if the financial statements of the state are
fairly presented. Miss Sanders addressed this objective during her presentation. Second is to determine if the schedule of expenditures of federal awards or CIFA is fairly presented We determined that the 2025 CIFA is fairly presented and is included on pages 86 through 138 of the report. Third is to determine if the state has complied with laws, regulations, contracts and grant agreements that may have a direct and material effect on federal awards
ourth is to obtain an understanding of internal controls over federal programs fifth is to plan and perform testing of internal control over compliance for major programs. state agencies and state supported institutions of higher education disbursed federal funds totaling $12.4 billion from469 federal award programs during the 2025 fiscal year. this was an increase of
approximately 133 million from 2024 largely due to new federal programs authorized in a continued response to the COVId-19 pandemic. Based on criteria established by federal regulations 16 major programs were reviewed for 2025. These programs represented67% of the state's total federal expenditures The state departments shown on this slide expended the federal awards received by the state.
The Department of Human Services expended63% followed by the Department of Education at 10%. The Department of Transportation at 8%. The University of Arkansas system at6%. The Department of Commerce at 2% and other state departments at 10 The state received federal awards from31 different federal agencies as shown on this slide, the federal departments of Health and Human
Servicesducation, agriculture and transportation provided 93% of those a It is the responsibility of all federal awarding agencies to review and provide resolution for all audit findings as well as to determine if questioned cost identified by the auditors require recoupment or other adjustment as shown on page six of the report and on this slide $12.9 million in question cost remained outstanding as of
June30,2025. pages 229 through 238 of the report provide the results of our follow up procedures regarding the uncorrected prior audit findings. the audit for fiscal year 2025 resulted in thirty3 findings the two financial findings were previously covered by Miss Sanders. The31 federal findings related to 9 different programs4 findings are 12% were repeat findings which were identified
for two programs administered by the department of Human Services. non questioned costs are reported in 14 findings and totaled $16.6 million. Question costs are identified or defined by federal regulations and are identified by the auditor because of a finding that resulted from a violation of a regulation including funds used to match federal awards, a lack of adequate supporting documentation or cost that appeared unreasonable
Question costs are not considered improper payments until they are reviewed and confirmed to be improper by the federal awarding agency. As auditors our responsibility is to express an opinion on compliance for each major program. based on the results of the audit. 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 noncompliance that is determined to be material either individually or when aggregated with other noncompliance findings in relation to the major program as a whole for the 2025 fiscal year a qualified opinion was issued for findings related to the summer electronic benefit transfer programme for children, coronavirus capital projects fun and childcare development fun cluster these findings are included in the schedule of findings and
question cost located on pages 20 through 85 of the report and are discussed on the slides that follow our findings were issued regarding the summer electronic benefit transfer program for children. This newly authorized program is administered by the Department of Human Services. wo findings contributed to the qualified opinion DHS improperly drew down federal funds in advance and unused funds were not returned to the federal agency timely
d d ition ally financial reports were not completed and submitted correctly non question causes totaled just over5 million dollars. 8 findings for the coronavirus capital projects fun were reported based on review of broadband projects administered by the Arkansas Economic Development Commission, Arkansas Broadband Office. This is a newly authorized program one finding with question cost of6.7 million dollars concerning
a lack of appropriate documentation to support disbursements contributed to the qualified opinion. Two findings were issued for the childcare development fun cluster also known as the CCDf cluster. This program is administered by the Department of Education. One finding regarding inaccurate financial status reports that were also not sufficiently reconciled to the schedule of expenditures of federal awards
contributed to the qualified opinion. No question costs were reported. The remaining federal findings did not result in an opinion modification. These findings will be summarized on the following slides all findings are located on pages 20 through 85 of the report. The remaining findings represent 9 federal programs and four state agencies.4 are repeat findings and question costs from these other federal findings totaled4.9 million dollars
defficiencies in internal control or noncompliance included the following ed er al financial reports for two programs were not properly completed and submitted to federal grantors resulting in two findings subawards for four federal programs were not reported correctly to the federal fundingccountability and transparency Act subaward reporting systems resulting in four findings documentation supporting payments for disbursements from
two federal programs were inadequate, resulting in two findings In13 findings payments were made to providers or recipients who did not meet eligibility requirements or for which eligibility determinations were not appropriately documented in one finding beneficiaries may have received duplicate benefits Additionally in one finding sub recipient payments were made to companies that were not listed on subgrant agreements which
could represent a corporate parentchild relationship. In one instant drawdowns of federal funds were not disbursed timely for one program the subgrant agreements did not specify the required matching amounts in one finding additional expenses were allowed after the project had been closed out. Lastly, for one federal program the agency did not have adequate
controls in place to verify that contractors meant financial deliverables of certain requirements agreements Mr Chair, this concludes my presentation.aggency representatives are present to answer committee questions. Thank you, Miss Dozier. I wanted
to kind of tie these two reports together for a couple of reasons one they they
actually are related to financial and compliance related matters but the other reason is for
those of you that may not understand or know this this is a major undertaking to prepare these two reports it's a statewide effort systemwide agency wide and and it enclo includes
a lot of cooperation and I know it doesn't happen easily and as a matter of fact, Kevin would you like to speak on this and and the task and and share your thanks for the cooperation absolutely thank you Mr chairir
Speaker 40
35:03
yes as the senator stated these two are very large reports with a lot of information. it takes a significant portion of legislative all the staff to get these reports done. They're important in considering that the first one relates a lot of times to the bonding and the bond rating for the state of Arkansas and making sure we get those out timely and it's again financial statements for the state of Arkansas and then the other one deals with the federal awards and federal funds we get to make sure we continue getting those federal funds each year to accomplish these reports it's done in conjunction with all of these individuals
you see out in the audience plus others from the executive branch and they work very well with us in the completion of these reports. it's it's a team effort. it takes us working together to be able to get these done and get them done timely. I always appreciate the opportunity to say thank you to my staff who spends the time on getting these two reports done as well as the executive branch assisting and helping make it happen. thank
you Kevin and and I too would want to express my thanks to first of all to you for for leading legislative audit and to your staff but also
the agencies and and other individuals included in in this process with that
being said, I know there are a lot of items that were discussed there are likely questions but my co-chair had a suggestion with why don't you just go ahead and share what what your thoughts
were and we we can we can work either way but would you
share your thoughts on this?lad to this report is significant. I
Representative Robin Lundstrum
Unverified
36:34
think it gives us a great overview I think it needs to be digested I realize it came out during fiscal session and a lot of us are just now getting through this if you can see mine you can see all the little postst-it notes where I've had questions I realize that some of you are just now getting through this and may have additional questions I would ask that we not pass over this to or pass over this today and finish this in august and not take a vote on this to give us more time to digest all this stuff think it's incredibly important material
OK thank you Representative Liundstrom. we also have some some
findings in question cost and items in there that in your standing committees we we take seriously and we review and so with with that it looks like there are several in the in the queue are they specific to reports or are they to the motion or the suggestion bypresentative
Luundstrom. we hear a motion there was a motion
Representative Rebecca Burkes
Unverified
37:44
I don't know that we use the word motion but that that was the motion to to pass over correct my thought is we don't take a vote on this
Representative Robin Lundstrum
Unverified
37:52
today if we want to start asking questions that's great because because I know there are questions out there but that we at the end we hold it over to August to give people just a little more time to review this. it's very significant. so that would be my motion that we not
take or pass this on until after the august meeting.
there's a second from Senator deeses so we have a motion in a second any discussion on
the motions discussion discussion all right
Representative Howard M. Beaty, Jr.
Unverified
38:20
you're lit uppresentative beatty you guess my question is we're gonna have discussion today among the members that are here and then we're gonna have discussion again in August and and I mean and replow the same row
I I think the motion was to not have any discussion
today but to passover discussion until August. so it's only discussed once. I see a lot of ikes lit up
Representative Howard M. Beaty, Jr.
Unverified
38:47
in in this room so I would encourage to go ahead and have discussion today cause some members may not be in attendance in August and this report's been out since what March? yes sir this report came out in March unfortunately it was doing fiscal
Representative Robin Lundstrum
Unverified
39:01
session and lots of folks haven't had a chance to truly digest it. it deserves to be
thoroughly digested if it it's with the will of the body if if people have questions I think we hear those and we can conclude the discussion in
Representative Howard M. Beaty, Jr.
Unverified
39:19
august. well that that that's all I just wanted to clarify and and and make certain. Thank you. right thank
youpresentative all right well we will go through the discussion queue then and we'll start with senator Love.
Senator Fredrick J. Love
Unverified
39:34
thank you Mr Chair. can we have someone from DHS Comor. I wanna talk or discuss the
EBTue cost in the in that program could you repeat that? I'm sorry we were discussing someone fromdHS come forward because I wanted to to discuss
the EBT program and then also have a question about the broadband right. thank you Senator Love
Speaker 74
40:03
and first of all before that I think we need to button up the the motion to hold over any
discussion looks like we've started down that path. So, you just rescind the
Representative Robin Lundstrum
Unverified
40:28
motion I'll withdraw the motion and take it up at the
proper time. now moving on thank you if you would introduce yourself for the record. good morning. I'm Mary Franklin, director of the division of
Speaker 80
40:42
county operations for Arkansas Department of Human Services. brett Hayes
Speaker 83
40:47
chief deputy counsel for Arkansas Department of Human Services we have
a policy of swearing in so if you would stand and repeat after me. 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 right Senator Love thank you Mr chairir. So Miss Franklin
Senator Fredrick J. Love
Unverified
41:16
is recent as last night I was at an was at an event and when we having issues of question cost about this program one thing that has come up is that there's been a lot of missing funds or someone drawing down funds and are these well let me ask first staff is that part of the question cost when we when we talk about funds that may have gone missing may have gone
Speaker 43
41:47
that's that's the question of the staff can
Senator Fredrick J. Love
Unverified
41:54
you tell us what page number you're on I'm not actually onpa on any page number I'm I'm going from the
presentation that was just provided to us OK around the question cost question I
Senator Fredrick J. Love
Unverified
42:10
just I want to clarify is is any of the question cause in regards to funds that may have
gone missing as a result of any breaches or
just or these just funds that have been drawn down and not utilized properly not dispersed not these
Speaker 32
42:28
are not the funds that were fraudulently taken. this is funds that were drawn in advance and
Speaker 91
42:33
they didn't have a cost to go with them so they needed to be returned to the federal awarding agency they were not the same as the
Senator Fredrick J. Love
Unverified
42:43
fraudulent. OK, thank you. So to to then another question of staff how do how
does artie resolve anything in regards to the fraudulence that has been taking place over the EBT programme do you work with with DHS on how do you all work with DHS on that and how's that reported? Thank you Senator Love.
Speaker 39
43:08
theres a a statutory requirement under law that when an official
Speaker 40
43:12
who's over public funds is identified that there's any fraudulent a loss of funds of
$1000 or more they're required to report to us just talking about normal processes at legislative audit when we receive reports those reports become we're notified of those as we are not man as management's responsibility to work through that at the time they keep us informed, they keep us updated with those notifications we include those in the subsequent audit that we do of those entities and look into those matters at that time OK do we have a report do we have any
Senator Fredrick J. Love
Unverified
43:51
reports on on on the past the previous and the current fraudulent So centered up
Speaker 40
43:59
that that's information that's not considered public at this time and that whenever we get those reports it becomes part of our working papers and that is not until the audit's complete that it would be that if the agencies here potentially if they want to discuss so but we do
Senator Fredrick J. Love
Unverified
44:16
we do have working papers on that they privy
just to are they privy to us so that we can review that in consultation with legal counsel? no sir. So then who are they privy to if it's not the body that that is over legislative audit Senator Love the
the work papers are part of the the the the audit that is in process or that will be in process and so the audit it is that audit is in process right
Senator Fredrick J. Love
Unverified
45:03
now when when would that audit be released to the to to us so that we can we can discuss this matter because and and I'm asking because this is this is has been an ongoing issue and it doesn't seem like we've gotten aold of it and so
Speaker 66
45:25
that that's my that's my big concern. you're
talking about the statute the the theft of the EBT OK. specifically to the working
papers statute is is clear that it is it is not available for review and it's not available for public consumption as I read it so but as far as the report and and the status of the audit I don't know if staff has a a thought on that yet.
Speaker 40
46:10
er love any transactions related to anything related to the current fiscal year which we are in fiscal year 2026 right now. that would end June30th, would be part of the DHS 2026 audit we would anticipate that in the I would anticipate around summer of next year. the summer of next year all right great
Senator Fredrick J. Love
Unverified
46:34
thendhS I have no further questions for you but I do have
questions in regards to the broadband. OK, before
we let DHS leave we're going to see if there's any other questionsbody have questions for DHS? I think I saw somebodydy waving was atpresentative 80. OK. Representative beatatty you're up thank you Mr chairir. I I guess my questions go back
Representative Howard M. Beaty, Jr.
Unverified
47:05
when I when I get an audit I always go back and look at the unresolved or previous findings
and in in our packet I guess that starts on like page229 and then they just kind of give a summary of all all the unresolved audit findings from 2025. starting on page well not page number but in the actual report they're 1,2,3,4,5,6 different findings with DhS that are showing unresolved I think it starts maybe on page 178 and I was just seeing if you had a response for
those unresolved findings from the 2025 audit Did you say page178
Speaker 109
47:58
represented think that's the first at the back
Representative Howard M. Beaty, Jr.
Unverified
48:00
of the of the report starting on like page230 it goes through the unresolved and it and it gives a status finding at the bottom either corrected or uncorrected or partially corrected
and it's uhdHS I think the outstanding says it's page 178179 with foster care is the first one that's showing uncorrected or partially Yes, so this
Speaker 83
48:42
this finding was would have been corrected in
July of 2025 training was completed with the DCfS and managerial accounting staff on this finding so it's it's
Speaker 114
48:56
been closed for since the beginning of this past fiscal year. OK well on
Representative Howard M. Beaty, Jr.
Unverified
49:02
on the summary table on page 234 it is it is clearly stating partially corrected so that was my question is what is still outstanding on that item or is it noted that during the time of production of this report that this was as lengthy as this
is that that was one error in the
Speaker 117
49:24
report yes I I believe that when it was
Speaker 83
49:29
when the report was completed it would have been partially corrected but then when legislative audit reached out to the agency for an update so as of there would have been31 days into this fiscal year where it was partially corrected and then it was completed at the end of
Representative Howard M. Beaty, Jr.
Unverified
49:56
it shows us partially corrected OK can can staff upon to that if
Speaker 38
50:05
that's an accurate statement or thank you Representative beatty
Representative Howard M. Beaty, Jr.
Unverified
50:08
that is a correct assessment by Brett Hayes. all right next item is page 185 and 186 I think that's dealing with adoption assistance
Speaker 83
50:23
Yespresentative, this is the same issue when legislative audit reached out to us at the beginning of the audit period. it was partially corrected and then in July of at the end of July we completed the
Speaker 114
50:36
training with the DCfS and managerial accounting staff to close this finding out
Representative Howard M. Beaty, Jr.
Unverified
50:42
OK? next one is 189 through 191
and that's dealing with theIP programme
Speaker 83
51:02
so these are related to our provider enrollment process and on this year's audit report you will notice that those are repeat findings they specifically relate to the revalidation process that we go through with all of our providers on a five year rolling basis
the specifics related to these findings were that we would have providers that would start the revalidation process before the deadline the deadline to revalidate them would pass and we were still in the process of working those revalidation applications because maybe the provider had failed to submit some required documentation and that put us past the revalidation date that we're required to meet by federal law so what we've done in this audit
cycle we've updated our process to move the revalidation date in our system60 days up so that we can work through any issues that we have with providers and that if somebody is past that revalidation deadline if a providers
Speaker 123
52:14
pass that deadline we would terminate them. I
Representative Howard M. Beaty, Jr.
Unverified
52:18
guess the next one is page 194 and 195 with the medical assistance program
Speaker 83
52:30
So this relates to payments that are made related to incarcerated juvenile juveniles and so I believe there's gonna be a repeat too yeah so the the process here it's it's a timing issue so the I think ty I think near I think 95% of the the juveniles that
legislative legislative audit identified in this finding have Ss medicaid so what that means is SsA they have their own eligibility system that is separate from DHS's eligibility system their eligibility system controls whether or not that case remains open in all of these cases we have reported their incarceration status to SsA in a timely manner the issue is on their end
getting those cases updated so if if they don't get the cases updated timely mosts like I believe 99% of these payments are capitated payments so it's a timing issue. Thecapitated payment has gone out the door before SsA updates their system and then what it will show is that there was a payment that was made after the incarceration date so we have a process in place on the back end to recoup any of those payments
that went out the door after their incarceration date. We do that on a quarterly
Representative Howard M. Beaty, Jr.
Unverified
54:10
basis OK we we made a little need a little more information on that the the the systems don't communicate with each other so this is like a you send a file in once
Speaker 83
54:21
a month or or something along those lines we we
Representative Howard M. Beaty, Jr.
Unverified
54:26
notify them about each individual case next item is 202 and204 we just went over that 1 205
and207 this is the last one and may be the same case this is
Speaker 114
54:39
also a repeat finding yespresentative beatty this is the same issue related to
Representative Howard M. Beaty, Jr.
Unverified
54:43
provider enrollment. OK well that that's the only reason I brought these up they were still showing on the on the form is no corrective action taken or partially corrected and if you look through everything that on there that's the majority there are very few I think there's maybe one other that that's showing on here is partially not corrected
I think that's 218 and219. one other and that I think that same thing with the map so that's probably covered in your explanation but but everything else from the outstanding of 2025 was showing corrective except those issues so just wanted further clarification
Thank you Representative beatty. Uhex up representative Richardson.
Speaker 129
55:39
thank you Mr Chair that man is actually for the
office of Technology OK uhpresentative Mayberrry OK skippings
representative Rye is your question for DA fordHS ok you're recognized thank you
Representative Johnny Rye
Unverified
55:57
sir let me ask you this y'all is there a possibility that the funding from federal coming into us anticipated funds
is there sometime a difference Miss Mary between the anticipated funds and the actual funding
Speaker 109
56:20
that comes in are you are you talking specifically about the summer EBTro the fed so the finding was because when we implemented the new summermer EBT program which provides for $120 benefit to eligible childrens to be used during the summer it's delivered on an EBT card
the same as for snap and for the whole summer the benefit is 120 when we implemented the program we funded the entire $120 not knowing when the families would redeem those benefits they might redeem them at all at one time they may wait till later in the summer they may partially redeem them throughout the summer and so we mistakenly just funded those benefits so that as the
family shopped the benefits to reimburse our provider would be in our bank account what we have learned and have since corrected and are doing it correctly for this 2026 summer EBT cycle is we are doing it based on a report from our EBT vendor of what benefits were redeemed the previous day. so now we are drawing funds as the benefits are redeemed and then we are wiring them to the EBT vendor rather than holding them in an
account, which is what we had done wrong
Representative Johnny Rye
Unverified
57:47
in the past yes ma'am follow up please but Mary let me ask you this from the time that you actually turned you know your funding loose from the time that you actually set this up maybe with the federal government maybe six months beforehand or something like that is there is there a time period that's actually separated there that would make a difference in the amount of that we're auditing so
Speaker 109
58:15
because we drew the funds in advance and not everyone spent their funds. there were funds that had to be returnedummm EBT also has 122 dayy benefit period those those funds are only good for that amount of time and then their expunged meaning no longer accessible to be spent and they're you know returned to the government so we did have excess funds in our account. we had drawn them early, which we should not have done. and then we had leftover money because all the benefits weren't
Speaker 80
58:47
spent and we needed to return them to the federal government and we have done that we have returned
all the funds to the federal government thank you thank you Mr chairman thank youpresentative Rye. Senator Deeses, I think you
Senator Tyler Dees
Unverified
59:04
said you had a question for staff and maybe someone
else thank you Mr chairir. I I think broadly asking as as we've we've already said this is a significant report and the single audit report
and when it was stated we have 12 billion on469 federal programs I think it was said that we've only dove into 16 of those significantly and I think what I'm asking is when I hear from constituents about concerns that they see and read and and watch in Minnesota and California with waste and fraud and abuse on different programs federal programs that are being audited by the states
if if I heard that correctly if there's469 federal programs with $12 billion and we have 16 in this report that we double clicked and really really audited extensively there's just some concerns that are we missing anything with400pl programs that are out there and so I think that's my first question to staff is how detailed we are and it this is extensive but if we're still missing400+ programs I I think I wanna make sure I heard that correct or understood that first.
I let staff comment on that but but you're getting really really deep in the technical weeds good question. but I don't think that it is the
fact that they're looking at some and not at others looking at some deeper and some not as deep. I think it more has to do with the the the the audit standards and what's considered a major program but I'll let the experts comment on that thank you senator Petty and senator dees yes you're
Speaker 40
1:00:55
you're the determination of which of the major programs we look at that is to defined by federal regulation. they identify for us and then walking through the amount of expenditures which programs we have to look at which programs need to be audited on an annual basis and they provide us some risk assessment procedures as well I would say that you know also is just for contextual purposes those 16 programs did represent about67% of our total federal expenditures as well but there's so specifically then on the
Senator Tyler Dees
Unverified
1:01:27
childcare development fund clusters I think those have caught a lot of attention nationally so I maybe specifically my question is on the ones we did audit in that category for childcare are does that mean we are physically sending leg audit teams to service providers to ensure services are are provided correctly. are we going directly are are there are there human beings going to these childcare providers thank you senator dees a great
Speaker 40
1:01:58
question. So the work that's done by legislative audit on that program in particular is defined by the a compliance supplement that's something that the feds put out every year for us to what to go audit that going all the way to that level is not part of what's covered in the course of
our review. thank you Thank you Senator deeses. good question. uhpresentative Mayberry you said you were some other agency OK.
senator Love are you still waiting for your next agency all right. Anybody else with
DhS before we let them leave the table. if not thank you thank you for your responses
Glenn howie state broadband director OK. I representative Mayberry I accidentally knocked you out it's not this one. OK. all right. and members
if you would just to to kind of speed things along if you would if you have a specific question about a specific page if you would give us that page number so those at the at the table there are or staff can find
those quickly. that would be appreciated so all right if you would if you would state your name for the record and then we're going to swear you
in. glenn howie state broadband director all right if you would stand and repeat after me, 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
Senator Fredrick J. Love
Unverified
1:04:17
Senator Love thank you Mr Chair. Now Mr Chair, I do not
have a number because I'm just going off the report that was just given but Id I had a question because there was a disbursement of6.6 million dollars to a vendor and my first my first question is that now we do have a we do have a
guideline it's it's is to far as far as vendors getting reimbursed for the work that they're doing in I'm just curious about how this one vendor slipped through the cracks. so can you walk me through can you walk me through that? Yeah I appreciate that senator and firsts I
Speaker 151
1:05:04
do want to say that you know our team worked well with with legislative audit and we fully appreciate the work and the job that they do to bring transparency to government is very important and'm I'm glad to be able to
provide some clarity. So the6.6 million in question here that you're referencing senator really it was not one provider on this one they reviewed I think hundreds and h und re d s of invoices on this particular thing that they looked at right and this constitutes6.6 million dollars in total over I think 212 different invoices OK to to multiple providers and and I think the clarity that I would like to to bring today is that you know for every
single dollar here the the6.6 million dollars right we have a documented invoice and proof of payment for every single dollar that this is referencing what there is is a little bit of a difference in interpretation as to how detailed a particular invoice needs to be right so it's you know multiple providers and hundreds of invoices that exist that they reviewed right with proof of payment for activities that took place in the build out of projects OK and there's just again
difference of opinion between our office and audit around specific levels of detail within a an invoice that we that we received so so then I'm gonna ask
Senator Fredrick J. Love
Unverified
1:06:29
youot it did provide you with with what their interpretation was is it was there any corrective action on your part to ensure that we would get the the documentation moving forward. Sure so we
Speaker 151
1:06:41
have of the again of the6.6 million question here we did a detailed review of all
of those as a result of this report when looking at that we think really in actuality it's from our opinion would be about47,000 dollars out of the6.6 that US Treasury may want to take a deeper look with us and this is we've done this with UStreasury in the past so to date when we've engaged with US Treasury around invoices and documentation at least until today it's always been satisfied to US Treasury's you know what they want to see to date we expect that to be the same here OK all right thank you thank you Mr chairir.
thank you senator Love Representative Richardson is this for broadband? OK. Senator Hammerer, is this for broadband? or k man ' s Senator Jamie Scott, is this
for broadband? OK Is your staff question about broadband or
all right you are I think off the hook here so you you're welcome to leave Senator Scott, would you you're recognized thank you Mr
Senator Jamie Scott
Unverified
1:08:08
Chair. my question is I saw on the report numbers by other findings but I didn't see and maybe I overlooked the numbers specifically for us having weak systems that are not protecting like our websites in case of cyber is that what they were trying to say like
I didn't see a number of how much money we lost for having weak structures with I assumed it was like cyber attempts and stuff like that but can you can you provide further clarity or did I misinterpret that I was trying to understand what that specific slide was indicating how we lost money and what that amount might have been overall Thank you. the question
Speaker 38
1:08:57
you're referring to is it is it the finding that's in
Speaker 40
1:09:00
regard to the kind of an IT security issue that we had the OsT in regard to that there's there's not any kind of dollar amount that's associated with that it's basically there's there's a control issue. they need to improve the system and they need to do something better there is staff here from again from that agency to respond to that finding if you had specific questions to help
Speaker 163
1:09:24
with that we've seen at countyle government or other you know
Senator Jamie Scott
Unverified
1:09:28
agencies where they've kind of hacked the page and they have to pay so and so amount to get that information back
Speaker 39
1:09:36
nothing like that that's correct there's no finding in in that you're speaking
Speaker 166
1:09:40
of that type of garden the information that's been
Representative Rebecca Burkes
Unverified
1:09:44
presented today. OK thank you and correct me if I'm wrong this this was determined through the evaluation of the internal controls is
that so there it wasn't it was part of the process of an audit is evaluating your controls and
Speaker 39
1:09:59
and this is a result of that evaluation of the internal controls is that correct yes sir that's correct
Speaker 40
1:10:05
and like I said and this is the state of Arkansas because some of those incidences you may be referring to or thinking of or down at the local level or at those levels
of which would be in separate reports all right thank you uhpresentativelundstrom you
Representative Robin Lundstrum
Unverified
1:10:18
had a question. Yes, being that this is the state of Arkansas and we've noted that these issues have occurred what has been done to stop us from having a cyberattack. what's what fixes have been put in or have they been put in
there was a recommendation but has it been done?
is there someone here from Shared Services that can speak to that question If thank you gentlemen if
you would state your name for the record and then we'll swear you in.
Speaker 174
1:11:03
jayharton, director of officefice of state Technology. Gary Vance
Gary Vance
Unverified
1:11:08
state chief informationcurity officer if you would stand and we'll swear
you in 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 right thank
you would you repeat the question just so we're all on the same page based
Representative Robin Lundstrum
Unverified
1:11:29
on the recommendations, OST needed to have some updates to prevent
threats and unauthorized access what have you done? I'll start off first
Speaker 173
1:11:41
so it wasn't every system it was just a couple of servers within the 1200 servers that we have per view over and so one of the and they were coming to a central logging server they just weren't being forwarded on to the analytics side of the house so we do have those logs if we needed to go back so what we've done is so I've talked I think before a
couple committees we're in the process of implementing ServiceNow which is our IT system management system so what we're doing with that system is we're doing discovery to find all the servers and then we're comparing it against our logging server to make sure
Speaker 174
1:12:18
that we have those all there yeah and and in general I would say what what are we doing to protect ourselves
Gary Vance
Unverified
1:12:29
from from cyber threats and you know that's a that's a big question because as you guys know
the the threat is is prevalent and it it increases day by day we we see you know especially at the local level there's been several incidents that have been quite costly both financially and and from just a disruption of of services in general but it at a state level at the executive branch level you know the there there are core components of things that we have to do to be able to protect our intellectual capital as well as our assets and our data
so you know some of the things that we've done is you know over the past really6 to8 months we've we've implemented an executive branch endpoint detection process where we now have our executive branch use our endpoints and some servers covered by an advanced endpoint of monitoring and detection service going forward into fiscal 27 as related to the finding on on the monitoring
the the next level of maturity that we want to bring is is a comprehensive enterprisele event management and monitoring system so that we have insights into all of our critical assets would would be the first order but in general we want to be able to monitor and and protect those devices and be able to alert alert on those in advance to eliminate the possibility of a threat or it becoming something more adverse
Representative Robin Lundstrum
Unverified
1:14:13
thank you I'll step out of the queue and let other folks
get in. I believe representative Richardson has a question for these
Speaker 187
1:14:25
gentlemen. at least one thank you Mr Chairman. so good morning thank you guys for being here as as usual so just to to sort of set the stage at this point I I know that there's been a number of reports and decisions made and a lot of changes that's going on over in the office of state Technology
specifically regarding this type of of circumstance can you tell me talk to a little bit about the funding mechanisms that you have in place and then what kinds of additional funding that you're looking for to be able to complete the mission as you migrate forward right I'll I'll take
Speaker 173
1:15:03
the first stab and then let Gary follow up. so a couple of years ago, we did the Arkansas forward study and so that brought to light that as a state as the
executive branch as a whole we spend about6 million dollars on cybersecurity the company that did that the consulting company that did that they compared us to other states that are kind of our size and their recommendation was about60 million is what we should be spending so we're we're very much in a deficit of what we should be spending. Gary and I have talked about it and we've talked with the other COs at the executive branch we feel like we should be in that 25 to30 million dollar range on
spending for cyber of course we can't do that all at one time right? so it's it's a gradual progression so Gary mentioned our endpoint detection that we rolled out across the executive branch so all servers all endpoints for the executive branch has this software on it it's 24x7 monitored and not only are the endpoints but we're also watching the identities of all the executive branch employees to make sure that you know if we see a login coming
from Germany that's not a good login right so we're blocking those and not allowing those to happen we so that crowd strike endpoint detection you know so we've gone from about6 million we've added about 2 million over the last 12 to 8 months and so that's where we see this where Gary talks about the maturity right we've
Speaker 191
1:16:39
slowly grow this to make the posture Yeah and I would just add that
Gary Vance
Unverified
1:16:49
you know there's there's a saying in the cyberw world that didn't you know that says you can never invest your way out of a of a cyber incident but but the thing that the thing that we're doing is that you know we are we're paying attention to the things that matter the most first and those things are are critical assets our intellectual capital and our data we have to be able to protect those as thoroughly as possible so as you know as a next step
with the endpoint management system that we've talked about is is going to be our our enterprise log management and alerting system so you know we work very closely with Secretary Fiskin and and finance and Jay and I think the important thing about cyber investment is is cyber forecasting right you've got you've got a forecast in advance what you're you know what your needs are gonna be for not just the next year but for the next two to three years or5 years
so that's one way that we can absorb or manage some of the investment because as Jay said if if we had $20 million right now and you gave it to us right now it would be difficult for us to use that money effectively but if we if we can work on a strategic roadmap that has some alignment with funding we we can mature at a rate that we can absorb with you know with our resources that we have today and the staff that we have today
Speaker 187
1:18:24
so I'll follow that up do you have and have you produced and published an existing roadmap for cybersecurity I I do we do
Gary Vance
Unverified
1:18:32
have a roadmap it it's been probably a couple of years since it's been reviewed and looked at but we do have
it and that that roadmap will will go we can it's a five year view if you will and it it it really de cut what the the purpose of the roadmap is is
to give us an understanding of
you know do we have are we in a defensible position with the state of Arkansas and and and so this maturity that we talk about is in alignment with that roadmap to get us to a point to where we we have more assurance than we have today that that we're protected that our
assets are protected so we do have a roadmap
Speaker 187
1:19:19
given the findings from this particular audit I think if it would be appropriate I'd like to see that sent to
staff and sent out to provide it to this group so that we can see what that roadmap looks like and where your additional investments in security are going to be coming over the next few years I I think from from my perspective looking at a roadmap that's something that you should be updating on an annual basis at the very least to make sure that you're meeting those expectations that establishing those goals for the next year and then meeting those and and and reinvesting those numbers are those dollars where they're most relevant what's the current
process for evaluating the logs that are being you're obviously consolidating that was on a single server that's what this finding was you had a couple of servers that weren't doing that what's the process for actually reviewing those and assessing threats and then mitigating those risks
Gary Vance
Unverified
1:20:18
so one of the things that we have to we have to leverage and take take full advantage of within the within the technology frameworks that we have available to us today is automation right
you you know it the software today has become so advanced that we get the benefit of the technology and the advanced monitoring the advanced learning alerting that you know even two years ago we didn't have and so we do have those processes in place we just have to grow those and mature those over time so it you know in in rev in in reference to the servers that were talked about in the findings those servers are now being
monitored and they are you know we can view and see alert alerts on those but the but the biggest one of the biggest things that I'm trying to bring to bear within the cyber office and the way we managed cyber is again we've got to leverage the technology and we've got to lev leverage automation in in today's world it we we couldn't bring enough people on staff to to monitor the number of alerts that we're seeing on a daily basis so we take we take
advantage of the technology that's in the software we take advantage of the advanced threatat intel that we get from some of our key service providers and and and you know all that intel and all that data goes into a central management console if you will and then when you apply a level of automation to that we can now see things that are going on within the state on a 24x7 basis
and and so it wasn't like before when we went home at5 we didn't come back on until 8 o'clock the next morning so we were we had a blind spot well today we've we've shrunk that blind spot significantly and we want to continue to do that by by leveraging the technology
that that we've got available to you know to purchase and to use so so
Speaker 187
1:22:31
if I understood you correctly you have deployed the software for reviewing the ongoing logging events
and alerting on things that are anomalies that's
correct we do OK all right thank you very much Mr Chairman. thank you Representative Richardson I believe next up
Representative Steve Unger
Unverified
1:22:59
for these gentlemen ispresentative Unger colaboration among other states with cybersecurity and if you if you compared us with the other49
Speaker 198
1:23:07
is there a state in the union that you could say these are the
Gary Vance
Unverified
1:23:17
guys that are closest to hitting the target first of all we do collaborate I can tell you we've worked very closely with North Carolina we work very closely with Oklahoma we very very closely with Louisiana umo North Dakota North Dakota has got really what I would consider to be a reference architecture
for how a state cyber organization ought to look and so we we have collaborated with those Oklahoma we've done a lot of collaboration with them Oklahoma did their consolidation effort uh6 years about 100 years ago ok a little longer but we we have spent a lot of time with the former director of information technology and thecisO
you know and how we compare to the to the you know to the contiguous fi0 that would I'm not sure I could give you anac a accurate ranking on that. I can tell you what our goal is our goal is is to be at the top of that list we wanna you know I wanna see our our cyber office and our cyber maturity to be in line with the with the North Dakota and a North Carolina and and some other states that we work
closely with that's the goal and I can tell you that state cyber is maturing it's
it's year over year it's maturing and it's getting better and you know I I plan on it getting better year over year Next up Representative Ry you
have a question for these gentlemen you're recognized thank you Mr
Representative Johnny Rye
Unverified
1:25:07
Chairmanellows let me ask you this is this to a
certain degree kind of like a moving target that's never changing I mean it's changing all the time and let me ask you this if you had what you would call up to date security against the people that are out there trying to hack into what we have how far do you think you're ahead of the ones that are actually trying to tap into the information that they may want to tamper with
Speaker 173
1:25:43
I'll start real quick and then let Gary follow up as well. so I mean it it's you're never gonna catch the the end of it it's changing and the and again kind of one of the things back to the crowd strikes and what we're monitoring better today some of the you know we talked or the finding was around not sending server logs and all that kind of stuff. I would say that's kind of old school architecture instead of just looking at logs that's one of the reasons
why we went with this new product is because it's looking at the identity and the biggest threat that we really have today is and Gary we can go into much more detail as is fishing right? are these emails where you give up credentials and they come in and impersonate you they're not necessarily finding the holes in the websites or the applications they're getting valid credentials and logging into the systems and you know impersonating you or the credentials that they
have and that's how they're moving and and a good example is where they'll you know, send an email and say hey I need to change my bank account for direct deposit for my paycheck and you have no clue that they sent that to somebody or you know we we see that with vendors on bills and and those type of and invoices that we pay yeah and just to add on to that
Gary Vance
Unverified
1:27:09
identity thread is probably really at the top of the list you know today and you know
identity compromise and identity threat is is our one of our biggest challenges 2 to 5 years ago you know adversaries look to exploit non vulnerabilities in systems right and that that that takes time what they do today is they just threw a phishing email they will they will get you to give up your credentials which is your user name and your password and so now they've they've really jumped over all the work that they have to do to exploit a vulnerability so if they getjay's
userna and password they've they've now got access to the kingdom because you know Jay obviously has privileged access as we have technicians that work across OST that have privileged access if once they get your identity and they get your credentials they've got us right so that that is probably our biggest concern is being able to
manage and protect against identity threats but to your point earlier it the the target is always moving it never stops it never changes you know I know we talk a lot about AI but AI is bringing a whole new world into cyber threatat and the way adversaries are going to use AI to attack us so it it you you know it's
we gotta always be ready as ready as we can be but that target is
always Thank you Representative Rye. thank you gentlemen following up to your most recent comment about fishing. what kind of training do we do for we have a lot of employees. I have a small company but we we do training on the the the latest fishing attacks or or you know the latest scam. what kind of training do we do in that area
Gary Vance
Unverified
1:29:19
so one of the one of the maturity things or the maturity items that we've done and we've advanced on is is of of an executive branch of cyberwareness training program we just recently got our cyber awareness program approved through the governor's office and and so what we do at the at the state level is that we are running quarterly mock campaigns to where we will send out a variety of of emails to to test our readiness
and then based on the results of those fishing campaigns that we do we we we issue some targeted training so as a user if you click on a phishing email you will get a follow up email that says hey you you clicked on a phishing email we need you to go out and take this remedial training and it it it you know it stacks a number of of offenses right if you're a first offender and and you seem to be do well at
identifying a phishing email then you know you'll get 11 training requirement on the on the other end of the hat we we actually have people that are repeat offenders that just can't seem to you know maybe get it right when it comes to recognizing a phishing email so phishing is something that we we've really stepped our game up on we're working with the department CIOs and we're we just recently met with our
CIOs and had some great input from some of the other departments about doing some video training to where we we you know we we're continuously training and talking about fishing we can we can never stop talking about fishing it's just never gonna go away and so we we are we're going to bring as much training to bear as we can to help our employees protect themselves from phishing email
thank you and they are they are getting more and more and more sophisticated. I received an email from the other day from myself and and and it used to be they were they were you know, Jim Petty and then you had this long now it's actually from my domain so they're they're getting very sophisticated so thank you for for what you're doing. I
believe we have one more in the queue uhpresentative Brown for for these gentlemen you're recognized thank you gentlemen
Representative Matt Brown
Unverified
1:31:57
one of the first numbers that I heard you bring up was how much other states our size are spending and then it sounded like we were s spending significantly less and our projection on what we need to spend is still less than half of what these other states are spending is how much we're spending a a legitimate measure of how well we're doing because it sounds like you all are on top of it
and I'm just that just concerned me that well if these states are spending all this money why aren't we spending closer to that not that I want to just spend money I want to protect our our structure here. So could you just address that a moment Ca are y'all just being more frugal or more efficient with software or can you address that you know it it's difficult to gauge your
Gary Vance
Unverified
1:32:52
level of cyber maturity based on the amount of
money that you spend each year into your program what what I always tell Jay and and and you know and working with staff is that I work very hard to try not and ask for things that we don't need right and so you you know my approach is to applying those dollars and and and knowing that it's a challenge you know to to get the funding in some cases but that's never gonna change right I've been doing this for a long time
cyber investment is is always something that there's a need for but for us in our office what what we try to focus on is the is the absolutely de core essentials of what we need to protect our assets to protect our employees to protect our data that endpoint example that we gave earlier is a key example of that the network monitoring that we want to grow into and and probably will be the next area that we
invest in is another one of those areas and then fishing we talked about fishing we're making a significant not so much of financial commitment there but you know we are committing resources training resources we're meeting you know regularly on you know the things that we can do to prevent fishing so it it's difficult to say if you spend60 million dollars a year
in in in your mind's eye you would think well we should never be attacked and you know that's just that's just not the case because it can happen where you know where your expense is very high and it can happen where your expense is very low I think the key to it is is addressing you know what cyber capabilities we have today or those gaps are and and very strategically applying that money in those
areas that we know will defend us and and let us defend you know state assets thank you for that explanation
Thank you Representative Brown. all right
gentlemen thank you thank you for sharing your your thoughts and your answers to these questions Next up, we have uhdFNA
I think that's who Senatorhammer wanted so we have a representative from DFNA that
can come to the table Jim Hutson secretary DFfa Andy Babbitt, DFfa thank you
gentlemen you know the drill would you stand to be sworn in please? do you solemnly swear or affirm that the testimony you're about to give will be the truth the
Senator Kim Hammer
Unverified
1:36:05
whole truth and nothing but the truth. sir we do thank
you Good morning Senatorhammer you're recognized. Morning gentlemen on page 93 of the report it talks about the deficit net position workman's compcommission if y'all found your way to that page yet or when you do let me know we have it the way I read that
it seems like we were not in a good position we did some things to try to address that but yet it seems like their statement says the resulting reductions in claims paid have not been sufficient to cover the added liability caused by a change in the actuaryly actuarial assumptions increasing the assumed life expectancy of the claimants can you give us a can you get us an explanation or just talk
about that claim if you would please and are we in the right direction? are we stagnant or just give us some insight please? it reads like we did good. it it reads like we did bad but we were we were not doing good. we addressed it but isn't enough to be in the position we
want to be in when it comes to this area. Senator, I think I'd be reluctant and I'm always reluctant to say no problem
Speaker 220
1:37:34
I think what I would prefer to do is get a better understanding
and look at the actual error report and then maybe circle back with you on that in terms of you know what we think the fix is and is the fix actually working? Andy I
Speaker 222
1:37:50
don't know if you have anything else. I I do just very briefly if you take a look at page 172 and 173 that's a 10 year claims for that very fun and that can give you some additional insight into it and may help answer some of the questions well could you go ahead and give us
Senator Kim Hammer
Unverified
1:38:11
the explanation of 172173 because I have not looked at it before you just brought it to our attention and tell me how it relates to
Speaker 213
1:38:19
what my question or concern was so this is going to give you a a kind of a 10 year history of
Speaker 222
1:38:25
the number of claims and as you can see the number of fund participants is really not declined as much as you might have expected so actuarial assumptions as I think we all know are based off of statistical averages of
life expectancies and so over time we would have expected more participants the number of participants in this fund to decline more rapidly but the bottom line number there is in the last 10 years we've gone from roughly 1400 down to roughly 1000 equal however the number of premiums coming in and the investment income has generally remained what I'd call stagnant across that period of time to so we're not depleting that
that liability that actuarial liability as quickly as we could but this kind of feeds into the the note that you see on page 93 I guess the other thing I would
Speaker 220
1:39:24
just add to that is some of the pension accounting you know there's actuarial liability and then there's cash liability. so you know the cash is sufficient to fund claims and claims are
Speaker 224
1:39:34
getting paid probably say it's it's also a conversation to involve workers' compensation commission for them to give you any commentary about the actual operation of the the comp fund at
Senator Kim Hammer
Unverified
1:39:46
so is it something that needs to be prepared to be addressed in the next legislative
session or do you feel that as it sits right now that over time it's gonna correct itself to where it will be in a healthier position other than what page 93 reads it to be I would say it bears monitoring
Speaker 224
1:40:08
in the same way that you know our pension underfunding bears monitoring but no action required at this time but I do think we should be
looking at it and having conversations making sure that we're continuing to move in a favorable trend not an unfavorable trend.
Speaker 227
1:40:27
who's the actuary on this is it again the big workers' compensation commission question that this is not nested
Senator Kim Hammer
Unverified
1:40:35
with DFfa Mr Chairman, I kinda idea what the motion coming up would be kind of like to flag this one to be discussed in august and maybe could come prepared to just touch on it a little bit more
after you have a chance to talk and we just flag it to be discussed in august
Speaker 228
1:40:53
please. thank you so noted Senator Hammer gentlemen you got off easy. thank you sir right, I
believe the last item, to be discussed is from education so we have representatives from Department of Education here that can answer questions
Speaker 214
1:41:34
Mr.Rogers, you knew that know the drill if you would introduce yourself for the recordgreg rogers
department of education and if you don't mind to stand to be sworn in
do you solemnly swear or affirm that the testimony you're about to give is the truth the whole truth and nothing but the truth.
thank you Representative Mayberry, you've waited patiently. you are recognized. thank you so
Representative Julie Mayberry
Unverified
1:41:58
much. I appreciate it. first of all, I I want to acknowledge the the huge task of moving the
childcare development block grant and and school readiness assistance from DHS over to ADE and there's always going to be some paperwork in the mix, you know people coming in that have not normally handled this paperwork that now suddenly are and I want to acknowledge that huge task that that was before you. but I'm specifically asking here about I guess it's finding number 18 and finding number 19. and
this deals with the childcare development block grant which I believe it correct me if I'm wrong but is that school readiness assistance programme is that correct? that's kind of the money that we're talking about and just try to kind of remind everybody that childcare providers around the state in the fall, in September we're given about a two week notice that as of October 1st their payments would be cut suddenly and there wasn't
a lot of heads up and it kind of created a big stir many will remember lots of discussions here at the Capitol about it. So I I think many of us were left with a how did this happen and how did we not know about it and we do understand there was an $8 million reduction from the feds you know yes we understand that that's been talked about but this audit does this help explain some of how it kind of caught us off guard that
there wasn't some reporting being done in a timely manner and I I'm even looking on let's see page51 it says the total expenditures reported by ADE and and these reports was $14.5 million less than the amount reported by ADE on its portion in the EFA I don't really understand that whole sentence and probably need someone to explain that to me a little bit more but it seems like there might have been some warning
signs that this was coming and so I wanted to give you the opportunity to explain maybe what this report really means and the things that you've done to make sure that we're not caught off guard again because I do believe that in here you're saying that you're working on some crosstraining and all that so just want to have that discussion thank you. So yes ma'am so that was actually it's
Speaker 234
1:44:33
actually two different things so the thing where we got notification from the the feds about the $8 million cut was in
Speaker 235
1:44:41
that last quarter of that grant based off poverty rates and we're we're still working with the feds to understand how they collect the poverty rates and why that sudden change on there so that that's something that we're working on over there to try to get a better understanding what that happens this right here are basically reconciliation696 reports that we're supposed to do monthly to show how much funds we've pulled out from the CtF block grant and sent out to the providers those there was a a person that was supposed to be doing those that
was supposed to do that reconciliation keeping those caught up we had a change over administration, found out that they weren't doing that is probably as good as they should have been and so that's where we started with this that this is the reconciliation reports that were late or not fully reconciled so we replaced that person with someone with more of an accounting background that is come which's worked in between finance and OEC now so we've got those reports all caught up and they are being timely now but this was these are just I don't wanna say
just these are reconciliation reports the696 reports that we have to turn into the feds so
Representative Julie Mayberry
Unverified
1:45:48
are you telling me someone was let go because of this or just moved to another area they're no
longer with the department they're no longer with the department that was overseeing this
Speaker 235
1:46:02
particular the the the finances of OEC they're they're no longer with us
Representative Julie Mayberry
Unverified
1:46:06
and and do you feel confident that these that we won't see this finding this next
Speaker 234
1:46:13
yes oh yes we have we have two people and when we're looking to hire a third one so we're improving the financepe the office and the finance for
Speaker 235
1:46:21
OEC that will actually have more we'll have3 there so we'll have to have some actually have some checks on that696 before before it's even filed now whereas before it was just this one person's responsibility to do it and nobody really was checking it.art of what we're setting up is a checks and balance act to make sure it is done and make sure it has reconciled. OK I I just know that there
Representative Julie Mayberry
Unverified
1:46:43
there were a lot of people yes the
$8 million I'm glad you're explaining that that was sort of a different issue but I believe that there were a lot in attendance in those meetings that still were saying this still doesn't add up. you know, yes theres a a sudden $8 million cut but there was no warning ahead of time. So I guess would you say that maybe these reports were part of that no
Speaker 235
1:47:15
no not at all no these no these are just reports of how the expenditures we've pulled down from the block grant and
Speaker 234
1:47:22
how we spend them they're just they're required reconciliation reports that we had to do and that didn't that wouldn't have impacted the 8 million reduction on that that was due with some counts at the fed the federal had to
Speaker 235
1:47:33
dealing with our poverty that we're still working and understanding where they got those numbers why did it change that? why were we notified so late so we're still searching for those answers but that this is completely different from that would not
Representative Julie Mayberry
Unverified
1:47:47
have affected any changes that were eventually made to the
Speaker 235
1:47:50
program this would not have no correct thank
you Thank you Representative Mayberry. next up is Representative Long you are recognized thank you Mr Chairman for the department
Representative Wayne Long
Unverified
1:48:07
I was wondering does the state have a program where we're funding daycares with it or any amount of of taxpayer money
Speaker 234
1:48:18
so this program doesn't. there's two different programs there's the ABC program that is taxed at that is out of public school funding that is state revenues. The CCdf block grant is 100% federal program and now on the state
Representative Wayne Long
Unverified
1:48:31
program if you could can you tell us what the inspection system is as far as you know based on what we've seen in in Minnesota to make sure that's nothing like that's happening in Arkansas and that question's both for you and for for audit so yes so we have
Speaker 234
1:48:50
licensing specialists that are required to go and got the details early on it So there's they're required to do at least two unannounced visits per year to all the providers in there and they the license specialist go through
Speaker 235
1:49:06
to make sure that they carry us up is operational it meets standards checks for the the attendance of the children they have signed up that are receiving the the vou the vouchers that go there so they do that every year we have a lot
we have state employees that are going out to all these daycares at least twice a year looking that if it's a new one we require one within the first three months and then follow up after that they're all unannounced so we're we're constantly going out to make sure that that the daycare providers are providing that service and guess y'all doing like health inspections while you're there also that
Representative Wayne Long
Unverified
1:49:38
I know that's part of the lossie special there's a standard that we do go
Speaker 235
1:49:42
in and check for them when we go out there to check everything that the daycare is operational as it should be and
Representative Wayne Long
Unverified
1:49:51
and for a they got it just wondering what what in particular y'all do to make sure the the funding is I guess as because it should be
Speaker 244
1:50:00
Thank you Representative Long in regard to what
Speaker 40
1:50:08
has been spoken to we're not going out to the actual providers like the you know the daycares and doing inspections but what we are doing is we're coming in and making sure that the department of edd is going out and making
their inspections and look at the documentation of that. So we're not making sure that you know we're making sure that they're monitoring but we're not monitoring thank you
Senator Kim Hammer
Unverified
1:50:44
sir appreciate it Next up Senatorhammer thank you Mr Chair and this is a public disclaimer. I'm a board president of a501c3 nonprofit daycare center that's faithbased and my questions are
not directly related to ours because we do not accept any federal or state funding for the record so my questions for the daycare centers in my area that have approached me about the subject of the waiting list the conversations that you, if I understood you right a while ago, the conversations you asked about having dialogue with the feds could you read restate what it is that is directly related to the funding that was cut that has created a waiting list
Speaker 236
1:51:24
well I I think that there's actually that
Speaker 235
1:51:29
there we're still working on the waitlist we understand there is a waitlist. The a million dollars that we were talking about last one was that the end of Fy25 that we our last quarter payment of Fy25 they the federal's governmentenate a notification saying that our block grant had been reduced by $8 million for that quarter. and that was primary due to the poverty counts reports they had
received from Arkansas showing that Arkansas wasn't as poverty as they as we had had been reporting on the in the first three quarters of the year so not under not I'm still not real sure where they got those numbers so I don't want to go too deep into that because we are having some conversations about how they get that data and make sure that doesn't happen again is that is that tied into the F map don't don't know I'm I'm
Senator Kim Hammer
Unverified
1:52:18
still trying to understand it. OK but the takeaway then is this a fair takeaway from this conversation?
we recognize that there was a funding cut from the feds which created the shortage in funding subsequently which created the waiting list and that the department is in active conversations with the feds to come up with why it was they identified us as a state that no longer qualified for the funding is that a fair statement?er no as much as we were
getting, I mean we still qualify but that with that reduction they had we're still getting
Speaker 235
1:52:52
that yes I'm sorry to say that again we
the reduction that that's what we're talking about why there was a reduction in our block grant and so we are still working with them on that and the total of that reduction
Senator Kim Hammer
Unverified
1:53:05
was to million dollars that we're talking about that's million dollars and so that 8 million is what has created was our waiting list before and how how many were on the waiting list before do you remember right
off don't don't even know I'd have to get get that. I could get that for you but I I don't have it with me on there
because the number that's being thrown around is3,000 but in reality there were a portion of those3,000 that were already on there so is the question the question would be did somebody get taken off of the waitlist or there were individuals that could not be added to the waitlist because we didn't get the $8 million funding. I'd I'd have to get that for you because when we get talking about the
Speaker 236
1:53:51
waitlist I know it gets very tricky on the waitlist
Speaker 235
1:53:54
because it deals with the there's also when you
have the foster care and the different parts of the waitlist how that goes and I I'd rather just get that information for for you
Senator Kim Hammer
Unverified
1:54:04
rather than just shooting from the hip. yeah that's fine. I appreciate that answer. so we can get together. thank
you thank you Mr chair. thank you senator Hammer Representative Mayberry is this a follow up with
Representative Julie Mayberry
Unverified
1:54:18
ok you're recognized thank you I I
actually wanted to ask staff and and greg you can also chime in cause I don't know if I still completely understand and and
if someone could just be in his layman's terms as possible the line the total expenditures reported and this is on page 51 was $14.5 million less than the amount reported by ADE on its portion of the SFA I I if someone could just explain that a little bit more to me and maybe somebody else who might read this report. what what does that mean? that means
the previous person that was here was not doing the reconciliation right
Speaker 235
1:55:01
I mean it's just that simple. she wasn't doing what she was supposed to do the expenditures that we were reporting in AI and the expenditures she reported on the696 didn't equal. she didn't go in and figure out why they didn't equal she didn't see where she might have made an error
Speaker 234
1:55:17
on that it was just not done correctly that's as plain as I can put it it's just wasn't done
Representative Julie Mayberry
Unverified
1:55:23
right so that one report then probably made you seem like you have more money than what you do. Is that
is that correct and in making just in making decisions regarding the program if that had been reported correctly does that not lead to you know
maybe a little bit sooner of a heads up, oh we've got we've we've got some issues that that's a lot of money to 14.5 million is it's a big difference it wouldn't have caused the issue on that
Speaker 234
1:55:54
because we know we're still on the finance side when
Speaker 235
1:55:57
I'd go through on expenditures on it when we draw down from the
federal government we keep up with the the number that we have on that different block grant that we're working out of and we keep an an excel spreadsheet we know how much we're taking out, how much is left in that block grant. what this is saying here is that when she got that information from my side and she looked at how much she pulled down on the claims were supposed to be she was off and she just reported as off rather than trying to figure out why it was off and so that's when we have somebody now that we are doing the reconciliation to find
out why she was off did she code something wrong? Did she miss a number? Did she miss you know what happened with that but no we keep up on the finance side we keep up with every expenditure we take out of the block grant through ACEs and keep that as a rolling total so we always know how much is
Representative Julie Mayberry
Unverified
1:56:52
left in that block grant and about what time frame does that report was is that June of 25 is like how was multiple
Speaker 236
1:56:59
when she was no longer there we found out that the reports had not I want to say it
Speaker 234
1:57:05
was several months that we had to go
Representative Julie Mayberry
Unverified
1:57:08
back and fix. OK when was this person no longer working with the department approximately
Speaker 261
1:57:17
ago maybe maybe I'm guessing now it runs it all runs together I don't remember I think it was like a year ago OK thank you
Representative Julie Mayberry
Unverified
1:57:27
just trying to understand the full issue and I appreciate the transparency thank you.
thank youpresentative Mayberry. lastst one in the queue he says is a very short one Senatorhammer you're recognized
Senator Kim Hammer
Unverified
1:57:44
I heard that laughing. ick the the person left on their own accordor where they terminated. I don't I don't know.
Speaker 245
1:57:56
Can I answer that? Can I say? I don't I
Speaker 263
1:58:02
don't know. I really don't not but here's what's here's my point.
Senator Kim Hammer
Unverified
1:58:09
do you know if they went to another state agency because if you do I think as we've said in other meetings in other places and other committees including this one that if they went to another state agency and they have any responsibility over any financial accounting matters that agency needs to be made aware of it within the limits of the law dealing with personnel issues but just to make you know and we all make mistakes I get that but if it
if it was a issue where it should have been reported and it wasn't reported and that employee left for whatever reasons under whatever purposes went to another state agency I think we owe it to that state agency if allowable under law to be able to notify them so it doesn't pop up in another agency somewhere. you don't have to answer I wouldn't
Chair
Unverified
1:59:02
even ask you if you agree but thank you thank you ok
Representative Rebecca Burkes
Unverified
1:59:07
thank you Senator Hammer and now we have one
morepresentativeurke's your re is it for this OK. all right you are dismissed and
uhpresentative burkes you're recognized relates to 25002 and it
Speaker 268
1:59:25
may be a question that staff can answer. um, dWsorkforce Services changed its methodology for calculating the year end estimates allowing uncollectible accounts and how could they make that change internally without consulting with DF andA.
Speaker 269
1:59:51
Sopresentative burkes that's the finding right and and so so how is
Speaker 268
1:59:55
it that they are able to make a change like that maybe work for services needs to come to the table to answer that question but but that's what happened right? they made a change without consultingdf andA which resulted in the finding that is an accurate assessment of the finding yes workforce services
Speaker 272
2:00:33
Good morning Christian rosberry a director of the division
Speaker 273
2:00:35
of reemployment. martinalley I'm the accounting manager at division of workforce Services thank you if you two would stand and raise
your right hand we will swear you in. 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 thank
you you heard the question do you want the question repeated or ok so I'm I'm addressing
Speaker 268
2:01:03
finding on page 17 which is 25-002. talking about an internal change that you made without DFNA's input? can you tell me how that would come about and how we prevent doing that in the future? Yes, yes I can.
Speaker 277
2:01:16
that was based on a very aged policy I mean because it was in our policy book. Policy is written by the director's discretion which is myself and it was based on information that was dated back to the eight0s so we were taking into account financial transactions from back in the eight0's to make that
estimate for how much we believe we would be collecting on in in future transactions and based on our calculations that did not seem like it was a good estimate. so in our efforts to be financially conservative. We made a change. I was not aware that that had to be reported to the department of finance and Administration because it was an estimate and it was inside our policy book that existing policy was so dated and there was nowhere in that that indicated that it would have to be changed with DF andA. we found that out later and it was
submitted to thef andA inoctober of last year. and so going forward how
Speaker 268
2:02:10
do we make sure that that doesn't happen or yes I I now I'm aware
Speaker 277
2:02:15
of that change and it was totally my fault and we have updated the policy to to include that information on it. OK, all right thank
you very much thank you follow up question on that so the the estimate itself you you worked through that with DFNA and and and the the
methodology is is sufficient now it just was the cart before the
Speaker 277
2:02:37
horse We we totally put the cart before the horse we had the best of intentions so that estimate the the methodology to determine that estimate has been submitted over todF andAccounting. I do not believe we have gotten final approval on that and so our plan is to go forward with the methodology we had in place with our IT process until we're told differently but I believe that that's on a conversation that's scheduled for later to be able to get final approval for that right anddFNAs here and they've
heard this conversation so I guess it'll be forthcoming
soon hopefully so yes sir right we are all clear in the queue for these two reports and as you can tell from the questions and from the the topics covered this is this requires a a tremendous amount of staff knowledge about a a broad spectrum of topics so thanks again to legislative audit staff and to to all the agency staff and representatives that have been
here they've been here for over two hours now and so thank you for that okpresentative lundstrom do you have a question 11 comment well you do your motion or
whatever you're going to suggest first. if the body so desires I would like to hold
Representative Robin Lundstrum
Unverified
2:04:00
this if you have questions so that we can have agency personnel available so that we
can finish this in the August meeting and to make sure that it's truly given the airring it deserves
and I would ask for it to be held
OK you're you're asking for these two reports to be held over until the August 13th and 14th meeting, can we can we have ahead of time can we can your motion I'm just asking include a release of any agency staff that may not be needed
and by that I mean can we get staff to or or can we get the members of the committee to get to staff any questions or agencies that they
want to represent so if there's only one, say for example it's workforce services we don't have all the other agencies here for another two hours. is that something that you could incorporate
in your motion if there's additional questions please email the chairs we'll
Representative Robin Lundstrum
Unverified
2:05:04
have those folks there if not we'll just continue with workforce services when we
reconvene in august all right so that's a that's a motion do we have
a second we have a second any discussion on the motion looks like Representative beatty you have a I just restate the
Representative Robin Lundstrum
Unverified
2:05:31
motion for me just out of an abundance of caution we'll hold this report over till August. if you have questions please get those to the chair so
we can have the proper agencies available and we
Representative Howard M. Beaty, Jr.
Unverified
2:05:43
can quickly dispatch with what needs to be
done I I guess based on that just a a quick follow up would that includes instructions to members to have specific request to the chairs prior to the august meeting of agencies that they want to speak to and questions that they may have so that we don't come back in august and have the volume of of state employees and
agencies sitting in this room waiting for maybe a potential question on the report that it would be a specific and targeted and listed and identified agency
on the agenda for the meeting. think that's a very legitimate request given the amount of volume, please take the
Representative Robin Lundstrum
Unverified
2:06:30
time to look over this in the next couple of months and let us know where our questions need to be focused and we'll have those agencies present and the other ones we won't you could we add that as an
amendment to your motion? I was going to ask for a clarification in the on the motion. What I
what I heard, I think between the two was that this is going to
be deferred but only to the extent of those agencies that are notified by say August 1st of their need to be here for further
questions I'll take that as a friendly
amendment thank you. right. so we, I guess we need a motion on the amendment have my motion we have a second all those in favor let it be known byi any opposed all right and then on the actual motion as amended all those in favor of any discussion all those in favor of the amended motion let it be known byi any opposed? All right motion
carries but again to recap we're gonna have staff send out a reminder and sometime in midully to have any agency that is needed at the august meeting notified by
the members of this committee Staff clear on that? OK. so
hopefully we will have a very limited scope discussion around these two reports which
are very comprehensive. so thank you to the members and thank you for the agency staff for being here today. We do have one more report it's a special report for the review of selected policies procedures and transactions for the hot spring
solid waste authority for the period January1st2023 through June30,20 25 and this will be presented by Mr. Charlie Kemp. thank you Mr chairir this report is issued in
Speaker 288
2:08:51
response to a legislative request approved by the legislative joint auditingittee for Arkansas legislative audit to conduct
Speaker 289
2:08:58
a review of selected policies procedures and transactions of the hott Spring County solid waste Auth
Speaker 288
2:09:06
objectives of this review were to determine if the authority adhered to laws and regulations pertaining to the authority and it's board of directors competitive bidding payroll, transfer station permits and inspections and transactions involving board
members administrators and employees. Other objectives were to assess internal control processes related to cash revenues receding and disbursements the authority
Speaker 289
2:09:36
was established by the Ho Spring County Qorum Court in February 1985 under Act699 of1979 which authorized the formation of solid waste authorities by counties and municipalities.
Speaker 288
2:09:53
the authority is managed by a board comprised of 8 members one member each from Donaldson Friendship and Midway and5 members appointed by theorum court. each year the authority's board approves a budget that must be then approved by the quorum court. The authority operates as an independent entity with its own management and employees The private audit reports for the authority for the calendar years 2021 and2022 contained one
finding relating to segregation of duties no response from the authority was provided in the reports as of the date of this report audit reports have not been obtained by the authority for calendar years 2324 or 25c according to the current authority administrator who
Speaker 289
2:10:41
was hired on August42025 all the office staff and the private CPA firm that was employed to provide bookkeeping services resigned when he was hired the authority received several
Speaker 288
2:10:55
types of revenue including sales tax site collections and use fees recycling fees dumpster rental and interest. The authority provides solid waste management services for bulk residential and commercial waste at
Speaker 289
2:11:06
locations throughout the county including a recycling center and nontranser stations. residents who live in
Speaker 288
2:11:13
the unincorporated areas of the county or one of the member cities may use the authority's facilities free of charge while residents of the cities of
Malvern, Rockport and Parla must pay a dump fee. The authority pays expenditures associated with these operations including salaries and wages, employee
Speaker 289
2:11:36
benefits recycling and disposal cost and other related expenditures revenues and expenditures for calendar years 2023,2024
Speaker 292
2:11:44
and2025 are provided in appendix A as a result of this review
Speaker 289
2:11:52
we issued5 findings first the authority did not
issue prenumbered receipts for all revenue received in the mail or by credit card in noncompliance with the accepted accounting practices
Speaker 288
2:12:06
Second, during disbursements tested testing we noted adequate supporting documentation was not maintained for 6 of64 disbursements tested authorization or approval for payment was not indicated on all invoices documentation was not maintained to support equipment lease payments and payoffs the authority made payments of $2000 per month plus additional
hourly charges to an attorney without a
Speaker 289
2:12:33
contract a mack truck purchased in 2025 it's not added to the authority's fixed asset listing and bid documentation was not maintained for all applicable purchases as required by Arkansas
Speaker 288
2:12:46
code hi rd inc inoctober 2021 the board increased its per diem allowance from $150 to200 dollars per board meeting but did not adopt a formal resolution to authorize this increase as required by Arkansas code
Speaker 289
2:13:01
ourth, proper documentation was not maintained for all mileage reimbursement to board members Additionally per diem and mileage paid for board members' attendance at Hot Spring Countyorum Court and member city council meetings should be accompanied by copies of meeting minutes that document a business purpose related to the authority fifth authority budgets did not contain individual salaries to document approval by the board is required by Arkansas code Mr Chair this concludes my presentation. The authority director is here to answer any questions
thank you Mr Camp do we have any questions from the membership Representative Luundstrom you have
Representative Robin Lundstrum
Unverified
2:13:47
a few questions just a quick question on the private audit reports just
just ok before you before you start we need to swear and since we do have questions so if you Mr Daley if you would stand and raise your right hand
we'll get you sworn in do you solemnly swear or affirm that the testimony you're about to give is the truth the whole truth
Representative Robin Lundstrum
Unverified
2:14:15
and nothing but the truth do thank you all rightpresentative Lunstrum just a quick question on the audit report second page middle section it says as of this state audit reports have not been attained by the authority for years 23,24 and25. any updates on that no
Speaker 300
2:14:30
ma'am we we have well rephrase that we have
Speaker 301
2:14:37
allocated funds in this year's this year's budget to accomplish those we were waiting until we got the findings from this Investigate or not investigation but the the evaluation of our spec of our procedures and now we want to make sure we were doing things the right way take care of that we weren't sure where this was going to lead us so we didn't want to spend money on the audits until we knew you know exactly
what issues we may have had in the past so we need to make sure we corrected and we didn't want to use the and
Speaker 303
2:15:16
an a county firm that had been telling us we were
Representative Robin Lundstrum
Unverified
2:15:20
doing OK if we weren't OK, just to follow up so it's not that they were unable to obtain them it's the fact
that they did not do an audit for 23,24 and25. so there's no audit to be had no
Speaker 304
2:15:34
ma'am and and so that was my first day on the job was
Speaker 301
2:15:40
August4,2025. I believe the audit for your 2022 was completed and submitted to the solar waste board in either June or July of 25 so they just perceived the 22 audit whenever I came on board my first meeting I requested that the board allow me to reach out to our representative and ask for some assistance from legislative audit to make sure that we were operating within the law and doing things correctly
glad you reached out Thank you Representative Lundstrom. Senatorhammer you are first in the queue. you are recognized thank you Mr
Senator Kim Hammer
Unverified
2:16:23
chairir on the mack truck not being added to the authorities fixed asset listing has it since been added to it so it's being accounted for. Yes sir it has. thank you Thank you Senatorhammer, Representative beatty you're recognized thank you Mr Chair.
Representative Howard M. Beaty, Jr.
Unverified
2:16:42
just a quick question on the private CPpa firm that was employed to do the bookkeeping and and the audits was this the same firm that had had been doing previous audits that that had completed the 2022 audit that was engaged to do the the ones that
Speaker 307
2:17:00
were outstanding yes the the firm that that performed the 22 audit was initially
Speaker 301
2:17:06
going to be retained to do both 23 and24
and but we prior to 2022 it had been done by a a different firm for at least the last 20 years and then in I think it was 21 or 22 they they switched from the the one firm and went to a new one OK so did you
Representative Howard M. Beaty, Jr.
Unverified
2:17:31
have engagement letter letters signed by the firm? not for 23 and24. and
what reason did they give for withdrawing and resigning from performing work for you it
Speaker 307
2:17:45
it wasn't them it was the the the board of directors of the saw waste Authority
Speaker 301
2:17:50
wanted to wait until we had gotten a the review done and make sure that we weren't in violation of anything to make sure we were where we needed to be we didn't know for a complete audit when whenever we requested this we requested an actual audit so we didn't know if we were gonna have to do another audit or exactly where we were gonna be so we did not that there was discussion there was an offer made they the board just
tabled the the performing of of signing the the engagement letter and until this report was done in this action had been completed and now whenever once this is public record we'll address it with the board and then the board will move forward with selecting a and the county firm whether it's the same one or not I don't know that'll be a decision made by the board of directors well guess I guess the
Representative Howard M. Beaty, Jr.
Unverified
2:18:45
only concern I would have there is
they'd completed audits in all the previous years so they knew 23,24,25 and ongoing that we're going to have to have an audit. They knew that was going to be a substantial finding I don't understand why they would not have moved forward with trying to secure a provider and affirm to perform that work and that may have alleviated a lot of of the issues that are here so can you give any insight to that as to why they thought, well, we don't have to do audits now
Speaker 307
2:19:19
we we knew we were gonna have to do the audits and like I said I think
Speaker 301
2:19:24
it was just we wanted to make sure that the the firm that had done our previous audits if there were things that were not being done correctly and they weren't caught we didn't want to use the same people and so we wanted to see what was found and know if anything if if a a different firm needed to be hired or what's going on I umm
as far as why they have chosen to completely wait I know that I requested it in the budget for this year because I knew we needed to do them and they but they still have not done an engagement letter but I'm well I'm pretty sure that by our next meeting I know that our accountant that does our monthly books is actually they have asked him to reach out and start getting some ideas on firms that we could get the the the
audits completed with and so we're basically ready to to engage and start that we were just waiting to so basically waiting on the results of this process to see if
Speaker 314
2:20:35
maybe we needed a different one go ahead thank youpresentative buddy one
Representative Rick McClure
Unverified
2:20:39
of the reasons that they asked for this was based on a lot of things he just described. This was almost a complete changeover of guard
from the board to the inhouse bookkeeping all at all levels so the new team came in from software to just day to day routine on the accounting process as there was a lot of questions. It didn't interfere with day to day operations serving the community but there was a lot of questions and so they felt best to ask and I want to thank the executive committee for allowing this to happen because it gives a clean mark of this is what we need going forward and I have a good I have full trust in them they'll accomplish that
Speaker 99
2:21:22
thank you appreciate the information. Thank youpresentative just to follow up
on on that you you've been in there since August of 2025 but it it the it said and this may be for staff but said that the private CPA firm that was employed to provide the bookkeeping services resigned as well that was not the same firm that did the audit in 2022 I hope. No sir they were different firms and were they current on their bookkeeping services through July or August
of 2025 or where they behind in their reporting and financial statements? Do we have financial statements to be audited for 23 and24 and and and through part of 2 5 because if if they were doing a bookkeeping services and they were behind and they you don't have someone to do the books for 2023 or 2024 that's going to present a problem when the audit does begin. Do you know anything about that they were not behind it was just a
Speaker 300
2:22:22
the the day up my first day on the job when
Speaker 301
2:22:25
I came in there was a letter on my desk from the accounting firm that had been that had been retained previously and they told me that as of august31st they were no longer wished to continue as ourtal firm so but yes what we do have the the bookkeeping and all that is up to date and everything is everything is ready to go it's just a matter of me getting word from the board
of directors once they vote to move forward with the audits and then I will contact the whatever firm they tell me to use and I will start turning over whatever they need to perform the a ok so
so the it sounds like the internal financial statements were up to date. Did staff look at anything like that as part of this review? we
Speaker 317
2:23:14
received general ledgers just just to do our
Speaker 292
2:23:17
basic procedures but is as far as any prepared financial statements no sir we did not look at that thank you
Speaker 139
2:23:28
I do not see anyone else in the queue who once going
tws gone. right. thank you gentlemen. you're dismissed thank you
committee OK Do I have motion to
file this report motion in a second. any discussion on the motion? all those in favor let it be known by I. any opposed motion carries. OK
that is it other than notifying
of our special or our next meeting, which is will be August 13th and 14th we will not have anything in July because of legislative conferences so as a reminder we do have these two page summary reports that go along with the the two reports that we went through today if nobody else has anything then
Agenda
A. Call to Order by Chair
B. Adoption of Minutes
C. Reports of Executive and Standing Committees: 1. Executive Committee 2. Counties and Municipalities 3. Educational Institutions 4. State Agencies
D. Review of Reports:
1. State of Arkansas Annual Comprehensive Financial Report – Fiscal Year Ended June 30, 2025 (Early Released February 3, 2026)
2. State of Arkansas Single Audit Report – Fiscal Year Ended June 30, 2025 (Early Released March 30, 2026)
E. Other Business:
The next meetings of the Legislative Joint Auditing Committee will be held August 13 and 14, 2026.
F. New Business
G. Adjournment
Documents
No documents posted.
Speakers
Senator Jim Petty Chair
Unverified
Representative Robin Lundstrum
Unverified
Senator Matt Stone
Unverified
Senator Tyler Dees
Unverified
Representative Steve Unger
Unverified
Speaker 25
Speaker 32
Speaker 40
Representative Rebecca Burkes
Unverified
Representative Howard M. Beaty, Jr.
Unverified
Senator Fredrick J. Love
Unverified
Speaker 74
Speaker 80
Speaker 83
Speaker 43
Speaker 91
Speaker 39
Speaker 66
Speaker 109
Speaker 114
Speaker 117
Speaker 38
Speaker 123
Speaker 129
Representative Johnny Rye
Unverified
Speaker 151
Senator Jamie Scott
Unverified
Speaker 163
Speaker 166
Speaker 174
Gary Vance
Unverified
Speaker 173
Speaker 187
Speaker 191
Speaker 198
Representative Matt Brown
Unverified
Senator Kim Hammer
Unverified
Speaker 220
Speaker 222
Speaker 213
Speaker 224
Speaker 227
Speaker 228
Speaker 214
Representative Julie Mayberry
Unverified
Speaker 234
Speaker 235
Representative Wayne Long
Unverified
Speaker 244
Speaker 236
Speaker 261
Speaker 245
Speaker 263
Chair
Unverified
Speaker 268
Speaker 269
Speaker 272
Speaker 273
Speaker 277
Speaker 288
Speaker 289
Speaker 292
Speaker 300
Speaker 301
Speaker 303
Speaker 304
Speaker 307
Speaker 314
Representative Rick McClure
Unverified
Speaker 99
Speaker 317
Speaker 139