Legislative auditors report dozens of open findings, cite foster-care documentation gaps and delayed state financial statements

April Renfro, director of Legislative Audits at the Legislative Services Office, told the Joint Finance and Appropriation Committee on Jan. 7 that the auditors continue to find uncorrected problems across state agencies and expect delays to the annual comprehensive financial report and single-audit because of late agency reporting tied to a new accounting system.

The presentation to the committee focused on the audit office's statutory scope, follow-up procedures and examples of findings that lawmakers should consider when reviewing agency budgets. Renfro said the audit division issues several types of reports, including the annual comprehensive financial report audit, the state's single-audit package for federal grant compliance and agency accountability reviews that typically occur every three years.

Why it matters: Audit findings that remain uncorrected can inform appropriations and oversight. Renfro said the office will deliver an "uncorrected findings" report to the committee; members said they expect to use that information when evaluating agency budgets, and at least one senator noted withholding funding has been used in the past to force corrective action.

Renfro described the audit office's statutory authority and work plan, including staffing and the types of reports it issues. She said auditors are required to complete the audit of the statewide financial statements each year and report internal-control findings within 60 days of issuing an opinion. She explained the single-audit schedule of federal awards is due by March 31 and that accountability reports examine internal controls and compliance without issuing an opinion in the same way as a financial-statement audit.

On the status of open items, Renfro said the office's annual public report focuses on findings that remain uncorrected; this year the office is reporting four years' worth of open findings, down from five years in prior years. She summarized the age and distribution of uncorrected findings: "70% of our uncorrected findings are from the current reporting period" and many of those simply have not yet had follow-up testing, she said. About 30% are findings where agencies have been unable to correct the underlying issue in a reasonable timeframe.

Renfro gave specific examples the committee may find significant. In one recurring accountability finding at the Department of Fish and Game, auditors flagged noncompliance with the state travel policy, largely because staff did not consistently complete travel vouchers or retain required receipts and documentation. Renfro said the department partially corrected procedures but reverted to uncorrected on later follow-up tests partially because of the agency's transition to the new LUMA financial system, which prevented auditors from obtaining sufficient samples to test.

She also detailed findings in the Department of Health and Welfare's fiscal 2023 accountability review tied to foster-care placements. Renfro said auditors tested 19 qualified residential treatment program placements and found: 10 lacked a required placement assessment; 21% of the sample lacked a retrievable court order; 5% of placements were not made within required timelines; 84% did not retain a court notice documenting placement details; and 42% lacked required 30-day case consultations. "What makes this significant is we're talking about foster children, and they might be negatively impacted if they don't receive the care that they need when they need it," Renfro said.

Renfro also described a single-audit internal-control finding tied to the low-income home energy assistance program (LIHEAP): annual updates to the program's benefits matrix were not documented, increasing the risk that an erroneous change could go undetected even though auditors did not identify specific mispayments in that test.

On timing, Renfro told the committee the Office of the State Controller did not deliver the draft financial statements until Dec. 30, one day before the statutory deadline for the auditors to complete their work for the annual comprehensive financial report. "We didn't receive them until December 30," she said, and the audit office has estimated finishing the ACFR audit in March. She warned that the late delivery also makes it unlikely the state will meet the March 31 single-audit deadline and said she planned to contact federal grantors to explain the delay.

Committee members asked about causes and consequences. One co-chair framed the audit role this way: "we not only appropriate the money, but we make sure that it is appropriately spent," and Senator Groh said the committee has withheld funding in the past to secure corrective action. Renfro said some uncorrected findings require legislation or policy changes, while others reflect training, documentation or technical issues.

The auditors will send the committee the uncorrected-findings report and several outstanding accountability reports; Renfro said five accountability reports were pending issuance at the time of the presentation. She stood for committee questions after the briefing.

Ending: The audit office will provide the committee the full uncorrected-findings report and pending accountability reports. Renfro warned that until the state controller and agencies provide timely, complete financial data the annual financial opinion and federal single-audit package will likely be delayed, and she signaled she would notify federal cognizant agencies about the expected timing.