Legislative Audit Division State of Montana Report to the Legislature Financial-Compliance Audit March 2000 For the Two Fiscal Years Ended June 30, 1999 Montana State Library Commission This report contains one recommendation related to processing payroll with the Statewide Accounting, Budgeting, and Human Resource System. Direct comments/inquiries to: Legislative Audit Division Room 135, State Capitol PO Box 201705 99-21 Helena MT 59620-1705 Help eliminate fraud, waste, and abuse in state government. Call the Fraud Hotline at 1-800-222-4446 statewide or 444-4446 in Helena. FINANCIAL-COMPLIANCE AUDITS Financial-compliance audits are conducted by the Legislative Audit Division to determine if an agency’s financial operations are properly conducted, the financial reports are presented fairly, and the agency has complied with applicable laws and regulations. In performing the audit work, the audit staff uses standards set forth by the American Institute of Certified Public Accountants and the United States General Accounting Office. Financial-compliance audit staff members hold degrees with an emphasis in accounting. Most staff members hold Certified Public Accountant (CPA) cer- tificates. Government Auditing Standards, the Single Audit Act Amendments of 1996 and OMB Circular A-133 require the auditor to issue certain financial, internal control, and compliance reports. This individual agency audit report is not intended to comply with these reporting requirements and is therefore not intended for distribution to federal grantor agencies. The Legislative Audit Division issues a statewide biennial Single Audit Report which complies with the above reporting requirements. The Single Audit Report for the two fiscal years ended June 30, 1999, will be issued by March 31, 2000. Copies of the Single Audit Report, when available, can be obtained by contacting: Single Audit Coordinator Legislative Audit Division Office of Budget and Program Planning Room 135, State Capitol State Capitol PO Box 201705 Helena MT 59620 Helena MT 59620-1705 Phone (406) 444-3616 MEMBERS OF THE LEGISLATIVE AUDIT COMMITTEE Senator Linda Nelson, Vice Chair Representative Bruce Simon, Chair Senator Reiny Jabs Representative Beverly Barnhart Senator Ken Miller Representative Mary Anne Guggenheim Senator Barry “Spook” Stang Representative Dick Haines Senator Mike Taylor Representative Robert Pavlovich Senator Jon Tester Representative Steve Vick LEGISLATIVE AUDIT DIVISION Scott A. Seacat, Legislative Auditor Deputy Legislative Auditors: John W. Northey, Legal Counsel Jim Pellegrini, Performance Audit Tori Hunthausen, IT & Operations Manager James Gillett, Financial-Compliance Audit March 2000 The Legislative Audit Committee of the Montana State Legislature: This is our financial-compliance audit report on the Montana State Library Commission for fiscal years 1997-98 and 1998-99. The report contains one recommendation related to processing payroll with the Statewide Budgeting, Accounting, and Human Resource System. Written responses to the audit report from the Montana State Library Commission and the Department of Administration are included in the back of the audit report. We thank the Montana State Library Commission officials and their staff for their cooperation and assistance throughout the audit. Respectfully submitted, (Signature on File) Scott A. Seacat Legislative Auditor 616 Helena Avenue – Steamboat Block, PO Box 201705 Helena MT 59620-1705 Phone (406)444-3122 FAX (406)444-9784 E-Mail [email protected] Legislative Audit Division Financial-Compliance Audit For the Two Fiscal Years Ended June 30, 1999 Montana State Library Commission Members of the audit staff involved in this audit were Cindy S. Jorgenson, Sonia Powell, Jenny Solem, and Vickie Rauser. Table of Contents Appointed and Administrative Officials ................... Page iii Report Summary ...................................... Page v Introduction Introduction .......................................... Page 1 Background .......................................... Page 1 Statewide Library Resources Program ............... Page 2 Natural Resource Information System Program ........ Page 3 Funding ....................................... Page 4 Prior Audit Prior Audit Recommendations ............................ Page 5 Recommendations Findings and NRIS Payroll ......................................... Page 7 Recommendations Income Tax Withholding ......................... Page 8 Voluntary Withholdings .......................... Page 9 Group Insurance ................................ Page 9 Statewide Impact .............................. Page 10 Independent Auditor’s Independent Auditor’s Report .......................... Page A-3 Report & Library Financial Schedules Schedule of Changes in Fund Balances for the Fiscal Year Ended June 30, 1999 ........................ Page A-5 Schedule of Changes in Fund Balances for the Fiscal Year Ended June 30, 1998 ........................ Page A-6 Schedule of Total Revenues & Transfers-In for the Fiscal Year Ended June 30, 1999 .................. Page A-7 Schedule of Total Revenues & Transfers-In for the Fiscal Year Ended June 30, 1998 .................. Page A-8 Schedule of Total Expenditures & Transfers-Out for the Fiscal Year Ended June 30, 1999 .................. Page A-9 Schedule of Total Expenditures & Transfers-Out for the Fiscal Year Ended June 30, 1998 ................. Page A-10 Notes to the Financial Schedules ....................... Page A-11 Page i Table of Contents Agency Responses Montana State Library Commission ...................... Page B-3 Department of Administration .......................... Page B-5 Page ii Appointed and Administrative Officials Montana State Library Term Commission Expires Michael Schulz* Chairperson Dillon May 2001 Mary Doggett Vice Chairperson White Sulphur Springs May 2001 Cheri Bergeron** Helena Rosemary Garvey Butte May 2000 David Johnson Billings May 2000 Dorothy Laird Whitefish May 2002 Al Randall Troy May 2002 * Appointed by the Commissioner of Higher Education from the Montana University System. ** Designee for the Superintendent of Public Instruction. No term is set. Administration Karen Strege, State Librarian Jim Stimson, Program Manager, Natural Resource Information System Darlene Staffeldt, Program Manager, Statewide Library Resources Kris Schmitz, Accountant Page iii Page iv Report Summary Montana State Library This financial-compliance audit report contains the results of the audit Commission of the Montana State Library Commission (Library) for the two fiscal years ended June 30, 1999. The report contains one recommendation directed to the Library related to processing payroll on the Statewide Accounting, Budgeting, and Human Resource System. We issued an unqualified opinion on the financial schedules contained in the report. This means the reader may rely on the financial information presented and the supporting data on the Statewide Budgeting and Accounting System. The listing below serves as a means of summarizing the recommendations contained in the report, the Library’s response thereto, and a reference to the supporting comments. Recommendation #1 We recommend the Library work with the Department of Administration to identify and implement cost-effective methods for processing payroll in accordance with federal and state withholding requirements. . . . . . . . . . . . . . . . . . Page 10 Page v Introduction Introduction We performed a financial-compliance audit of the Montana State Library Commission (Library) for the two fiscal years ended June 30, 1999. The objectives of the audit were to: 1. Determine if the Library complied with applicable laws and regula- tions. 2. Make recommendations for improvement in the internal and man- agement controls of the Library. 3. Determine if the financial schedules present fairly the Library’s results of operations and changes in fund balances for the two fiscal years ended June 30, 1999. This report contains one recommendation to the Library. Areas of concern deemed not to have a significant effect on the successful operations of the Library programs are not included in this report, but have been discussed with management. In accordance with section 5-13- 307, MCA, we analyzed and disclosed the costs, if significant, of implementing the recommendation made in this report. Background The Library is the focal point for the development and improvement of library services in Montana. It provides general library services to Montana state government and operates the Montana Talking Book Collection and Natural Resource Information System. The Library operates under policies established by the Montana State Library Com- mission. The Library was created in 1929 by law, which is currently codified in Title 22, chapter 1, MCA. The Library Commission consists of seven members as follows: five persons appointed by the Governor; the state Superintendent of Public Instruction or her designee; and a librarian appointed by the Commissioner of Higher Education from the Montana University System. The Library’s financial activity is accounted for in two programs: 1) the Statewide Library Resources Program; and 2) the Natural Resource Information System Program. Page 1