Financial-compliance audit, Board of Investments, Department of Commerce for the fiscal year ended June 30 ..

90 Pages·1993·1.9 MB·English

by  Montana. Legislature. Office of the Legislative Auditor

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354.88
L72BI
1993
Office of the Legislative Auditor
State of Montana
Report to the Legislature
Financial-Compliance Audit
January 1994
For the Two Fiscal Years Ended June 30, 1993
STATE DOCUMENTS COLLECTION
FtB .io-*
Board of Investments MONTANA STATE LIBRARV
1>^1^MEO.N6TtAhNAAVE.5.9620
HELENA.
Department of Commerce
This report contains three recommendations to enhance compli-
ance with state laws and to improve internal control and account-
ing procedures. These recommendations address:
Accounting for financial activity in accordance with state law
and accounting policy.
> Social security contribution account investments.
Direct comments/inquiries to:
Office of the Legislative Auditor
Room
135, State Capitol
PO Box 201705
MT
93-3 Helena 59620-1705
MONTANASTATELIBRARY
3 0864 1002 4304
FINANCIAL-COMPLIANCE AUDITS
Financial-compliance audits are conducted by the Office of the Legislative Auditor to deter-
mine ifan agency's financial operationsare properly conducted, the financial reports are pre-
sented fairly, and the agency has complied with applicable laws and regulations which could
have a significant financial impact. In performing the audit work, the audit staff uses stand-
ards set forth by the American Institute ofCertified Public Accountants and the United States
General Accounting Office. Financial-compliance auditstaff members hold degrees with an
emphasis in accounting. Most staff members hold Certified Public Accountant (CPA) cer-
tificates.
The Single Audit Act of 1984 and 0MB Circular A-128 require the auditor to issue certain
financial, internal control, and compliance reports regarding the state's federal financial
assistance programs, including all findings of noncompliance and questioned costs. This
individual agency audit report is not intended to comply with the Single Audit Act of 1984
or OMB Circular A-128 and is therefore not intended for distribution to federal grantor
agencies. The Office of the Legislative Auditor issues a statewide biennial Single Audit
Report which complies with the reporting requirements listed above. TheSingle Audit Report
for the two fiscal years ended June 30, 1991 has been issued. Copies of the Single Audit
Report can be obtained by contacting:
Office of the Legislative Auditor
Room 135 State Capitol
PO Box 201705
MT
Helena 59620-1705
MEMBERS OF THE LEGISLATIVE AUDIT COMMITTEE
Senator Greg Jergeson, Chairman Representative JohnCobb, Vice Chairman
Senator Gerry Devlin Representative Ernest Bergsagel
Senator Eve Franklin Representative Linda Nelson
Senator Tom Keating Representative Robert Pavlovich
Office of the Legislative Auditor
Financial-Compliance Audit
For the Two Fiscal Years Ended June 30, 1993
Board of Investments
Department of Commerce
Members of the audit staff involved in this audit were: Jody Brandt,
Pete Brustkern, John Fine, Cindy S. Jorgenson, and DJ Kimball.
Digitized by the Internet Archive
in 2010 with funding from
IVIontana State Library
http://www.archive.org/details/financialcomplia1993mont
STATE OF MONTANA
STATE CAPITOL
HELENA, MONTANA 59620
406/444-3122 DEPUTY LEGISLATIVEAUDITORS:
MARYBRYSON
Operationsand EDPAudit
JAMESGILLETT
LEGISLATIVEAUDITOR:
SCOTTA.SEACAT Financial-ComplianceAudit
LEGALCOUNSEL; JIM PELLEGRINI
JOHN W. NORTHEY PerformanceAudit
January 1994
The Legislative Audit Committee
of the Montana State Legislature:
This is our financial-compliance audit report on the Board of Investments
(board) of the Department of Commerce for the fiscal year ending June 30, 1993.
Included in this report are three recommendations addressing accounting for
financial activity in accordance with state law and accounting policy and Social
Security Contribution Account investments. The board's written response to the
audit recommendations is included at the end of the audit report.
We thank the Executive Director and his staff for their assistance and
cooperation.
Respectfully submitt
i. Seacat
Legislative Auditor

Table of Contents
List of Tables iv
Appointed and Administrative Officials v
Summary of Recommendations vii
Introdaction Introduction 1
Background
1
Investment Management Programs 2
Economic Development Programs 3
Mortgage Loan Program 3
Coal Tax Loan Program 3
Economic Development Bond Program 4
Municipal Finance Consolidation Act Program 4
Additional Bond Programs 6
Prior Audit Prior Audit Recommendations 7
Recommendations
Findings and Enterprise Fund Accounting Issues 8
Recommendations Arbitrage 8
Miscellaneous Accounting Errors 10
State Compliance 12
Social Security Contribution Account 12
Independent Auditor's Summary of Independent Auditor's Reports A-2
&
Reports Agency
Financial Statements All Other Funds
:
Independent Auditor's Report A-5
Statement of Investments Managed
as of June 30, 1993 and 1992 A-7
Statement of Investment Income for the
Fiscal Years Ended June 30, 1993 and 1992 A-7
Statement of Changes in Investments
Managed for the Fiscal Years Ended
June 30, 1993 and 1992 A-8
Notes to the Financial Statements A-8
Page
i
8
Table of Contents
Short-Term Investment Pool
:
Independent Auditor's Report A-15
Statement of Net Asset Value as of
June 30, 1993 and 1992 A-17
Statement of Changes in Net Asset Value
for the Fiscal Years Ended June 30, 1993
and 1992 A-17
Statement of Investment Income and
Distribution for the Fiscal Years Ended
June 30, 1993 and 1992 A-17
Notes to the Financial Statements A-1
Montana Common Stock Pool
:
Independent Auditor's Report A-25
Statement of Net Asset Value as of
June 30, 1993 and 1992 A-27
Statement of Changes in Net Asset
Value for the Fiscal Years Ended
June 30, 1993 and 1992 A-27
Statement of Investment Income and
Distributions for the Fiscal Years
Ended June 30, 1993 and 1992 A-27
Notes to Financial Statements A-28
Montana Convertible Securities Pool
:
Independent Auditor's Report A-37
Statement of Net Asset Value as of
June 30, 1993 A-39
Statement of Changes in Net Asset
Value for the Fiscal Year Ended
June 30, 1993 A-39
Statement of Investment Income and
Distribution for the Fiscal Year
Ended June 30, 1993 A-39
Page
ii
Table of Contents
Notes to Financial Statements A-40
Enterprise Fund
:
Independent Auditor's Report A-45
Balance Sheet as of June 30, 1993 A-46
Statement of Revenues, Expenses, and
Changes in Retained Earnings for the
Fiscal Year Ended June 30, 1993 A-47
Statement of Cash Flows for the Fiscal
Year Ended June 30, 1993 Increase
(Decrease) in Cash and Cash Equivalents A-48
Notes to Financial Statements A-49
Agency Response Board of Investments B-3
Page
iii
List of Tables
Table 1 Outstanding Arbitrage Liability 9
Page iv