YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

May 13, 2002

Report No. 2002-36

The following findings were noted as a result of an audit conducted by our office of the Office of the State Treasurer.

The State Treasurer’s Office (STO) expended over $374,000 since March 1999 for two computer software systems.  However, these systems were not implemented or utilized in a timely manner by the STO.  

The STO contracted with a computer programming vendor in March 1999 to develop software to replace the database and reporting system for the Time Deposit and Linked Deposit system, an old system which was not Year 2000 compliant.  The STO did not implement proper procedures to communicate program specifications or to monitor the development of the system to ensure the system would meet the needs of the STO.  When the vendor failed to meet the completion deadline, the contract was terminated.  Since September 2000, STO staff continued to periodically work on further development of the initial programming performed by the vendor to prepare the system for full implementation.  The STO began using the new system in parallel with its old system in August 2001, and indicated it was fully operational as of December 1, 2001.  Approximately 32 months elapsed between signing the contract and full operation of the system and the STO expended significantly more on the project than the original estimate. 

Also, the STO purchased a bank reconciliation/deposit verification software package in April 2000, to automate portions of the reconciliation process for certain state bank accounts.  While "collection" accounts have been reconciled for several months, as of January 2002, 21 months after purchase, the STO has still not fully implemented the use of this software for other accounts as originally planned. 

The STO maintains the state's main operating bank accounts and tracks related outstanding paper checks.  When paper checks have been outstanding for thirteen months, the checks are "outlawed" by the state, meaning the checks will no longer be honored by the bank.  Any claims for those disbursements after that point are paid by reissuing a new check.  The STO's procedures for outstanding checks do not include efforts to ensure long outstanding checks clear prior to their outlaw date. 

The STO tracks a total of eight different series of checks, seven of which are used for payments of program benefits to recipients, income tax refunds to businesses and individuals, and state employee payroll disbursements.  The eighth series (A-series checks) is used for payments to the state's vendors for normal costs of operating state government and program disbursements which are not covered by other check series. 

Our review focused on the A-series checks since that series, other than the series used for personal income tax refunds, represented the largest group of checks being outlawed and the types of payments for which follow-up contacts would appear to be the most successful.  During the year ended June 30, 2001, A-series checks totaling over $2.1 million were outlawed. 

During the audit period, there were no procedures in place to follow-up on long outstanding checks.  The STO receives monthly reports from the bank listing outstanding checks, as well as checks to be outlawed during the next month.  While these reports do not include payee information, that data can be obtained from the state's SAM II accounting system.  However, none of this information is distributed to the state agencies that originally issued the checks.  This information would allow the applicable agencies to identify payees that should be contacted regarding the status of the outstanding checks.  The State Auditor's office analyzed the A-series outstanding checks, totaling approximately $138,000, which were outlawed in August and September, 2001 (originally written in July and August, 2000).  Of that amount, approximately $86,000 (62 percent) was for 520 checks written to businesses and approximately $19,000 (13 percent) was for 32 checks written to other governmental entities, including a few checks to other state agencies.  Most of these payees have permanent addresses and should be easily located for follow-up. 

Complete Audit Report