The Department of Geology and Mineral Industries encountered challenges that contributed to serious financial reporting and cash flow issues. In 2016, new department management started to make improvements and has implemented some financial controls, but further improvement is needed.
Department is addressing lack of controls over federal grant processing
The majority of the department’s revenue is derived from Other Funds and Federal Funds, which are received through cooperative agreements and fee-for-services projects. In fiscal year 2015, the department recorded $4.7 million of federal revenues and expected about the same for fiscal year 2016.
From fiscal year 2014 through fiscal year 2015, the department experienced significant turnover in leadership and fiscal staff positions, resulting in a loss of institutional knowledge and experience and contributing to serious financial reporting and cash flow issues at the department.
Further, a lack of adequate controls contributed to the department using inappropriate grant management practices including 1) drawing down federal monies prior to incurring expenditures; 2) inaccurately reporting federal expenditures in the Schedule of Expenditures of Federal Awards; 3) untimely reporting indirect costs; and 4) inadequate supporting documentation.
In collaboration with a review team from the Department of Administrative Services, in 2016 new management began implementing a number of changes to strengthen controls over financial processes.
Management is also in the process of developing policies and procedures over financial processes. At the time of our audit, however, formal policies and procedures had not yet been adopted.
We recommend the Department of Geology and Mineral Industries continue to improve internal controls over financial processes, including the proper recording and reporting of federal program monies. Our specific recommendations can be found on Page 10 of this report.
The Department of Geology and Mineral Industries (department) concurs with the findings and recommendations of the audit report. The department will implement all recommendations as part of its ongoing efforts to improve financial and business practices. The department’s full response, including the implementation status of each recommendation, can be found at the end of this report.