Representative Robin Lundstrum It's 1:30. And we are going to take some folks out of order, but let's do some business first. First, adoption of minutes. Do I have a motion? Looks like Representative Marcus Richmond is giving me a notice. Okay, so second. All right. Thank you. Let's go to reports then. Let's start just a little out of order.
Kevin White Yeah, well, madam chair, we do have the ten reports without findings that are in there today. We've got five we're going to present with findings. But the ten without findings, you can go and approve those.
Representative Robin Lundstrum Okay, Let's take those ten without findings and mark those as approved. =
Kevin White Okay. So at the request, we're going to take the Department of Labor first. And so the Labor report we had today has three findings. And this is the June 30th, 2023, report. Finding 1, it should start on page six of your synopsis. The first finding, DFA's Financial Management Guide requires special written authorization with justification of the benefit to the state by the agency head for all meal reimbursements without overnight travel. Any meals provided may not exceed the maximum allowable rates as listed in the Federal Travel Directory without additional special authorization from the agency head.
None of the boards that provided meals at board meetings or exceeded the maximum allowed rates obtained the required special authorization. And you can see additional detail on these meals in the table of that finding. The second finding, our review of travel expenditures and reimbursements for compliance with state travel regulations revealed the following deficiencies: reimbursements for private vehicle mileage is to be computed using the shortest major highway route between destinations.
The division of Labor had excess mileage claimed as well as a duplicate reimbursement, resulting in overpayments totaling of about $1,700. Also, reimbursement of travel expenses may only be claimed in connection with official business of the state. A letter of authorization by the administrative head of the agency with justification of the benefit to the State should accompany any travel expenses reimbursed for personal convenience. Seven of the nine board members of the Professional Engineers and Surveyors Board do not live in Little Rock and must drive 2 to 3 hours to attend board meetings. To accommodate these board members' drives, the board set the start time for meetings at 10 a.m. Two board members incurred expenses totaling about $700 for lodging and meals prior to the meetings without an official business purpose being documented. This letter of Special authorization was not provided for these expenses.
In the last finding, DFA's Financial Management Guide requires cash, including checks, to be deposited to the Treasury at least weekly. Our review revealed deposits were made more than ten days after the receipt date as noted in the table of the finding. Additionally, our review of receipts reveals several deficiencies in various divisions of the agency where incorrect license fees were charged, duplicate payments were received from licensees and various other issues with license requirements.
And you can see a lot of detail about these deficiencies in the bullets of that finding. The total net underpayment for these deficiencies, for these incorrect payments, totaled about $820. Madam Chair, that concludes the findings for the Labor and Licensing Board.
Representative Robin Lundstrum Thank you. And if I could have the Secretary come up and any of his guests. Please introduce yourself for the record.
Secretary Daryl Bassett Madam Secretary, members of the committee, Daryl Bassett, Labor and Licensing secretary.
Steve Guntharp Steve Guntharp, Labor and licensing.
Representative Robin Lundstrum Director Bassett, do you want to go line by line and address these starting at finding one and let us know what's been done for corrective action?
Secretary Daryl Bassett Absolutely. The first finding, Madam Chairman, was regarding the lack of an authorization for a travel order. We have now created that authorization form along with the help of DFA. So we have that form in place. Let me tell you just exactly what created that scenario. That occurred with our board members actually. They were traveling in town from out of town and they were staying overnight. We simply were in error by not forcing them to declare that and having an established form in place where that would require them to do that. We now have that form in place. And so that issue should not be a problem going forward.
Representative Robin Lundstrum All right. Any questions? Any questions from members? Okay. Thank you. If you could go to finding two.
Secretary Daryl Bassett Yes, the next finding was vicinity miles. And we call them vicinity miles. When you use Google Maps, and, of course, we discussed this at length with our auditor, DFA was actually looking at miles from one city limit to the next city limit. Well, that's not exactly what happens with my inspectors who are traveling to the various cities. They get to the city line, but then they often have to travel around in the city.
And so they were including those miles in on their forms, which they rightly should be doing because they're not traveling around in the city for pleasure. They're moving around, going to different sites. And so that was the discrepancy. Hopefully we won't have that finding again. But I just don't know what kind of position we're going to have to be in. We can't tell them to only seek reimbursement from city limit to city limit. So hopefully we can work with DFA and resolve this in the future. But that was the vicinity mile issue.
Representative Robin Lundstrum Okay. Thank you. Finding 3. We're on page four, bottom of page 4.
Secretary Daryl Bassett I am so sorry, Madam Chairman. I'm a little discombobulated. I left my readers at home, so I'm having trouble finding– This was occasioned as we were changing systems. We've put in a platform that we call electronic licensing platform that reports directly to ASIS. Before then, we were taking checks. We were on a more manual system. And so the auditor chose just by chance to test our deposits as we were changing from the manual system to our electronic licensing platform. The idea behind that, Madam Chairman and members of the committee, is that we can now, instead of having people come in personally, we can perform these licensing procedures online.
He caught us just in that 60 day gap, and those deposits weren't being deposited to ASIS within that ten day period of time, though there was no indication at all that they were not being deposited. We just weren't making it within a ten day period of time. Since that audit exception, and that was late in 2022, we've completely adhered to that ten day deposit tool. We have ELP up and running. But we have three entities out of the 21 that still aren't on ELP, but that was what occasioned that particular finding.
Representative Robin Lundstrum Okay. Thank you. Any questions from members? Seeing none, we will report these for tomorrow. Thank you.
Secretary Daryl Bassett Thank you, ma'am. Thank you, members of the committee.
Kevin White The next report we have with findings is the attorney general. This is back at the first part of your synopsis. This is a June 30th, 2023, report. And it has one finding. In our review of 20 lump sum career service payments made during the fiscal year, we noted one payment of $800, which is the amount awarded for 10 to 14 years of service, to which the employee was not entitled. The employee's career service date entered in ASIS did not reflect a gap in service between 2012 and 2017, and it was not until February 2023 when the employee transferred to another agency that the career service date was updated in ASIS. By then, the employee had erroneously received a total of $2,400 for fiscal years 2021 through 2023. Madam Chair, that concludes the finding.
Representative Robin Lundstrum Thank you. Is anyone from the Attorney General's office here, Mr. Rosenbaum? Please introduce yourself for the record.
Sid Rosenbaum I'm Sid Rosenbaum, Chief Fiscal Officer for the Attorney General's Office.
Zack Mayo Zack Mayo, General Counsel, Attorney General's Office.
Representative Robin Lundstrum Okay. Thank you, gentlemen. Could you give us an explanation or how it's been handled?
Sid Rosenbaum Sure. In 2017, an employee was hired by our agency and his career service was erroneously entered into ASIS. So moving forward to 2020, 2021 and 2022, he was incorrectly paid career service at the career service bonus for the years that he accrued. And this was not the case. It was discovered and the total amount was $2,400. And we have, under the advice of Legislative Audit, we have gone back and talked with the employee and worked through OPM to get the money returned back to the state.
Representative Robin Lundstrum Okay. Thank you. Any questions? Okay. Without objection, we will report it as filed. Thank you.
Sid Rosenbaum Thank you.
Kevin White Okay. Our next report of findings is the Department of Human Services 2023 report, and this report contains three findings. The first finding, while performing an observation of assets from a current Captive Asset listing dated March 20th, 2024, we noted nine of the 60 equipment items sampled with a total purchase cost of almost $33,000 could not be physically located for observation or were not properly identified for audit verification, as noted in the bullets of the filing. Additionally, of the 60 items tested, six had documented databases being last inventoried over two years prior to the sample listing date of March 20th, 2024.
The second finding, during our review of the Arkansas Able Investments of Foster Care Trust funds, we noted a total of $1.3 million in foster care client funds were sent by the agency to a third party administrator for investment against multiple foster care client investment accounts over the last five years. Our review of the check contributions issued during FY 23 and corresponding any investment balances noted that in two instances, check contributions of $700 and $800 respectively had been applied by the third party administrator against incorrect foster care accounts.
Also, the agency failed to properly monitor, identify and follow through with timely remedial action regarding check contributions outstanding at the end of the year. Eight outstanding items totaling $8,300 were outstanding, ranging from 10 to 21 months at the time of our review with the following issues also noted: Five of these outstanding checks were sent to the third party administrator, but never invested against the applicable account, and three of them were misfiled by the agency and never submitted to third party administrator for investment.
The third finding, the agency's procedures documented gift card handling by the Division of Children and Family Services state that a completed and signed chain of custody form listing distribution date and recipient receipt must be returned to the agency within 14 business days. The agency procedures also state that all gift cards must be kept secure in the division safe. During fiscal year 23, the agency purchased 116 gift cards with a total value of over $11,000 to be used by DCFS for Christmas gifts, graduation gifts and survey incentives.
Additionally, as of the beginning of the fiscal year, the agency had 48 gift cards with a total value of about $2,400 on hand in the safe. Based on review of distribution of gift cards, we determined that the agency did not properly follow procedure regarding the obtaining and maintaining a final recipient signed and dated chain of custody forms and did not ensure that the entry of the card were held in the division safe. For 17 gift cards valued at $1,700, our review revealed that five of those gift cards valued at $500 that were reported distributed in December 2022, the final signed chain of custody forms listed different card numbers other than identifying numbers on file with the agency.
For eight gift cards valued at $800, they were intended to be distributed in May of 2023. The chain of custody form provided had no recipient signature and date or was signed and dated by the recipient in March of 2024 at the time of our review. And for four gift cards valued at $400, they were intended to be distributed in May of 2023. These were not distributed but were being held onsite at a county field office. Additionally, the agency failed to report the safe contents valued at $1,700 as an asset in ASIS at June 30, 2023. Madam Chair, that concludes the findings for DHS.
Representative Robin Lundstrum Okay. And do we have agency representatives here? If you could state your name and position for the record, please.
Misty Eubanks Misty Eubanks, deputy secretary of the agency over operations and budget.
Brett Hays Brett Hays, chief deputy counsel.
Representative Robin Lundstrum Okay. Thank you. There's quite a bit to unpack here. If we could start with finding one.
Misty Eubanks Yes, this is an agency wide finding, as noted. This was based on a sample of assets, and we do concur with this finding. We noted deficiencies. Those have been updated correctly in ASIS and division procedures have been updated and we've done retraining with our several capital asset managers and gone back through policy.
Representative Robin Lundstrum I have a question. I understand that's supposed to be updated annually, and a couple of these are two years old.
Misty Eubanks Yes, that is correct.
Representative Robin Lundstrum Okay.
Misty Eubanks So we've gone back and done reconciliations on those. We also have the issue sometimes things are not retired timely and so we've made a real effort to clean up our ASIS roles around assets as well.
Representative Robin Lundstrum Okay. There was another question on inspections. When you report something lost or stolen-- I've lost my question. Let's go to the next one. Members, do you have any questions?
Misty Eubanks On things that are lost and stolen, we do go back out and try to do another field siting of that. Or if it rises to the level where it can be criminal activity, we've also undergone a method where we're referring those or making police reports.
Representative Robin Lundstrum Okay. And has that been done in the last audit?
Misty Eubanks That has been done since the last audit. Yes. And that's been an ongoing-- we've made a real effort to clean up our asseting. And we have so many stations throughout the state. And this has been an ongoing cleanup process over the last, I would say, 4 or 5 years. We've really been heavily invested in that work.
Representative Robin Lundstrum Okay. Thank you. Members, do you have any questions on the finding number one? All right. Finding number two.
Misty Eubanks So finding number two, these are foster care trust fund accounts that we hold on behalf of our foster care client children. We've made several strides in this area. We implemented a new process for submitting those checks to the third party administrator that's much more timely. We've also done the reconciliation process for these ABLE accounts, and we're doing monthly meetings with the third party administrator. Brett, anything to add?
Brett Hays I will add, on some of these, there was a few instances where on these deposits that didn't get made, those funds were deposited to the corrected account. And in the event that one of the children that was in foster care was no longer in foster care, we returned those funds to the Social Security Administration. So I think that was on two of the cases. On five of the cases we re-credited to those accounts.
Representative Robin Lundstrum Members, do you have any questions? Quiet today. All right. Next finding, number three, the gift cards.
Misty Eubanks Yes. So gift cards we utilize in DCFS for various events. It's outlined here in the audit, but primarily for graduation and or Christmas gifts for our foster youth. This is one where we did have gift cards that were recorded either incorrectly-- we did update those. And for ones that were located out in the field, those were either returned back to central office and placed properly in the safe or chain of custody was redone. And we have done retraining on those procedures. And we do have safety measures such as only two people accessing the safe at any one time and sign in and sign out procedures in place.
Representative Robin Lundstrum In past audits, has this been an issue in past audits?
Brett Hays I do believe we had an audit finding on this particular issue about 4 or 5 years ago, but it's been quite a while. I think this is the first time it was actually back in the audit testing for a few different cycles.
Misty Eubanks That would be correct. So we did have appropriate internal controls. It's just retraining and making sure that those are always adhered to. So having proper due diligence, that's something we definitely leaned in again on.
Representative Robin Lundstrum Okay. Thank you. Members, any questions on number three? Okay. I believe that concludes. Any questions, comments from members?
Misty Eubanks Okay. Thank you so much.
Representative Robin Lundstrum Okay. Thank you. Without any objection, we'll move to the next one.
Kevin White The next report that we have with findings is the Department of Parks, Heritage and Tourism 2023 report. This report contains two findings. The first finding, as noted in fiscal year 22, there was a deficiency in the agency's calculation of sick leave payouts. In 2023 we reviewed all 28 employee sick leave payouts made in the fiscal year. And it revealed one instance of an employee who did not receive the correct payment amount. The employee was paid a little over $1,100, but was only entitled to about $600, resulting in an overpayment of almost $500.
And the second finding, the department notified us in April of 2024 of the loss of receipts totaling at least $700 from one of its museums. In this case, an employee was terminated and parks law enforcement officers are currently investigating this matter. This finding was referred to the prosecuting attorney and the attorney general. Madam Chair, that concludes the findings for Parks, Heritage and Tourism.
Representative Robin Lundstrum Is there anybody from the agency that can come up? If you could introduce yourself for the record, please.
Shea Lewis Shea Lewis, secretary of the Department of Parks, Heritage and Tourism.
Jamie Fisher Jamie Fisher, CFO, Parks, Heritage and Tourism.
Representative Robin Lundstrum Okay. Finding number one.
Shea Lewis So finding number one ended up being a calculation error that took place for a retiring employee for pay out of sick leave. Since that mistake, we have implemented additional review measures and procedures that include senior level staff review at the CFO or finance level to prevent this from happening in the future.
Representative Robin Lundstrum Okay. Thank you. Any questions from the body? All right. I think most of us are interested in finding number two.
Shea Lewis Sure. So at Mosaic Templar Cultural Center here in Little Rock, a self-reported theft was made of $700 that led to termination of an employee. Investigations are still ongoing, and it's been turned over to the Pulaski County Prosecuting Attorney's office, who is working on an affidavit. Since that time, we have implemented a point of sale system with internal controls to prevent this from happening in the future and is functioning at this time. Okay.
Representative Robin Lundstrum And do you do some type of spot testing with that or does it automatically catch something when it goes to the wrong account since this was going to the wrong account?
Shea Lewis So the previous process was more of a manual process, kind of an older style of bookkeeping and didn't allow for as many checks and balances. This new system, when reservations are made for rentals, it is implemented at that time.
Representative Robin Lundstrum Okay. All right. Thank you. I think we should pass this on for review, but I'd like to know what the total loss was.
Shea Lewis At this point in time, we feel that $6,193 are suspected total losses. As I said earlier, it's going through the investigative process. The affidavit is related to getting records from the person's account to understand exactly how much may have been taken.
Representative Robin Lundstrum All right. Thank you. And there weren't any other employees involved?
Shea Lewis No, ma'am.
Representative Robin Lundstrum Okay. Thank you. Members, do you have any questions? Okay, We'll report this. Thank you.
Shea Lewis Thank you.
Representative Robin Lundstrum Okay. Last one.
Kevin White Our last report today is the Game & Fish Commission 2023 Report. And this report contains one finding. The Arkansas Game & Fish Commission notified us of the following thefts of state funds and property. The first bullet there, the AG notified us that a vendor on December 4th, 2023, had a $420,000 payment that the agency made by ACH in November that was not deposited into the vendor's bank account. Upon further review, it was confirmed that Game & Fish staff had received and acted upon a fraudulent email requesting banking data change, resulting in a payment being made to a bank account not belonging to the vendor. A police report was filed with the police department and the FBI. The investigation is ongoing.
On March 4th of this year, an 18 x 21 foot carport with a cost of almost $2,000 was stolen from Game & Fish property located in Phillips County. A police report was filed with the Phillips County Sheriff's Office. And on May 21st this year, a laptop with the cost of about $1,400 was stolen from Game & Fish property in Prairie County, and the report was filed with the Prairie County Sheriff's Office. And this finding was referred to the respective prosecuting attorneys, as well as the attorney general after they concluded the filing.
Representative Robin Lundstrum Thank you. And folks from Game & Fish, if you could come up. Please identify yourself for the record.
Austin Booth Good afternoon, everybody. I'm Austin Booth, the director of the Arkansas Game & Fish Commission.
Emily Shumate Emily Shumate, CFO.
Representative Robin Lundstrum Thank you. Let's start with the big one. Tell us what's going on and update us, please.
Austin Booth Yes, ma'am. So promptly after we discovered the fraudulent email from a third party, we reported the theft to DFA and promptly implemented an entirely different procedure for changing bank account information. We also required multiple times agency wide training for our staff. And since then we've been able to work with the Department of Justice and the FBI. Not a whole lot we can say in this venue today, but we're very confident in working with them that we will be able to recover nearly all of what was taken from the agency.
Representative Robin Lundstrum Thank you. And this was a phishing scheme?
Austin Booth Yes, ma'am.
Representative Robin Lundstrum All right. I hope you share what you've learned with other agencies. That type of scheme could easily work on anybody.
Austin Booth And unfortunately, ma'am, they're only becoming more and more common and more and more effective.
Representative Robin Lundstrum Yes. Any questions from the body members? Representative Wardlaw?
Representative Jeff Wardlaw My question is not for the department, but Audit. It seems like reading this finding, everything was done right here. I mean, they had a theft, they reported it. So I guess I'm kind of dumbfounded to why that's a finding, because it looks like they done everything correctly in the timeline they were supposed to do it in.
Kevin White It's just a reporting mechanism when we get things like--
Representative Jeff Wardlaw So it's not necessarily a finding. It's a report to the committee that these steps took place?
Kevin White It's that, plus we have to report it to the prosecutor. By the agreement we have with prosecutors, if we have-- and the law requires us too if there's a loss of funds that we have to report that.
Representative Jeff Wardlaw But it's already reported to the prosecutor in the means of going through the local law.
Kevin White It's just a formality for us to report to you guys so that you know what's going on.
Representative Jeff Wardlaw Thank you. I was just curious.
Representative Robin Lundstrum Representative Richmond.
Representative Marcus Richmond Very quickly. Concerning the computer that was over in Philips, I believe in Phillips County-- or actually, carport. And then the computer that was in Prairie County. For the computer itself, that laptop, was that left in a vehicle or do you know?
Emily Shumate No, sir. It was in a residence turned office and they entered the building through a window.
Representative Marcus Richmond Okay. The only thing I can say, back when I first come up here to Little Rock, every month there was some type of theft going on. And some of it was left in a vehicle. Some of it was what you're describing here. This stuff comes in waves. So I would go out and remind your people to take every security precaution possible because the thieves, they never quit on this thing. Would you agree?
Austin Booth Yes, sir. And I don't want to discuss publicly where our vulnerabilities are, but what I will say is the agency's made increasing facility control and security cameras more of a priority this fiscal year and into next.
Representative Marcus Richmond Thank you. Thank you, Madam Chair.
Representative Robin Lundstrum Thank you. I'm just curious, how does anybody take an 18 x 21 carport? That's pretty difficult.
Austin Booth We have often wondered the same thing, ma'am.
Representative Robin Lundstrum Okay. Inquiring minds want to know how that worked. All right. Any other comments? Yes, Senator Dismang.
Senator Jonathan Dismang I mean, I had the same thought about the findings. I mean, it can qualify as a finding if you provide a recommendation. But I'm not sure we really provide-- we kind of gave a recommendation, but we didn't also. Now, I think they followed through on their own with some-- it's pretty diligent in what they've done and probably not being mimicked by many other agencies. I would be curious how we do that in the future. There are several of these that are actually self-reported and the we show up, but then we call them findings, but they're technically not findings. And maybe at some point, I'm not sure if you just call that notes in a normal audit or what.
Representative Robin Lundstrum Or a self report.
Senator Jonathan Dismang Well, there's terminology for various portions of an audit. Findings is probably not what this is.
Kevin White There's some things in the code that says we have to report losses over a certain amount of money. That's what this is. And we have a lot of those, as you're referring to. That's just generally how we refer to things, as a filing. I mean, I agree with you. I mean, they've done some things here, and there are some things they've done that could be done, too.
I know we've had these. This is, like you said, this is getting to be a recurring thing where they send in fraudulent information. We had one at the Highway Retirement System not too long ago and they're requiring some kind of two factor authentication. There's things like that they can do. So, yeah, I agree with you. These are things that we just have to report by code.
Senator Jonathan Dismang Well, like I said, we may need to just-- I mean, because to me, an audit finding is a little bit different than what we're saying here. I mean, this isn't really a finding. I'm not sure at the time you could have deemed that their internal controls were insufficient. It's just the world's changed, right? So it's a best practices issue as much as it is anything. So anyway, I think there may be a different way to list that in an audit report as opposed to just being a finding. So a different section.
Representative Robin Lundstrum Okay. All right. Thank you. Any other members? Okay, we will report this as reviewed. I understand, Mr. Booth, this is your last meeting with us. And so I want to wish you all the best.
Austin Booth Thank you.
Representative Robin Lundstrum All right, members, any other comments? Questions? All right. This meeting is concluded. Merry Christmas.
