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Audit: Hundreds of billions in errors in Missouri’s annual financial report

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(The Center Square) – An audit of Missouri’s comprehensive financial report for 2023 found billions of dollars in errors and a need for improved internal controls and procedures.

“Considering we have a state budget just over $50 billion and the multiple errors we identified were in excess of $718 billion, it’s clear this additional level of review is vital to ensure we have accurate financial reporting,” Republican Auditor Scott Fitzpatrick said in a statement announcing the report.

The review of the accounting division in the state’s Office of Administration found various errors in financial statements and in required supplementary information. If the information hadn’t been corrected, the state’s Annual Comprehensive Financial Report would have been materially misstated, possibly leading to a wide range of problems related to state finances.

“The audit found the contributions to retirement systems were overstated by more than $718 billion in the Notes and an amount included in the Required Supplementary Information-General Fund was understated by more than $2.9 billion,” according to the audit. “The misstatements, which resulted from data entry and transposition errors as well as a failure to update amounts when revised source data was received, were not identified” in a review of the draft of the annual report.

For the third consecutive audit, the Department of Revenue’s financial controls and procedures were inadequate in the reporting of governmental and custodial funds. It led to an incorrect report submitted to the Office of Administration for compilation in the annual report and some reports weren’t submitted on time.

“For withholding income tax and sales and use tax refund liability balances (accounts payable), the Department of Revenue reported actual individual income tax refund expenditures of approximately $1.2 billion and corporate income tax refund expenditures of approximately $215.1 million, when they should have reported withholding income tax and sales and use tax refund liability balances of approximately $129.3 million and $194.6 million, respectively,” according to the audit.

The Department of Revenue didn’t use accepted standards to determine net sales and use tax accounts receivable balances. If the audit hadn’t caught the error, the overstated balances would have been $265 million for Government Wide-Government Activities, $191.7 million for the General Fund, $73.3 million for the Public Education Fund, $313.8 million for the Sales and Use Tax Non-State Fund, a custodial account.

“Multiple data entry and calculation errors were identified in the custodial fund balances and financial activities for the Motor Fuel Tax and Bonds Non-State Fund, the Sales and Use Tax Non-State Fund, the Motor Vehicle Clearing Non-State Fund, and the Family Support Trust Non-State Fund,” according to the audit.

The errors would have been an understatement of funds by approximately $2.9 billion.

“The errors discovered by our audit of the Annual Comprehensive Financial Report highlight the importance of the work we do to make sure adequate controls and procedures are in place throughout state government,” Fitzpatrick said.

The audit also found problems with financial controls and procedures in the Department of Social Services and the Office of Secretary of State.

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