Legislature(2023 - 2024)ANCH LIO DENALI Rm
10/24/2024 09:00 AM House LEGISLATIVE BUDGET & AUDIT
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| Audio | Topic |
|---|---|
| Start | |
| Approval of Minutes | |
| Top Audit Issues Presentation | |
| Executive Session | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
October 24, 2024
Anchorage, Alaska
9:05 a.m.
MEMBERS PRESENT
Representative Ben Carpenter, Chair
Representative DeLena Johnson
Representative Sarah Vance
Representative Frank Tomaszewski
Representative Andy Josephson
Senator James Kaufman
Senator Scott Kawasaki
Senator Click Bishop (alternate)
MEMBERS ABSENT
Senator Bert Stedman, Vice Chair
Senator Bill Wielechowski
Senator Lyman Hoffman
Representative Mike Cronk (alternate)
OTHER LEGISLATORS PRESENT
Senator David Wilson
COMMITTEE CALENDAR
APPROVAL OF MINUTES
TOP AUDIT ISSUES PRESENTATION
EXECUTIVE SESSION
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KRIS CURTIS, Legislative Auditor
Legislative Audit Division
Legislative Agencies and Offices
Juneau, Alaska
POSITION STATEMENT: Gave a PowerPoint presentation, entitled
LB&A Oversight Top Audit Issues."
ACTION NARRATIVE
9:04:59 AM
CHAIR BEN CARPENTER called the Legislative Budget and Audit
Committee meeting to order at [9:04] a.m. Representatives Vance
(via teleconference), Tomaszewski (via teleconference),
Josephson, and Carpenter and Senators Kaufman, Kawasaki (via
teleconference), and Bishop (via teleconference) were present at
the call to order. Representative D. Johnson arrived as the
meeting was in progress. Also present was Senator Wilson.
^APPROVAL OF MINUTES
APPROVAL OF MINUTES
9:07:09 AM
CHAIR CARPENTER announced that the first order of business would
be the approval of minutes.
SENATOR KAUFMAN moved that the Legislative Budget and Audit
Committee approve the minutes for the June 24, 2024, meeting, as
presented. There being no objection, the minutes were approved.
^TOP AUDIT ISSUES PRESENTATION
TOP AUDIT ISSUES PRESENTATION
9:07:42 AM
CHAIR CARPENTER announced that the next order of business would
be a presentation of the prior fiscal year's top audit issues
from the legislative auditor, Kris Curtis.
9:08:05 AM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Legislative Agencies and Offices, gave a PowerPoint
presentation, entitled LB&A Oversight Top Audit Issues," dated
10/24/24. She began on slide 2, explaining that three years
ago, the Legislative Budget and Audit Committee adopted a new
oversight process to encourage a new corrective action for audit
findings. The process was outlines on slide 2, "Audit Finding
Oversight Process," which read as follows [original punctuation
provided]:
Focus
Identify top audit findings in terms of fiscal or
societal impact and degree of difficulty in addressing
findings.
Communicate
Work with Auditees to identify corrective action for
top audit findings.
Evaluate
Determine whether action requires legislative action.
Refer to legislative committee for consideration.
Measure
Examine progress through legislative finance
committees or other legislative committees as
relevant.
Repeat
Once the Single Audit is released repeat. Process
covers all reports issued over a fiscal year.
CHAIR CARPENTER sought to clarify that departments are already
familiar with the findings presented in today's hearing because
they are from previous audits.
MS. CURTIS answered in the affirmative.
9:09:07 AM
MS. CURTIS stated that there are seven top audit issues for FY
24, some of which are a collection of multiple findings. She
addressed the first finding on slide 3, "Disclaimer of Opinion
International Airports Repeat Finding," which read as follows
[original punctuation provided]:
Issues That Led to Disclaimed Audit Opinion
• During FY 22, Alaska International Airport
System's (AIAS) controller retired and other key
accounting staff resigned. Department of
Transportation and Public Facilities management
decided to contract out AIAS' accounting
function. A controller was hired to oversee the
contractor; however, the controller was not a CPA
• Since FY22, AIAS has been unable to produce
financial statements for audit in a timely
manner. The FY 23 audit was not available for
inclusion in the State's financial statements.
Consequently, Legislative Audit was unable to
obtain sufficient appropriate evidence regarding
AIAS' financial information included in the
State's financial statements.
MS. CURTIS detailed the second finding on slide 4, "No FY
23 Financial Info for Alaska Aerospace Corporation," which
read as follows [original punctuation provided]:
For the first time, a component unit's financial
information was not included in the State's financial
statements.
• Turnover of accounting staff, change in financial
systems, and complexities in accounting and
reporting a failed rocket launch led to delays in
producing AAC's financial statements. The State's
financial statements listed "0" for all AAC
accounts. This did not impact the [sic] our FY 23
audit opinion because AAC is an insignificant
part of the financial statements.
9:10:40 AM
MS. CURTIS explained the third finding on slide 5, "Late
Audit and Disclaimed Opinion AK National Guard & Naval
Militia Retirement System," which read as follows [original
punctuation provided]:
KPMG was unable to complete the audit timely and
disclaimed an opinion.
• Data needed for the audit was not maintained by
DMVA. Specifically, auditors needed information
regarding individuals who had terminated
employment with the system in order to test
actuarial information. The audit was delayed
while Division of Retirement and Benefits
accountants attempted to work with DMVA
management to obtain the data. Ultimately, the
information was not available and KPMG was unable
to obtain sufficient appropriate evidence and
disclaimed an opinion. This will likely be on
ongoing challenge and may prevent an audit
opinion in the future.
MS. CURTIS reviewed the fourth finding on slide 6, "Financial
Statement Errors & Late Draft Statements Repeat Findings," which
read as follows [original punctuation provided]:
Significant Errors in Draft Statements
• There continued to be significant errors in the
draft financial statements. The Division of
Finance is understaffed in terms of resources and
training. Division accounting staff suffer from
routine turnover and lack of experience.
Late Draft Statements
• Turnover, vacancies and a lack of training and
knowledge contributed to delays in creating the
FY 23 draft financial statements. Statements were
provided for audit on December 13, 2023 around 6
weeks late.
9:11:56 AM
MS. CURTIS discussed the fifth finding on slide 7, "Division of
Public Assistance Federal Program Findings Repeat Finding,"
which read as follows [original punctuation provided]:
Division struggling with staffing shortages, lack of
staff experience, poor training, and lack of adequate
internal controls.
• Material noncompliance with federal laws and
material weaknesses in internal controls over the
following federal programs.
o Low Income Heating Assistance
o Pandemic EBT Food Benefits
o Supplemental Nutrition Assistance (Food
Stamps)
o Temporary Assistance for Needy Families
MS. CURTIS explained the sixth finding on slide 8,
"Shortfalls Repeat Finding," which read as follows
[original punctuation provided]:
Certain departments not addressing shortfalls in a
timely manner
• Five departments with shortfalls in FY 23
compared to nine in FY 22 (improvement).
• Department of Law, Department of Health, and
Department of Natural Resources have not
addressed shortfalls in a timely manner.
CHAIR CARPENTER asked whether "shortfall" is an audit
description.
MS. CURTIS answered yes in addition to a budget description.
She said many appropriations are funded by general funds and
another funding source, such as federal assistance. If the
federal funds are not coming in as expected, agencies are
required to restrict that portion of the authorization to avoid
overspending the general fund portion. Sometimes agencies do
not do this appropriately, which is what auditors test for.
9:15:02 AM
REPRESENTATIVE JOSEPHSON asked why theoretically, the attorney
general (AG) could not ask his administrative director about the
shortfall.
MS. CURTIS said sometimes the shortfall is due to a lack of
staff and not prioritization. Other times its more complicated
or related to a reimbursable service agreement (RSA) with
another agency. She added that sometimes, the federal
government disallows expenditures, which results in shortfalls.
REPRESENTATIVE JOSEPHSON understood the words "have not
addressed" to mean that the agency did not tell the auditors
anything.
MS. CURTIS clarified that explanations were provided. Often
times, the shortfalls were due to competing priorities or lack
of staff.
CHAIR CARPENTER shared his understanding that the purpose of
bringing these audit findings forward is for a recommendation
from the Legislative Budget and Audit Committee and to follow up
on these specific items next session. He asked whether that is
correct.
MS. CURTIS answered yes, especially during the budget
subcommittee process.
9:17:41 AM
MS. CURTIS resumed the presentation by addressing the seventh
finding on slide 9, "Marijuana Control Board," which read as
follows [original punctuation provided]:
2024 Audit Made two Recommendations to the board/AMCO
1. Alcohol and Marijuana Control Office (AMCO) director
should establish procedures to ensure handler permit
documentation is properly maintained.
2. The board and AMCO director should continue to
implement a new license and enforcement information
system.
CHAIR CARPENTER asked whether Ms. Curtis had received an update
from any of these agencies since the audit was released.
MS. CURTIS said only the chief financial officer (CFO) of the
Division of Retirement and Benefits (DRB).
9:19:41 AM
SENATOR KAUFMAN shared his understanding that the new process
includes a set of criteria to determine importance and urgency.
He asked for an overview of the evaluation process.
MS. CURTIS said the following factors are considered: the impact
on public safety and social assistance programs; the amount of
time the agency has been struggling; and findings that continue
to fester. She explained that she starts by looking through
each page of the single audit and reviews the recommendations
from the performance audit.
9:22:14 AM
MS. CURTIS concluded the presentation on slide 10, "Next Steps
LB&A Oversight," which read as follows [original punctuation
provided]:
Legislative Auditor sends letters on behalf of the
LB&A committee to the auditees asking for the status
of corrective action. A summary of the responses will
be presented at the December LB&A meeting. For those
audit findings that warrant consideration by other
legislative committees, the findings may be forwarded
to the appropriate committees for consideration during
the 2025 legislative session.
^EXECUTIVE SESSION
EXECUTIVE SESSION
9:23:13 AM
CHAIR CARPENTER announced that the next order of business would
be executive session to receive and discuss the case of
Legislative Budget and Audit Committee v. Dunleavy, et. al, Case
No. S-18904, and discuss the preliminary audit releases.
SENATOR KAUFMAN moved that the Legislative Budget and Audit
Committee go into executive session under Uniform Rule 22(b)(3)
for the discussion of matters that may, by law, be required to
be confidential. He asked that the following persons remain in
the room or online: Emily Nauman, legislative services
director, and necessary staff; Emily Nauman, legal services
director and necessary staff; Kris Curtis, legislative auditor,
and necessary staff; any legislators not on the committee; staff
of legislators on the committee. There being no objection, it
was so ordered.
SENATOR KAWASAKI asked whether the presentation listed on the
agenda would be heard during executive session.
CHAIR CARPENTER stated that the presentation by the Office of
Children's Services (OCS) would not be discussed in executive
session.
9:25:22 AM
The committee took an at-ease from 9:25 a.m. to 9:29 a.m.
9:29:02 AM
CHAIR CARPENTER clarified that the presentation referenced by
Senator Kawasaki was a printing error and would not be discussed
during today's meeting.
9:30:06 AM
The committee took an at-ease from 9:30 a.m. to 10:07 a.m. for
the purpose of executive session.
10:07:49 AM
CHAIR CARPENTER called the Legislative Budget and Audit
Committee meeting to order at 10:07 a.m. Representatives Vance
(via teleconference), D. Johnson, Tomaszewski (via
teleconference), Josephson, and Carpenter and Senators Kaufman,
Kawasaki (via teleconference), were present at the call to
order.
10:09:12 AM
CHAIR CARPENTER stated that during executive session, the
committee discussed legal advice pertaining to Legislative
Budget and Audit Committee v Dunleavy, et. al, Case No. S-18904.
At this time, he said the committee needs to decide whether to
increase the existing contract amount by $35,000 to see the case
through the Supreme Court deliberations.
10:10:02 AM
SEANTOR KAUFMAN moved that the Legislative Budget & Audit
Committee approve an amendment to the existing contract with
Stoel Rives, dated January 12, 2023, to increase the contract
amount by $35,000 for a total amount not to exceed $335,000, for
legal services, litigation and appeal costs in the ongoing
matter, Legislative Budget and Audit Committee v. Dunleavy, et.
al, Case No. S-18904, relating to the deposit of certain state
taxes and royalties resulting from Federal Energy Regulatory
Commission (FERC) decisions into the general fund (GF). There
being no objection, it was so ordered.
10:10:54 AM
CHAIR CARPENTER said during executive session, the committee
also discussed the preliminary audit release of the Board of
Certified Direct Entry Midwives; the State Board of Registration
for Architects, Engineers, and Land Surveyors; The Board of
Veterinary Examiners; the Board of Nursing; and the State Board
of Parole.
10:11:36 AM
SENATOR KAUFMAN moved that the Legislative Budget and Audit
Committee move and release to the department the preliminary
audits on the Board of Certified Direct Entry Midwives; the
State Board of Registration for Architects, Engineers, and Land
Surveyors; The Board of Veterinary Examiners; the Board of
Nursing; and the State Board of Parole. There being no
objection, it was so ordered.
REPRESENTATIVE CARPENTER sought questions or comments from
committee members.
10:12:18 AM
SENATOR KAUFMAN thanked the team of auditors for their
continuous work on these issues.
REPRESENTATIVE D. JOHNSON expressed her appreciation to Chair
Carpenter for following through on the Constitutional Budget
Reserve (CBR) lawsuit.
10:13:28 AM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
10:13 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| lbac meeting_ppt 1_final_10172024.pptx |
JBUD 10/24/2024 9:00:00 AM |
LB&A Oversight Top Audit Issues |