Auditor Fitzpatrick releases annual report examining state's financial reporting process

JEFFERSON CITY, MO (May 23, 2023) -- Missouri State Auditor Scott Fitzpatrick today released the annual report produced by his office on the state's financial reporting processes. The report examines Missouri's annual statewide financial statements and makes recommendations to ensure accurate financial reporting, which better protects and accounts for taxpayer resources.

To avoid the appearance of a conflict of interest, the State Auditor recused himself from participation in the audit of the state's Annual Comprehensive Financial Report (ACFR) for fiscal year 2022 because he managed various cash and investment balances in his role as State Treasurer as of June 30, 2022. He directed the Audit Director to oversee procedures performed by the State Auditor's professional audit staff.

In March, the State Auditor's Office issued the audit of the state's ACFR for fiscal year 2022. The state's financial statements in the ACFR covered approximately $57 billion in assets and $34 billion in expenses. In connection with that audit, auditors tested internal controls, as well as compliance with laws and regulations; those results are included in the report issued today.

Auditors found that the Department of Revenue needs to improve controls and procedures of certain governmental and custodial fund financial activities. If not for calculation errors discovered by the audit, Department of Revenue net accounts receivable and related liability balances would have been overstated by approximately $75 million in the ACFR. Auditors also found several other calculation errors that resulted in both the overstatement and understatement of various balances. The report recommends the Department of Revenue strengthen controls and procedures to prepare and submit accurate financial reports to the Office of Administration.

The audit identified inadequate controls and procedures over financial reporting of Medicaid payment data and Medicaid drug rebate data within the Department of Social Services - MO HealthNet Division. Auditors found misstatements that would have resulted in the understatement of the Government Wide - Governmental Activities and General Fund accounts receivable by $23 million and accounts payable by $60 million. Errors in Medicaid drug rebate accounts receivable data would have resulted in the overstatement of balances by approximately $30.6 million in the ACFR. Auditors also identified errors within other Department of Social Services accounts payable reporting, which would have resulted in the overstatement of the Government Wide - Government Activities and General Fund accounts payable balances by approximately $5.9 million. The report recommends the Department of Social Services strengthen controls and procedures to prepare and submit accurate Medicaid payment, Medicaid accounts receivable, and accounts payable reports to the Office of Administration.

Additionally, the audit recommends the Department of Natural Resources implement adequate controls and procedures over financial reporting of loans receivable. The report identified a misstatement that would have resulted in the Government Wide - Governmental Activities and Conservation and Environmental Protection Fund loans receivable balance being overstated by approximately $27.5 million in the ACFR.

The report issued today also recommends the Office of Secretary of State implement controls and procedures over financial reporting of accounts receivable. The report uncovered the misstatement of civil penalty accounts receivable data that could have resulted in the overstatement of net accounts receivable and related liability balances by at least $9.7 million in the ACFR.

The report also identifies inadequate controls and procedures over financial reporting of the financial activities of the Unemployment Compensation Fund (UCF) within the Department of Labor and Industrial Relations. The department did not submit the financial reports to the Office of Administration in a timely fashion and some of the fund balances were misstated, including the net position balance which was overstated by approximately $8 million. The report recommends the department strengthen controls and procedures to prepare and submit accurate and timely UCF financial reports.

The audit recommends the Office of Administration - Division of Accounting strengthen controls and procedures over classification of ending fund balances. If a fund balance classification error had not been identified, the Government Wide - Governmental Activities and General Fund restricted fund balance would have been overstated, and the unassigned fund balance would have been understated, by approximately $1.4 billion in the ACFR. The report also notes the Office of Administration has not fully corrected a weakness in the security settings for the Statewide Advantage for Missouri Financial system.

The complete report detailing the findings in the Annual Comprehensive Financial Report is available online here.