DMR hasn't been audited by the state in over 10 years

mmnewsom@sunherald.comMarch 9, 2013 

Pickering

BILOXI -- The last state audit of the Mississippi Department of Marine Resources came in 2002, the year Bill Walker became the executive director at the agency. Now DMR is the focus of ongoing state and federal investigations.

Before the ongoing investigation began, DMR's books had been audited four times -- 1995, 1996, 1999 and 2002 -- after the agency's creation in 1994. Though the public may have the perception state agencies are required to be audited each year, as all county and city governments, that isn't true. DMR and other "smaller" state agencies don't get reviewed every year, while the larger ones like the state departments of transportation, education and others do.

The four audits weren't all comprehensive. One only looked at federal spending and finances, another involved federal money and two looked at how money was being spent to see if it was in compliance with state protocols and that assets are properly accounted for, among other issues.

State auditors past and present told the Sun Herald the reason smaller agencies aren't audited as much is because there simply isn't enough manpower. Rather, the only option is to get to them on a rotation basis and focus on the larger state government agencies. Gov. Phil Bryant, who was auditor from 1996 until 2008, said he believes the agency needs 25 to 30 more auditors.

"Every year, I would go to the Legislature and say that we need more auditors," Bryant said. "In fact, when I was running for governor someone said 'Phil Bryant asked for more spending as state auditor.' You bet I did because this is what you get when you don't have enough auditors to go around. You end up in a rotation basis and you end up not being able to do the job you wish you could."

Pickering sounds off

In the years following Hurricane Katrina in 2005 and the BP oil spill of 2010, the DMR was suddenly spending many times its state budget in federal money, grants and BP funds.

State Auditor Stacey Pickering, who took office in 2008, said his office has about 20 investigators, who are working more than 130 cases, and the audit and financial compliance office has less than 60 employees to cover the state. When asked whether he thought there could have been scrutiny on DMR over the last decade, given the issues that have been raised during the investigation, Pickering said he didn't think so.

"No," Pickering said. "When you take a look at the auditor's office, we can only do what we are budgeted by the Legislature, as far as scope and practice goes, because we have to do a certain number of larger programs to get a certain percentage of the state budget.

"If I don't do a majority of the state budget, over 50 percent, then as auditor we can't sign the certified annual financial returns for the state," Pickering said. "We're kind of restricted in areas there. The smaller agencies do get rotated through as far as us (or CPA firms) auditing those agencies."

Presently, county governments and cities, even those with a population of only a few hundred, are required to pay for audits to turn over to the state each year. Pickering said that may be something that should be required of all state government agencies that aren't normally part of the eight or nine larger government agencies that are audited every year.

"There's nothing to preclude them from going and getting an annual audit done every year and they should be doing that," Pickering said. "That may be something we need to address legislatively."

Pickering also noted federal funds are required to get federal audits.

"Those federal programs require those dollars to be audited in and of themselves," Pickering said. "So, you've got inspector generals who of course, as it has been reported, have been part of this investigation and others who have been looking over DMR's shoulders, so it's not the fact that they have not been looked at. When we know that there are inspector generals looking over their shoulders and auditing a large portion of their budget then we will defer and let them do that work so we can go and focus on other state agencies."

"You're really trying to do the most with what limited resources we and the federal government have."

Issues raised years ago

Questions about how the agency handled its financial transactions, the way it monitored grants, and also controls over managing assets were cited in the four audits performed between 1995 and 2002. Pickering's office turned over portions of those documents to the Sun Herald this week.

The audit performed in 2002 recommended DMR strengthen controls over assets management and also over bank accounts. It also requested controls over cash management be put into place and there should be steps taken to ensure purchases comply with official directives.

Auditors had found there weren't enough controls over cash management of Sport Fish Restoration grants. Preparers of some bank accounts had also reconciled funds without documenting them and there was no evidence of supervisors reviewing those transactions. The audit also found the agency paid $1,669 for a luncheon for employees who were receiving training. The safety training only began 15 minutes before the meal time hour.

A response from Walker, who was new on the job then, said the agency agreed with the findings of the 2002 audit and would take the recommended steps to correct the issues.

That was the last time the agency was audited by the state, until the recent investigation began.

Auditor's office 'backs off'

At a recent meeting of the DMR's governing board, DMR Director of Administrative Services Tom Doster commented on the reviews the agency's funds go through.

"Over time, the state auditor's office has backed off a little bit on actually coming in to audit an agency on the financial end because there are so many checks and balances on the front end, from their perspective," Doster said.

Doster said federal grant programs are audited individually on a periodic basis. DMR conducts an in-house property audit every year. Doster also said many items sent out for bid go through the Department of Finance and Administration, which approves purchase orders.

DMR handles millions

DMR has grown to be a powerful state agency since it was formed in 1994. Today, it has more than 140 employees, other contract workers and an annual state funding appropriation of about $19 million, plus typically more than that in federal money and grants to go with the state money. The agency has also handled distribution of millions of dollars received from BP LLC since the 2010 oil spill, and much more money from the oil company is likely on the way through the RESTORE Act.

Issues aplenty

Spending during Walker's tenure has been scrutinized during ongoing state and federal investigations. Walker was fired in January, but has denied wrongdoing.

The Sun Herald has reported the Investigative Audit Division of the State Auditor's Office and the FBI are investigating the DMR's spending. The U.S. Inspector General for the U.S. Interior Department is also investigating.

The Sun Herald has reported on preliminary federal audit reports that raise questions about a lack of bids for some DMR work; appraisals the agency used for land purchases; the head of the DMR's Coastal Impact Assistance Program using money she oversaw to buy her parents' property in Pascagoula for the DMR; and the DMR's use of money to buy property in Gulf Hills subdivision owned by Walker's son, among other issues.

The activities of an organization Walker directs called the Mississippi Marine Resources Foundation have also been reported in the newspaper. The foundation owns two recreational fishing boats, a 36-foot Topaz sport fisherman and a 42-foot Californian convertible. The DMR spent more than $1.46 million out of a Rigs to Reefs program fund on upgrades, maintenance and insurance for the two fishing boats.

The fishing trips the DMR has taken lawmakers and other influential folks on have been questioned. The DMR defends the use of the boats, which it leases from the foundation, saying they are used to educate people through fishing trips to artificial reefs the agency maintains.

Doster recently told the DMR's governing board the foundation wasn't audited by the state.

"That was a completely separate entity," Doster said. "We didn't have control of that foundation in the business office at all. That was a completely separate nonprofit organization."

Millions unaccounted for

DMR Interim Director Danny Guice, whom Walker had hired as deputy director late last year, said recently he couldn't determine how some $4 million in tidelands money, which is state funds, was spent.

A few days after he made the comments to the Sun Herald, Guice said about $2.3 million of the $4 million had been accounted for, but he's yet to explain where the money went. He told the Sun Herald the funds couldn't be discussed further because they may be part of the ongoing investigation.

Pickering said his employees are in the process of a major investigation and audit of DMR now.

"I can promise you before this investigation is over with, we will know where every dollar and penny has been spent," Pickering said.

Bryant comments

Bryant said he was surprised it's been over a decade since the last state review of DMR, but he also recalls having manpower issues when he was auditor.

"The auditor's office has always been woefully understaffed," Bryant said. " ... We've always struggled with how we do not have enough people to do all of the audits we have."

Bryant said he believes Pickering is a good auditor.

"I'd hate to say anything when I was not auditor," Bryant said. "I'm going to be real careful because I think Stacey is doing a good job and I don't want to be critical of him or his agency because they are doing the very best they can with the resources they have. All I can say is I know when we were there, I did my very best to try to put them on a rotation basis. I believe we got to most of the agencies."

Bryant said when he became auditor there was a list of agencies that hadn't been checked in a few years and he placed them on a rotation. His staff was responsible for three of the four audits done on DMR in its history, but the last came six years before Bryant left office.

"We tried our very best to expand (the audits)," Bryant said. "We've got some smaller agencies, maybe the Mississippi Arts Commission and those types of things, but one the size of DMR, certainly we've tried our very best to get an audit of that one done."

The governor said Pickering's idea of having state agencies pay for their own audits to be filed with the state isn't a bad one.

"That would be a good idea, particularly if you could have them pay for it," Bryant said. "An agency the size of DMR bringing in that type of revenue could easily pay for a financial compliance audit by hiring a CPA firm."

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