Legislative Committee Reviews 10 Audits of State Programs
The Legislative Audit Committee held hearings Thursday on 10 audits. These audits found:
The State Board of Investments allowed Montana Historical Society funds to be invested in private corporate capital stock, contrary to the Montana Constitution.
Three pension trust funds (Public Employees’ Retirement System-Defined Benefit Retirement Plan, Sheriff’s Retirement System, Game Wardens’ and Peace Officers’ Retirement System) administered by the Public Employees’ Retirement Board do not have sufficient resources to fund benefits earned by members of these systems as required by the Montana Constitution and state law. Discussion of the audit included legislative proposals to fix these shortfalls.
The unfunded liability of the Teachers’ Retirement System also does not amortize within 30 years, as required by the Montana Constitution.
Pension benefit inflation within the Public Employee Retirement Administration and Teachers’ Retirement System can result from the following practices during the benefit calculation period (highest average 36 months’ compensation):
significant amounts of overtime
bonuses and other discretionary payments
legislative service prior to full-time public service
compensation from double employment
other significant, late-career compensation increases
exemptions to benefits growth limits
An examination of individual cases found that eight retirees cumulatively may have increased their lifetime pension payments by $1.75 million using some of the above practices. Agency controls and statutory changes are necessary to curb these practices.
Montana State Fund has inadequate cash and invested assets to cover Old Fund (pre-July 1, 1990) obligations through fiscal year 2011, so the state will need to use general funds to compensate.
The Judicial Branch should improve internal controls over drug court payments to clients and filing fees paid to clerks of district courts.
The Montana Board of Housing purchased 272 single-family mortgages and issued low-income tax credits to produce or preserve 238 units of affordable rental housing.
Insure Montana, which helps over 1,600 small businesses obtain health insurance for employees, must improve controls to prevent improper payments to ineligible businesses or individuals. Some businesses have received assistance in spite of falling outside some program requirements, such as having:
employees over income limits;
more eligible employees on payroll than allowed; or
delinquent state taxes.
In addition, auditors reported how these agencies have responded to past audits:
Recommendations addressing the need for better vehicle fleet information and for improved policies and business practices at various state agencies have been or are being implemented. Resulting vehicle fleet reductions will generate annual savings of at least $470,000. The recommendations are the result of a 2009 audit.
The Department of Labor and Industry has implemented a recommendation to improve management controls of the Subsequent Injury Fund. The recommendation was the result of a 2009 audit.
In other business:
Secretary of State Linda McCulloch presented a list of anticipated and unanticipated financial obligations for her office, including the maintenance of 23 record-keeping systems, paper business filings, and Statewide Voter Files. The list was a request of the audit committee, after a financial audit of the Secretary of State’s Office was presented in November 2010.
The Montana State Fund board of directors will consider in January a performance audit recommendation to provide additional compensation disclosure.
The Legislative Audit Division has found sponsors for legislation, including background checks for division employees, elimination of lottery drawing observation, and rules for loaning employees between agencies.
Audit summaries and full text are available at leg.mt.gov/audit. Committee members are:
Sen. Mitch Tropila (D-Great Falls), chair
Rep. Dee Brown (R-Hungry Horse), vice chair
Sen. Greg Barkus (R-Kalispell)
Sen. John Brenden (R-Scobey)
Sen. Taylor Brown (R-Huntley)
Sen. Mike Cooney (D-Helena)
Rep. Betsy Hands (D-Helena)
Sen. Cliff Larsen (D-Missoula)
Rep. Scott Mendenhall (D-Clancy)
Rep. Carolyn Pease-Lopez (D-Billings)
Rep. Wayne Stahl (R-Saco)
Rep. Bill Wilson (D-Great Falls)
At least five new members will be appointed to the committee during the 2011 session, as Senators Barkus and Cooney and Representatives Brown, Mendenhall, and Wilson will not be returning for the 2011 session due to term limits.
The Legislative Audit Division provides independent, objective, fact-based evaluations of the stewardship, performance and cost of government policies, programs, and operations. For more information, call 444-3122 or go to leg.mt.gov/audit. To report improper acts committed by state agencies, departments, or employees, call the division’s fraud hotline at (800) 222-4446 or 444-4446 (in Helena).
