THE MISSISSIPPI LEGISLATURE

Background

Every four years, the Legislature contracts with a certified public accounting firm to conduct an audit of the Office of the State Auditor in compliance with MISS. CODE ANN. Section 7-7-216, which states: No less than once during each four-year term of the State Auditor, the Legislature shall receive bids from an independent, certified public accounting firm for an opinion and a legal compliance audit of the Office of the State Auditor. Such firm, so selected, shall report its findings and recommendations to the Legislature and the Governor. The cost of this audit shall be paid from funds appropriated for this purpose by the Legislature.

PEER received five bids in response to its request for proposals for an opinion and legal compliance audit of the Office of the State Auditor. PEER contracted with Eubank and Betts, PLLC, to conduct the audit.

Eubank and Betts issued an unqualified audit opinion which states that the general purpose financial statements present fairly, in all material respects, the financial position of the Office of the State Auditor at June 30, 1996, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. The following material audit findings were noted during the audit.

Material Audit Findings

Audit Costs and Interest Not Collected

MISS. CODE ANN. Section 7-7-211(g) and Section 7-7-213 (1972) state that the State Auditor shall collect audit costs and interest for investigations resulting in collections of audit exceptions. In twenty-two cases tested, the Office of the State Auditor did not collect audit costs and interest. In some of those cases, the State Auditor's Office calculated costs and interest but included no documentation to explain why the collection was waived. In other cases, the State Auditor's Office waived costs without documentation. In its response, the State Auditor's Office agreed to review policies regarding collection of costs and interest to ensure that such policies are in compliance with legal requirements.

Exception Clearing (Bank) Account

The State Auditor's Office should review internal controls over the Exception Clearing Account to address the following weaknesses:

• The State Auditor's Office allows field staff to make verbal requests for repayment of audit exceptions and to accept money for repayments while in the field. This process could allow one individual to determine exceptions amount(s), initiate the claim(s), accept the payment and deliver the funds to the agency.
• The State Auditor's Office does not maintain a control log tracking the status of investigations in progress. Upon determination of an audit exception, the agency does not document the status of claims or assessments for which payments are pending to ensure that control over incoming receipts is established at the earliest possible moment.

The State Auditor's Office should take appropriate action to correct these weaknesses by adopting or changing appropriate policies in writing.

In its response, the State Auditor's Office agreed to take corrective action.

Inaccurate General Ledger

During the fiscal year ended June 30, 1996, the Office of the State Auditor attempted to implement an interface of its purchase order system with its general ledger system. The interface was not implemented correctly, causing inaccurate entries to the general ledger and misstatement of expenditures. Agency personnel were aware of the situation and were reconciling the State Auditor cash accounts to the Department of Finance Administration (DFA) monthly. However, the remainder of the general ledger was incorrect and not reconciled to DFA.

During the course of the audit, State Auditor personnel prepared a reconciliation of the revenue and expense accounts to DFA records and made correcting entries to the general ledger as determined necessary. Effective October 1, 1996, the State Auditor's Office became an on-line user of the Statewide Automated Accounting System (SAAS).

Because SAAS now serves as the agency's general ledger, further recommendations or corrective action were not required.

Inadequate Segregation of Duties for Contract Audit Review Fees

The State Auditor's Office reviews workpapers for school district audits that it contracts out to independent certified public accounting firms. The State Auditor's Office then bills such firms for the reviews. The office does not segregate the review, billing, and receipt of remittance functions. One individual performs the reviews, prepares the invoices, and receives the remittances directly. While the audit contained no indication of mishandled funds, the potential for abuse exists because of the lack of duty segregation.

The State Auditor's Office has taken action to segregate these duties.

Travel Policies

The audit noted the following weaknesses in internal controls regarding travel:

• Travel policies for the State Auditor's Office regarding the reimbursement of commuting expenses do not appear to be in compliance with Internal Revenue Service regulations which require that any reimbursement for commuting expenses be included in the employee's taxable wages. Some employees received mileage reimbursements for commuting to the State Auditor's Office from their homes on a regular basis while other employees did not, creating the appearance of favoritism.
• One agency employee received reimbursement for over 5,000 miles of travel per month. According to a review of travel vouchers, the individual did not plan the travel in regions.

Eubank and Betts recommended that the State Auditor's Office require proper planning of work procedures to minimize travel expenses, review travel reimbursement policies, and document the basis for compliance with applicable Internal Revenue Service regulations. The agency recently changed its travel policies to eliminate reimbursement of commuting expenses in most cases.

The State Auditor's Office responded that it has reviewed travel policies, consulted with the Department of Finance and Administration, and is confident that its travel policies and positions are in compliance with Internal Revenue Service regulations.

Download Full Text Report in Acrobat Format - (1,059 K bytes)

PEER Home Page.

E-Mail