This digest covers our financial audit and State compliance audit of the Office of the Comptroller Non-Fiscal Officer Responsibilities for the two years ended June 30, 2000.

The State Comptroller’s Office (Office) has not performed adequate disaster contingency testing. A comprehensive test for recovering all critical computer applications and interfaces across all platforms has not been performed.

If a disaster were to render the Office’s computer operations inoperable, the potential impact on State Government operations could be significant.

The Office recently renewed its contract with a Chicago-based vendor to provide disaster contingency services for all of its critical computing platforms. The new contract provides recovery services for the Office’s mainframe, local area network (LAN), and minicomputers. The Disaster Contingency Coordinator stated that a limited test is planned for December 2000; however, this will not include recovery of any of the Office’s critical applications. A second test is planned for March 2001.

A comprehensive test of the plan across all platforms will assist Office officials in identifying weaknesses in the plan to ensure recovery procedures are adequate in the event of a disaster. Continuous testing of individual components of the plan would also help ensure the plan is appropriately modified, as the Office’s computing environment and disaster recovery needs change. (Finding 1, pages 15-16)

We recommended the Office continue updating their plan and have that plan approved by upper management. In addition, we recommended the Office perform a comprehensive test to ensure the computer operations, including established interfaces and critical applications, can be recovered.

Office management concurred with the recommendation and indicated there are some deficiencies in their plan but they have shown due diligence and have proceeded with their planning to the best of their abilities.

The Office of the Comptroller (Office) did not comply with a provision of the State Finance Act and SAMS procedures for expenditures of the Statewide Accounting Management System (SAMS) Project.

In fiscal year 1996 the Office began implementation of a Statewide Accounting Management System, and entered into a lease agreement effective until 2002 with a vendor for the purchase of computer hardware, software, consulting services and licensing agreements. The Office entered into thirteen separate lease agreements with the vendor at an interest rate equal to, or less than 6 percent.

During the current audit period the Office paid-off the entire balances of all the remaining lease agreements pursuant to provisions in the leases for early termination. The total amount paid was $8,671,884. The entire amount was charged to the EDP line item and detail object 1687, EDP equipment.

Each lease schedule detailed vendor charges, including consulting services, travel expenditures, software, licensing costs, EDP equipment and training. In accordance with SAMS procedures, agencies that receive an EDP appropriation should utilize the proper operational detail object codes when reporting expenditures, and payments for computer software must cite detail object 1284.

Office management considered the above charges related to the SAMS Project and, therefore, appropriately chargeable to the electronic data processing appropriation line item and detail object 1687, EDP equipment, only. (Finding 4, pages 20-21)

We recommended the Office request future appropriations for these type projects under the appropriate line items and detail object codes and charge the expenditures to these line items and detail object codes to ensure correct recording of expenditures.

Office management agreed with our recommendation and noted a supplemental appropriation bill was enacted allowing full payment of the balance of the SAMS obligation in fiscal year 1999. The payment was made in accordance with procedures established by the prior administration, which had structured the contract.

At June 30, 2000, 123 units of local government were chronically delinquent in filing their annual financial reports with the Comptroller as required by the Governmental Account Audit Act (Act). Chronically delinquent units are three or more years delinquent in filing their reports.

The Act requires local governments to file appropriate annual financial reports or audits and financial reports within six months of their year-end. An extension of 60 days is available. After the time limit, the Comptroller is to send a delinquency notice specifying a due date for compliance. If the government body does not comply, the Act specifies the Comptroller shall cause an audit to be made by a licensed public accountant. Of the 123 units chronically delinquent, the Comptroller commissioned audits on only seven units.

Office officials indicated the Office does not have sufficient funds to have all the government units audited, and that the public is better served by working with the smaller units of government to bring them into voluntary compliance rather than cause them the additional expense of an involuntary audit. (Finding 5, page 22)

We recommended the Local Government Division of the Comptroller’s Office contract for audits on all delinquent governmental units as specified in the statute or seek a change in the law.

The Comptroller’s Office partially agreed with the recommendation and indicated the Office prioritizes its decision on which entities to audit based on resource availability and cost benefit analysis. The Office indicated it will seek legislation to clarify the Office’s responsibility related to this activity.

The remaining findings were less significant and are being given attention by management. We will review progress toward the implementation of our recommendations in our next audit.

Comptroller Office responses were provided by Ms. Carol Kraus, Chief Internal Auditor.

Our auditors state the Office’s financial statements as of and for the two years ended June 30, 2000 are fairly presented in all material respects.

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WILLIAM G. HOLLAND, Auditor General

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The firm of Sleeper, Disbrow, Tarro Morrison, & Lively were our special assistant auditors.