Office of the Legislative Auditor - Financial Audit Division

Report Summary
Report on Internal Control
Over Statewide Financial Reporting

 

Financial Audit Division Report 13-06

Released May 17, 2012

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Conclusion

The State of Minnesota’s financial statements were fairly stated in all material respects. However, the state did not comply with the statutory deadline for issuing the financial statements and continued to have weaknesses in internal controls over financial reporting.

Our audit report contains five findings related to internal controls over the preparation of the state’s financial statements and one finding related to delays in drawing federal funds to reimburse for federal grant program expenditures. Three of the findings include concerns from our previous audit that have not been fully resolved.¹

In addition, we previously reported to the Department of Management and Budget system security issues in the new accounting system (SWIFT) related to incompatible security roles and the development and assessment of mitigating controls for conflicting security access and incompatible duties.^2,3 Establishing and maintaining appropriate security access in the new accounting system is fundamental to the state’s ability to ensure the integrity of its financial operations.

Key Findings

• The Department of Management and Budget did not finalize financial statements in order to report the state’s financial operations to the Legislature in a timely manner.
• The Department of Management and Budget did not adequately resolve some issues resulting from the implementation of the new accounting system.
• Prior Finding Partially Resolved: The Department of Management and Budget and other state agencies did not have adequate internal controls to prevent and detect errors and inaccuracies in the financial information used to compile the financial statements and footnote disclosures.
• Prior Finding Partially Resolved: Some agencies allowed employees to have inappropriate access to state business systems or perform incompatible duties without establishing mitigating controls.
• Prior Finding Partially Resolved: Some agencies lacked a comprehensive internal control structure over financial reporting to sufficiently mitigate the risk of potential misstatements in the financial statements.

Audit Scope

We audited the state’s financial statements for the fiscal year ended June 30, 2012. Our audit encompassed many large state agencies that had financial activities significant to the financial statements.

Background

The Department of Management and Budget is responsible for preparing the state’s annual financial statements, which are included in the State of Minnesota’s Comprehensive Annual Financial Report. To prepare the statements, the department uses information from a variety of sources, including information provided by other agencies. The issues contained in this report relate to weaknesses in internal controls in the state’s financial reporting process as a whole.

 

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¹ Office of the Legislative Auditor’s Financial Audit Division Report 12-03, Report on Internal Control Over Statewide Financial Reporting, issued February 16, 2012.

² Office of the Legislative Auditor, Financial Audit Division, Report 11-24, Statewide Integrated Financial Tools (SWIFT) Application Security Controls, issued November 3, 2011.

³ Office of the Legislative Auditor, Financial Audit Division, Report 12-23, Department of Management and Budget: Statewide Integrated Financial Tools (SWIFT), issued November 16, 2012.