Legislative auditors report progress, highlight uncorrected findings and delays from new financial system

April Renfro, director of Legislative Audits at the Legislative Services Office, told the Joint Finance and Appropriation Committee on Jan. 7 that auditors have reduced the backlog of very old uncorrected findings and are reporting fewer multi‑year open items, but several substantive issues remain open and the office faces schedule delays tied to a new statewide financial system.

Renfro said the audit office now has open findings covering the past four years (down from roughly five years in prior reports) and that about 70% of the uncorrected findings are from the current reporting period — meaning follow‑up work has not yet occurred. “We really only have 30% that the entities have not been able to get their findings corrected in a reasonable amount of time,” she said.

The auditors also told the committee they expect delays in two key deadlines this year. The office audits the state’s Annual Comprehensive Financial Report (ACFR) and the single audit that reports federal expenditures. Renfro said the ACFR normally arrives from the state controller in time for auditors to complete their opinion within the statutory schedule, but this year the controller’s office delivered financial statements very late. “We were supposed to get them in November… we got them December 30,” Renfro said. Because of that late delivery and additional IT issues, the office estimates it cannot meet its usual December 31 ACFR deadline and also expects a delay in the March 31 single audit deadline.

Renfro described the late delivery as tied to the controller’s transition to the new LUMA financial system and said auditors shifted staff to work on the single audit; the mix of work will reduce efficiency. She said the office will try to notify federal grantors early to minimize consequences for the state: “I am a little bit concerned about that because… the federal grantors have picked up their communication with states about ensuring a timely single audit,” she said, and added she planned to contact the state’s cognizant agency at HHS.

Committee members raised the risk that audit delays could affect credit ratings and federal relationships. Renfro said her review of other states that issued audits late did not show a clear effect on credit ratings, but she emphasized the importance of communicating early with federal grantors and said some grantors previously pressed states for timelier single audits.

Renfro reviewed the audit office’s scope and workload: the division has 30 financial and IT auditor positions, one administrative assistant and some current openings; it plans roughly 28 reports a year across 11–15 agencies and performs the statewide ACFR audit, the single audit (SEFA), accountability reports (management reviews) and agreed‑upon procedure engagements.

She summarized common types of findings — internal control weaknesses, noncompliance with statutes or policies, and substantive errors — and explained her office’s follow‑up processes. For opinion audits (ACFR and single audit), agencies must provide follow‑up documentation for the next year’s audit; accountability reports get a 90‑day, first annual and second annual follow‑up cycle to test corrective actions.

Renfro singled out three illustrative problem areas from recent work. First, a recurring accountability finding at the Department of Fish and Game involved noncompliance with state travel policy and missing supporting documentation; follow‑up returned the finding to “uncorrected” after agency changes to payroll processing and migration to LUMA that left auditors unable to test samples. Second, the Department of Health and Welfare’s 2023 accountability report included findings tied to qualified residential treatment program (QRTP) placements for youth in foster care. Auditors tested 19 placements: 10 lacked required placement assessments, 5% omitted required details, 21% lacked a located court order, 5% were not placed within 60 days of the placement start, 84% lacked a retained court notice identifying placement dates and recommended level of care, and 42% did not show required 30‑day case consultations. Renfro said those lapses are significant because they affect children placed in higher‑level treatment settings and indicated inconsistent application of internal controls and record retention.

Third, the office saw systemic IT control and governance weaknesses and cited an example from the 2023 single audit related to the Low Income Home Energy Assistance Program (LIHEAP): updates to the program benefit matrix lacked documented review and approval. That example did not produce immediate monetary errors, Renfro said, but increased the risk of undetected mistakes.

Committee members asked about agencies that disagree with audit findings. Renfro said disagreements are uncommon but can occur, particularly in complex federal program rules; if an agency disputes a single audit finding, auditors may engage the federal grantor and the finding can be rescinded if the federal agency sides with the state. The committee’s co‑chair added that the legislature has withheld funding in the past when agencies refused to accept corrective action.

Renfro closed by urging work groups and committee members to review open findings for agencies they oversee and to use the audit summaries on the legislative budget website. She told members the office will issue its uncorrected findings report to the committee the same day and that some accountability reports were still in draft pending agency responses.

The committee did not take a formal action during the hearing; members and auditors discussed next steps for communication with federal grantors and noted the need to monitor repeat or systemic issues.