s 354.56 L72DL 1976 APR 8 7? Sli^ILMimrfs STATE OF MONTANA DEPARTMENT OF LIVESTOCK 1 REPORT ON AUDIT Conducted Under Contract By Mostad and Jackson, CPA' s Fiscal Year Ended June 30, 1976 OFFICE OF THE LEGISLATIVE AUDITOR STATE OF MONTANA STATE CAPITOL • HELENA MONTANA STATE LIBRARY :,Lii:] iirL 3 0864 1002 2301 8 STATE OF MONTANA DEPARTMENT OF LIVESTOCK REPORT ON AUDIT Conducted Under Contract By Mostad and Jackson, CPA's Fiscal Year Ended June 30, 1976 76C-13 Digitized by the Internet Archive in 2010 with funding from IVIontana State Library http://www.archive.org/details/stateofmontan1976most OVERVIEW AUDIT OF THE DEPARTMENT OF LIVESTOCK JUNE 30, 1976 INTRODUCTION The audit of the Department of Livestock was a financial com- pliance audit. The purpose of the audit was to determine whether the financial operations of the Department of Livestock are being properly conducted, whether the financial statements are fairly presented for the audit period, and whether the De- partment of Livestock has complied with the state laws and regu- lations. The audit covered fiscal year ended June 30, 1976, and resulted in a qualified opinion on the financial statements. A qualified opinion means that the financial statements do pre- sent fairly the financial position, current fund revenues and expenditures, and changes in fund balance, in conformity with generally accepted accounting principles, except for a stated reason. The reason for the qualified opinion is because the Department of Livestock does not maintain formal accounting records for fixed assets. For that reason equipment is not included in the balance sheet. There are seven recommendations in the audit report. The recom- mendations were discussed with the chief accountant and during this discussion he concurred with these recommendations, however, on the agency response to Morris Brusett he concurred with three, did not concur with three, and partially concurred with one. SYNOPSIS OF MAJOR FINDINGS There are several areas of major findi.ngs presented in the audit report. These are listed below. RECEIVABLES During our audit of accounts receivables we found $1,640 of receivables not recorded on the SBAS record which we felt represented unrecorded revenues at that date and recommended that the Department implement procedures to record these re- ceivables on SBAS. Generally accepted accounting principles for governmental agencies state that revenues should be recorded when received except when susceptible to accrual. We feel these receivables were susceptible to accrual and, therefore, should be recorded on the accounting system. We also recommended that the Department of Livestock use a process of aging the accounts receivables. Our recommendation was directed to a written for- mal aging of accounts receivables and not a visual review as brought out by the chief accountant for the Department of Live- stock. The lack of personnel is not an adequate reason for not carrying out this recommendation. INVENTORIES We recommended that the Department of Livestock establish a policy of taking an annual inventory of supplies. Again, this recommendation was directed at a written formal inventory of supplies. The chief accountant replied that they already do this but not in a formal documented fashion. GENERAL Most of our other comments were directed to procedural and clerical type errors which we found during our examination. Our recommendations were made to correct internal control weaknesses and not necessarily change the accounting system of the Department of Livestock. We still maintain that these weaknesses are there and steps should be taken to correct these weaknesses . CONCLUSION In conclusion, our recommendations should be reviewed more in the light of internal control problems and not as criticism directed at the Department of Livestock and constructive changes be reviewed. STATE OF MONTANA DEPARTMENT OF LIVESTOCK REPORT ON AUDIT Conducted Under Contract By Mostad and Jackson, CPA's Fiscal Year Ended June 30, 1976 76C-13 STATE OF MONTANA MORRIS L BRUSETT LEGISLATIVE AUDITOR ^tfitt ixi tli:e ^t^i&\nii\xt ^niiiixxx STATE CAPITOL HELENA. MONTANA 59601 406/449-3122 January 26, 1977 DEPUTY LEGISLATIVE AUDITORS: JOSEPH J. CALNAN ADMINISTRATION AND PROGRAM AUDITS ELLEN FEAVER FINANCIAL-COMPLIANCE AND CONTRACTED AUDITS STAFF LEGAL COUNSEL JOHN W. NORTHEY The Legislative Audit Cominittee of the Montana State Legislature: Transmitted herewith is the report on the audit of the Department of Livestock for the year ended June 30, 1976. The audit was conducted by Mostad and Jackson, Certified Public Accountants under a contract between the firm and our office. The comments and recommendations contained in this report represent the views of the firm and not necessarily the Legislative Auditor. The agency's written response to the report recommenda- tions is included in the back of the audit report. Respectfully submitted, Morris L. Brusett, C.P.A. Legislative Auditor TABLE OF CONTENTS Page Suitiinary of Recommendations i Accountants' Report 1 Auditor's Comments 2 Introduction 2 General 4 Receivables 7 Inventories 8 Plant, Property and Equipment 8 Disbursements and Expenditures 9 Financial Statements Balance Sheet 10 Statement of Revenue Compared to Revenue Estimates 12 Statement of Changes in Fund Balances 14 Statement of Support Expenditures Compared with Appropriations 16 Statement of Expenditures by Funds and Programs 17 Notes to the Financial Statements 21 Agency Reply 25 SUMMARY OF RECOMMENDATIONS As a separate section in the front of each audit report we include a listing of all recommendations together with a notation as to whether the agency concurs or does not concur with each recommendation. This listing serves as a means of summarizing the recommendations contained in the report and the audited agency's reply thereto and also as a ready reference to the supporting comments. The full reply of the Department of Livestock is included in the back of this report. Page Implement procedures to put existing receivable amounts on S.B.A.S. Agency Reply: Do not concur. See page 25. Use the process of ageing the accounts receivable. Agency Reply: Do not concur. See page 25. Establish a policy of taking an annual inventory of supplies. Agency Reply: Concur. The department currently does this, but not in a formal documented fashion. See page 26. Correct plant, property, and equipment records for all equipment that cannot be found and that identification numbers not visible on equipment be restored. Agency Reply: Concur. See page 26. A procedure of using receiving reports be established. Agency Reply: Do not concur. See page 26. A procedure of cancellation of invoices be established. Agency Reply: Concur. The department currently has a procedure to cancel invoices. See page 26. Current administrative methods be used for warrant transfers and purchase orders. Agency Reply: Partially concur. See page 26. -i- The Legislative Audit Cominittee of the Montana State Legislature: Wc have examined the balance sheet of the Department of Livestock and related statements of operations and changes in fund balance for the year ended June 30, 1976. Our examination was made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances . The Department of Livestock does not maintain formal accounting records for fixed assets: therefore, equipment is not included in the accompanying balance sheet. Except for the above described omission, in our opinion, the aforementioned financial statements which we examined present fairly the financial position of the Department of Livestock at June 30, 1976 and the results of its operations and changes in fund balance for the year in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. /- } / A^m/^c< ^ ^, -1- DEPARTMENT OF LIVESTOCK Auditor's Comments Introduction The primary purpose of our examination of the financial statements of the various funds of the Department of Livestock for the period ended June 30, 1976, was to enable us to form an opinion as to the financial position of the various funds of the Department and the results of operations of such funds for the period then ended. As a part of our examination, we reviewed and tested the Department's system of internal accounting control to the extent considered necessary to evaluate the system as required by generally accepted auditing standards. The purpose of the evaluation was to establish a basis for reliance thereon in determining the nature, timing, and extent of auditing procedures that were necessary for expressing an opinion on the financial statements. The objective of internal accounting control is to provide a reasonable, but not absolute, assurance as to the safeguarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a system of internal accounting control should not exceed the benefits derived and also recognizes that the evaluation of these factors necessarily requires estimates and judgements by management. There are inherent limitations that should be recognized in considering the potential effectiveness of any system of internal ■2- accounting control. In the performance of most control procedures, errors can result from misunderstanding of instr\ictions, mistakes of judgment, carelessness or other personal factors. Control procedures whose effectiveness depends upon segregation of duties can be circumvented by collusion. Similarly, control procedures can be circumvented intentionally by management with respect either to the execution and recording of transactions or with respect to the estimates and judgments required in the preparation of financial statements; further, projection of any evaluation of internal accounting control to future periods is subject to the risk that the procedures may become inadequate because of changes in conditions and that the degree of compliance with the procedures may deteriorate. Our study and evaluation of the Department of Livestock's system of internal accounting control for the year ended June 30, 1976, would not necessarily disclose all weaknesses in the system. -3- COMMENTS GENKRAL The Department of Livestock consists of two major divisions; the Animal Health Division is responsible for control and eradication of animal diseases, and the prevention of the transmission of animal diseases to humans; the Brands-Enforcement Division is responsible for the protection of the livestock industry from theft and predatory animals. The goal is to protect Montana's livestock industry from disease, theft, and predation; assure citizens safe, nutritious food of animal origin. CENTRALIZED SERVICES This program is responsible for the functions of accounting, budgeting, payroll, personnel, purchasing, and general services for the Department. The goal of the program is to provide timely, effective, and economical central support to the two divisions of the Department, ANIMAL HEALTH ADMINISTRATION This program is responsible for providing central direction to the programs within the Animal Health Division (Diagnostic Laboratory program, Disease Control program, and Milk & Egg program), maintaining a working liaison with Montana veterinarians, livestock producers, and Animal Health officers of other states and the Federal Government; and keeping informed about state and national livestock disease trends. -4- DIAGNOSTIC LABORATORY The Diagnostic Laboratory program is responsible for providing expertise to the Department in virology, bacteriology, pathology, parasitology, and media preparation. The program provides scientific and technological support to the other programs in the Department in diagnosis and control of animal disease. DISEASE CONTROL The Disease Control program is charged with the day-to-day prevention, control, and eradication of animal diseases in Montana, safeguarding the health and food production capacity of the State's livestock and poultry, and preventing the transmission of animal diseases to man. The program is responsible for slaughter of diseased livestock, payment of indemnity claims on livestock ordered killed; enforcement of sanitary standards and inspection of animals in livestock markets, garbage cooking establishments, and rendering plants; and administration of the poultry improvement program. MILK & EGG Responsibilities of this program are to maintain inspection and testing programs to assure consumers safe milk, milk products, and eggs. The inspection programs are carried out in cooperation with the U.S. Department of Agriculture and the U.S. Public Health Service. INSPECTION & CONTROL This program is responsible for reducing the loss of livestock from theft, fraud, or other unlawful practices; recommending legis- -5- lation and instituting regulations that will protect the livestock industry; and governing and regulating the recording and use of livestock brands and the filing of security interests. PREDATORY ANIMAL CONTROL This program is responsible for the control of predatory animals capable of injuring or killing domestic livestock and poultry, and has the goal of reducing losses to the livestock industry due to predators. The program cooperates with the Depart- ment of Fish £c Game, the U.S. Bureau of Sport Fisheries and Wildlife, and county authorities. RABIES AND RODENT CONTROL This program is responsible for controlling and eliminating, if possible, rabies incidents; and for controlling noxious rodent populations in Montana. The goals are to prevent the exposure of domestic animals and man from rabid predatory animals; and to co- ordinate a State program for the control of noxious rodents specific to the needs of each county where said species are destroying food, fiber or natural resources. -6- RFXEIVABLES The Department of Livestock, by the use of the Diagnostic Lab at Bozeman, generates accounts receivable for the services performed by the Lab. The amounts receivable are posted to ledger cards at the Helena office and, in turn, when payment is received the ledger card is credited for the amount. Statements for the receivables are sent out on the twentieth of every month for billing purposes. A review of the receivables provided assurances that the outstanding balances will be collected in the future. As of June 30, 1976, $6,845 remained outstanding. This amount is not recorded in S.B.A.S. records and it represents unrecorded revenues at that date. The Department should implement procedures to record the receivables in S.B.A.S. to provide adequate disclosure and to ensure that all revenues are recorded in the right fiscal year. A review of the ledgers also indicated that the receivables outstanding ranged from one to six months old. Procedures for ageing the receivables have not been established within the Department at the current time. The use of ageing the receivables would provide a better means of control over the accounts and it would also enable the Department to spot troublesome accounts from which payments are more difficult to obtain. Recommendation We recommend that : 1) The Department of Livestock implement procedures to put existing receivable amounts on S.B.A.S. 2) The Department of Livestock use the process of ageing the accounts receivable. -7- INVENTORIES The Department of Livestock is currently expensing all goods or supplies that are purchased. At June 30, 1976 approximately $6,000 worth of supplies, that had previously been expensed, were stored at Helena and $10,000 worth of supplies, also expensed, were stored at Bozeman. No annual inventory is being taken on these goods by the Department. An annual inventory of supplies stored at Helena and Bozeman would facilitate additional internal control over these supplies. Also inventory procedures would provide a means of record of supplies on hand which could be used as a basis for further purchases. In addition, an inventory would disclose any major discrepancies that would occur which could not be explained, Recommendation We recommend that the Department of Livestock establish a policy of taking an annual inventory of supplies. PLANT, PROPERTY, AND EQUIPMENT The Department of Livestock is currently maintaining equipment records that show description, purchase date, purchase amount, and identification number. A test of these records revealed that items listed could not be found and that identification numbers were worn off of some of the items. Recommendation We recommend that the Department of Livestock correct plant, property, and equipment records for all equipment that cannot be found and that identification numbers not visible on equipment be restored. •8- DISBURSEMENTS AND EXPENDITURES During our examination of cash disbursements and expenditures clerical and procedural errors were found. The department does not presently use receiving reports to verify supplies and goods that are purchased and received. In some cases vendor packing slips were being used to check accuracy and amounts. The use of re- ceiving reports would provide a means of verification of items on invoices that are to be paid. In addition, receiving reports could be used as an inventory tool for verification of goods received . Although most of the invoices accompany the warrant trans- fer to accounting for payment there are no formal procedures for cancellation of the invoice once it has been approved for pay- ment. A procedure of this nature would insure that double payments are not made on invoices. Two of the transfer warrant claims tested had purchase orders issued after the purchase had been made. Proper authorization was given but the purchase order should have been made before the pur- chase was made. Recommendation We recommend that: 1) A procedure of using receiving reports be established. 2) A procedure of cancellation of invoices be established. 3) Current administrative methods be used for warrant transfers and purchase orders. -9- FINANCIAL STATEMENTS in o oo o c p: H hJ W >H XO 2 hJ W gg^ <: w w hJ i^ zo o O Di O M H H HS C/3 UO W H ^ w o > W r^ a* M CO W (T> CO Q r o o C3^ o iH CNl oo CO in t^ r-i ON CM r-l in O O O^ ^ O n r #■ ro <1- 00 (T. 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E o o o CO QJ rd H MOSTAD K JACKSON CER -,n 0 PUBLIC ACCOUNTANTS DEPARTMENT OF LIVESTOCK ALL FUNDS Statement of Support Expenditures Compared with Appropriations For the Year Ended June 30, 1976 TOTAL UNEXPENDED AVAILABLE EXPENDITURES BALANCE GENERAL FUND Central Services - $ 11,423 $ 9,375 $ 2 048 Animal Health Administration 27,408 27,282 'l26 Diagnostic Laboratory 149,014 127*221 21 793 Milk and Egg 133,379 121^630 11*749 Rabies and Rodent 65,085 54,540 io'545 TOTAL $ 386,309 $ 340,048 $ 46,261 FEDERAL FUNDS Central Services $ 40,000 $ 16,143 $ 23,857 Milk and Egg 10,330 10,287 43 Inspection and Control 1^973 0 1 973 TOTAL CETA FUNDS $ 52,303 $ 26,430 $ 25,873 Disease Control $ 39,702 $ 34,806 $ 4,896 TOTAL $ 39,702 $ 34,806 $ 4,896 PRIVATE FUNDS Central Services $ 100,787 $ 100,657 $ 130 Animal Health Administration 31,503 31 271 232 Diagnostic Laboratory 151,870 151^505 365 Disease Control 375,207 315,966 59 241 Inspection and Control 1,052,122 996,894 55*228 Predatory Animal Control 207,393 205,042 2*351 TOTAL $1,918,882 $1,801,335 $ 117,547 TOTAL ALL SUPPORT EXPENDITURES COMPARED WITH APPROPRIATIONS $2,397,196 $2,202,619 $ 194,577 The accompanying notes are an integral part of these financial statements. rlA-D Mus'Au s JACKSON (■ ^t4*-^~d public. ACCOUNIANTS DEPARTMENT OF LIVESTOCK ALL FUNDS Statements of Expenditures by Funds & Programs For the Year Ended June 30, 1976 GENERAL FUNDS FEDERAL FUNDS CETA FUNDS PRIVATE FUNDS CENTRALIZED SERVICES PROGRAM Salaries Employee Benefits Contracted Services Supplies & Materials Communications Travel Rent Repair & Maintenance Other Expenses Equipment TOTAL ! 3,401 $ 60 441 383 16,083 1,621 1,113 43 2,303 70 9,375 $ 16,143 $ 75,436 9,639 191 3,719 8,196 50 629 575 221 2,001 $ 100,657 ANIMAL HEALTH PROGRAM Salaries Other Compensation Employee Benefits Contracted Services Supplies & Materials Communications Travel Rent Utilities Repair & Maintenance Otner Expenses TOTAL . 19 ,170 494 2 ,245 594 190 2 ,515 2 ,014 35 25 27 ,282 $ 20,699 775 2,336 788 316 2,136 3,828 61 25 307 $ 31,271 The accompanying notes are an integral part of these financial statements. (Continued) MOSTAD K JACKSON CtHT7FTED~HjBI IC AC COUNTANTS DEPARTMENT OF LIVESTOCK ALL FUNDS Statements of Expenditures by Funds & Programs For the Year Ended June 30, 1976 I GENERAL FEDERAL FUNDS FUNDS DIAGNOSTIC TJ^BORATORY PROGRAM 85,513 Salaries $ Employee Benefits 10,607 Contracted Services 7,753 Supplies & Materials 4,262 Communications 1,823 Travel 1,308 Rent 23 Utilities 1,878 Repair & Maintenance 2,597 Other Expenses 567 Goods Purchased for Re sale Equipment $. 10,890 127,221 TOTAL DISEASE CONTROL PROGRAM CETA FUNDS Salaries Other Compensation Employee Benefits Contracted Services Supplies & Materials Communications Travel Rent Repair & Maintenance Other Expenses Equipment Benefits & Claims TOTAL PRIVATE FUNDS $ 100,603 13,405 5,280 11,022 2,696 712 212 8,787 5,579 1,212 448 1,549 $ 151,505 $ 31,019 $ 182,516 256 3,787 19,365 27,890 13,499 3,496 33,706 485 743 354 4,306 $_ 29,350 $ 34,806 315,966 The accompanying notes are an integral part of these financial statements. (Continued) M'li.s.iQ . j,',.„hsoN • ^»^18:T .uh. IIH, 1 . DEPARTMENT OF LIVESTOCK ALL FUNDS Statements of Expenditures by Funds & Programs For the Year Ended June 30, 1976 GENERAL FEDERAL CETA PRIVATE FUNDS FUNDS FUNDS FUNDS MILK AND EGG PROGRAM Salaries $ 89,797 $ Other Compensation 337 Employee Benefits 11,678 Contracted Services 576 166 Supplies & Materials 2,845 1,566 Communication 273 1,078 Travel 11,352 6,640 Rent 300 Repair & Maintenance 710 418 Other Expenses 47 82 Equipment 4,052 $ 121,630 TOTAL $ 10,287 INSPECTION AND CONTROL Salaries Other Compensation Employee Benefits Contracted Services Supplies & Materials Communications Travel Rent Utilities Repair & Maintenance Other Expenses Equipment TOTAL $ 721,202 1,813 93,849 13,044 26,569 24,271 101,270 825 745 4,354 4,744 4,208 $ 996,894 The accompanying notes are an integral part of these financial statements. (Continued) MOST AD JACKSON .. I w'l I iMr^> p: IBl I ACC ONM : AN iS DEPARTMENT OF LIVESTOCK ALL FUNDS Statements of Expenditures by Funds & Programs For the Year Ended June 30, 1976 GENERAL FUNDS FEDERAL FUNDS CETA FUNDS PRIVATE FUNDS PREDATORY ANIMAL CONTROL PROGRAM Salaries Employee Benefits Contracted Services Supplies & Materials Communications Travel Rent Repair & Maintenance Other Expenses Equipment TOTAL $ 56,860 7,496 106,171 4,051 2,038 16,356 14 10,486 852 718 $ 205,042 RABIES & RODENT CONTROL PROGRAM Salaries Employee Benefits Contracted Services Supplies & Materials Communications Travel Rent Repair & Maintenance Other Expenses Equipment TOTAL $ 27,376 3,616 3,794 5,069 820 10,460 291 9 654 2,451 $ 54,540 TOTAL ALL FUNDS AND PROGRAMS $ 340,048 $ 26,430 $ 34,806 $1,801,335 The accompanying notes are an integral part of these financial statements. ^' 'SI AO JAt KSO N I. (-Ml~p4r?J~Pi 1(3; DEPARTMENT OF LIVESTOCK Notes to the Financial Statements For the Fiscal Year Ended June 30, 1976 Summary of Significant Accounting Policies The accounting policies of the Department of Livestock conform to generally accepted accounting principles as applicable to governmental units except for the account not on the Statewide Budgeting and Accounting System. Following is a summary of the significant policies. Basis of Accounting The modified accrual basis of accounting is followed for all funds. Under this method, expenditures are recorded when the lia- bility is incurred and revenues are recorded when received in cash, unless susceptible to accrual; i.e., measurable and available to finance the department's operations, or of a material amount and not received at the normal time of receipt. Inventories The supplies used by the various programs are expensed as incurred and, consequently, there is no formal inventory of supplies, General Fixed Assets and Depreciation General fixed assets are recorded as expenditures in the various funds at the time of purchase. Such assets are not capit- alized at cost in a general fixed assets group of accounts, and depreciation is not provided on general fixed assets. -21- MOST AD ■. JmCKSON CEFiilMED PUBLIC ACCOUN I AmS Vacation and Sick Pay Liabilities incurred because of unused vacation and sick pay by employees are not recorded. The expenditure is recorded when paid. Permanent employees are allowed to accumulate and carry over a maximum of two years vacation into each calendar year. Permanent employees can accumulate an unlimited amount of unused sick leave. Upon termination, permanent employees having unused accumulated vacation and sick leave are paid 100% of unused vaca- tion time and 257o of unused sick leave based upon their current pay rate. Encumbrances All funds employ encumbrance accounting under which all com- mitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation. The balances in the reserve for encumbrances account of each fund is included in the accrued support expenditure accounts of each fund. Appropriations Appropriations in the general fund and in the federal and private revenue fund are made by the legislature for operating purposes. Expenditures against these appropriations are funded by the corresponding funds at the state level. Unexpended or un- encumbered balances in these appropriations revert to the respective state funds at year end. -22- pyiOSTAD N JACKSON CEiRTIRED PUBLIC ACCOUNTANTS Account not on Statewide Budgeting and Accounting System The Department of Livestock maintains Accounts Receivable outside of S.B.A.S. for laboratory charges at the Bozeman Lab. As of June 30, 1976, the department had $6,845 in receivables not recorded in S.B.A.S. Investments The Department of Livestock maintains investments through the State Board of Investments in the following amounts: Animal Health Emergency ERA Inspection and Control ERA $ 83,061 172,115 $255,176 As of June 30, 1976 the Department of Livestock also had an additional $150,000 in investments in the following amounts: Federal Land Bank Securities Federal Land Bank Securities Federal Land Bank Securities Federal Land Bank Securities $ 60,000 at 5.3757o maturing July 20, 1976 30,000 at 5.125% maturing April 20, 1978 30,000 at 5.000% maturing January 22, 1979 30,000 at 5.000% maturing January 22, 1979 $150,000 The funds received from the maturing Federal Land Bank Securities at July 20, 1976, $60,000, have been deposited in the State Treasury. During the year an additional $97,000 in Federal Land Bank Securities were sold creating a net loss on sale of investments of $14,370. -23- MOSTAD ^ J<\CKSON CEhiK lED PUBLIC ACCOUNTANTS Stock Rstray AA The Department of Livestock maintains a reserve account (Stock Estray AA) for money that is deposited with the Department for cattle sold through livestock yards across the state. These cattle are not identified at the time of the sale for proper ownership and as such, the money for the sale is held until owner- ship is established. If legal ownership is not established within three years the money reverts to the Department of Livestock. As of June 30, 1976, $53,136 was the balance in the fund. -24- MOSTAD -. JACKSON CERIIFIGD PUBl IC ACCOUNTANTS AGENCY REPLY i.i,"'. I !i;!" -1. ' ■,-. I .. ■•■'IIKIAI Ml Al III l.ilVI'.K )i| ■ ■!. rii: ' I l.iK.'i. II VM. AJi.i.i ;.'r .!.., '■RAND, INKiRCLMrNT DIVISION l.inr . I "I .-. ■ (•-.,!■,., 1-1 ^.lr.:.., 'i ,i -, STATE OF MONTANA DEPARTMENT OF LIVESTOCK hlELENA. MONTANA 59601 .lor, . .i.iM r(i.l 1 January 21 , 1977 RDAKP I i| I IVI Ml ""K K. i..il C . li,ill:l,-Ti,. ■„ Mil, . c ily R..|„.,l L. Df ,. I>.i„|v.. J.., l: .rinor Euycne C. Dr>ntild-ion, Hcl-^iui Frod A. JoHnston, Great Falls Vernon V. Kellor. Fisht-ill Ralph J. Parlter, Fort Shaw Roberj M. Simcn^ Turner Morris L. Brusett Legislative Auditor Capitol Building Helena, Montana 59601 Dear Morris: mont..:;a llGIIjUTivf In reply to the audit report of this agency, I want to point out our policy of doing things in this Department. The first action we take when an added function, small or large is suggested or con- templated, we ask, is it necessary or just desirable, and if it is necessary, is it necessary enough to warrant the time and effort it will take? By adhering to the above policy, I am proud to say that the accounting section of this department has the same number of personnel as we had prior to reorganization in spite of the added re- quirements of SBAS, Pork Check Off fees. Laboratory fees and many others. In view of the general concern over the growth of government, both in dollars and personnel, I feel this is important. Recommendation: The Department of Livestock implement procedures to put existing receivable amounts on SBAS. will need a much clearer explanation of the necessity of this function be- put it into practice. The next to last sentence in the first paragraph Answer: fore I can ^u,^ .^ .,,^^ ^..^v,..,^^. ...^ ,,^^o y.^ .^^^ ^^,.^^,.^^ ,,, ^,.^ . ..^^ f.„, v.^, ^f.., under receivables states in part - "it represents unrecorded revenue at that date" Chapter 2-0240.40 of the SBAS Manual states in part - "revenues are recorded when received in cash.''' The last sentence in the same paragraph states in part - "to en- sure that all revenues are recorded in the right fiscal year." The answer to that seems to me to be that under the SBAS system receivables are not revenue. If it can be shown that this recommendation is a real necessity it will be implemented. Recommendation: receivable. The Department of Livestock use the process of aging the accounts Answer: Each month, as we send out the statements, each account is visually reviewed. Each account that has a balance that is over 60 days old is given a reminder either in the form of a hand written note on the statement or in more delinquent cases, a letter is written. We have had no serious problems with collections. It is my opinion that this recommendation may be desirable, but with our limited personnel it is far from necessary. -25- Morris L. Brusett January 21 , 1977 Page - 2- Recomniendation: That the Department of Livestock establish a policy of taking an annual inventory of supplies. Answer: As explained to the auditor at the time of the audit, we already do this, but not in a formal documented fashion. In the case of printed forms; each March prior to submitting a requisition to the Purchasing Division, we inventory our stock of forms, add last years count to what was received during the year and subtract the current inventory to determine the number of forms used, providing a basis of estimating the next years needs. We use the same system for laboratory supplies. Small items such as pencils, yens, file folders etc., are counted every week or two and a constant quanity is kept on hand. If the audit committee feels that a more formal inventory process is desirable and will outline a definite system, we will do our best to im- lement their system. Recommendation: That the Department of Livestock correct plant, property, and equipment records for all equipment that cannot be found and that identification numbers not visible on equipment be restored. Answer: This recommendation will be carried out when we take our next physical inventory in June, 1977. Recommendation: A procedure of using receiving reports be established. Answer: At present the receiving clerk checks merchandise received against the packing slip and sends the packing slip up to the accounting clerk for verification of the invoice. In my opinion this is more efficient than filling out another form. Recommendation: A procedure of cancellation of invoices be established. Answer: I wish the auditor could have been a little more specific. At present the original invoice is sent to accounting with the claim. A copy of the invoice is marked with the claim number and filed in the invoice file. What more can be done? Recommendation: Current administrative methods be used for warrant transfers and purchase orders. Answer: I don't know what the reference to warrant transfers can be so I cannot comment. In the case of purchase orders; there are times when we just can't wait 3 to 6 weeks for a purchase order to come out of the purchasing division. We never order anything that requires a purchase order without prior approval from the purchasing division. I will be glad to clarify or go into greater detail on any of the above if it is necessary. Sincerely, -, CECIL C. GREENFIELD Chief, Centralized Services Bureau -26-