MINUTES
MINUTES
Government Operations & Audit Committee
Representative Ernie Otten, Chair
Senator Dean Wink, Vice Chair
First Meeting, 2024 Interim Room 362 – State Capitol
Wednesday, July 31, 2024 Pierre, South Dakota
The first meeting of the 2024 Interim Government Operations and Audit Committee (Committee) was called to order by Chair Otten at 9:00 a.m., July 31, 2024, in room 362, State Capitol Building, Pierre, South Dakota.
A quorum was determined with the following members answering the roll call: Representatives Duba, Peterson, Reisch, Bartels, Otten and Senators Nesiba, Reed, Wheeler, Hunhoff and Wink.
Staff members present were Russell Olson, Auditor General for the Department of Legislative Audit (DLA), Kelly Mikkelsen, IS Audit Manager for DLA, and Mike Kogelmann and Lisa Schofield, State Government Audit Mangers for DLA.
NOTE: For purpose of continuity, the following minutes are not necessarily in chronological order. The bulleted items below each agenda item are documents sent out by the Committee.
Approval of Minutes
Senator Reed moved, seconded by Senator Wheeler, the minutes of the November 8, 2023 and November 13, 2023 meetings be approved (Minutes 11-8-23 Doc.1 and Minutes 11-13-23 Doc.1a). Motion prevailed unanimously on a voice vote.
Representative Otten addressed the Committee regarding the alleged embezzlement from the Department of Social Services. He proposed having one meeting tentatively in October to examine the case, as the proceeding are currently ongoing. Committee members discussed who to invite to the meeting and suggested looking broadly at overall processes.
Item 1 – Brand Board to review the 2023 annual Report (SDCL 40-18-18)
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Debbie Trapp, Director of the South Dakota Brand Board was present to address the Committee. She provided background information about the Brand Board and presented the Brand Board 2023 Report.
She stated the Brand Board operates solely on funds generated by the programs they administer. Those programs include the brand registration program and the brand ownership inspection program. The Brand Board is made up of five members and they currently have 18 full-time staff and 122 part-time staff. Ms. Trapp advised that they saw a decrease in the number of livestock inspected and provided information on inspections. In calendar year 2023, brand inspectors recovered approximately $700,000 worth of livestock while they were conducting inspections. She also discussed inspection fee deposits, missing or stolen livestock statistics, recovered strays and Brand Board holds, livestock investigations, and the brand program. Ms. Trapp advised the Brand Board added district supervisor positions and they have received positive feedback related to this change. They are in the process of upgrading their computer software so they can process inspections electronically.
Senator Wink moved, seconded by Representative Duba, to accept the Brand Board’s report. The motion passed 10-0 on a roll call vote.
Item 2 – Department of Legislative Audit to review the Single Audit Report for the State of South Dakota for the fiscal year ended June 30, 2023
Russell Olson, Auditor General with the Department of Legislative Audit (DLA), Mike Kogelmann and Lisa Schofield, State Government Audit Managers with the DLA were present to address the Committee.
Mr. Kogelmann provided the Single Audit Overview document and described the various sections of the Single Audit Report. He described the Single Audit as an audit of the State’s financial statements as well as the federal awards expended by the State. He reviewed the various basis of accounting methods used in the report.
Mr. Kogelmann provided an overview of the audit of the federal awards under the Uniform Guidance. He explained the federal regulations relating to larger Type A programs and smaller Type B programs. There were about $2.9 billion in federal expenditures in fiscal year 2023. Based on federal guidelines, they tested 17 Type A programs and 4 Type B programs. That resulted in about 57% of the grants being subject to Single Audit testing.
He reviewed two other auditor reports that were contained in the Single Audit: 1) the Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards, and 2) the Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance. He defined material weaknesses and significant deficiencies. He advised that they issued 21 unmodified opinions for the programs they tested, meaning they found them to be materially in compliance with federal statutes.
Mr. Kogelmann and Ms. Schofield reviewed the audit findings and corrective action plans:
Finding No. 2023-001 – Department of Agriculture and Natural Resources – A material weakness in controls over financial reporting.
Finding No. 2023-002 – Statewide Financial Reporting Process – A material weakness in internal controls over financial reporting.
Finding No. 2023-003 – Department of Public Safety – A material weakness and non-compliance in internal controls over Federal Funding Accountability and Transparency Act (FFATA) Reporting.
Finding No. 2023-004 – Department of Social Services – A material weakness in controls over the payments of claims.
Finding No. 2023-005 – Department of Labor and Regulation – A material weakness in internal control over compliance.
Finding No. 2023-006 – Department of Labor and Regulation, Unemployment Insurance Fund – A material weakness in internal control over compliance
Finding No. 2023-007 – Soybean Research and Promotion Council – A significant deficiency in the preparation of financial statements.
Finding No. 2023-008 – South Dakota Corn Utilization Council – A significant deficiency in the preparation of financial statements.
Finding No. 2023-009 – South Dakota Corn Utilization Council – A significant deficiency in segregation of duties.
Finding No. 2023-010 – South Dakota Wheat Utilization, Research and Market Development Commission – A significant deficiency in the preparation of full disclosure financial statements.
Finding No. 2023-011 – South Dakota Wheat Utilization, Research and Market Development Commission – A significant deficiency in a lack of proper segregation of duties.
Senator Wink moved, seconded by Representative Reed, to approve the Single Audit report for the State of South Dakota for the year ending June 30, 2023. The motion passed 9-1 on a roll call vote.
Item 3 – Auditor General to report on compiled authorizations to derive a direct benefit from a contract (SDCL 3-23-3)
Russell Olson, Auditor General with the Department of Legislative Audit (DLA was present to address the Committee. He presented a Compilation of Conflict-of-Interest Disclosures for State Authorities, Boards and Commissions report for fiscal year 2024. He reviewed 17 annual disclosures and 4 waiver requests. He did not see any concerns when viewing from an auditor’s standpoint.
Senator Wink moved, seconded by Representative Duba, to accept the compiled authorizations report presented. The motion passed 10-0 on a roll call vote.
Item 4 – Bureau of Human Resources and Administration to provide the annual report of compiled authorizations to derive a direct benefit from a contract (SDCL 5-18A-17.2)
Mallori Barnett, Legal Counsel for the Bureau of Human Resources and Administration (BHRA) was present to address the Committee. She explained that BHRA compiles authorizations, or waivers, to receive a direct benefit from a contract and reports to the Committee annually. Ms. Barnett advised they did not receive any waivers for fiscal year 2024.
Senator Wink moved, seconded by Representative Bartels, to accept the annual report as presented. The motion passed 9-0 on a roll call vote.
Item 5 – Department of Corrections to present the reports on abuse and neglect in private placement facilities for the period July 1, 2023 through June 30, 2024 (SDCL 26-11A-33.1)
Kristi Bunkers, Juvenile Division Director for the Department of Corrections (DOC) was present to address the Committee. She provided the annual report on abuse and neglect in private care facilities for 07/01/23 through 06/30/24. She provided background information and explained how the information in the report is obtained. The number of reports annually has been trending down for the last three years. Ms. Bunkers summarized the nine incidents from the report.
Senator Wink moved, seconded by Senator Wheeler, to accept the nine reports as present by DOC. The motion passed 9-0 on a roll call vote.
Item 6 – Department of Corrections (DOC) to present their agency performance measures (SDCL 2-6-37)
Kellie Wasko, Secretary of the Department of Corrections (DOC) and Brittni Skipper, Director of Finance and Administration with DOC were present to address the Committee. Ms. Skipper provided the DOC Performance Measures and reviewed the DOC Presentation and their three goals.
Goal one is to modernize the state correctional system.
Goal two is to provide effective community supervision.
Goal three is to utilize evidence-based practices to support reentry.
Senator Wink moved, seconded by Representative Peterson, to accept agency performance measures as presented by DOC. The motion passed 9-0 on a roll call vote.
Item 7 – Department of Corrections – Committee questions on the Governor’s Housing Program
Kellie Wasko, Secretary of the Department of Corrections (DOC) and Brittni Skipper, Director of Finance and Administration with DOC were present to answer the Committee’s questions on the Governor’s Housing Program.
The next Committee meetings are scheduled for September 5, 2024 and October 8, 2024, with an additional meeting to be scheduled for October.
A motion was made by Senator Wheeler to adjourn, seconded by Representative Bartels. The motion passed on a voice vote.