ative Audit Division State ofMontana Report to the Legislature December 1998 Financial-Compliaiice Audit For the Two Fiscal Years Ended June 30, 1998 Office of the Secretary of State This report contains four recommendations related to: • Improving cash managementto adequately safeguard cash and preventtheft. * Establishing fees commensuratewith costs in accordancewith state law. * Allocating costs appropriately between the Enterprise and Internal Service Funds. There is also a disclosure issue related to: * Investmentearnings ^^-fDCCUME;;rscOLLECL'OW w^ Direct comments/inquiries to: LegislativeAudit Division Room 135, State Capitol PO Box 201705 MT 98-30 Helena 59620-1705 Help eliminate fraud, waste, and abuse in state government. Call the Fraud Hotline at 1-800-222-4446 statewide or444-4446 in Helena. MONTANASTATELIBRARY 3 0864 0014 3402 9 FINANCIAL-COMPLIANCE AUDITS Financial-compliance audits are conducted bythe Legislative Audit Division to determine ifan agency's financial operations areproperly conducted, the financial reports are presented fairl>, and the agency has complied with applicable laws and regulations. In performing the audit work, the audit staffuses standards set forth bytheAmerican Institute ofCertified Public Accountants and the United States General Accounting Office. Financial-compliance audit staffmembers hold degrees with an emphasis in accounting. Most staffmembers hold Certified Public Accountant (CPA) cer- tificates. 0MB Government Auditing Standards, the SingleAuditActAmendments of 1996 and CircularA- 133 require the auditorto issue certain fmancial, internal control, and compliance reports. This individual agency auditreport is not intendedto complywith these reportingrequirements and is therefore not mtended for distribution to federal grantor agencies. The Legislative Audit Division issues a statewide biennial Single Audit Report whichcomplies with the above reportmg requirements. The Single Audit Report forthe two fiscal years ended June 30, 1999, will be issued by March 31, 2000. Copies ofthe SingleAudit Report, when available, can be obtained by contacting: SingleAudit Coordinator LegislativeAudit Division Office ofBudget andProgram Planning Room 135, State Capitol State Capitol PO Box201705 Helena MT 59620 Helena MT 59620-1705 Phone (406) 444-3616 MEMBERS OF THE LEGISLATIVE AUDIT COMMITTEE LEGISLATIVE AUDIT DIVISION Scott A. Seacat, Legislative Auditor Deputy Legislative Auditt)rs: John W. Northey. Legal Counsel Jim Pellegrini. Performance Audit Tori Hunthausen, IT & Operations Manager James Giliett, Financial-Compliance Audit December 1998 To the Legislative Audit Committee ofthe Montana State Legislature: This is our financial-compliance audit report on the Office ofthe Secretary ofState for the two fiscal years ended June 30, 1998. Included in this report are recommendations concerning cash management, fees commensurate with costs, allocation ofcosts, and a disclosure issue related to investment earnings. The office's written response to tiie audit recommendations is included in the back oftiie audit report. We thank the Secretary ofState and his stafffor their assistance and cooperation .RespectfiJJy submitted, jcott A. Seacat Legislative Auditor Room 135. State Capitol Building. PO Box 201705 Helena MT 59620-1705 Phone (406)444-3122 FAX (406) 444-9784 [email protected] Legislative Audit Division Financial-Compliance Audit For the Two Fiscal Years Ended June 30, 1998 Office of the Secretary of State Members ofthe audit staffinvolved inthis auditwereVictoria Murphy. Laura L. Noms, Vickie Rauser, andJenny Solem. ». 5 Table of Contents ListofTables Page iii Elected and Administrative Officials Page iv Report Summary Page v Introduction Introduction Page 1 Background Page 1 PriorAudit PriorAudit Recommendations Page 3 Recommendations Findings and Cash Management Page 5 Recommendations Fees CommensurateWith Costs Page 7 hitemal Service Fund Page 8 Enterprise Fund Page 9 Allocation ofCosts Page 12 Disclosure Issue hvestment Earnings Page 1 Independent Auditor's Independent Auditor's Report PageA-3 & Report Office Financial Schedules ScheduleofChanges inFund Balances forthe Fiscal Year Ended June 30, 1998 PageA-5 Schedule ofChanges in Fund Balances forthe Fiscal Year Ended June 30, 1997 PageA-6 & Schedule ofTotal Revenues Transfers-InfortheFiscal Year Ended June 30, 1998 PageA-7 Schedule ofTotal Revenues & Transfers-In forthe Fiscal Year EndedJune 30, 1997 Page A-8 & ScheduleofTotal Expenditures Transfers-Out forthe Fiscal Year EndedJune 30, 1998 Page A-9 & Schedule ofTotal Expenditures Transfers-Out forthe Fiscal YearEndedJune 30, 1997 Page A-10 Page i Table of Contents Office Response Secretar>' ofStale's Office Page B-3 Page ii List of Tables Page 10 Table 1 SecretaryofState Fee Schedule Page iii Elected and Administrative OHlcials Office ofthe Secretary of Mike Cooney Secretary' ofState State Angela Fultz ChiefDeputy Dan Wh>tc ChiefLegal Counsel Gary Managhan Deputy for Management Services Kathy Lubke Deputy for Administrative Rules Joe Kenvin Deputy' for Elections Lynn Keller State Records Manager Gregg Wheeler Deputy- for Information Services LesLee Shell-Beckert Deputy for Business Services For additional information concerning the Office ofthe Secretary of Stale, contact Mike Cooney, Secretary ofState, at: PO Box 202801 Helena MT 59620-2801 (406) 444-2034 e-mail: mcooney(a)jtate.mt.us Page iv