REPORT DIGEST

FINANCIAL AND COMPLIANCE AUDIT
For the Two Years Ended:
June 30, 1998

Summary of Findings:

SYNOPSIS

• Federally funded disaster assistance projects were not completed by the federal due dates resulting in $122,780 in questioned costs.

• During Fiscal Year 1997, the Department reported lump sum payments for accrued leave time as direct rather than indirect program costs. This resulted in $24,525 in questioned costs.

• The Department's reporting of program income and expenses to the U.S. Fish and Wildlife Service excluded $602,374 received in the form of commodities and services instead of cash.

• The Department lacked adequate internal controls over its accounting for federal and State program activity.

{Expenditures and Activity Measures are summarized on the next page.}

FY 1998

FY 1997

FY 1996

$404,967,106

$202,779,623
1,414,953
$204,194,576
$202,187,483
$191,716,064
$10,471,419

$371,082,293

$196,047,708
1,025,323
$197,073,031
$175,034,585
$163,583,960
$11,450,625

$349,823,349

$186,223,025
2,333,771
$188,556,796
$163,600,324
$153,689,902
$9,910,422

FY 1998

FY 1997

FY 1996

$77,048,755
13,188,500
739,591
3,113,205
722,591
2,921,222
520,228
1,551,167
1,895,715
21,096,573
6,991,770
410,160
99,478
23,787,476
59,232
50,037,666
11,247
$204,194,576

$72,455,985
11,760,505
665,700
3,182,565
706,187
2,789,340
428,015
1,476,273
1,845,034
22,367,405
6,248,993
0
83,933
30,979,024
47,912
42,023,418
12,742
$197,073,031

$82,726,137
12,603,036
779,781
3,090,596
808,402
2,758,571
556,857
1,587,789
1,911,543
17,301,584
1,409,468
1,113,812
90,895
31,270,124
715,064
29,821,452
11,685
$188,556,796

FY 1998

FY 1997

FY 1996

$40,132,900
20,777,300
4,189,200
1,238,900
647,100
166,600
6,513,700
73,665,700

$41,767,300
20,096,600
4,000,200
1,172,100
588,000
150,700
4,343,600
72,118,500

$39,078,600
19,920,700
4,566,200
1,176,900
557,500
398,700
1,615,100
67,313,700

1998

1997

1996

2,059
412
$692,372,279
$8,346,000
$23,636,000

2,063
389
$659,136,030
$9,586,000
$22,620,000

2,037
361
$631,977,000
$10,187,000
$21,631,000

Disaster work at state parks completed after due dates

Accounting system was not reconciled

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

DISASTER PROJECT WORK COMPLETED AFTER DUE DATES

 

The Department did not request time extensions to complete certain federally funded disaster assistance projects and performed some disaster related work after the due dates.

 

The Department obtained federal funds from the Federal Emergency Management Agency for emergency costs, debris removal, and repairs and restoration at State parks. These federal funds are available for presidentially declared disasters. Project completion deadlines are set from the date that a major disaster or emergency is declared. Debris removal and emergency work must be completed within 6 months, and permanent work must be completed within 18 months. Department officials stated they believed the time frame for completion of projects began with the inspection and completion of the Disaster Survey Reports, rather than from the declared date of the disaster. In some instances, inspections did not occur until one year after the disaster declaration. In other instances, the projects were delayed as a result of reflooding.

 

Costs incurred subsequent to the federal deadlines are questioned costs in the amount of $100,334 for the two years ended June 30, 1998. Also, the Department had unresolved questioned costs of $22,446 from the prior audit. Failure to obtain extensions could result in the need to repay the federal funds and could also cause a loss of future revenue. (Finding 98-4, pages 137-138)

 

Department officials concurred with our recommendation and stated they have requested time extensions for the projects cited in the finding. They also stated that procedures for managing disaster assistance projects will be revised to strengthen controls.

 

INCORRECT REPORTING OF TERMINATION PAYMENTS

 

During Fiscal Year 1997, the Department incorrectly reported lump sum payments of accrued vacation and sick time for employees leaving State employment as direct program costs. Federal cost principles require such payments be allocated to federal programs as an indirect cost.

 

The Department's Office of Internal Audit identified this condition and lump sum payroll payments were appropriately excluded from direct federal program costs in Fiscal Year 1998. However, there was no correction of the Fiscal Year 1997 federally reported personal services costs, and therefore we questioned $24,525 of such costs reported for the Wildlife Restoration Program. (Finding 98-11, page 146)

 

Department officials agreed with our recommendation to file amended reports with the U.S. Fish and Wildlife Service to resolve the questioned costs identified.

 

FEDERAL PROGRAM INCOME NOT REPORTED

 

The Department did not report all sources of program income received and expenses incurred pursuant to Wildlife Restoration projects administered with federal financial assistance.

 

During the 1997 crop year, the Department leased 23,179 acres at 74 different wildlife habitat sites. Many of these leased agricultural lands were acquired or managed with federal funds. Frequently, the Department receives its lease payments in commodities or services from the lessee instead of cash. The form of lease payment is determined in conjunction with the needs and objectives of the wildlife project. The value of such services and commodities received from leases involving active, federally funded wildlife projects in the 1997 crop year was $602,374. However, this value received was excluded from the Department's reporting of program income and expenses to the U.S. Fish and Wildlife Service.

 

Federal regulations require "accurate, current, and complete disclosure of the financial results of financially assisted activities....financial information must be related to performance or productivity data." Income generated by a grant supported activity is considered program income and shall be deducted from outlays unless permission to report using an alternative method is received from the U.S. Fish and Wildlife Service. Furthermore, federal regulations state that program income "shall be accounted for in the project records and disposed of as directed by the [U.S. Fish and Wildlife Service] Director." (Finding 98-8, page 143)

 

Department officials concurred with our recommendation to seek guidance from the U.S. Fish and Wildlife Service and report program income from all sources in an approved manner. They stated the Service is currently preparing a national policy clarification on program income which should provide clearer guidance for the Department in the future.

 

LACK OF ADEQUATE CONTROLS OVER ACCOUNTING FOR PROGRAM ACTIVITY

 

The Department lacked adequate internal controls over its accounting of federal and State program activity. In order to account for the various federal and State programs administered by the Department, a separate programmatic accounting system (PAS) is utilized. The PAS was not reconciled to the Department's primary accounting records. Furthermore, it was noted that the Department lacked a regular review of programmatic data by program and project managers.

 

Financial administration requirements contained in federal OMB Circular A-102 require effective internal controls over grants. Regular reconciliations and monitoring of accounting and cost data are an integral part of an effective internal control structure.

 

Failure to implement effective reconciliation and monitoring controls could lead to the loss of federal funds and diminishes the integrity of the Department's programmatic cost data. (Finding 98-10, page 145)

 

We recommended that responsibilities be established and that periodic reconciliations and reviews of programmatic cost data be performed by appropriate fiscal and program personnel, and the Department concurred.

 

OTHER FINDINGS

 

The remaining findings were less significant and have been given appropriate attention by the Department. We will review progress towards the implementation of our recommendations in our next audit.

 

Mr. Brad Hammond, Chief Internal Auditor for the Department, provided the responses.

 

AUDITORS' OPINION

Our auditors stated the Department's financial statements as of June 30, 1997 and June 30, 1998 were fairly presented except for the effects of such adjustments, if any, as might have been determined to be necessary had they been able to examine evidence regarding year 2000 disclosures.

 

____________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:KMA:pp

 

SPECIAL ASSISTANT AUDITORS

Sleeper, Disbrow, Morrison, Tarro & Lively were our special assistant auditors for this audit.