OKLAHOMA MILITARY DEPARTMENT

staff for the assistance and cooperation extended to our office during the course of our engagement.<br><br> Sincerely, STEVE BURRAGE, CPA STATE AUDITOR & INSPECTOR Mission Statement The mission of the Oklahoma Military Department is to preserve the state and the nation through the organization and training of the Oklahoma National Guard, to be ready for federal duty when called upon by the president of the United States, pursuant to congressional authority, and to be ready for state duty when called upon by the governor of Oklahoma. Key Staff Major General Myles L. Deering ................................................................................................<br><br> ......... Adjutant General Lisa Smith .................................................................................................................... ................................<br><br> Comptroller Lieutenant Colonel Billy Robison ................................................................... Camp Gruber Base Operation s Manager Specialist Katheryn Stewart ......................................................................... Camp Gruber Support Servi ces Supervisor Mary Fowler ...................................................................................................................<br><br> . State Office Head Accountant Oklahoma Military Department Camp Gruber 3 Activity Board 86 Operational Audit 1 Background The Oklahoma Military Department (Agency) was established in 1951 and serves as the administrative agency for all matters concerning the Oklahoma National Guard and other military organizations. The governor, as commander-in-chief of the National Guard, appoints the adjutant general, the executive and administrative officer.<br><br> Camp Gruber (Gruber) is part of the Agency and is located in Braggs, Oklahoma. Activity Board 86 is a fund used to provide quality support and recreational services that contribute to the retention, readiness, mental, physical, and emotional well-being of soldiers stationed at Gruber. This could include recreational games, electronic equipment, or utility payments.<br><br> Receipts to the fund result from a golf ball driving range, a laundry facility and a small fee tied to the number of beverage cases sold in vending machines at Gruber. Authority, Purpose, and Scope This audit was conducted at the request of Gruber management. We conducted this performance audit in accordance with generally accepted government auditing standards.<br><br> Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This report is a public document pursuant to the Oklahoma Open Records Act (51 O.S.<br><br> § 24A.1 et seq.), and shall be open to any person for inspection and copying. The audit period covered was July 1, 2006 through December 31, 2008. Objective 1 - To determine whether the Agency 9s internal controls for Camp Gruber 9s Activity Board 86 Fund provide reasonable assurance that revenues and expenditures were accurately reported in the accounting records.<br><br> Conclusion Key personnel involved in certain processes no longer work for Gruber. This prevented us from obtaining an understanding of the internal control structure in place for the period of July 1, 2006 through December 31, 2006. As a result, we did not conclude on controls for this period.<br><br> For the period January 1, 2007 through December 31, 2008, the internal controls: " Generally provide reasonable assurance that expenditures were accurately reported in the accounting records. However, one area does need to be strengthened; " Do not provide reasonable assurance that revenues were accurately reported. Methodology To accomplish our objective, we performed the following: " Reviewed the Activity Board 86 Fund Standard Operating Procedures manual; " Documented internal controls related to the receipting and expenditure processes; " Tested expenditure controls, which included: " Ensuring all utility payment claims were properly authorized.<br><br> This included ensuring the invoice supported the payment, the invoice was mathematically accurate, the correct account code was used, and the expenditure was reasonable given the Activity Board 86 Fund 9s mission; Oklahoma Military Department Camp Gruber 3 Activity Board 86 Operational Audit 2 " Determined whether the person receiving warrants from the Office of State Finance (OSF) was independent of the posting and approval process. Observation Inadequate Segregation of Duties Related to Receipting Process An effective internal control system provides for adequate segregation of duties. The board custodian is responsible for: " Receipting monies from the driving range and laundry facility; " Preparing deposits; " Reconciling the fund.<br><br> An inherent risk to this situation is the golf ball driving range machine and laundry facility machines have no mechanism in place to allow the comparison of inputs (funds received) to outputs (golf balls/wash cycles dispensed). Additionally, the number of beverages stocked in vending machines by the vending machine vendor 1 Management does not consider lack of segregation of duties or the lack of monitoring related to the vending machine receipts a risk. Misappropriation of assets could occur and not be detected in a timely manner.<br><br> is not being monitored by Gruber and compared to receipts. Recommendation We recommend: " Two employees be responsible for collecting funds from the golf ball driving range and laundry facility; " The person(s) responsible for receipting not be responsible for reconciling the fund; " Gruber management request a report from the vendor each time they refill the vending machines, including a beginning balance of beverages currently in the machines, and a listing identifying the number of beverages added to the machines each visit. This will allow management to compare its vending machine receipts to actual outputs (beverages dispensed); " Gruber management monitor the inventory of laundry items in its soap dispenser unit in the laundry facility, allowing them to compare receipts to laundry soap used.<br><br> Views of Responsible Officials We concur. Observation Lapsed Vending Machine Contract with Vendor The Activity Board 86 Fund Standard Operating Procedures §§ 3-3-1 through 3-3-2 require that vending machine agreements be in writing and include a commission rate or fixed amount, provide for written documentation of all transactions, and require documentation of annual agreement by all parties to continue the vending agreement. 1 Gruber management states 24 vending machines are on the base.<br><br> The Activity Board 86 Fund receives $1.50 per case of beverages sold. Prior to our questions, Gruber management was unsure of the fee received from the vendor or the number of machines on base. The parties do not have a current agreement detailing this arrangement.<br><br> Oklahoma Military Department Camp Gruber 3 Activity Board 86 Operational Audit 3 Gruber 9s most recent contract with the vending machine vendor is from 2005 and has expired. Without a service contract, there could be an interruption in service to the vending machines or in payment of Gruber 9s fees. Recommendation We recommend Gruber management request the vendor provide a current agreement specifying the details of the fee per case arrangement to ensure compliance with the Standard Operating Procedures criteria listed above.<br><br> Views of Responsible Officials We concur. Observation Inadequate Review of Certain Expenditure Claims An effective internal control system provides for a detailed review of expenditure claims. The accountant in the Agency 9s state office is responsible for reviewing and approving non-utility invoices from the Activity Board 86 Fund.<br><br> She stated to us on multiple occasions there was no activity in this fund. We reviewed six claims (56 claims totaling $20,687 made up the population) paid from the fund and noted three of them ($3,494.04) had originally been approved by the accountant to be paid from another Activity Board 9s fund. When assigning the funding source to the claim, the accountant 9s supervisor (head accountant) made the correction and adjusted the expenditure to Activity Board 86.<br><br> As a result, we felt the accountant 9s review for allowable activity was not sufficient. The accountant appeared unclear as to the requirements of Activity Board 86 Fund. Unallowable expenditures could occur and not be detected in a timely manner.<br><br> Recommendation Regarding the claims in question, we recommend the head accountant discuss the discrepancies with the accountant and why the adjustments were made. In the future, when adjustments are made by the head accountant, discussion should occur at that time to prevent the error from occurring again. In addition, we recommend the accountant review the Activity Board 86 Fund Standard Operating Procedures manual.<br><br> Views of Responsible Officials We concur. Additional Procedures Performed Methodology As a result of the control deficiencies identified under objective 1 of this report, the following procedures were performed: " Reviewed all utility payment expenditure claims submitted to the Agency 9s state office between July 1, 2006 and December 31, 2006 for reasonableness given the Activity Board 86 Fund 9s mission. No exceptions were noted.<br><br> " Reviewed all non-utility payment expenditure claims submitted during the audit period for reasonableness given the Activity Board 86 Fund 9s mission. No exceptions were noted. OFFICE OF THE STATE AUDITOR AND INSPECTOR 2300 N.<br><br> LINCOLN BOULEVARD, ROOM 100 OKLAHOMA CITY, OK 73105-4896 WWW.SAI.OK.GOV

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