State auditors found billions of dollars in accounting mistakes and said Oregon potentially spent about $5 million of federal money in ways that may not have met government requirements, according to a report released Wednesday.
Every year, state auditors dig into the financial records of Oregon government agencies. Wednesday’s report reflects two efforts: to check that the state’s financial information is accurate, and to determine whether state agencies are obeying the federal government’s requirements on how federal money is spent.
Oregon received $17 billion in federal money in the 2020 fiscal year for programs ranging from agricultural research to health care coverage.
That’s a notable increase from prior years, in large part because of the COVID-19 pandemic, which boosted demand for public services that the federal government helps pay for, like unemployment benefits for people who lost their jobs. The state typically receives about $12 billion in federal dollars each year, auditors said.
Overall, auditors said the state’s financial statements were “unmodified,” or “clean” — meaning they conformed with a broadly accepted set of accounting principles.
State government agencies, such as the Oregon Department of Agriculture or the Department of Transportation, are responsible for ensuring their financial and accounting information is accurate. Accurate financial statements are “essential for ensuring that reliable and transparent financial information is provided to decision makers and key stakeholders,” auditors wrote in their report.
“These financial audits are critically important to ensuring our state is properly accounting for the resources entrusted to us by the taxpayers of Oregon and the federal government,” Secretary of State Shemia Fagan said in a statement. “While there were some steps identified for improvement, I am pleased that Oregon is managing these funds well because they are critical to services Oregonians count on the most.”
Auditors found mistakes
In the first part of their report, focused on the state’s financial statements, auditors said those statements aligned with a broadly recognized set of accounting principles. Auditors looked at “all major funds” of the government and hundreds of accounts at 23 of Oregon’s state agencies.
While they found $6.4 billionin accounting errors, auditors said they were unintentional mistakes.
This doesn’t mean the state misspent billions of dollars. It means the state categorized money incorrectly.
For instance, the Department of Revenue incorrectly included information from earlier fiscal years and included some information that didn’t meet the qualifications for a specific type of activity, resulting in a much larger figure in one category than was accurate.
These errors happen when an agency doesn’t record a transaction or codes it incorrectly, which can mean that the amount of money appears in the wrong year, or in the wrong location in financial statements, auditors said.
Auditors also said that the biggest dollar adjustments due to these errors were needed because of agencies’ failure to accurately implement new accounting standards accurately. But the rest of the errors were the result of shortcomings in internal controls.
Auditors found “material weaknesses” in the internal controls of two state agencies, which meant they ran the risk of missing problems.
They found two such weaknesses at the Department of Revenue, which collects taxes, and one weakness at the Department of Consumer and Business Services, which regulates the state’s insurance industry and oversees workplace safety, among other things.
When there are weak internal controls, “there is a reasonable possibility” that misstatements won’t be prevented or found – or corrected quickly, auditors said.
On eight other issues, auditors found “significant deficiencies” in controls at state agencies. That’s a lower level of severity but still requires fixing, they said.
Some spending questioned
Auditors also questioned whether the state properly spent about $5 million of federal money.
Oregon administered 405 federal programs in the 2020 fiscal year. Auditors looked at 14 of the biggest programs to see whether the state complied with federal requirements. Those 14 accounted for about 82% of the $17 billion in federal funds that Oregon spent in the 2020 budget year.
Auditors said the state agency responsible for distributing cash benefits to poor Oregon families didn’t have enough internal controls and didn’t comply with the federal government’s requirements.
It’s the third year in a row that auditors have issued what’s called a “qualified opinion” on that program, called Temporary Assistance for Needy Families, or TANF.
A “qualified opinion” means a state agency doesn’t have adequate internal measures, or “controls,” in place to catch or prevent the state from falling out of line with federal requirements. Auditors said Oregon’s Department of Human Services didn’t have adequate controls and wasn’t compliant with federal requirements for the cash assistance program.
Two federal programs that Oregon runs — t
he cash assistance program and Medicaid — have issues dating back to 2010 that still haven’t been resolved, auditors said. Medicaid is the government health plan for low-income people and other qualifying groups.
Auditors also questioned whether about $5 million in spending was properly paid for with federal funds. They identified $2.3 million that was potentially questionable and projected, based on their sample, that another $2.9 million could be questioned as well.
“When we question costs, we are identifying program costs that may, or may not, be allowed to be paid for with federal funds,” auditors said. The relevant federal agency reviews state auditor’s conclusions and decides whether the federal government can reimburse the state for the spending.
A good share of these “questioned costs” were associated with the Child Care and Development Fund, which is money the feds give to the state to help low-income families get child care and to improve the quality of child care.
Auditors identified and projected that the state, through its human services and education departments, spent $4.2 million of that money in ways that could be questioned.
For example, auditors said that the state’s Department of Human Services didn’t retain supporting documents, like attendance records, which would have helped auditors verify that the amount of money child care providers were being paid was correct.