An Audit Report on Selected Financial Controls at the State Office of Administrative Hearings
Report Number 12-036
The State Office of Administrative Hearings (SOAH) should improve the accuracy and consistency of information related to its activities, cost allocations, and budget that it reports to agency management, the Legislative Budget Board, the Office of the Governor, and the Legislature. Improving its accounting, budgeting, and reporting processes would help SOAH to more reasonably project the total funds the agency needs to operate and help agency management make informed decisions. While SOAH has made improvements to its information technology based on prior audit recommendations, it should make further improvements to help ensure that all financial data is secure. In addition, four key performance measures tested for fiscal year 2011 were certified with qualification.
In order to improve its processes, SOAH should:
- Improve its budgeting processes and controls.
- Improve the accuracy of the information presented in its Hearings Activity Report.
- Improve its processes for collecting and recording time worked.
- Continue to improve controls over its systems to help ensure that financial data is secure.
- Update its policies and procedures over the collection, calculation, review, and reporting of performance measures.
Those issues are discussed in more detail below.
SOAH uses a methodology for developing its budgets that should be improved because the methodology does not consider the actual costs of providing services. While SOAH develops budget projections related to interagency contracts based on its projected workload, it develops the remainder of its budget based only on the amounts of funds it received in prior years. SOAH does not develop a comprehensive budget that is based on the costs of the services the agency provides. Without developing a budget based on the costs of providing services, SOAH cannot adequately evaluate its operations and reasonably project its needs. As a result, SOAH overestimated the General Revenue totals and underestimated the State Highway Fund totals it would need to cover its expenses in fiscal year 2011.
Hearings Activity Report
SOAH reported inaccurate information in two of the three parts of its Hearings Activity Report for September 1, 2010, through August 31, 2011. Auditors considered information in the Hearings Activity Report to be materially accurate if it was within 5 percent of calculated results. The Hearings Activity Report summarizes SOAH's performance and costs and is not used as a basis for the agency's billing or its annual financial report. SOAH submits the report to the Legislative Budget Board and the Office of the Governor by May 1 and November 1 of each fiscal year.
Part I and Part II contained inaccurate information due to calculation errors and SOAH not following the definitions of how to report the information. For example, in Part I, SOAH overstated the number of cases pending at the end of the fiscal year by 62 percent because it used a mathematical formula rather than obtaining a count of all pending cases. In addition, the costs reported in Part II did not reflect actual costs for each agency, fund type, and category.
Based on information in SOAH's timekeeping and accounting systems, SOAH reported accurate information that complied with definitions in Part III, which reports judges' indirect time.
Time Collection Process
SOAH's time collection process and timekeeping systems are not integrated and do not allow individuals or management to identify overreported, underreported, or unreported time for any given day. Auditors identified weaknesses related to unrecorded, duplicate, and data entry timekeeping errors. The majority of the calculations related to SOAH's budget, Hearings Activity Report, and performance measures depend on time worked information.
Information Technology Controls
While SOAH has made improvements to its information technology based on prior audit recommendations, it should make further improvements to help ensure that all financial data is secure. For example, SOAH is using systems that are no longer supported by the vendor, which increases the risk of a loss of the application operations and underlying data that might not be remediated by the vendor.
Four key performance measures tested for fiscal year 2011 were certified with qualification because SOAH did not have updated policies and procedures over the collection, calculation, review, and reporting of its performance measures. Those four performance measures were:
- Number of Cases Disposed.
- Number of Administrative License Revocation Cases Disposed.
- Number of Administrative Fine Cases Disposed.
- Average Time to Dispose of a Case (Median Number of Days).
Auditors communicated other, less significant, issues to SOAH management separately in writing. Those issues were related to SOAH's budget process, methods of finance, Hearings Activity Report, information technology, and performance measures.
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