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

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 internal controls over annual statewide financial statements, and certain compliance issues, and makes recommendations to ensure accurate financial reporting, which better protects and accounts for taxpayer resources.

In April, the State Auditor's Office issued an audit of the state's Annual Comprehensive Financial Report (ACFR) for fiscal year 2024. The state's financial statements in the ACFR covered approximately $66 billion in assets and $40 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.

"I'm encouraged by some of the changes that have been made based on our past recommendations to ensure more accurate financial reporting, but more improvements are necessary to ensure the Annual Comprehensive Financial Report does not have significant misstatements. I'm proud of the work my office does to provide this additional level of review, but also encourage our state departments to continue improving their own review process to guard against errors ranging in the millions to even billions of dollars," said Fitzpatrick.

Similar to the prior three reports, auditors once again found significant errors and misstatements made by the Department of Revenue (DOR). The audit found the Department of Revenue (DOR) continues to lack adequate controls and procedures over financial reporting of certain governmental and custodial fund activities. As a result, numerous balances submitted to the Office of Administration - Division of Accounting (DOA) for inclusion in the ACFR for the year ended June 30, 2024, were materially misstated. The audit noted understatements of net accounts receivable balances of approximately $60.9 million and $36.2 million. Additionally, the audit identified errors in certain Custodial Funds - Program balances that resulted in understatements of assets and activity by approximately $166 million and $1.2 billion, respectively. Finally, the audit noted a revised report submitted to the DOA to address the $36.2 million understatement contained calculation errors, and resulted in net accounts receivable and related liability balances being understated by approximately $26.7 million. The DOR submitted revised reports to the DOA to correct these misstatements prior to completing the ACFR.

The other finding in the annual audit of the ACFR was previously noted in our State of Missouri Single Audit report for the year ended June 30, 2023. The finding details how the Department of Social Services  - MO HealthNet Division (MHD) does not have adequate controls to ensure proper management of receipts which totaled approximately $1.5 billion during fiscal year 2024. The MHD does not adequately restrict user access within the Medicaid Management Information System (MMIS). In response to the single audit finding, in August 2024, the MHD implemented some documented supervisory reviews of entries and changes made in the MMIS by employees whose duties are not segregated. However, not adequately reviewing all activities of these employees increases the risks of misappropriation and undetected errors. Additionally, the MHD does not account for all cash control numbers to ensure all checks and money orders received are properly deposited or returned to senders.

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