State auditors cite thefts, forged warrant and missing equipment across multiple agencies

Legislative auditors on December 16 presented FY24 findings that detailed employee thefts, a forged state warrant cashed for nearly $610,000, and inventory and cash-control problems at several state agencies.

The auditors told the Legislative Joint Auditing Committee that the Department of Human Services investigation found about $8,000 taken from the Disaster Supplemental Nutrition Assistance Program after false or incomplete information was submitted and that 13 employees received temporary disaster food benefits; those employees were terminated and cases were referred to the Pulaski County Prosecutor's Office. Auditors also reported an apparent theft of about $5,800 from Medicaid-related benefits and said the matter was referred to prosecutors and the attorney general.

Audit staff further reported that a state warrant payable to the University of Arkansas at Little Rock had been altered and cashed for almost $610,000. The payee line on the redeemed warrant had been changed to a private business name while the warrant number and amount remained intact. Auditors said the UALR affidavit was completed in late August, the bank honored the state's forgery claim, and the funds were recovered and deposited into the state's Treasury account in November. Bridal Hayes, identified in the meeting as chief deputy counsel for DHS, said the altered warrant was cashed by an auto body shop in California and that the agency referred the matter to the Pulaski County prosecutor and the FBI.

The audit of the Department of Parks, Heritage and Tourism found nearly $3,500 in lost receipts at a state museum and several change-fund exceptions, including a $100 drawer shortage at Daisy State Park and an $80 overage at War Memorial Stadium. Shay Lewis, secretary of the department, said the agency is considering testing cashless transactions at large venues such as War Memorial Stadium but must weigh customer preference for cash. Lewis said the department is reviewing procedures to reconcile both cash and bank balances for change funds.

At the Department of Corrections, auditors identified misuse of a state-issued fuel card by an employee, with potentially fraudulent purchases between July 2022 and August 2024 totaling about $4,500; the employee was terminated and the case forwarded to the Arkansas State Police and prosecutors. Auditors also flagged that scheduled disaster-recovery testing for critical corrections IT systems did not occur in 2024; Colleen Halsey, the department's chief information officer, said a production disaster-recovery test is scheduled and that the department is implementing telematics and a dedicated fuel-card monitor to detect misuse.

The Arkansas Department of Veterans Affairs audit found four Fayetteville Veterans Home employees received roughly $561 for time they were not at work and that, in a separate review, about $6,600 in unapproved overtime payments were identified. ADVA officials said they have tightened preapproval procedures for overtime and centralized written approval with the secretary.

Committee members asked agencies about recovery of funds and whether other state agencies had been warned about the altered warrant; DHS counsel confirmed referrals to prosecutors and the FBI but said other state agencies had not been notified. The committee filed the audit reports without objection and requested supporting lists and follow-up documents from staff.

The committee asked agencies to provide any additional documentation requested and signaled interest in monitoring the implementation of new controls, including the Corrections telematics program and Parks' consideration of cashless options.