General Government/Regulatory
An Audit Report on Internal Control and Financial Processes at the Commission on the Arts and the Funeral Service Commission
June 2002
Report Number 02-056
Overall Conclusion
The Commission on the Arts (COA) and the Funeral Service Commission (FSC) need
to address significant weaknesses in their respective core functions. At COA
inadequate grant monitoring increases the risk that grantees will not spend
grant funds as intended. The State Auditor's Office reported on weaknesses in
COA's grant monitoring process in 1991 and 1996. Weaknesses in monitoring continue
to exist. In addition, unnecessary delays in the grant award process and a lack
of procedures for determining grant amounts impair COA's ability to award grants
promptly and properly. COA awarded grants totaling $4.7 million in fiscal year
2002. At FSC, weaknesses in information system controls and flaws in the license
issuance process hinder the agency's ability to record and monitor key data
regarding licensees. FSC risks converting flawed data to the new information
system it is acquiring at an estimated cost of $228,000. The Department of Information
Resources is currently working with FSC to establish controls for the new system.
Key Facts and Findings
COA lacks key controls to ensure that grantees spend funds as intended and that grants are awarded promptly and properly. For example:
- For most of the COA monitoring files we tested, we found no evidence that COA verified that grantees spent funds in accordance with agency policy. COA's policies require agency staff to test internal controls, for example reviewing grantee transactions for appropriate authorization. However, none of the 19 files tested, representing grants totaling $746,648, contained documentation of internal control testing.
- COA's average grant processing time is 10.5 months, compared to an average of 7 months in similar states. COA should consider streamlining procedures to reduce processing time and cost. For example, COA brings peer panelists from across the state to Austin to listen to presentations and review applications. This delays the approval process by an estimated 1.5 months and costs COA at least $22,000 annually in travel reimbursements.
- COA does not have written procedures for determining amounts awarded to grantees. As a result, it has awarded certain grantees more than they requested. COA also lacks a written methodology for redistributing unused grant funds. COA estimates that grantees returned $80,000 in unused funds in fiscal year 2001.
FSC's information-system control weaknesses and flawed license issuance process impede the recording and monitoring of key information regarding licensees:
- Significant weaknesses in FSC's information system controls can create inaccurate licensing data for monitoring. For example, system data indicates that the FSC issued a license in the year 3201.
- Flaws in FSC's license issuance process caused FSC to issue 13 duplicate
license numbers to funeral home establishments. Issuing duplicate license
numbers raises the risk that FSC could inaccurately record information on
fee collections, inspections, and complaints regarding specific licensees.
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