Losing Track: Accounting Problems Dog Arkansas Cities, Agencies

by Kate Knable  on Monday, Jun. 11, 2012 12:00 am  

Bruce Engstrom, a state lottery commissioner and partner in accounting firm EGP PLLC of North Little Rock, says accounting errors by cities and state agencies are caused by a breakdown of oversight and controls. (Photo by Hannah Pfeiffer)

What do Altheimer, Bauxite, Blytheville, Eudora, Gould and Helena-West Helena have in common with the Arkansas Scholarship Lottery and the Arkansas Forestry Commission?

They are all governmental entities with accounting problems.

The problems range in kind and dollar value, but throughout the state they’ve resulted in lost jobs, ballooning tax bills and strained services in some already financially limited places.

“One thing they have in common is a breakdown in oversight and controls,” said Bruce Engstrom, state lottery commissioner and senior partner in accounting firm EGP PLLC in North Little Rock. Engstrom is certified in financial forensics.

The Arkansas Lottery, as an example of a state agency with accounting problems, was charged about $100,000 last year by the Internal Revenue Service for making late deposits of tax payments from 2010 lottery winnings. It was the lottery’s second such infraction.

Jon Moore, deputy legislative auditor in charge of state agencies for the Arkansas Division of Legislative Audit, said “mostly human error” had resulted in state agencies misusing funds.

He mentioned the Forestry Commission, where it was discovered last November that earmarked federal grant funds were being used to subsidize payroll.

Most state agencies use computer programs to manage funds, and the Division of Legislative Audit annually audits state programs that receive more than $26.1 million in federal dollars. Both practices reduce the number of errors made within large federally funded programs, Moore said. 

Smaller agencies rarely received enough federal program money to require a regular compliance audit. Agencies that get between $2.6 million and $26.1 million in federal funds get audited irregularly for federal compliance, Moore said.

All government agencies have a financial audit annually or nearly annually, but not all of their federally funded programs are audited for compliance. 

About 88 percent, or $7.7 billion, of the federal program money entering the state got audited last year.

But all state agencies should have internal controls in place to manage their resources, and all should know the federal requirements for the funds they receive, Moore said.



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