An Audit Report on Expenditures at the State Office of Risk Management
June 2006
Report Number 06-043
Overall Conclusion
The State Office of Risk Management (Office) has most of the internal controls necessary to provide reasonable assurance that its expenditures are properly authorized, reasonable, and processed correctly and in a timely manner. Auditors examined the Office's expenditure control activities--which include approvals, authorizations, verifications, reconciliations, and segregation of duties--and a sample of expenditures.
Although all of the expenditures auditors tested were appropriate and reasonable, opportunities exist for the Office to strengthen the processes related to its workers' compensation benefit payments, payroll function, Claims Management System, financial monitoring, information systems, and policies and procedures. In addition, the Office did not have an internal audit function, as required, for a portion of the audit period.
Expenditure categories tested included salaries and wages, professional service fees, and workers' compensation benefits. (Workers' compensation benefits include the medical and indemnity payments for all state employees' workers' compensation claims.) These three categories represented 96.8 percent of the Office's total expenditures during the audit period. Although the expenditures tested came from selected categories, the internal controls in place are the same for all types of expenditures.
Any system of internal controls has inherent limitations and can provide only reasonable assurance of achieving the control objective, regardless of how well it is designed and operated. Internal controls cannot provide absolute assurance that errors or irregularities would be prevented or detected.
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