Office of the Legislative Auditor - Financial Audit Division

Report Summary

Department of Finance

Fiscal Year Ended June 30, 2003

Key Audit Conclusions

• We issued an unqualified audit opinion, dated December 5, 2003, on the State of Minnesota’s basic financial statements for the year ended June 30, 2003. In accordance with Government Auditing Standards, we also issued our report, dated December 5, 2003, on our consideration of the State of Minnesota’s internal control over financial reporting and our tests of compliance with certain provisions of laws, regulations, contracts, and grants. In March 2004, we will issue our report on compliance with requirements applicable to each major federal program and internal control over compliance in accordance with the U.S. Office of Management and Budget’s Circular A-133.

Key Findings and Recommendations

• Three state agencies submitted erroneous or incomplete accounting information to the Department of Finance; some of the exceptions could have resulted in material errors in the state’s financial statements. We recommended that the Department of Finance work with the affected agencies to ensure they prepare accurate information for financial reporting. We also recommended that the department enhance its process for determining liabilities to be reported in the financial statements.
• The Department of Finance has not ensured that state departments properly account for financial activities in agency funds. As a result, we posted audit adjustments of $14.5 million to correct agency fund financial statement amounts. We recommended the department develop a policy for state agencies to follow to properly account for agency fund activities.
• A component of the state’s accounting system (the Contract Financial Management Subsystem) erroneously reports information that understated liabilities in the state’s financial statements by up to $9 million. We recommended that the department ensure that the correct information in CFMS is used so that liabilities are accurately recorded in the state’s financial statements.

Management letters address internal control weaknesses and noncompliance issues we identified during our audit of the state’s financial statements and federally funded programs. The scope of our work in the Department of Finance was limited to those activities administered by the department that were material to the State of Minnesota’s basic financial statements and federal financial assistance programs for the fiscal year ended June 30, 2003. Our work in the Department of Finance focused primarily on preparation of the state’s basic financial statements as well as certain of the department’s statewide financial management responsibilities relating to cash and debt management, payroll, and the state’s accounting system.