Posts Tagged ‘audit’

Two Nevada Charitable Groups Out Of Compliance Over Use Of Special License Plate Funds

By Sean Whaley | 3:12 pm October 17th, 2012

CARSON CITY – An annual review of funds distributed to charitable groups from the sales of special license plates has found that the University Medical Center Foundation in Las Vegas failed to provide required documentation on the use of the money, and some information that was provided was inaccurate.

A UMC spokesman said today the deficiencies are being corrected.

The review by the state Legislative Auditor has been submitted to the five lawmakers serving on the Commission on Special License Plates.

University Medical Center Foundation special license plate design.

In a letter to the lawmakers dated Sept. 28, Legislative Auditor Paul Townsend said UMC was notified of the reporting requirements on July 26, and the facility was contacted three times by phone in September.

“UMC did not respond timely and subsequently submitted forms and records on Sept. 17, 2012,” Townsend said in the letter. “Our review found the amount reported in license plate revenues for fiscal year 2012 was inaccurate. UMC reported revenues of $2,574, but state records show $7,943 was sent to UMC. Also the balance sheet provided by UMC did not balance.”

Townsend said in an email today that UMC is working on correcting the deficiencies identified in the review.

UMC is to use the money it receives from the new plate to support the development of multi-organ transplantation. It has received $7,943 in special license plate revenues but has not spent any of the funds yet.

Brendan Bussmann, director of community relations at UMC, said the failure to submit the proper documentation was a misunderstanding that is now being rectified. It was the first filing required for the new plate, he said.

“And we’re working with them to correct that and get an accurate and amended report to them promptly,” he said.

UMC has the only transplant program in the state, Bussmann said. The kidney transplant program currently is beating national averages in outcomes, he said.

“And with the proceeds from this plate, we’ll be able to help facilitate some current and future needs for that program and being able to provide support to the community at large that requires transplants,” Bussmann said.

He encouraged Nevadans to apply for the special plate.

“I think it is a very cool design and it goes to a great cause,” Bussmann said.

The charitable group Horse Power, which was the subject of a review by lawmakers earlier this year, also failed to provide complete information for the September report, including failing to provide bank reconciliations for three consecutive years.

Horse Power is required to use the funds, which totaled just over $108,000 in Fiscal Year 2012, for the benefit of wild horses. The group has received $471,354 from 4,851 special license plates since 1998.

Concerns identified in a May 2012 hearing regarding proper documentation from Horse Power were not entirely resolved with the receipt of further information from the group, Townsend said in the letter.

The group is not receiving new funding from the special plate until the concerns are resolved.

One example is the failure of Horse Power’s Board of Trustees to review the compensation paid to Executive Director Sally Summers, listed at $35,580 for calendar year 2011, and make any needed changes. No documents were provided in response to this request.

Townsend said auditors did not identify any evidence of improper practices by the organizations that submitted complete information. The review did not include actual audits of the charitable organizations, however.

State law requires certain organizations receiving revenue from the special license plates to provide the financial information so legislative auditors can determine if there are procedures in place to ensure fees are expended for proper purposes. Governmental entities included in the state’s executive budget are exempted from the reporting requirements.

Nevada’s special license plate program has generated significant revenues over the years.

The 34 types of special plates listed in the audit, from support of the Atomic Testing Museum to Nevada Ducks Unlimited and Friends of Red Rock Canyon, are now on 206,932 vehicles and generated nearly $4.4 million in 2012. Since 1998, the plates, which have been produced at different times, have generated just over $37 million.

The 12 state agencies receiving funds that are exempted from the reporting requirements include the Department of Wildlife and volunteer fire fighters, which report the information in the executive budget.

The Las Vegas Commemorative plate has generated the most revenue, totaling $13.5 million since the city’s 2005 centennial. The funds are used to commemorate Las Vegas history, including the restoration of historic buildings.

The license plate to support environmental work at Lake Tahoe has generated $5.5 million since 1998.

The variety of special license plates to support Nevada’s veterans home have generated nearly $3.6 million since they were first offered, including $514,803 in 2012.

 Nevada Special License Plates

License Plate # Of Active Plates FY2012 Revenues Total Revenues
Animal Appreciation  2,321 $50,686 $316,908
Atomic Testing     977 $21,683 $125,639
Boulder City Chamber  1,908 $41,249 $281,353
Desert Preserve     945 $20,605 $259,634
Nevada Ducks Unlimited     289 $6,020 $59,933
Federal Lands Around Las Vegas     440 $9,547 $62,095
Friends of Red Rock  1,835 $40,817 $130,902
Future Farmers of America  1,402 $30,097 $315,697
Horse Power  4,851 $108,563 $471,354
Hot August Nights  1,698 $38,394 $290,605
Immigrant Workers Citizenship Project  2,789 $62,647 $544,734
Las Vegas Commemorative 78,646 $1,743,883 $13,476,255
Mt. Charleston  2,711 $58,113 $486,598
Nevada Carpenters Union     124 $2,667 $24,657
Nevada Library Association     287 $5,962 $60,567
Nevada Wildlife Record Book  3,962 $85,637 $579,684
Professional Firefighters  2,874 $60,358 $694,026
Pyramid Lake Paiute Tribe  3,086 $66,515 $723,239
Reno Air Races  1,595 $34,902 $220,672
Search and Rescue     170 $3,667 $19,098
Support of Rodeos  6,544 $142,013 $1,401,869
University Medical Center Foundation     291 $7,943 $7,943
Exempt Organizations
Aviation    359 $7,495 $82,572
Department of Wildlife  1,062 $28,402 $28,402
Donation of Human Organs  1,056 $22,329 $195,560
Education of Children in the Arts  5,186 $57,521 $696,445
Lake Tahoe Basin 17,181 $370,129 $5,552,118
Missing or Exploited Children  3,828 $42,833 $499,956
Nevada Tourism     346 $7,254 $76,179
United We Stand 17,107 $369,152 $2,961,039
UNLV  4,137 $92,991 $999,008
UNR  7,515 $165,596 $1,493,374
Veterans 27,492 $514,803 $3,569,196
Volunteer Firefighters     552 $11,736 $111,378
Totals 206,932 $4,361,454 $37,098,502

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Audio clips:

UMC spokesman Brendan Bussmann says the correct information will soon be provided to the Legislative Auditor:

101712Bussmann1 :18 to them promptly.”

Bussmann says the funds will enable UMC to provide additional support to those Nevadans needing transplants:

101712Bussmann2 :14 that requires transplants.”

 

Legislative Audit Finds Welfare Benefits Paid To Deceased Clients, Some Funds Spent After Death

By Sean Whaley | 1:16 pm September 19th, 2012

CARSON CITY – A legislative audit released today says that the state Welfare Division needs to do a better job of identifying when clients receiving benefits have passed away.

The audit, reviewed today by the Legislative Commission’s Audit Subcommittee, found 189 instances of people listed by a separate state agency as having passed away between July 1, 2007 and Dec. 31, 2009 that were listed by the division as still living.

Legislative auditors tested Electronic Benefits Transfer (EBT) cards used to provide benefits in 50 of the cases. They found that the division paid more than $11,500 in benefits to 27 of the 50 clients after their dates of death.

Benefits were paid by the agency up to 10 months after the clients died. The state’s vendor for the EBT program later removed $7,225 of unused benefits from the accounts.

Benefits provided to Nevadans include food stamps, now called the Supplemental Nutrition Assistance Program (SNAP), and a cash grant program called Temporary Assistance for Needy Families (TANF).

Auditors also found that EBT cards in some cases were used after the dates of death of the clients.

Of the 50 cases tested, 13 were found where SNAP transactions using the cards had occurred after the clients’ dates of death. The transactions totaled $6,502 and took place from 13 to 247 days after the clients’ dates of death.

The audit made five recommendations to correct the issues found in the review, and all were accepted by the Division of Welfare and Supportive Services.

Lawmakers serving on the subcommittee noted that the amounts involved in such cases were small compared to the nearly $500 million in SNAP benefits provided to Nevadans in federal fiscal year 2011. The SNAP program is entirely federally funded.

Assemblywoman Maggie Carlton, D-Las Vegas, said no one should take money that is not due to them, but the incidents of potential abuse found in the audit appear to be few.

“If we’re talking $497 million in SNAP monies in the year 2011, and we’re looking at the possibility of it might be $6,000 worth of problems, it just seems like such a small amount and such a small problem compared to all the benefits that are being paid out here,” she said.

Legislative Auditor Paul Townsend said auditors also identified potential fraudulent activity during the review.

“It does point out there is a problem there,” he said. “It’s not a huge problem but the problem does exist. And along the way we also found some instances where there’s possibly some fraudulent activity taking place where someone is actually getting a card issued after their date of death.”

Steve Fisher, acting administrator of the division, said the flaws found in the review are serious and need to be addressed. He noted, however, that the benefits are available to an entire household, so even if a client passes away, other family members might use the EBT cards to access the benefits.

The agency is actively working on implementing all five of the recommendations, Fisher said.

The agency has an investigative unit to look for instances of fraud to recover benefits paid inappropriately, and criminal prosecutions can occur as well.

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Audio clips:

Assemblywoman Maggie Carlton says the incidents of potential abuse are few compared to the amount of benefits provided:

091912Carlton :26 paid out here.”

Legislative Auditor Paul Townsend says some evidence of fraudulent activity was uncovered during the review:

091912Townsend :16 date of death.”

 

Nevada House Reps. Vote To Audit Federal Reserve, Measure Also Supported By Sen. Heller

By Sean Whaley | 12:45 pm July 25th, 2012

CARSON CITYRep. Mark Amodei, R-Nev., today voted in favor of H.R. 459, the Federal Reserve Transparency Act.

The legislation, which Amodei is cosponsoring, would direct the comptroller general to complete an audit of the board of governors of the Federal Reserve system and of the Federal Reserve banks, followed by a detailed report to Congress. The bill passed the House 327 to 98.

Reps. Shelley Berkley, D-Nev., and Joe Heck, R-Nev., also supported the legislation.

Rep. Mark Amodei, R-Nev.

“The Fed’s monetary policy has far-reaching consequences for the American people, affecting everything from employment to consumer prices to interest rates,” Amodei said in a statement after the vote. “Some oversight and accountability are more than warranted. It makes you wonder, who would oppose such transparency? This is an issue where my colleague from Texas, Rep. Ron Paul, has been right and I’m proud to support his effort.”

U.S. Sen. Dean Heller, R-Nev., a supporter of the audit legislation, issued a statement after the House vote: “The Federal Reserve is a major influence over our country’s economy, and the ability to audit this institution would bring much-needed accountability.

“It is essential that Congress exercise its constitutional responsibility to conduct oversight and scrutinize monetary policy in an open and transparent way,” he said. “I am a strong supporter of this bill, and I hope the Senate will take action on this legislation.”

Heller was a cosponsor of H.R. 459 when he was in the House and is currently a cosponsor of the Senate companion bill (S. 202).

Audit Urges State Tax Department To Use Risk Assessment To Pick Businesses For Compliance

By Sean Whaley | 3:21 pm May 1st, 2012

CARSON CITY – Nevada’s Tax Department could enhance its audit efforts by adhering to its own risk assessment formula for determining which businesses to review for compliance, an audit released today said.

The audit of the agency by the state Division of Internal Audits found that it does not follow its risk assessment results when determining which businesses to analyze for potential tax collections.

“Review of the sales tax audits performed in calendar year 2010 revealed the department only selected a few of the businesses it deemed to be the highest risk,” the report said.

The audit found that Tax Department staff rely instead on a supervisor’s judgment of which businesses to review. The agency also performs smaller audits to ensure a high number of reviews.

“Using the audit supervisor’s judgment and pursuing smaller audits negates the use of risk assessment when selecting audits,” the review said.

The audit also recommended that the agency consider reallocating its audit staff after updating its risk assessment process.

The audit of the agency was reviewed today by the Executive Branch Audit Committee.

William Chisel, executive director of the Department of Taxation, accepted all of the audit recommendations. Chisel took over the agency in September after serving as chief of internal audits.

Tax Department chief William Chisel. / Nevada News Bureau file photo.

“We’re moving forward on the risk assessment, which has already been implemented,” he said. “As far as resources to implement the collections process, that’s going to be done through internal resources, in other words we’re going to amend our current computer system to address the changes that we need to redesign our collection process.

“Hopefully this will help us maximize our resources, and I think that is what we’re going to get out of this,” Chisel said.

Internal auditors said that a survey of six other states showed they all use risk assessments to select sales tax audits. A 2004 audit of the agency found that Michigan increased its violation findings by 10 percent after converting to a method of selecting taxpayer audits based on risk.

“The department should emphasize the amount of taxable sales as the primary risk component when selecting audits,” the review said. “As taxable sales increase, so does the number of errors in dollars reported. However, our review of Nevada’s audits based on taxable sales shows it has not emphasized higher taxable sales when selecting audits.”

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Audio clip:

Tax Department Director William Chisel says the audit recommendations are being implemented:

050112Chisel :22 our collection process.”

 

 

 

State Employee Contracting Controversy Addressed With Administrative Changes

By Sean Whaley | 3:37 pm October 13th, 2011

CARSON CITY – Ten months after a legislative audit first raised serious questions about current and former state employees working as contractors for state agencies, the Board of Examiners earlier this week approved administrative changes to prevent future abuses.

The changes approved Tuesday bring closure to the issue of “double dipping”, but not before it spawned legislation and a serious examination of the state employee contracting process.

The audit, released in December 2010, identified numerous potential concerns, including a case of one worker seeking payment for 25 hours of work in one 24-hour day and another where a current state employee earned $62,590 as a contractor in fiscal years 2008 and 2009 while earning a state salary as well.

The audit identified 250 current and former employees providing services to the state. These employees were paid a total of $11.6 million during fiscal years 2008 and 2009, the years covered by the review.

The Board of Examiners is composed of Gov. Brian Sandoval, Attorney General Catherine Cortez Masto and Secretary of State Ross Miller.

In addition to the administrative changes, Masto’s office was asked by the Legislative Commission’s Audit Subcommittee to review the information for potential criminal violations.

Jennifer Lopez, a spokeswoman for the Attorney General’s Office, said today the requested review was completed on June 10 but no action was taken against any current or former employees referenced in the audit.

“The case was declined due to insufficient evidence primarily related to the fact, as pointed out in the legislative audit, that no positive controls were in effect to document or record the time state contractors were actually engaged in their state duties,” she said.

The new rules added to the State Administrative Manual implement the changes mandated by Assembly Bill 240, sponsored by Ways and Means Committee Chairwoman Debbie Smith, D-Sparks.

The new rules prohibit a current state employee from being hired under contract by a state agency unless approved by the Board of Examiners. The same approval is required of a former state employee who has not been out of state employment for at least two years.

Such contracts can only be approved if certain circumstances are found to exist, including situations where a short-term or unusual economic circumstance exists for an agency requiring such employment.

Smith said she is pleased with the voted by the board.

“I think we’ll see a lot better accountability and reporting on the use of consultants because of this,” she said. “I’m glad. It may be the type of thing that we need to keep sort of tweaking each session until we have it where we need it to be, but so far, so good.”

“I think we demonstrated it was the right thing to do,” Smith said.

State Sen. Sheila Leslie, D-Reno, who serves as chairwoman of the Audit Subcommittee, said she was pleased that the Sandoval administration took the audit recommendations seriously. They are overdue, she said.

“There were a few instances that either were very sloppy record keeping or might have been more suitable for prosecution, so I hope somebody is following up on those,” Leslie said.

Sen. Sheila Leslie, D-Reno. / Nevada News Bureau file photo.

“If citizens are going to have confidence in government, they need to be assured that everyone is playing by the same rules,” she said. “The audit raised a lot of red flags about whether there were state employees who were getting sweetheart contracts.”

The administrative changes approved Tuesday will go a long way to correcting any such abuses, Leslie said.

The administrative changes come as yet another state employee contracting controversy involving a new member of Sandoval’s cabinet was recently reported in the Las Vegas Sun. The newspaper reported Sept. 29 that Frank Woodbeck, the newly appointed director of the Nevada Department of Employment, Training and Rehabilitation, held down two state jobs last fiscal year, earning almost as much as the governor.

Woodbeck told the newspaper he worked 60- to 70-hour weeks to fulfill the demands of the two jobs.

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Audio clips:

Assemblywoman Debbie Smith says the law may need tweaking, but she is pleased with the changes:

101311Smith :10 far, so good.”

State Sen. Sheila Leslie says she is pleased the Sandoval administration took the audit recommendations seriously:

101311Leslie1 :20 the same rules.”

Leslie says the audit raised red flags about whether there were state employees getting sweetheart contracts:

101311Leslie2 :26 the Audit Subcommittee.”

Leslie says there were a few instances that may have risen to the level of prosecution:

101311Leslie3 :11 up on those.”

Employment Training Contracts Worth Nearly $24 Million Approved By State Board

By Sean Whaley | 4:33 pm July 20th, 2011

CARSON CITY – The state Board of Examiners today approved contracts worth nearly $24 million in federal funds to provide employment and training services to job seekers as Nevada continues to lead the nation in unemployment.

The contracts were approved by Gov. Brian Sandoval and Secretary of State Ross Miller after Sandoval received assurances that the two contracts for Nevadaworks in northern Nevada would be managed consistent with any findings in an audit of the workforce investment board now under way.

Cindy Jones, administrator of the state Employment Security Division, assured Sandoval that the money would be expended by Nevadaworks in compliance with federal and state rules.

Cindy Jones of the Employment Security Division responds to questions about job training contracts today at a Board of Examiners meeting. / Photo: Sean Whaley, Nevada News Bureau

The three Nevadaworks contracts approved by the board are worth $6.8 million. The three contracts with Workforce Connections in southern Nevada are worth $16.9 million.

After the meeting, Jones said there is an audit under way of Nevadaworks as part of the Department of Employment, Training and Rehabilitation’s normal oversight of the contracts. The review is being performed by the state Division of Internal Audits. The audit is not complete and no findings are yet publicly available for review.

The funds are used to train jobless Nevadans for new types of work where there is demand, as well as provide everything from work boots to child care subsidies to assist people in securing a job.

The approval of the contracts comes as Nevada continues to borrow money from the federal government to pay unemployment benefits.

Jones said the state has borrowed $775 million from the federal government to date to pay benefits. The first interest payment of $29.1 million on that borrowed money is due in September. The state has allocated $64 million to make the interest payments over the two years of the current budget.

The state will not be able to repay the federal loans in the near term, she said. Nevada, like more than 30 other states, is continuing to borrow from the federal government to pay benefits, Jones said.

The agency this fall will review the status of the state’s unemployment trust fund, which is funded with a tax on employer payrolls, to assess what the tax rate for calendar year 2012 will be, Jones said.

Nevada employers this year are paying on average a tax rate of 2 percent on the first $26,600 of each employee’s wages. The 2010 rate was 1.33 percent. But the $410 million in revenue projected from the higher tax rate this year is still not enough to pay benefits and begin repaying the federal loan.

And while the federal loans were interest free for the first two years, those payments must be made beginning this year unless Congress takes some action to extend the grace period, Jones said.

Jones said she does not yet know what course the Employment Security Council will take with regard to the 2012 tax rate when it meets in October.

Nevada’s jobless rate was 12.1 percent in May, down from its peak of 14.9 percent but still highest in the nation.

Audio clips:

Cindy Jones, administrator of the state Employment Security Division, says the audits are a regular part of the agency’s oversight of the funds:

072011Jones1 :24 to our constituents.”

 

 

Bill Bringing Transparency To State Employee Contracting Wins Final Legislative Approval

By Sean Whaley | 8:53 pm June 6th, 2011

CARSON CITY – A bill aimed at increasing transparency and accountability for state employees working as contractors saw final legislative approval today when the Assembly and Senate reached agreement on compromise language to the measure.

Assembly Bill 240, sponsored by Ways and Means Committee Chairwoman Debbie Smith, D-Sparks, will now go to Gov. Brian Sandoval for his consideration.

There was a bit of drama in the Senate when a vote to adopt the conference committee report resolving differences with the Assembly saw a tie 10-10 vote after Sen. Ben Kieckhefer, R-Reno, expressed some reservations about the effect of the measure on the ability of state agencies to deliver services with a reduced workforce.

“We’re imposing a two-year moratorium for employees exiting state service when we’re about to lay off 600 state and (Nevada System of Higher Education) employees,” he said. “My concern is we will have unintended consequences on this one.”

With Senate Majority Leader Steven Horsford, D-Las Vegas, out of the chambers, Lt. Gov. Brian Krolicki, the president of the Senate, exercised a rare opportunity to vote, and he sided with those rejecting the report, which then failed 11-10.

The drama was short-lived, however, as the Senate reconsidered the report upon Horsford’s return, adopting the report and sending the bill to the governor.

After acknowledging the positive elements of the bill in seeking to eliminate double-dipping by state workers, Kieckhefer decided in the second discussion to support the measure. It then won a unanimous vote from the Senate.

The legislation was prompted by an audit of Nevada state agencies using current and former employees as contractors. It identified numerous potential concerns, including a case of one worker seeking payment for 25 hours of work in one 24-hour day.

The audit also found an example of a current state employee earning $62,590 as a contractor in fiscal years 2008 and 2009 while earning a state salary as well.

The audit identified 250 current and former employees providing services to the state. These employees were paid a total of $11.6 million during fiscal years 2008 and 2009, the years covered by the review.

Smith said the Senate amendment to the bill, and the changes agreed to in the conference committee, strengthen the rules that will govern current and former state employees who work as contractors.

Smith said she sent the bill to conference to address some concerns raised by state Budget Director Andrew Clinger. The main change is to have the information on contracting reported to the Board of Examiners, headed by Sandoval, rather than the Legislature’s Interim Finance Committee, she said.

“We certainly don’t want it to be an impediment; we want it to work; so absolutely we’re good,” Smith said. “It strengthened it because we raised the cooling off period from one year to two years, so we actually strengthened the bill.”

The bill would prohibit a current state employee from being hired under contract by a state agency unless approved by the Board of Examiners. The same approval would be required of a former state employee who has not been out of state employment for at least two years.

Such contracts could only be approved if certain circumstances are found to exist, including situations where a short-term or unusual economic circumstance exists for an agency requiring such employment.

The bill also requires all contracts with individuals entered into by the state or the higher education system to ensure the individuals being hired are in good standing with the secretary of state’s office with regard to business licensing.

Audio clips:

Assemblywoman Debbie Smith says the bill went to conference to address some concerns by Budget Director Andrew Clinger:

060611Smith1 :12 absolutely we’re good.”

Smith said the bill is actually stronger as a result:

060611Smith2 :07 strengthened the bill.”

Bill To Improve Accountability In State Contracting Wins Assembly Approval

By Sean Whaley | 8:33 pm April 26th, 2011

CARSON CITY – A bill aimed at increasing transparency and accountability in state contracting passed the Assembly by a deadline today and will now be considered in the Senate.

Assembly Bill 240, sponsored by Ways and Means Committee Chairwoman Debbie Smith, D-Sparks, passed on a 40-2 vote.

“In these times of economic and budgetary challenges, it is more critical than ever that we take every step possible to use taxpayer revenue effectively, save money, and improve state services,” Smith said. “Bringing state contracting out into the open for all to see and establishing a cooling off period for state employees are great steps forward for accomplishing those goals.”

AB240 changes the definition of “consultant” to make sure the state contracting process is transparent and state agencies are held accountable for the contracts they award. The legislation would help prevent state contractors from receiving contracts in excess of what can be done in-house by state employees.  The bill would also extend the cooling off period before a retired state employee could contract with the state to two years.

AB240 would also explicitly permit auditing of all contracts in which persons are employed by the state. The terms of employment contracts would be publicly available, ensuring more transparency, holding the state accountable, and preventing abuses. The bill requires school districts to report their use of consultants as well. Additionally, the legislation would require that anyone who does business with the state must go through the business portal provided by the Secretary of State’s office to obtain a Nevada business license.

The legislation was prompted by an audit of Nevada state agencies using current and former employees as contractors. It identified numerous potential concerns, including a case of one worker seeking payment for 25 hours of work in one 24-hour day.

The audit also found an example of a current state employee earning $62,590 as a contractor in fiscal years 2008 and 2009 while earning a state salary as well.

The audit identified 250 current and former employees providing services to the state. These employees were paid a total of $11.6 million during fiscal years 2008 and 2009, the years covered by the review.

 

State Senate Majority Leader Requests Emergency Bill To Audit Tax Department

By Sean Whaley | 11:02 am March 14th, 2011

(Updated at 2:12 p.m. on March 14, 2011 to include new comments from Sandoval Administration)

CARSON CITY – Senate Majority Leader Steven Horsford has requested emergency legislation to conduct a performance audit of the revenue collection functions of the Department of Taxation following questions last week about the thoroughness of the agency’s review of mining tax payments.

“We were told by the head of the Tax Department that they haven’t had properly trained individuals in place for two years on the net proceeds – that’s a major problem,” he said. “I am glad that the governor is going to immediately try to address that but the question then becomes what else isn’t being properly audited at a time when we have a $2.5 billion budget hole.”

Sen. Steven Horsford/
Photo: Cathleen Allison/ NevadaPhotoSource.com

Horsford, D-Las Vegas, is working with Sen. Sheila Leslie, D-Reno, the chairwoman of the Legislative Commission’s Audit Subcommittee and Chairwoman of the Senate Revenue Committee, on the precise language for the bill.

A number of the members of the Senate Revenue Committee expressed concern at a hearing Thursday when former Tax Department Executive Director Dino DiCianno told the panel that his agency has not had trained auditors to review the net proceeds of minerals tax reports submitted by mining companies, “for a couple of years.”

This at the same time gold prices have reached record levels.

Horsford asked DiCianno if he had informed former Gov. Jim Gibbons about the lack of trained auditors to review mining deductions claimed under the law, which are self reported by the companies.

DiCianno replied he had not, and that maybe he should have informed the governor.

The following day, DiCianno submitted his resignation to Gov. Brian Sandoval effective immediately.

In announcing DiCianno’s departure, Sandoval also named Deputy Director Chris Nielsen to lead the agency until the governor can appoint a successor. Sandoval asked Nielsen to begin preparing a full transition plan, including an immediate strategy to resume auditing mine operators to ensure the proper payment of the net proceeds of minerals tax. Sandoval has also directed the state Internal Audit Division to assist the Department of Taxation as it resumes the net proceeds audits.

Sandoval Senior Adviser Dale Erquiaga today said at a press briefing the governor has instructed the interim tax agency director to determine when the last mining audits were performed, which operators were audited and whether any deficiencies were identified.

The information will then be presented at a special meeting of the Tax Commission set for March 21. Sandoval may also call the Executive Branch Audit Committee together to consider evaluating other revenue sources collected by the Tax Department.

Erquiaga said there is at least one audit of a mining operator that the Tax Department is aware of. The Tax Department is required to conduct random audits so it is not clear if the 100 mining operators in the state could all be reviewed right away, he said.

Sandoval in his proposed budget made only a minor reduction in the agency funding to ensure it could effectively collect tax revenue, Erquiaga said.

“It’s bad management practice in the last administration to allow two years to go by without an audit,” Erquiaga said. “We want an explanation from the staff. We’re going to work with them to be sure going forward that doesn’t happen.”

Horsford said he does not know if the tax deductions claimed by the mining industry over the past few years are legitimate or not. The audit being requested will help answer that question, as well as whether audits of other revenues owed to the state are also being handled appropriately by the agency, he said.

“I was a little concerned about the fact that we’ve had increased revenues from mining, but also increased deductions,” he said. “So the tax payments are down.”

Horsford said the state needs to make sure the reporting is accurate.

“It’s obviously a top priority,” he said.

Leslie said one major focus will clearly be the auditing of the net proceeds of mines.

“This is a direct result of the testimony at the Revenue Committee last week which seemed to shock everyone,” she said. “That at a time when the price of gold is at record highs, we have not been auditing. And I think many of us are concerned about the whole idea of self reporting.”

The huge mining corporations likely have the best tax attorneys available to ensure they take advantage of every “loophole” in claiming exemptions from the mining tax, Leslie said.

“I’m sure they have been looking very closely at how to minimize their tax obligations, and that’s not illegal,” she said. “Right now it seems very one-sided on behalf of the mining companies.”

Leslie said she has questions about whether the mining exemptions have possibly been expanded over the years through the regulatory process that the Legislature may not be fully aware of.

The state has to ensure the exemptions are appropriate and the state is collecting all that is owed, she said.

“We’re outgunned to begin with,” Leslie said. “But the idea that we have nobody and haven’t had anybody looking at that for the last two years is preposterous. We need to be armed with our experts and right now we are unarmed.”

The mining industry has been a major target of both Democratic and Republican lawmakers already in the 2011 session. Some lawmakers have suggested the mining industry can afford to pay more in taxes and lessen the severity of cuts to education and state programs proposed in Sandoval’s $5.8 billion general fund budget.

Leslie said she wants to look at the multiple exemptions the mining industry can take on the minerals tax paid to the state and county governments and whether they are still appropriate, particularly the changes made in 1989.

Audio clips:

Senate Majority Leader Steven Horsford says the Tax Department has not been properly auditing the net proceeds tax:

031411Horsford1 :11 a major problem.”

Horsford says the question is what else has not been audited:

031411Horsford2 : 15 $2.5 billion budget hole.”

Horsford says mining revenues are up but tax payments are down:

031411Horsford3 :21 payments are down.”

Sen. Sheila Leslie says the bill request is a direct result of the shocking testimony last week:

031411Leslie1 :25 idea of self-reporting.”

Leslie says she is certain that mining companies are taking every tax deduction they can:

031114Leslie2 :13 that’s not illegal.”

Leslie says the state is outgunned in the auditing process:

031411Leslie3 :30 years is preposterous.”

Sandoval Senior Adviser Dale Erquiaga says it was bad management practice by the Gibbons Administration not to audit mining companies:

031411Erquiaga :11 that doesn’t happen.”

Audit Revealing “Double Dipping” Employees Spurs Legislation

By Andrew Doughman | 6:19 pm March 8th, 2011

CARSON CITY – Speaker Pro Tempore Debbie Smith, D-Sparks, wants better reporting on state contracts with consultants.

She said an audit last December proved that lax reporting requirements had allowed many consultants to profit from taxpayers as they escaped legislative scrutiny.

She asked the auditing staff how she could improve oversight of consultants. They recommended removing references to consultants in favor of defining “contract” broadly. So that is what Smith wrote into her bill.

“People figure out loopholes and somebody abuses them, and that’s bad for everybody,” Smith said.

Salaries earned by current and former state employees working as contractors for state agencies, a practice called “double dipping,” was the subject of a critical Legislative Counsel Bureau audit released late last year. The audit identified 51 current and former state employees working at 14 different agencies as contractors doing work similar to their duties as state employees during the audit period of fiscal years 2008 and 2009.

A Nevada News Bureau inquiry probed into allegations that one of those employees was earning $350 per hour.

Smith’s bill would cover most contracts with state agencies.

The bill, however, exempts contracts related to school districts, Medicaid and the Public Employees Benefits Program from her bill.

Smith said that the Medicaid and Public Employees Benefits Program contracts pass through other oversight that the Legislature need not take up.

“It will involve every contract that needs to be considered,” she said.

A Board of Examiners comprising some of the state’s constitutional officers vet those larger contracts.

Smith highlighted her bill at a press conference earlier this afternoon. She joined several other Democratic legislators who also paraded bills they are championing before members of the press this afternoon.

The bill has bipartisanship sponsorship.

Audio Clip

Assemblywoman Debbie Smith talking about how her bill increases accountability:

030811Smith:15 our state well

Colorado River Commission Pays Big Bucks To ‘Double-Dippers,’ But No $350 Hourly Rate

By Sean Whaley | 10:30 am January 14th, 2011

CARSON CITY – Nevada’s Colorado River Commission is one of the state agencies cited in a recent legislative audit as paying some of the highest salaries to former state employees working as contractors, the Nevada News Bureau has learned.

Information obtained as a result of a public records request shows two former state employees, James Davenport and Sara Price, both attorneys, have collectively earned over half a million dollars in salaries as contractors for the agency over the past three and a half years.

Davenport, who was a manager for the CRC when he ended his state employment, has earned $411,708 in that time and Price, who was a deputy attorney general within the Nevada Attorney General’s Office when she ended  her state employment,  has earned $105,431.

Officials with the agency, which is not funded with taxpayer dollars, defend Davenport’s contract as necessary for the state to protect itself in complex negotiations with other states and the U.S. over the use of Colorado River water in the midst of a lengthy drought. He started his work as a contractor after retiring from the state in the fall of 2006.

Despite a section of his contract indicating he could be paid $350 an hour for his work, Davenport never earned such a rate, agency officials said.

Price’s work as a special consultant to the commission on matters concerning the Lower Colorado River Multi-Species Conservation Program is also essential for complying with the Endangered Species Act, the officials said.

The Colorado River Commission is a small state agency employing only about 35 people. Its budget is derived from water and power sales to various entities and is not funded with taxpayer funds of any type.

Colorado River Commission Executive Director George Caan said because of its size, the agency relies on contractors to provide specialized expertise when necessary.

Salaries earned by current and former state employees working as contractors for state agencies, a practice called “double dipping,” was the subject of a critical Legislative Counsel Bureau audit released late last year. The audit identified 51 current and former state employees working at 14 different agencies as contractors doing work similar to their duties as state employees during the audit period of fiscal years 2008 and 2009.

Two such employees were identified as working for the Colorado River Commission.

Davenport’s initial contract shows that he was paid up to $10,000 a month plus expenses. It also says that if the monthly payment was deemed “disproportionately large or small,” that the contractor “shall invoice the commission in the amount of $350 per hour for worked performed in lieu of the monthly payment.”

The Davenport contract appears to be one highlighted in the Legislative audit issued late last year: “For example, one agency contracted with a former employee at a rate of $350 per hour vs. $65 per hour cost to the state as an employee.”

But Caan said Davenport was never paid $350 an hour despite the contract language authorizing such a rate. Instead, Davenport was paid up to $120,000 a year, he said.

The agency was not contacted by legislative auditors to discuss the contracts ahead of the release of the audit, said CRC Deputy Executive Director Jim Salo.

An analysis by the agency of the hours Davenport worked in fiscal years 2007, 2008 and 2009 shows he earned on average about $185 an hour, more than his hourly rate as a state employee but well below the $350 rate cited in the audit.

The contract was modified in May 2009 and the $350 an hour component was eliminated. The revised contract, which reduced the monthly maximum pay to $5,000, was approved by the state Board of Examiners, made up of the governor, secretary of state and attorney general.

Caan said Nevada was in the midst of negotiations with the federal government and the six other states in the Colorado River Compact regarding water usage during the current drought when Davenport retired. His experience in the negotiations made it critical for the commission to continue to use his services, he said.

“So the reason to keep Jim working at the same kind of responsibility he had in this position was to ensure the continuity of those important discussions among the seven states and the federal government,” Caan said. “That was the criteria that we used in order to substantiate Jim’s continued work on behalf of the commission at a pay that was equivalent to what he would have earned had he kept up his state employment.”

Davenport is also representing Nevada and the commission as a special deputy attorney general in a Colorado River water rights case involving the Navajo Reservation in Arizona.

Davenport’s contract is anticipated to expire completely on June 30 of this year, Caan said. The lower monthly rate of pay in the renegotiated contract is because his work is coming to an end, he said.

Price’s contract shows she was hired initially at $175 an hour up to $125,000 starting in April 2005. The contract was also approved by the Board of Examiners. The contract was revised in April 2007 and the hourly rate increased to $190 up to $125,000 a year. It was amended again in April 2009 to $210 an hour through April 2011.

She had worked in the Attorney General’s office as an attorney assigned to provide legal advice to the Colorado River Commission.

“We have lots of lawyers who work . . . for the seven basin states who work for different agencies,” Caan said. “What Sara is earning is probably at the low end of what they earn and is certainly reasonable for someone with her expertise.”

Davenport could not be reached for comment.

Price said her contract with the commission has been managed conservatively and the maximum limit has never been exceeded.

Audio:

Colorado River Commission Executive Director George Caan says the agency only hires contractors when specialized expertise is required:

011211Caan3 :20 a full-time person.”

Caan says Davenport’s continued employment was critical for important Colorado River negotiations:

011212Caan1 :12 the federal government.”

Caan says Davenport was paid at a level similar to what he earned as a state employee:

011211Caan2 :16 his state employment.”

Caan says Price is being paid a reasonable salary for her work:

011211Caan4 :14 with her expertise.”

Nevada State Agency Posts Contract Information Following Release Of Audit

By Sean Whaley | 11:31 am January 7th, 2011

CARSON CITY – In the wake of a legislative audit critical of state agency contracting practices with current and former employees, the Nevada Department of Conservation and Natural Resources has posted its information online.

Bob Conrad, public information officer for the department, said the contract information was placed on the agency’s website on Dec. 29.

The audit of Nevada state agencies using current and former employees as contractors identified numerous potential concerns, including a case of one worker seeking payment for 25 hours of work in one 24-hour day and another where a former state worker is now earning $350 an hour as a contractor versus $65 an hour in his state job. This contract is still in effect and has been extended through June 30, 2011. As of September this year, the contractor has earned $472,493 from the state.

The audit information was turned over to the Nevada Attorney General for review for any potential abuses.

The Conservation and Natural Resources Department lists six current and former employees with contracts on its website, including one individual earning $150 an hour and another earning $200 an hour. An explanation for the need for each contract is included. All of the contracts have been approved by the Nevada Board of Examiners, made up of the governor, secretary of state and attorney general.

The agency’s website says the contracts fulfill specific needs that cannot be met by existing staffing levels or with current staff expertise. None of the contracts use the state general fund as a revenue source. The agency’s website also links to the actual contracts.

Conrad said the $350 an hour contract cited in the audit does not involve his agency. The information was posted to provide transparency to the public, he said.

“Our contracts are probably saving money for the state,” Conrad said. “We’re not using general funds and we think we have a good story to tell.”

The most significant contracts are for:

-          Christine Thiel, a former deputy state engineer with the Division of Water Resources who retired in 2004, is earning $150 an hour as a negotiator for the Truckee River Operating Agreement in northern Nevada. She earned $12,712 in fiscal year 2008 and $15,150 in fiscal year 2009.

-          Roland Westergard, a former state engineer with the Division of Water Resources who retired in 1990. He too is employed as a negotiator for the Truckee River Operating Agreement. He initially earned $150 an hour but saw an increase to $200 an hour starting in September 2009. He earned $19,233 in 2008 and $28,928 in 2009.

The legislative audit discussed Dec. 8 identified 14 state agencies contracting with 51 current or former employees who were performing similar duties to their current or former job descriptions at a total cost of $2.3 million in fiscal years 2008 and 2009. Two such contracts were identified for the Department of Conservation and Natural Resources.

Andrew Clinger, director of the Department of Administration, acknowledged the audit raised concerns about the use of the contracting process by state agencies. He is working with a group of administrators and others to bring forward reforms to the process to the Board of Examiners by February.

Nevada Officials Moving Quickly To Address Concerns With State Employee Contracting

By Sean Whaley | 5:39 pm December 14th, 2010

CARSON CITY – Secretary of State Ross Miller said today an audit released last week examining current and former state employees winning contracts with state agencies contained “alarming findings.”

Miller asked for a response from Department of Administration Director Andrew Clinger on how the findings are going to be addressed. He made his comments at the Board of Examiners meeting, which is the panel that approves contracts entered into by the state. The board is made up of the governor, attorney general and secretary of state.

Miller said he wants to make sure the issues raised in the audit, including some contracts with current and former state employees that appear to involve excessively high rates of pay, are adequately addressed.

Clinger said a working group is being assembled to review current policies and procedures and will meet for the first time tomorrow. Representatives from the Attorney General’s office, the state Purchasing Division, the executive branch Internal Audit Division and others, will meet to develop recommendations to curb any further abuses, he said.

Clinger said he would like to bring some changes to the Board of Examiners by February for its approval, “to help prevent these sorts of violations from happening in the future.”

After the meeting, Clinger said the contracts are reviewed either by his agency or other state agencies that contract directly for the work, but there are no rules in place to deal with the issues raised in the Legislative Counsel Bureau audit reviewed by lawmakers.

A lot of the employees are hired under employment contracts approved by the Board of Examiners, he said. Once these “master service” agreements are approved by the board, the agencies can then contract with people individually and so the details of the employment agreements with current or former state employees do not come back to the board for review, Clinger said.

Clinger said he believes that the issue of excessive hours and pay identified in the audit involves a very small number of current and former state employees, but said he was disappointed by the findings.

“I was disappointed from the standpoint of given where we’re at with the budget crisis, and given where we’re at with public perception, I think it hurts our credibility going into session,” he said.

There may be justification for some of the rates of pay identified in the audit, but Clinger said at first look, the $350 an hour being paid to one former employee seems excessive.

The audit of Nevada state agencies using current and former employees as contractors identified numerous potential concerns, including a case of one worker seeking payment for 25 hours of work in one 24-hour day and another where a former state worker is now earning $350 an hour as a contractor versus $65 an hour in his state job.

The audit also found an example of a current state employee earning $62,590 as a contractor in fiscal years 2008 and 2009 while earning a state salary as well.

At least eight examples were identified where state employees working as contractors either did the contract work during regular state work hours or could not provide documentation to show they did the work on their own time.

The Legislative Commission’s Audit Subcommittee voted to turn the audit over to Attorney General Catherine Cortez Masto for a review of possible criminal violations.

The audit identified 250 current and former employees providing services to the state. These employees were paid a total of $11.6 million during fiscal years 2008 and 2009, the years covered by the review.

Audio clips:

Secretary of State Ross Miller says state agencies must correct issues found in audit:

121410Miller :12 the cracks again.”

Administration Director Andrew Clinger says he is working to put safeguards in place:

121410Clinger1 :15 deal with those.”

Clinger says the audit has hurt the state’s credibility going into the 2011 legislative session:

121410Clinger2 :13 going into session.”

Audit Of Nevada Agency Use Of State Workers As Contractors Finds Abuse, Potential Criminal Activity

By Sean Whaley | 12:00 pm December 8th, 2010

CARSON CITY – An audit of Nevada state agencies using current and former employees as contractors has identified numerous potential concerns, including a case of one worker seeking payment for 25 hours of work in one 24-hour day and another where a former state worker is now earning $350 an hour as a contractor versus $65 an hour in his state job.

The audit also found an example of a current state employee earning $62,590 as a contractor in fiscal years 2008 and 2009 while earning a state salary as well.

At least eight examples were identified where state employees working as contractors either did the contract work during regular state work hours or could not provide documentation to show they did the work on their own time.

The audit also shows that the Legislature was kept in the dark about much of the contract work by state employees because the Department of Administration used a narrow definition of the term “consultant.”

State Sen. Sheila Leslie, D-Reno, the chairwoman of the Legislative Commission’s Audit Subcommittee, said the audit suggests the potential of criminal actions in some cases. The panel voted to turn the audit over to Attorney General Catherine Cortez Masto for review and possible action.

Even if there is no criminal activity, the audit shows abuses of the contracting process, Leslie said.

Andrew Clinger, director of the state Department of Administration, agreed the use of current and former state employees as contractors “is out of hand.” The agency accepted all seven recommendations made in the audit.

The Legislature is expected to further address the issue in the upcoming 2011 session.

The use of current and former state employees as contractors was a major issue in the 2009 legislative session. The Legislature passed Assembly Bill 463 to tighten up the use of consultant contracts for current and former state employees.

But because of the narrow definition of consultant used by the state, AB463 has not resulted in information about such contracts entered into by the state being provided the lawmakers, the audit found. The Department of Administration did not provide any consultant contracts to the IFC for review and approval from July 2009 through July 2010, a period of more than one year, the audit found.

“Therefore, only under rare circumstances would a contractor be deemed a consultant and reported to the (Legislature’s Interim Finance Committee),” the audit found. “In contrast, boards, school districts and the Nevada System of Higher Education (NHSE) used a broad definition of consultant and reported many contracts to the IFC.”

The audit identified 250 current and former employees providing services to the state. These employees were paid a total of $11.6 million during fiscal years 2008 and 2009, the years covered by the review.

The state employee who put in for 25 hours of pay in a single day was paid for 10 hours of contract services, a regular 10-hour shift on his timesheet, plus an additional five hours of overtime.

The former employee being paid $350 an hour as a contractor compared to $65 an hour while a state employee is identified as a person with “an extensive background in complex water and natural resource issues.” The individual started work as a contractor at the higher rate of pay immediately after leaving state employment. The contract is still in effect and has been extended through June 30, 2011. As of September this year, the contractor has earned $472,493 from the state.

Among the other audit highlights:

A former state employee had a contract rate of $150 an hour versus $71 an hour as a state employee. The individual retired and came back to the same agency as a consultant regarding water and natural resource issues. The contract started in December 2007 and has been extended through February 2013. As of September 2010, the former employee has been paid $55,125.

A significant number of the current and former state employees doing independent contractor services are doing work similar to their state jobs. A total of 51 of 111 contracts reviewed show pay for similar work, including 18 current and 33 former employees. Many returned to the same agencies where they had worked.

The audit did find appropriate situations for employing a former employee as a consultant.

“Former employees provide a valuable resource to the state because of their knowledge and skills gained through years of state service,” the audit said.

In one example, a firefighter provided training for the Department of Public Safety at a rate of $26 an hour. Total payments were $1,400 over a two-year period.

Audit Finds Over $2M in Questionable Purchases and Spending in State Education Department Program

By Sean Whaley | 1:49 pm November 5th, 2009
CARSON CITY – An audit of a $92 million grant program created to improve student achievement in the public schools has identified numerous concerns, from inappropriate purchases to purchases that were made prior to approval by the Nevada Department of Education.

The innovation and prevention of remediation program was created by the 2005 Legislature, and the legislative audit reviewed the first two years of funding in Fiscal Years 2006 and 2007.

The audit, reviewed today by the Legislative Commission’s Audit Subcommittee, found $580,000 in expenditures by schools and school districts that were not authorized by a panel created to review the grant requests. One example was the Clark County School District’s purchase in 2006 of a $200,000 educational software program, a type of purchase specifically not authorized by the review panel, the Commission on Educational Excellence. No payback was sought by the department.

The audit also found $5.1 million in grant funds spent by schools and school districts prior to receiving approval for the expenditures from the commission.

In some cases, items rejected by the commission were amended back into grants by schools and school districts and subsequently received funding.

Schools also did not return unused funds in a timely manner, resulting in $45,000 in lost interest earnings that could have been earned by the Department of Education. Returned money also was not always deposited timely by the Education Department. In one case, the Washoe County School District returned $735,000 in unspent funds in August 2007, but the check was not deposited by the agency until December 2007.

The audit also determined that there was inadequate tracking of purchased items. Auditors could not find 6 percent of the items sought out in the review worth $170,000.

Other issues were also identified in the 47-page audit.

The audit covered the first two years of the program when $81 million of the fund was spent by school districts and schools over two years. The program was continued in the last budget, but no funding was appropriated for the program in the current budget.

Keith Rheault, superintendent of public instruction for the Education Department, acknowledged the many issues cited in the audit. Sixteen recommendations from auditors were accepted by the agency to fix the concerns if funding is provided again in future budgets by the Legislature.

Rheault told the legislative panel many of the problems occurred in the first round of funding due to the rush to get the money to the schools. Many of the concerns were corrected in the 2008 and 2009 funding cycle, he said.

In his official response to the audit, Rheault also noted that no additional staffing was provided to handle the new grant program. A request for additional positions in the 2007 legislative session was not funded.