Summary

This audit focused primarily on printing charges, tangible personal property, travel expenditures, contractual services, an overall review of the Bureau of Auditing within the Division of Pari-Mutuel Wagering, and the regulation of professions and occupations for the period January 1, 1996, through January 31, 1997, and selected Department actions taken through June 27, 1997. Matters coming to our attention relating to noncompliance with various guidelines and those relating to significant deficiencies in the design or operation of the system of internal control for those operations audited are as follows:

Alcoholic Beverages and Tobacco Licensing System Controls

The Department utilizes the Breakthrough to Exceptional Services and Technology (BEST) System to perform its responsibilities of licensing and regulating various professions and businesses. The BEST System is a fully integrated and comprehensive system which records, processes, and maintains business and professional licensing data, as well as application, examination, and revenue and receipting information.

Access Controls. Information Resource Commission Rule 44-4.040, Florida Administrative Code, provides that information handled by processing systems must be adequately protected against unauthorized acquisition of, use, modification, disclosure, or destruction. Contrary to the provisions of Information Resource Commission Rule 44-4.040, Florida Administrative Code, the Department did not timely delete the access privileges of former Division of Alcoholic Beverages and Tobacco employees from the mainframe security software (RACF) or the BEST System. Absent the timely deletion of user identification numbers and access capabilities once employees separate from positions, the Department has little assurance that unauthorized access to sensitive information will be detected in a timely manner. (See paragraphs 25 through 29.)

Application Controls. The BEST System did not contain certain application control procedures necessary to ensure that licenses were issued only to qualified individuals/businesses who had paid the proper fees. Programmed control procedures embedded in the computer program and formal written procedures approved by management are important measures to help prevent or detect unauthorized changes to data files, protect critical information from improper disclosure, and ensure the correct assessment of fees and reasonableness of data. (See paragraphs 30 through 32.)

Pari-Mutuel Audits

Section 550.0251, Florida Statutes (1996 Supplement), assigns the powers and duties of regulating the pari-mutuel industry to the Department's Division of Pari-Mutuel Wagering. Some of the Division's regulatory functions are performed by the Division's Bureau of Auditing, charged with financial oversight of the pari-mutuel industry. The Bureau of Auditing performs part of its functions by conducting audits to examine various aspects of the pari-mutuel activity to ensure that pari-mutuel calculations are accurate and distributed correctly, that admissions are recorded accurately, and that the proper amount of tax is paid to the State. The Department did not always ensure that complete audits of the various permit holders were performed. In addition, compliance audits were not always timely conducted. Such audits would provide additional assurance that pari-mutuel activities are conducted fairly and that all moneys due to the State are timely remitted and correct as to amount. (See paragraphs 33 through 39.)

Consumer Complaints

The Department protects the public through the licensure and regulation of nonmedical professions and certain major industries within the State. One function involved in the regulatory process is the receipt and resolution of complaints made by the public, other licensees, or through Department actions against the licensees regulated by the Department. According to Division records, 8,510 complaints were received during the audit period. Although the Department assessed fines for the violation of practice acts, it did not always collect or pursue the collection of imposed fines. In addition, the Department sometimes did not assess the subject costs related to the investigation and prosecution of cases resulting from complaints. (See paragraphs 40 through 45.)

Tangible Personal Property

Chapter 273, Florida Statutes, provides for the recording and identification of tangible personal property acquired by State agencies. Chapter 10.300, Rules of the Auditor General for State-Owned Tangible Personal Property (Rules of the Auditor General), provides the minimum standards necessary to adequately control and account for tangible personal property. The Department reported $24,629,678 of tangible personal property at June 30, 1996. The Department utilizes the Property Subsystem of the State Automated Management Accounting Subsystem (SAMAS) to maintain detailed records for each property item under the supervision of the custodian delegates and to maintain the general ledger accounts necessary to control property activity.

Property Records. Contrary to Chapter 10.300, Rules of the Auditor General, purchased property items were not always recorded in the SAMAS property records and, when recorded, often were not timely recorded. Also, the property records did not adequately reflect all required information, such as serial numbers and current locations. The failure to promptly and accurately record the acquisition, location, and transfer of property in the property records adversely affects the Department's ability to account for and control property and increases the risk that missing or stolen property would not be detected in a timely manner. (See paragraphs 49 through 52.)

Disposal of Property. Department control procedures for authorizing the disposal of tangible personal property were not operating effectively. For some test items, the Department was unable to provide documentation that proper authorization was obtained before the disposal of tangible personal property. Also, some property items were cannibalized prior to being classified as surplus and individual disposed property items were not always timely deleted from the active property records. Authorization procedures for disposal of State-owned property should be in effect to provide management with reasonable assurance that tangible property is disposed of when appropriate and that the method of disposition conforms to governing laws and rules. Also, absent the timely recording of property deletions in the property records, management has limited assurance of the accuracy of the property records at any given time. (See paragraphs 53 through 57.)

Insurance. The Department did not always ensure that periodic and timely reviews of the insurable values of Department assets were performed and that corresponding adjustments were made to update the values reported for insurance coverage. The amount of insurance coverage needed for building contents based on Department records was approximately $16,836,140 or $2,253,118 more than the Department's actual insurance coverage at January 31, 1997. Insurance coverage in amounts less than recommended by State guidelines decreases the Department's ability to adequately safeguard its property and can lessen the Department's capability to recover, should a loss occur. (See paragraphs 58 through 61.)

Revolving Fund

As similarly noted in audit report No. 12643, paragraphs 58 through 62, Department procedures for the operation of its Revolving Fund lacked some essential control features necessary to properly account for and monitor the funds maintained outside the State Treasury. Our current review of Revolving Fund reconciliations disclosed that delays in revouchering reimbursement requests continued to exist when the State Comptroller rejected the original requests. In addition, the Department did not always timely adjust the SAMAS accounting records in the event that checks issued from the Revolving Fund were voided. The untimely processing of reimbursements to the Revolving Fund and the untimely voiding of checks in the SAMAS are contrary to the restrictions established by the Florida Department of Banking and Finance and decrease the amounts available for current funding of expenses. (See paragraphs 62 through 66.)

Procurement from Certified Minority Business Enterprises

The Department did not substantially meet its 1995-96 fiscal year minority business enterprise procurement goal established for contractual services. (See paragraphs 67 through 69.)

The Secretary's written response to the audit findings and recommendations included in audit report No. 13050 is presented as Exhibit B.