PRESS RELEASE

March 7, 2005

State Auditor releases "2004 Statewide Accountability Report"

41 findings issued against state agencies

OLYMPIA—Today State Auditor Brian Sonntag released the 2004 Statewide Accountability Report highlighting 41 audit findings issued against state agencies. Of the 41 audit findings, 23 are repeat findings from last year's audit. An additional 16 management letters (problems identified that don't rise to the level of a finding) were issued to agencies (including 7 regarding audit findings from last year that have not been resolved).

In addition to the 41 audit findings, the state auditor highlighted the following "audit challenges":

• In addition to refusing to provide electronic records, agencies are using other methods to cause delays in our audits or to require us to spend unnecessary audit resources to accomplish our audit objectives and to meet state and federal auditing requirements.

• Some agencies ask us to justify why we want information. In some cases, they have denied us the information, if they are not satisfied with our responses.

• Some agencies indicate they are too busy to be audited and ask for a delay.

The 41 audit findings consisted of 19 findings for Social and Health Services; five findings for Labor and Industries; four findings for Community Trade and Economic Development; two findings each for Military and Transportation; and one finding each for Corrections, Employment Security, Financial Management, Health, Personnel, Retirement Systems, Superintendent of Public Instruction, Veterans Affairs, and Volunteer Firefighters and Reserves Officers.

Among the auditor's findings:

• Department of Retirement Systems is withholding approximately $1.1 million in accounts from beneficiaries of individuals who have been deceased for up to 40 years;

• Department of Employment Security (ESD) paid at least $142,847 in unemployment insurance benefits to ineligible individuals. ESD also paid more than $185,000 in benefits to individuals in their first week of unemployment in violation of state law (repeat finding);

• Department of Social and Health Services (DSHS) does not have adequate controls over payments made to child care providers resulting in $2.2 million in overpayments (repeat finding);

• DSHS wrote-off (forgave) $904,497 in required repayment from child care providers (overpayments) without proper documentation;

• DSHS does not adequately ensure costs are properly charged to state and federal funds leading to the questioning of more than $226 million in costs (repeat finding);

• DSHS does not perform adequate background checks on child care providers (repeat finding);

• Office of Superintendent of Public Instruction did not comply with state and federal requirements when contracting for services, resulting in $2,128,600 in questionable contracts;

• Department of Labor and Industries (L&I) did not provide evidence it complied with state bid laws when making more than $7.2 million in technology service purchases (repeat finding);

• L&I destroyed 30 percent of its inventory records prior to the approved destruction date (repeat finding);

• L&I does not have adequate controls in place to safeguard its pension payment system (the system processes more than $477 million in benefits a year);

• L&I was unable to reconcile more than $5.5 million in employer workers' compensation payments in its financial systems (repeat finding);

• L&I cannot account for more than $9 million in employer workers' compensation payments that were recorded as being received but not deposited (repeat finding);

• Department of Corrections does not have adequate controls over its pharmacy inventory to detect or prevent theft or loss of drugs;

• Department of Transportation (DOT) made travel payment to employees in excess of written contract amounts (repeat finding); and

• DOT does not have adequate controls over ticket sales and revenue collection for state ferries (repeat finding; finding dates back to 1986).

Earlier this year the state auditor was forced to "disclaim" the entire audit of the state's $6.1 billion Medicaid program due to obstruction of the audit by DSHS. According to the state auditor: "‘Disclaim' is a term used in auditing standards that means we cannot conclude, based on documentation and other evidence we were provided, whether all of these costs were allowable or whether all clients were eligible for services given to them and all providers were eligible for payments made to them."

"More troubling than there being 41 audit findings this year is the fact that 23 of them are repeat findings from last year," said Jason Mercier, budget analyst for the Evergreen Freedom Foundation. "State law requires audit correction to occur; obviously someone isn't doing their job since the problem continues to persist year after year. Take the ferries for example, when is someone going to be held accountable for the same audit finding spanning nearly two decades?"

"Those agencies refusing to cooperate with the state auditor must be held accountable," said Mercier. "Lawmakers could easily demonstrate their commitment to government transparency by making an example of agencies that obstruct the people's elected state auditor."

"The problems identified in this audit have nothing to do with how efficient agencies are, rather they are examples of violations of law. Imagine the type of savings that could be realized by auditing the actual performance of agency programs," said Mercier. "It is past time to allow the state auditor to conduct truly independent and comprehensive performance audits of state government."

Contact: Jason Mercier | Budget Research Analyst | 360.956.3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org