Results in Brief

The Office of the Military did not always carry out its financial and administrative activities in accordance with laws, regulations, and policies. Specifically, the Office did not follow rules for controlling expenditures, soliciting and managing contracts, administering personnel and payroll functions, or safeguarding assets. Failure to follow these rules contributed to unauthorized purchases, over expenditure of state funds, questionable contract awards, and improper personnel and payroll administration. These problems occurred because the Office has not established an adequate system of financial and administrative controls as required by state law.

Principal Findings

· Employees frequently made purchases without proper authorization and approval. Of 27 purchase orders tested, we found 14 totaling almost $23,000 were not properly approved. Of these, seven were approved by individuals acting outside their scope of authority, and seven contained no evidence of approval. In addition, five purchase orders were prepared after the vendor provided services. (page 9)

· The Office overspent its budget for college tuition reimbursement by more than $9,000 in fiscal year 2000. This occurred because staff recorded expenditures in the wrong fiscal year. To make up for overspending, the Office dropped its tuition reimbursement rate to Guard members from 42% in 1999 to 25% in 2000. (page 11)

· The Office overspent its authority for the operating category of its main budget account by more than $11,000 in fiscal year 2001. This occurred because goods were purchased outside the state’s accounting system and were never recorded as Office expenditures. (page 12)

· The Office did not follow the state’s solicitation requirements for 5 of the 10 contracts we tested. For three contracts, the Office did not document it attempted to solicit and review at least three bids from vendors. Two contract solicitations were not advertised in local newspapers as required. Because of inadequate solicitation methods, it is questionable whether some contracts were awarded fairly. (page 14)

· Independent contractor services were not always obtained by contract when required. We identified 5 payments totaling over $16,000 that should have been paid under a contract but were not. (page 16)

· The Office allowed 3 of 10 contractors to perform work prior to receiving approval from the Board of Examiners. In total, the Office made 15 payments of about $19,000 for services rendered outside contract effective dates. (page 16)

· Of 15 employee personnel files reviewed, 14 did not contain current work performance standards or evidence that a performance evaluation had been completed during calendar year 2000. In addition, 3 of 10 supervisors of these employees had not attended the required training on performance appraisals. (page 19)

· The Office had significant problems related to the approval, accumulation, and use of overtime. Over 70% of the instances of overtime we tested showed no evidence of supervisory approval prior to being worked. Two employees accumulated more compensatory time than allowed under state regulations. Finally, employees did not use annual leave and accrued compensatory time in the order required. (page 20)

· Some employees did not complete their timesheets accurately. Three employees’ timesheets showed major differences in the way they reported time when attending the same out-of-state conference. In addition, 6 employees on active military duty did not record leave on their timesheets 35 times in the 10 weeks we tested. We also identified 23 instances where overtime may not have been reported on timesheets. Finally, the Office allowed certain employees to trade shifts without state approval and without adequate controls in place. (page 21)

Office of the Military

Agency Response

to Audit Recommendations

Recommendation Number		Accepted	Rejected

1	Review purchase orders to ensure purchases are authorized and approved by employees acting within their scope of authority	X

2	Develop and implement procedures to ensure expenditures are recorded in the proper year, budget authority is not exceeded, and all transactions are recorded in the state’s accounting system	X

3	Revise procedures to ensure contract solicitation requirements are followed and services are obtained by contract when required	X

4	Monitor contracting needs and activities to ensure contracts are approved before work is performed	X

5	Revise procedures to include verification of contractor insurance requirements	X

6	Provide guidance to staff for obtaining appropriate approvals for leases	X

7	Ensure federal and state employees with contracting responsibilities are properly trained and supervised	X

8	Develop policies and procedures to ensure employees have current work performance standards, receive timely performance evaluations, and attend eval-uation training when required	X

9	Monitor the approval, accumulation, and use of overtime, in accordance with state laws and Office policy	X

10	Obtain assistance from the Department of Personnel to resolve payroll issues related to preparing timesheets, using military or other leave, reporting overtime, and trading shifts	X

11	Follow state rules and Office policy for safeguarding fixed assets	X

12	Work with Financial Management, Training and Controls in establishing a comprehensive, written system of financial and administrative controls	X

13	Periodically review control systems to ensure procedures are followed and controls are working as intended	X

	TOTALS	13	0