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The Louisiana Department of Revenue understated revenue by nearly $40 million in its 2022 financial report and failed to maintain control of payroll, reports the Louisiana Legislative Auditor.
LLA Mike Waguespack recently issued a Financial Review for the Treasury Department for Fiscal Year 2022 “to provide assurances on financial information material to the State’s annual comprehensive financial report; Evaluating the effectiveness of LDR’s internal controls over financial reporting and compliance; and determine whether LDR has complied with applicable laws and regulations.”
The primary finding focused on the inadequate preparation of the 2022 annual financial report. This report feeds into the state’s annual comprehensive financial report.
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“Adjusted sales, corporate and individual tax revenues were understated by $39.5 million and modified receivables were understated by $32.2 million due to $7.5 million in hotel /Motel tax receipts and $32.2 million in outstanding sales, corporate and individual tax receivables were omitted,” auditors wrote. “Management did not identify the above omissions during the AFR preparation and review process.”
The other finding related to insufficient payroll controls, leading to delays or lack of certification of timesheets and supervisor approvals.
“In addition, LDR did not maintain adequate controls over pre-entry procedures when changes were made to HR master data,” the report said. “Failure to ensure that employees and managers certify and approve timesheets in a timely manner, and that changes to HR data are accurate, increases the risk that errors and/or fraud will occur and not be detected in a timely manner.”
A review of 14,116 timesheets from July 1, 2021 to May 29, 2022 revealed that 463 were not certified by employees until after the payroll posting date and a further 374 were not certified at all.
Another 1,840 were approved by supervisors after the payroll posting date, while 860 were never approved.
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Four out of 22 changes to HR master data involved salary changes, which the report said were not supported by evidence of review and approval.
“LDR management should ensure that employees comply with established policies and procedures, including the timely and proper certification and approval of timesheets and the review and approval of personnel changes,” the auditors wrote.
LDR Secretary Kevin Richard responded to the findings in a series of letters to Waguespack in December that outlined additional actions the department is taking to fix the problems.
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The department directed a dedicated analytical resource in the Office of Management and Finance to help evaluate all AFR system reports and vowed to “retest and validate every AFR system report,” he wrote.
For payroll, LDR now requires all timekeepers to send email reminders to employees and managers regarding payslips and approval deadlines. According to Richard, HR reps now also run regular reports to identify pending certifications and approvals and forward the reports to management to remind employees.
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