Audit State Agencies: Oct. 9, 2025

Representative Steve Unger Thank you. All for, aye. All opposed, any opposed. Thank you. That passed. I’d like to recognize Mr. Bullington at this time. 

Tom Bullington Okay, thank you, Mr. Chair. Today we’re presenting three reports with findings, and we also have several reports without findings. And these are listed on page one of the audit summary. 

Representative Steve Unger Without objection, we will file these reports. 

Department of Agriculture

Tom Bullington Okay. All right. The first report with findings is the Department of Agriculture FY 204 report, which contains one finding. The Department discovered an erroneous unauthorized payroll disbursement of $1,240 resulting from an employee’s paycheck being deposited into an incorrect bank account. 

Further review revealed that the employee’s direct deposit account information was changed without the employee’s authorization by an individual who gained access to the employee’s email. The department was unable to recover the funds. And additionally, the department failed to notify us as required by Arkansas Code. This finding was referred to the prosecuting attorney and the attorney general. Mr. Chair, that concludes the findings for the Department of Agriculture. 

Representative Steve Unger Are there any members of the agency here that would like to come to the table? Thank you. And once you’re in place, would you please identify yourself for the record? 

Inoussa Zaki Department of Agriculture, Inoussa Zaki, Chief Fiscal Officer. 

Fred Wiedower Fred Wiedower, I’m his deputy with the Department of Agriculture. 

Representative Steve Unger Thank you. Do you gentlemen have a statement about this? 

Inoussa Zaki Yes, sir. Thank you again, Mr. Chairman, members. The department agrees with the finding and we’ve implemented controls in place to ensure that this does not happen going forward. 

And in the controls that we have in place going forward in case of a payroll change or direct deposit change request from employees, now we’ll be contacting the employee himself making the request. In addition to contacting the employee, we will also be requesting that they verify that the date of birth, their social security, personnel number, home address, phone number, and also their bank account number. 

Representative Steve Unger Members, do you have any questions? I see Senator Payton. 

Senator John Payton Thank you, Mr. Chair. So was there any way to track the funds and who the culprit was and be able to make sure that person didn’t say, Hey, it worked one time, now I can do it 10 times to a different agency or something? I mean, have we been able to track that? 

Inoussa Zaki So since this happened, our HR department reached out to OPM to report the issue. And also our CIO, the chief information officer, was also involved and coordinated also with the Office of State Technology. And I believe an identity test report was filed by the chief information officer with the Little Rock Police Department. No report as of yet from the Little Rock Police Department. 

Senator John Payton So as far as you know, the investigation’s underway but they have not identified the culprit. 

Inoussa Zaki To the best of my knowledge, yes.

Senator John Payton Okay, thank you. 

Representative Steve Unger Are there any other questions? Yes, sir. Go ahead. 

Representative Matt Brown Thank you, Mr. Chair. And this may be more of a comment than a question. But I know that I’ve been seeing a lot of uptick in wire fraud, which is kind of the same sort of thing where someone intercepts an email, they send wiring instructions, goes to a bank account. 

But one thing I’ve seen that has changed here recently is now the scammers are, in addition to impersonating the email, they will then hijack the phone number so that when you call to verify, you’re actually talking to the scammer. And so just maybe have a thought of instead of verifying, have them calling an employee, verifying email or social security number and birth date, which obviously since Equifax and things is already out there. I mean, essentially, your information is everywhere now. 

Maybe one way to resolve the problem is like we will not make payroll deposit changes unless you actually physically come into the office and hand us the piece of paper with the information. Just maybe a thought. Just because I know that my day job, I’ve seen this. It’s getting a lot more sophisticated out there with these hijackings. 

Representative Steve Unger Members, are there any other questions? Senator Payton. 

Senator John Payton Thank you. And I guess that kind of goes back to my question, maybe. Do you know if it was a sophisticated hijacking by some foreign actor like that? Or could it have just been a relative or an angry spouse or something? 

Inoussa Zaki The email request came from a dot gov, the employee’s actual email address. 

Senator John Payton Okay. 

Inoussa Zaki So there’s no telling who actually initiated that request. 

Senator John Payton Okay, thank you. 

Representative Steve Unger Are there any other questions? Without objection, we will file this report. Thank you, gentlemen. 

Department of Education

Tom Bullington Okay. All right, the next report we have with findings is the Department of Education FY24 report. And this report contains four findings. The first finding, according to the LEARNS Act, the Division of Elementary and Secondary Education shall administer the Arkansas Children’s Educational Freedom Account Program. Educational Freedom accounts are state-funded accounts used to cover approved educational expenses, including private school tuition, curriculum, tutoring, etc. 

During our review, we discovered that agency did not have controls in place to review students with EFAs for duplicate enrollment in a public school. Based on analysis of EFAs that disbursed funds to EFA providers in state fiscal year 24, we identified 239 students with potential duplicate enrollment in a public school during the 23-24 school year, which could result in duplicate funding to either the public school or to the EFA provider. A test of 34 of the 239 students revealed 28 instances of duplicate enrollment. 

The second finding, the Arkansas Constitution states in part that no money shall be paid out of the Treasury until the same shall have been appropriated by law, and then only in accordance with said appropriation. Act 572 of the 23 regular session authorized a $10 million appropriation for the merit teacher incentive grants to local education agencies. 

In addition to the $10 million that was disbursed from the merit teacher incentive appropriation, agency used almost $2 million in unexpended funds appropriated for the National Board of Professional Teaching Standards Financial Incentives to pay the remaining merit teacher incentives on June 21, 2024. The initial appropriation of $10 million was an estimated amount and did not include fringe benefits. Appropriations are established so that funds can be used for authorized purposes. These funds were appropriated for one purpose but used for another in violation of the Constitution. 

The third finding, ADE rules govern National Board for Professional Teaching Standards incentive payments based on teacher certification dates and school poverty levels. Annual incentive payments may be $2,500, $5,000, or $10,000. 

Specifically, ADE rules allow for a teacher who is working full-time in a public school that is not a high poverty school or a high poverty charter school to receive a yearly incentive payment of $2,500 for no more than five school years. A review of 48 incentive payments identified one instance where an eligible recipient that was not in a high poverty school was paid $5,000 rather than $2,500, which resulted in an overpayment of $2,500. 

And the fourth finding, the Board of Trustees for the Arkansas Schools for the Blind and Deaf was informed on July 18, 2023, that one Gator utility vehicle valued at about $10,000 was stolen. The agency notified law enforcement of the incident but did not report the theft to the Chief Fiscal Officer or to Arkansas Legislative Audit as required. Mr. Chair, that concludes the findings for the Department of Education. 

Representative Steve Unger Thank you. Would the agency representatives please come to the table and identify yourselves for the record? 

Courtney Salas Ford Courtney Salas Ford, Chief of Staff, Department of End. 

Greg Rogers Greg Rogers, Department of Ed.

Representative Steve Unger Good afternoon. Do you have any statements to make? 

Greg Rogers Yes, sir. On the first finding, this was the first year of the EFA. Kind of looking at now, we do have a standard operation procedures in place now. We are looking at enrollment more often. I think we’re doing it quarterly now. We are checking those through Triand. We’re going through each one of them that may come up as showing us duplicate working with the private school or the public schools. 

Sometimes it’s a public school that’s coding them as a resident attendee when they shouldn’t have been because they’re only taking some of the classes there. So we’re working with that. We’re also making sure that each student has a unique identifier number so we can compare that quicker in trying to make sure that we are catching these duplicates on the front end now. 

We’ve also, after this, we’ve asked OIG to come in and just do an overall look at the entire program to help us identify any additional weaknesses or any ways we can make this program stronger and making sure we are tracking and figuring out how these duplicates are being put into the system. On the next one, the merit teacher pay, we did meet all the obligations for the national board. That was a teacher incentive program. 

So we used any excess appropriation we had there to make sure that we were making sure all the teacher merit pay payments went out to those teachers at that time. We’ve fixed that also now. We’ve gone through and we’ve got a federal appropriation we’re using right now, as well, if we ever need any additional appropriation. Our appropriation act allows us to have two appropriation transfers throughout the year. Or if we’re in a fiscal session, we’ll take care of it that way. So we’ve got things in place to make sure we have the appropriation in that line item now. 

The third one, which was the teacher, that was just a mistake that was made. They keyed it in as eligible for the five thousand when it wasn’t. We went back and checked all the other ones that received five thousand, didn’t find any additional errors on that. We’ve also added a statement of assurance from the superintendents, making sure they know what’s going on with that. And we are working with that teacher to make sure that we get the $2,500 back. 

And then on the last one, there was a piece of equipment on the Deaf School that was stolen. It was reported to the board for the Deaf and Blind. We’ve gone back and retrained our people that when something is stolen, a report is required to be filed. And that’s necessary even before you take it to your board. We’ve also added additional security out at the Blind and Deaf school campus now. And so we’ve gone through, retrained and added more security to make sure that doesn’t happen anymore. And I’d be happy to answer any questions. 

Representative Steve Unger Thank you. Members, do you have any questions? Representative Brown. 

Representative Matt Brown Thank you, Mr. Chair. Regarding finding number one on the overpayments for the students that were enrolled in two different schools, is that something that y’all are able to recoup? Can you just take that money out of the next payments or how does that work? 

Greg Rogers If it actually was an overpayment. But just because it was a duplicate in this first year doesn’t actually mean it was an overpayment. If they were registered to take an EFA, they went to the private school in the first part of the year but for whatever reason that wasn’t working out and they went back to the public school, since we were pulling the records on the back end, it would show as a duplicate. 

But they were actually in that private school at that time. Then they went back to their public school. So there’s instances of that happened. But if there was an overpayment, then, yes, we are able to go back in and access that. 

Representative Steve Unger Members, do you have any other questions? Seeing none, without objection, we will file this report. Thank you. 

Department of Health

Tom Bullington Okay. Our last report with findings today is the Department of Health FY24 report, and this report contains three findings. The first finding, while performing bank reconciliation testing, we found two instances in which the bank reconciliation did not agree with the book or bank balance, even though they were reviewed and approved by supervisors. These instances reveal that employees did not follow established internal controls. After we questioned the agency, correct reconciliations were produced, but the new reconciliations did not include timely sign-offs or dates. 

The second finding, according to Department of Health Internal Audit, an employee falsified or altered travel receipts from July 1, 2023, through June 19, 2024, for meals and lodging, resulting in fraudulent overpayments of about $1,500. This amount includes charges for alcohol that were reimbursed in full or in part with 34 meals. The employee resigned from the Department of Health on June 20, 2024. This finding was referred to the prosecuting attorney and the attorney general, and it was also certified to the bond board. 

The third finding, according to Arkansas Code, contracts exceeding an estimated purchase price of $75,000 shall be awarded by competitive sealed bidding unless a determination is made in writing by the agency procurement official or the state procurement director that this method is not practicable and advantageous and specifically states the reasons. 

While conducting capital asset additions testing, we noted one item costing approximately $117,000 that was not awarded by competitive sealed bidding. According to agency staff, evidence of proper purchase does not exist. Mr. Chair, that concludes finance for the Department of Health. 

Representative Steve Unger Thank you. Would the members of the agency come forward and have a seat and identify yourselves for the record, please? 

Don Adams Don Adams, Chief of Staff, Health Department. 

Matt Gilmore Matt Gilmore, Department of Health. 

Representative Steve Unger Thank you. I actually have a question on finding number three, last paragraph, last sentence: According to the agency staff, evidence of proper purchase does not exist. Could you explain exactly what you mean by that? 

Don Adams Yes, sir. That was, at the time when the auditors found this particular issue, this finding, we did not have the appropriate paperwork to show that we had gone through the sealed bid competitive process. We have subsequently found where we did post an invitation for bid as required on our website for the public. We have found a bid response sheet, but we were missing some paperwork in this process. So that’s what that is referring to. 

Representative Steve Unger Thank you. Members, do you have any questions? Senator Payton. 

Senator John Payton Thank you, Mr Chair. So you almost answered my question. But what was the piece of equipment and who had to sign off on that purchase? Wouldn’t they have needed to have seen the documentation? 

Don Adams It was a steam sterilizer for our public health lab. It was a $117,000 purchase. I’m not sure I understand your last part of your question. We did do an invitation for bid, which is what is required by procurement law. We did have a vendor submit a bid and we completed a response packet on that bid. What we do not have is the tabulation sheet. So there’s some indication that we only had one better, but we can’t prove that for sure. And that’s the problem with the paperwork being incomplete. But the solicitation was done correctly, but we did not have all the paperwork that we needed to have. 

Senator John Payton Well, I guess that explains why somebody would have signed off on it. I don’t know how your agency works, but somebody had to write a check or sign off on an electronic transfer or something in order to pay for it. And I would think that the person with that responsibility would want to see the documentation. 

Don Adams Yes, sir. The purchase order that we created had the bid response sheet on it of the vendor. So we did have that and what their bid was and they were the awarded vendor. We just didn’t have the documentation to show if there were other vendors that also bid. 

Representative Steve Unger Members, are there any other questions? Seeing none, without objection, we’ll file this report. Moving on to new business, the next meeting will be held on November 13, 2025. And we are adjourned.