Annual report of the North Carolina Office of the State Auditor : accountability, integrity & reliability

              honesty • integrity • Professionalism

        A           R                     S                 P      

North Carolina O   ce of the State Auditor

LESLIE W. MERRITT, JR., CPA, CFP

increasing efficiency... exposing fraud

Increasing Efficiency... Exposing Fraud

3 Message from the Auditor

4 2009 Strategic Plan

7 Executive Summary

9 Financial Audit Division

11 Management Services &

Nongovernmental Compliance Division

14 Investigative Division

22 Performance Audit Division

25 Information Systems Audit Division

29 General Administration

32 Appendix A

39 Appendix B

40 Contact Information

Contents

Annual Report 2008 | Contents

Increasing Efficiency... Exposing Fraud

Annual Report 2008 | Message from the Auditor

S erving as North Carolina’s State Auditor for the last four years

has been a privilege and an honor. The State has seen a growing

emphasis on government ethics as taxpayers increasingly seek

to hold State government accountable for the spending of taxpayer

money. I am pleased to say that the Office of the State Auditor has

played an important role in the process through our audits and

investigations of fraud, waste and abuse of State resources.

One of the single most important factors of holding State

government accountable is transparency. I believe that transparency

is an essential element in the functioning of any representative

democracy. If State government is run from behind a curtain and is

not transparent, its citizenry may grow suspicious of its actions or motivations leading to the public’s

disillusionment and apathy towards government institutions. However, sunshine is a marvelous

antiseptic for this ailment in government and I believe that opening State agencies’ books and records,

with respect for State law and as an effort to increase transparency, is the first step in reversing any

negative trends flowing from past bureaucratic stonewalling and government secrecy.

The Office of the State Auditor is willing to lead by example. History reveals no other time when

technology has provided such an accessible platform as the World Wide Web. Through new technology,

State agencies and departments are able to display accurate and timely information regarding the

spending of taxpayer money. For years the State Auditor’s Office has published its work product

on the World Wide Web in an easily accessible format to enable public scrutiny and review. Now,

we are preparing to take the extra step to increase transparency by publishing the Office’s budget,

expenditures and contract information on our website at www. ncauditor. net.

It is my hope that the Office of the State Auditor is the first of many State agencies willing to take

this step out from behind the government curtain and into the sunlight. I put my faith in the public

trust as I work towards the goal of strengthening State government by increasing transparency and

accountability to the taxpayer. I am willing to do my part, and on behalf of North Carolina’s taxpayers

I challenge other agency and department heads to do the same.

Sincerely,

State Auditor Leslie Merritt

Message from the Auditor

Increasing Efficiency... Exposing Fraud

T he Office of the State Auditor has been

a leader in holding State government

accountable and recommending

government reforms. Beginning with the

release of this report, the State Auditor’s office is

preparing to lead State government into an era of

greater transparency by posting budget, expenses

and contract information on the State Auditor’s

website ( www. ncauditor. net). The available

content will first include Fiscal Years 2007- 2008

and 2008- 2009 with plans to update the current

numbers every quarter and reach back and post

previous fiscal years as we move forward. We

recognize that this is only a first step in greater

transparency in State government and trust that

as the Office of the State Auditor breaks new

ground, other agencies and departments will

follow.

In addition to our focus on increased

transparency, we recognize that the consistent

and professional audits and investigations

performed by State auditors lend assurance and

credibility to other State government agencies’

record of supporting the public. Therefore, it is

incumbent on the Office of the State Auditor

to set challenging, yet attainable goals and

objectives for the 2008- 2009 Fiscal Year. The

following are goals and objects broken- down by

audit division:

Financial Audit Division

The subjects and frequency of audits in our

Financial Audit Division are largely dictated by

State statute or federal requirements and remain

mostly constant every fiscal year. These audits

include State agencies, all sixteen universities,

fifty- eight community colleges, clerks of superior

court in all 100 counties, the state’s Comprehensive

Annual Financial Report ( CAFR), Smart Start

nonprofit organizations, and Fiscal Control audits

at agencies not audited annually.

Smart Start audits are one variable within the

Financial Audit Division. The Office of the State

Auditor is able to contract with private CPA firms

to cost- effectively perform these audits which allow

State auditors to devote themselves to other audits

and uncovering fraud, waste and abuse of State

resources. For the Fiscal Year ended June 30, 2007,

45 Smart Start audits were performed, 39 by CPA

firms averaging $ 9,192 per audit. In prior years, the

average cost for the Office of the State Auditor to

conduct a Smart Start audit was $ 25,459 per audit.

That equals a $ 16,267 savings per audit or $ 634,423

per year. For Fiscal Year 2007- 2008, all Smart Start

audits will be contracted with CPA firms and meet

the goals of increasing savings for the taxpayer.

In addition, the Office of the State Auditor will be

releasing all Smart Start audits by March 31, 2009.

It is anticipated that the earlier release of the audit

reports will allow the North Carolina Partnership

for Children, Inc., and the local partnerships to

more quickly address identified deficiencies and

to make the necessary improvements to ensure

accountability of state funds.

Management Services and

Nongovernmental Compliance Division

The Management Services and Nongovernmental

Compliance Division ( MS& NGCD) focuses on

the spending of State and federal pass- through

2009 Strategic Plan

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud

grants to non- profits. In Fiscal Year 2008- 2009,

MS& NGCD will focus on the administration

of the Grants Information Center ( GIC) online

reporting system that opened in 2008 and

will streamline the process of satisfying filing

requirements of State grants.

Most non- profits satisfy their grant requirements

and filing deadlines. However, increased

monitoring resulting in a decrease in the level

of noncompliance is a goal that will ensure that

taxpayers’ money reaches the communities it was

intended to serve. The reality is that the number

of noncompliant grantees ebbs and flows with

reporting deadlines. MS& NGCD’s goal for Fiscal

Year 2008- 2009 is to continue efforts to reduce the

number of noncompliant grants by 15%, keeping

the total value of those in noncompliance to no

more than 5% of the total grants awarded.

In addition to monitoring compliance levels,

MS& NGCD is equipping non- profits with the

necessary skills needed to properly account for

State grant funds and to remain in compliance.

These skills can be learned through MS& NGCD’s

available training courses. MS& NGCD plans to

continue the State Auditor’s efforts for Fiscal Year

2008- 2009 by offering both live and online grants

training. MS& NGCD will conduct a minimum

of six live sessions per month, in addition to

offering online courses in an e- Learning format

that includes a course test for each participant. An

important part of training is providing information

to grantees and grantors that is relevant to their

particular circumstances. To aid in this effort, the

MS& NGCD will continue to issue its Best Practices

quarterly newsletter and identify other efforts to

benefit both grantors and grantees. Best Practices

is distributed to all 5,000+ grantees identified in

our grants database, as well as to agency personnel

involved with grants administration.

To ensure accountability and compliance,

the Office of the State Auditor investigates

the spending of grant funds by non- profit

organizations. The goal for Fiscal Year 2008- 2009

is to increase the number of new investigations

to 40 by the end of this fiscal year, a 48% increase

in investigations. In an effort to help train agency

monitors to be proactive, MS& NGCD plans to

conduct separate monitoring reviews of grantor

agencies. For Fiscal Year 2007- 2008, these reviews

were conducted in conjunction with the grant

investigation. MS& NGCD’s goal is to complete 12

separate agency monitoring reviews by the end of

Fiscal Year 2008- 2009.

Investigative Division

The Investigative Division forms the core of the

Office of the State Auditor’s watchdog function.

Through this Division, the State Auditor’s Office is

able to proactively uncover fraud, waste and abuse

in State government. The Investigative Division’s

goals for Fiscal Year 2008- 2009 are to effectively

promote the State Auditor’s Hotline, enhance

the Investigative Task Force and increase the

efficiency and effectiveness of handling multiple

investigations simultaneously.

The Investigative Division achieved remarkable

results for the 2007- 2008 Fiscal Year. Specifically,

the Division had 29 open cases as of July 11, 2007,

and opened 257 during Fiscal Year 2007- 2008. The

State Auditor’s Office and the respective agencies

assisting with referrals closed 241 cases, with 45

pending serious matters as of June 30, 2008. The

average age of cases closed was 57 days. Nearly

doubling the intake while using half the time to

resolve these matters is a credit to the women and

men of the Investigative Division, and the internal

Annual Report 2008 | Strategic Plan

Increasing Efficiency... Exposing Fraud

auditors of the various state agencies who have

come to work more closely and effectively with the

State Auditor and his staff.

Performance Audit Division

Compared to other divisions in the Office of

the State Auditor, the Performance Audit Division

is uniquely engineered to evaluate whether State

programs are reaching their goals. For Fiscal Year

2008- 2009, the Division plans to conduct more

performance audits than in Fiscal Year 2007- 2008,

equip performance auditors with additional tools

through new training, and provide greater flexibility

to meet emerging needs when they arise.

The Performance Audit Division was recognized

by the National State Auditors Association for best

2008 performance audit less than 2000 hours. The

audit entitled Internal Auditing in North Carolina

Agencies and Institutions is an example of the type

of performance audits that will continue to be

conducted by the Office of the State Auditor in

Fiscal Year 2008- 2009.

Information Systems Audit Division

The Information Systems ( IS) Audit Division’s

responsibilities include analyzing State agency

computer systems to ensure that they are properly

secured, produce accurate financial reports and

comply with State regulations. IS Division auditors

are in a unique position to think proactively about

discovering suspicious data trends flowing from

an agency’s information systems.

The State Auditor’s goal for Fiscal Year 2007-

2008 was to continue the collaboration between

IS auditors and the Financial and Investigative

audit teams and to increase proactive auditing

by providing computer forensic assistance and

data mining analyses of agency financial data. At

a university official’s request, the State Auditor

used that collaborative effort to uncover a widely

reported case regarding university employees

using taxpayers’ resources to operate an unlawful

pirating ring that downloaded Hollywood movies

and pornographic pictures and films. For the 2008-

2009 Fiscal Year, the Office of the State Auditor

plans to continue this collaboration and increase

its focus on fraud, waste and abuse in the State’s

information technology systems.

The IS Audit Division performs Strategic

Audit Reviews that are issued separately from IS

audits. These reviews are used to uncover fraud,

waste or abuse of taxpayer resources by following

suspicious State agency data trends. A recent target

of an IS Strategic Audit Review was to identify

invalid Social Security Numbers ( SSNs) in the

North Carolina Division of Social Services. This

review found 1,906 SSNs that were invalid. The

review also found 1,237 SSNs that belonged to the

deceased persons category on the Social Security

Administration’s Death File. Finally, the review

found 69 food stamp recipients with a certification

date equal to or greater than 45 days after their date

of death. The IS Audit Division plans to conduct

a greater number of Strategic Audit Reviews in

Fiscal Year 2008- 2009.

In addition to investigative activities, the IS

Audit Division is currently implementing an

upgrade to the Agency’s existing audit software.

This software will allow easier access to auditee

data by auditors in other sections of the office and

will allow the use of a built in “ Extract, Transmit,

and Load” ( ETL) technology that will expedite

the acquisition of agency data to be used by the

Financial Auditors in financial audits and by IS

auditors in their strategic reviews.

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud

Financial Audit Division

• State Auditors identified $ 1,180,411 in questioned

costs resulting from 129 identified audit

findings. This represents a significant increase in

questioned costs and the number of findings over

the prior year ($ 507,833 and 89, respectively).

• The Office of the State Auditor saved a recurring

$ 634,413 on 39 Smart Start audits by contracting

with private CPA firms for Fiscal Year 2007- 2008.

In Fiscal Year 2008- 2009, the Agency plans to

contract- out all Smart Start audits to increase

this savings for the taxpayer.

Management Services and

Nongovernmental Compliance Division

• During Fiscal Year 2007- 2008, the State

Auditor’s Office trained 2,882 participants in 99

training sessions on improving accountability

and compliance with state and federal grant

requirements. That brings the total number

of participants trained since August 2005 to

approximately 11,075.

• While the monthly percentage varies, the rate

of grant recipients in noncompliance with their

grant requirements dropped 7% from July 1, 2007

to June 30, 2008. That represents a decline in the

percentage of noncompliant grantees to 11.4%

of total grants ( 2.9% of total grant dollars). This

reflects the proper accounting of an additional

$ 13.1 million.

��� In February 2008, the State Auditor opened

the online Grants Information Center ( GIC)

allowing grantor agencies and non- State grantees

to file annual reports online. By June 30, 2008,

more than 1,500 grantees used GIC to file their

2007 annual reports online. Improvements

through GIC will help eliminate redundancy,

increase data capture efficiency and improve

reporting timeliness.

• For Fiscal Year 2008- 2009, MS& NGCD carried

forward four grant investigations from Fiscal

Year 2007- 2008, opened 25 and completed 27

investigations. These investigations resulted in the

State Auditor’s Office recommending repayment

of $ 797,692 in grant funds, equal to an average of

$ 29,544 per investigation.

Investigative Division

• The Investigative Division had 29 open cases as

of July 2007 and opened 257 cases during Fiscal

Year 2007- 2008.

• The State Auditor’s Office and the respective

agencies assisting with referrals closed 241 cases

in Fiscal Year 2007- 2008, with 45 cases pending.

• The State Auditor’s Office reduced the average

case age to 57 days from 315 days in Fiscal Year

2004- 2005.

Performance Audit Division

• The Performance Audit Division was recognized

by the National State Auditors Association for best

2008 performance audit less than 2000 hours. The

audit entitled Internal Auditing in North Carolina

Agencies and Institutions is an example of the type

of valuable contribution the Performance Audit

Division makes to the Office of the State Auditor

and State government in general.

Executive Summary

Annual Report 2008 | Executive Summary

Increasing Efficiency... Exposing Fraud

• Performance Audits conducted in Fiscal

Year 2007- 2008 include: the North Carolina

Education Lottery, Albemarle Mental Health

Center, Academically or Intellectually Gifted

Program, Department of Transportation

Highway Schedules and Costs, Department of

Juvenile Justice and Delinquency Prevention,

Department of Health and Human Services

Division of Medical Assistance, Department of

Environment and Natural Resources.

Information Systems Audit Division

• The IS Audit Division conducted Strategic Audit

Reviews of North Carolina Division of Social

Services and North Carolina State University.

These reviews uncovered thousands of invalid

Social Security Numbers and university

employees using taxpayer money for their

personal use.

General Administration

• The follow- up to the 2006 AuditWatch

curriculum was completed in 2007. Efficiency

levels were analyzed and recommendations

from AuditWatch were implemented with

impressive results. In 2005, the Office of the

State Auditor used 103,703 audit hours in

the Financial Audit Division alone. After the

AuditWatch efficiencies were in place, the

Financial Audit Division used only 87,358 audit

hours. This equates to a total efficiency gain of

15,980 audit hours or $ 1,358,300 ( audit hours x

billing rate).

• In 2008, the State Auditor’s Office became an

authorized Continuing Professional Education

( CPE) sponsor recognized by the NC State Board

of CPA Examiners. This is part of the ongoing

commitment by the State Auditor to conduct

quality continuing education.

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud

S taff in the Financial Audit Section audit state

agencies, universities, community colleges,

clerks of Superior Court, and Smart Start

nonprofit organizations. The State Auditor is

required to perform these audits as part of its

statutory responsibilities or to comply with federal

requirements. Some audits are performed at the

State Auditor’s discretion to ensure that all agencies

are properly reporting their financial conditions.

The Office of the State Auditor spent the greatest

percentage of hours ( 49%) to perform annual

financial statement audits including those of the

State’s sixteen universities and fifty- eight community

colleges. One of its largest financial audits is the

state’s Comprehensive Annual Financial Report

( CAFR), which accounted for 15% of staff hours.

The CAFR contains the annual financial statements

for the State of North Carolina as a whole.

Another major financial audit project, accounting

for 29% of staff time, is the state’s Single Audit

Report. The Single Audit Report contains the

results of the audit of the state’s financial statements

and the audit of the state’s compliance with laws and

regulations pertaining to federal grant programs.

The Agency also periodically audits selected fiscal

controls of clerks of Superior Court and general

government agencies.

The audit staff conducts financial and compliance

audits of the organizations participating in the

Smart Start program, including the statewide

coordinating agency ( The North Carolina

Partnership for Children, Inc.) and the individual

local partnerships. Smart Start is an early childhood

development program designed to prepare children

to begin school healthy and ready to succeed.

Currently, 78 Smart Start partnerships operate

throughout the state.

Financial Audit Results Summary

For the fourteenth consecutive year, the State Au-ditor

issued an unqualified opinion on the State’s fi-nancial

statements. This opinion, for the Fiscal Year

ended June 30, 2007, was contained in the CAFR

prepared by the Office of the State Controller.

The State of North Carolina also received the

Certificate of Achievement for Excellence in Fi-nancial

Reporting from the Government Finance

Officers Association for the fourteenth consecu-tive

year. This award is given to government units

whose CAFR achieves the highest standards in gov-ernment

accounting and financial reporting.

In conjunction with the audit of the State’s finan-cial

statements, the State Auditor issues a report

on internal control over financial reporting and on

compliance and other matters based on an audit

of financial statements in the Single Audit Report.

Nine findings of non- compliance and weaknesses

in internal control related to the financial statement

audit were reported. These findings disclosed inter-nal

control deficiencies related to separation of du-ties,

year- end financial reporting, and approval of

journal entries.

With regard to compliance with federal program

requirements, the State Auditor issued a qualified

opinion on certain federal programs due to mate-rial

noncompliance with certain requirements. In

total, auditors identified $ 1,180,411 in questioned

costs resulting from 129 identified audit findings.

Financial Audit Division

Annual Report 2008 | Financial Audit Division

0 Increasing Effi ciency... Exposing Fraud

Th is represents a signifi cant increase in questioned

costs and the number of fi ndings over the prior year

($ 507,833 and 89, respectively).

In addition to reporting on the CAFR and Single

Audit at the statewide level,

the Offi ce of the State Audi-tor

publishes in separately

issued reports the audit fi nd-ings

and recommendations

from CAFR and Single Au-dit

work for each individual

government agency.

Reported fi ndings from

university and community

college audits for Fiscal Year

2007 primarily related to four

areas: access rights, fi nan-cial

statement preparation,

management oversight and

internal control weaknesses.

Th ese internal control weak-nesses

were in areas such as

fi nancial aid awards, cash

receipts and deposits, cash

disbursements and separa-tion

of duties.

In the Clerk of Superior

Court audits performed in

Fiscal Year 2007, the State Auditor’s Offi ce noted

internal control weaknesses. Th ese internal control

weaknesses were in areas such as timely invest-ments,

cash receipts, segregation of duties, and

timely deposits.

Smart Start fi ndings issued during 2006- 2007 fo-cused

on internal control weaknesses and fi nancial

statements errors. For the Fiscal Year ended June

30, 2007, 45 Smart Start audits were performed,

39 by CPA fi rms averaging

$ 9,192 per audit. In prior

years, the average cost for the

Offi ce of the State Auditor to

conduct a Smart Start audit

was $ 25,459 per audit. Th at

equals a $ 16,267 savings per

audit or $ 634,423 per year.

For Fiscal Year 2007- 2008,

all Smart Start audits will be

contracted with CPA fi rms

and meet the goal of increas-ing

savings for the taxpayer.

In addition, the Offi ce

of the State Auditor will be

releasing all Smart Start au-dits

by March 31, 2009. It is

anticipated that the earlier

release of the audit reports

will allow the North Caroli-na

Partnership for Children,

Inc., and the local partner-ships

to more quickly ad-dress

identifi ed defi ciencies

and to make the necessary improvements to ensure

accountability of state funds.

A complete list of Financial Audit Division au-dits

( prefi xes FCA, FIN and NGV) is detailed in

Appendix A.

In total, auditors

identifi ed $ 1,180,411

in questioned costs

resulting from

129 identifi ed

audit fi ndings.

Th is represents a

signifi cant increase

in questioned costs

and the number of

fi ndings over the prior

year.

North Carolina Office of the State Auditor

Increasing Effi ciency... Exposing Fraud

Management Services &

Nongovernmental Compliance

Division

T he Management Services and

Nongovernmental Compliance Division

( MS& NGCD), has the responsibility of

increasing oversight and accountability of State

and Federal pass- through grants typically given

to nonprofi t organizations. MS& NGCD responds

to the growing need for compliance oversight

and training to adhere to changing reporting

requirements.

MS& NGCD’s mission is to increase training

and “ best practices” for nonprofi t organizations

receiving State grants and to increase compliance

and accountability of funds on the grantee and

funding agency levels. MS& NGCD has set

measurable goals for Fiscal Year 2008- 2009 based

on past accomplishments.

Th e Offi ce of the State Auditor is pleased to

report that MS& NGCD continues to meet all areas

of its original mission. Th e following is a summary

of accomplishments for Fiscal Year 2007- 2008:

Training

• Grants Training: During Fiscal Year 2007- 2008,

MS& NGCD trained 2,882 participants in 99

training sessions, bringing the total number

of participants trained since August 2005 to

approximately 11,075.

• Eff ective Grants Administration Certifi cate

Program: Working with the Offi ce of State

Personnel, MS& NGCD established the Eff ective

Grants Administration Certifi cate Program

in 2007, consisting of fi ve core grants training

courses that provide the basics for proper

oversight and accountability of grant funds.

During Fiscal Year 2007- 2008, 61 grantee and

agency personnel have earned this Certifi cate

bringing the total number of Certifi cate holders

to 120.

• Multifaceted Training: Other types of training

included grants administration sessions tailored

to State agency program and fi nancial personnel,

grants reporting/ accountability sessions tailored

to grantees, special sessions conducted at the

request of various groups ( e. g., specifi c agencies

and state level associations of various types)

and presentations at 16 conferences during the

Fiscal Year 2007- 2008.

Compliance

• Increased Grantee Compliance: Posting

of the monthly noncompliance list on the

State Auditor’s website has served to inform

legislators, State funding agencies, and the

public which grantees have not complied with

the statutory reporting requirements. While the

monthly percentage varies, the noncompliance

rate dropped 7% from July 1, 2007 to June 30,

2008. Th at represents a decline in the percentage

of noncompliant grantees to 11.4% of total

grants ( 2.9% of total grant dollars). Th is refl ects

Annual Report 2008 | Management Services & Nongovernmental Compliance Division

12 Increasing Efficiency... Exposing Fraud

the proper accounting of an additional $ 13.1

million.

• Online Reporting Program: A major focus

of MS& NGCD for Fiscal Year 2008- 2009 is

finalizing the implementation of the North

Carolina Grants Information Center ( GIC). GIC

opened to grantors and grantees on February

28, 2008 and allows grantor agencies and non-

State grantees to file annual reports online. By

July 30, 2008, more than 1,500 grantees used

GIC to file their 2007 annual reports online.

Improvements through GIC will help eliminate

redundancy, increase data capture efficiency,

and improve reporting timeliness.

Best Practices and Research Assistance

• Quarterly Best Practices Newsletter: This

newsletter updates grantees on state grant

requirements, potential financial accountability

problems and developing adequate internal

policies and accounting controls. MS& NGCD

published four quarterly issues during Fiscal

Year 2007- 2008 with an email distribution of

more than 6,000. All issues are posted on the

State Auditor’s website ( www. ncauditor. net).

• Research and Reporting Assistance: MS& NGCD

continues to provide assistance, via telephone

or email, on unique, confusing or complicated

questions related to grants reporting and the

implementation of the GIC. Many of these

questions require research of both grantee and

grantor issues, with 519 requiring detailed

research.

• Current Documents and Formats: MS& NGCD

provides grantees and funding agencies with

information on required grant reporting

documents and formats through developing,

updating and maintaining online forms dictated

by the reporting statute.

Agency and Grantee Examinations

• Grant Investigations: For Fiscal Year 2007-

2008, MS& NGCD carried forward four grant

investigations from Fiscal Year 2006- 2007,

opened 25 and completed 27 investigations.

These investigations resulted in the State

Auditor’s Office recommending repayment of

$ 797,692 in grant funds, equal to an average of

$ 29,544 per investigation.

• Investigation Training Tools: MS& NGCD uses

the investigation process to educate State agency

personnel on monitoring techniques and to

suggest improvement to those techniques.

In addition, the investigation provides an

excellent opportunity to provide best practice

information on improving accountability

directly to grantees.

Special Projects

• Local Government Grants: MS& NGCD

continues to work closely with the Local

Government Commission at the state level to

identify and capture data on the approximately

$ 12 billion in grants flowing to local government

units.

Goals for Fiscal Year 2008- 2009

For Fiscal Year 2008- 2009, MS& NGCD will

focus on administration of the Grants Information

Center ( GIC) online reporting system. We will

continue to conduct training sessions statewide

for both funding agency and grantee personnel

North Carolina Office of the State Auditor

Increasing Effi ciency... Exposing Fraud

on the use of the GIC, as well as basic grant

functions. Th e GIC has increased the accuracy

and timeliness of grants data to all interested

parties while signifi cantly decreasing the workload

of the funding agencies

and the Offi ce of the State

Auditor. Th e GIC aff ords

both grantor agencies and

grantees a much simpler

method of complying

with statutory reporting

requirements.

Compliance reporting

and subsequent

processing is an important

bench mark in how

eff ective MS& NGCD

is at compliance and

accountability. Th e

number of noncompliant

grantees will ebb and

fl ow with reporting

deadlines. However, the

GIC will greatly improve

the timeliness of adding

noncompliant grantees

and removing grantees from the noncompliance

list when delinquent reports are provided. Th e

data in the GIC is updated nightly and will allow

the public to pull up a report showing the most

current noncompliance and suspension lists.

MS& NGCD’s goal for Fiscal Year 2008- 2009

is to continue eff orts to reduce the number of

noncompliant grants by 15%, keeping the total

value of those in noncompliance to no more than

5% of the total grants awarded.

Coordinating and cooperating with the grantor

agency is of primary importance to successfully

monitor and review nonprofi ts and their grantor

agencies. Th e goal for Fiscal Year 2008- 2009 is

to increase the number of new investigations to

40, a 48% increase in investigations. In an eff ort

to help train agency monitors to be proactive,

MS& NGCD plans to conduct

separate monitoring reviews

of grantor agencies. For

Fiscal Year 2007- 2008, these

reviews were conducted in

conjunction with the grant

investigation. MS& NGCD’s

goal is to complete 12 separate

agency monitoring reviews in

Fiscal Year 2008- 2009.

Training is an important

function of MS& NGCD,

and we plan to continue our

eff orts in Fiscal Year 2008-

2009 by off ering both live

and online grants training.

MS& NGCD will conduct a

minimum of six live sessions

per month, in addition to

off ering online courses in

an e- Learning format that

includes a course test for

each participant. An important part of training

is providing information to grantees and grantors

that is relevant to their particular circumstances.

To aid in this eff ort, MS& NGCD will continue to

issue its Best Practices quarterly newsletter and

identify other eff orts to benefi t both grantors

and grantees. Best Practices is distributed to all

5,000+ grantees identifi ed in our grants database,

as well as agency personnel involved with grants

administration.

A complete list of MS& NGCD reports ( prefi x

GRA) is detailed in Appendix A.

During Fiscal Year

2007- 2008, MS& NGCD

trained 2,882 participants

in 99 training sessions,

bringing the total number

of participants trained

since August 2005 to

approximately 11,075.

Annual Report 2008 | Management Services & Nongovernmental Compliance Division

Increasing Effi ciency... Exposing Fraud

T he Offi ce of the State Auditor’s Investiga-tive

Division has proven to be an eff ec-tive

tool for investigating allegations of

fraud, waste and abuse of State resources. Rely-ing

on State constitutional and statutory authority,

this Division of the State Auditor’s Offi ce exposes

the variety and frequency of

improper governmental ac-tivities

and abuses in State

government. Furthermore,

the State Auditor publishes

all material fi ndings in a

public report, and refers all

substantiated allegations

of criminal activity to law

enforcement and to the rel-evant

legal authorities for

investigation and prosecu-tion.

Th e majority of tips that

lead to investigations come

from the State Auditor’s

confi dential, 24- hour, toll-free

hotline [ 1- 800- 730-

TIPS ( 8477)]. Th is hotline is

designed for State employees

and the general public to report activities they

believe may be illegal or improper. Allegations of

fraud, waste and abuse may also be reported by

traditional mail or hotline@ ncauditor. net.

To protect the integrity of tips, allegations of

improper governmental activities are strictly

confi dential. In addition, State law provides

protection from retaliation or discrimination for

whistleblowers who report improper or illegal

activities to the State Auditor. Th e Investigative

Division takes seriously and responds accordingly

to all specifi c and credible allegations of improper

governmental activities, but is especially concerned

about allegations of retaliation that may bring a

chilling eff ect on future tips.

Th e Offi ce of the State

Auditor satisfi ed the

statutory requirement to

periodically promote the

State Auditor’s Hotline

in Fiscal Year 2007- 2008.

Consequently, the number

of cases opened has nearly

doubled since the previous

fi scal year. In addition, the

average case age has been

reduced by over 50%. Th e

Offi ce of the State Auditor

has eff ectively responded

to staffi ng needs of the

Investigative Division, and

the mission of this Division

has evolved into addressing

the more egregious and

notorious cases of fraud,

waste and abuse. Even those matters referred

by the State Auditor to other agencies’ internal

auditors are monitored by the Auditor’s staff for

timely inquiry and resolution.

Th e goals for Fiscal Year 2008- 2009 are to

eff ectively promote the State Auditor’s Hotline,

enhance the Investigative Task Force and increase

the effi ciency and eff ectiveness of handling

multiple investigations simultaneously.

Investigative Division

Th e Division had 29 open

cases as of July 11, 2007,

and opened 257 during

Fiscal Year 2007- 2008.

Th e State Auditor’s Offi ce

and the respective agencies

assisting with referrals

closed 241 cases, with 45

pending serious matters as

of July 30, 2008.

North Carolina Office of the State Auditor

Increasing Effi ciency... Exposing Fraud

In the fall of 2007, the Offi ce of the State Auditor

launched a statewide television ad blitz featuring

two 30 second spots designed to expose fraud,

waste and abuse in State government. Th is one

area is unique in that money spent to promote

the Hotline has reaped a far greater amount in

savings to the taxpayers when fraud, waste and

abuse of State money is uncovered. Timing of

this promotion was key, since the Investigative

Division prepared itself to

handle the sharp increase

in new cases. Specifi cally,

the Division had 29 open

cases as of July 11, 2007, and

opened 257 during Fiscal

Year 2007- 2008. It should be

noted that this number does

not include immediate and

undocumented referrals.

Th e State Auditor’s Offi ce

and the respective agencies

assisting with referrals

closed 241 cases, with 45

pending serious matters as

of July 30, 2008. In addition,

the average case age was 57

days. Nearly doubling the

intake while using half the

time to resolve these matters is a credit to the

women and men of the Investigative Division,

and the internal auditors of the various state

agencies who have come to work more closely and

eff ectively with the State Auditor and his staff .

Building on the team- centered approach that

was begun in 2005, the Offi ce of the State Auditor

launched a new entity labeled the Investigative Task

Force ( ITF) in 2007. Led by the new head of the

Investigations Division and the Chief Deputy State

Auditor, the ITF is designed to steer investigations

when a deeper vein of fraud, waste or abuse is

detected by using standard auditing techniques,

while applying more innovative investigative

and cyber- driven methods. Being comprised of

auditors and staff with investigative, performance,

non- profi t compliance, fi nancial and information

system backgrounds, the ITF is positioned to

follow “ risk- based” leads and then drill down to

the source of fraud, waste or

abuse of public resources.

Th e following are

summaries of the more

notable cases in Fiscal Year

2007- 2008. A complete list

of Investigative Division

reports ( prefi x INV) is

detailed in Appendix A.

North Carolina Central

University

Th e Offi ce of the State

Auditor received an

allegation through the

State Auditor’s Hotline

concerning improper

payments of $ 2,000 checks

to an undergraduate student

and her acquaintances by the North Carolina

Central University Assistant Provost and Associate

Vice- Chancellor of Academic Aff airs ( Assistant

Provost). Allegedly, the Assistant Provost

authorized and made payments for University

work that was not performed and received portions

of the money in return so he could make payments

on his University- issued credit card.

Investigators found that the Assistant Provost

inappropriately authorized graduate assistant

Investigators found that

the Assistant Provost

inappropriately authorized

graduate assistant contracts

and honoraria for unauthorized

individuals. Th e review

discovered nine payments,

totaling $ 36,041, improperly

authorized by the Assistant

Provost.

Annual Report 2008 | Investigative Division

16 Increasing Efficiency... Exposing Fraud

contracts and honoraria for unauthorized

individuals. The review discovered nine payments,

totaling $ 36,041, improperly authorized by the

Assistant Provost. Seven of these payments

were cashed with a total value of $ 15,341. Two

remaining payments valued at $ 20,700 were

authorized or issued but never cashed. In

addition, a review of credit card statements for

the Assistant Provost’s credit card issued by the

University revealed delinquency charges, a notice

of account cancellation and a notice to assign the

account to a collection agent. These findings lend

credibility to the complainant’s assertion that the

Assistant Provost’s actions were taken to help

make his credit card payments.

Investigators also found two employment forms

initiated by the Assistant Provost for an unqualified

student that contained false authorization

signatures and other documentation with either

false information or lack of sufficient approvals.

Further, the review revealed the Assistant Provost

did not report an improper relationship with an

undergraduate student to University officials.

Other findings included the Assistant Provost

charging personal expenses to the University-issued

credit card, graduate assistant payments

were improperly charged to federal grants, and

lack of proper approvals and justifications for

honoraria payments.

Several findings from this investigation

were referred to the U. S. Attorney’s Office,

the District Attorney, and the State Bureau of

Investigation. Investigators recommended the

strongest disciplinary action available against the

Assistant Provost, collection of reimbursement

for unauthorized expenses, and improved

administrative controls. As a result of our

review, the University removed the Assistant

Provost from all administrative responsibilities

and ultimately terminated his employment. In

addition, the Assistant Provost paid restitution to

the University.

Department of Health And Human Services

– Adult Care Licensure Section

The Office of the State Auditor received a com-plaint

through the State Auditor’s Hotline concern-ing

the procedures performed by the North Caro-lina

Department of Health and Human Services’

Adult Care Licensure Section ( ACLS) regarding

its oversight of two adult care homes, one licensed

and the other, unlicensed.

The investigation found that ACLS allowed a li-censed

home’s management structure to continue

in violation of State law despite the high risk of

resident injury or death as documented in a May

2007 citation. The May 2007 citation documented

the improper use of a restraint which resulted in

the death of one resident. After receiving a sus-pension

of admissions and numerous citations, the

adult care home received new ownership although

it continued to include one of the former owners

in the new ownership structure. The North Caro-lina

Administrative Code prohibits the approval of

a new license to management that had a license

suspension in the prior six months.

In addition, the investigation found that ACLS

did not promptly respond to violations discovered

in a county investigation of an unlicensed home.

Furthermore, ACLS failed to notify the respon-sible

persons of the home’s residents that the home

received a cease of operations letter that precluded

the home from feeding and administering medi-cations

to their residents. As a result, this unli-censed

home remained in operation after the cease

operations notification which allowed residents to

North Carolina Office of the State Auditor

Increasing Effi ciency... Exposing Fraud

remain in an environment that jeopardized their

health and safety.

Investigators recommended changes in the li-cense

approval procedures, a restructuring of

complaint responses, and an improved notifi ca-tion

process.

North Carolina

Central University

Th e Offi ce of the State Au-ditor

was contacted by the

University of North Caroli-na

General Administration

aft er they became aware of

allegations regarding po-tential

inappropriate use of

the North Carolina Cen-tral

University ( University)

computer networks. Alleg-edly,

employees within the

University’s Information

Technology Services De-partment

misused the Uni-versity’s

networks and computers by downloading

copyrighted and pornographic materials. In addi-tion,

these employees allegedly circumvented pur-chasing

procedures to acquire items for personal

use.

Forensic analysis of computers and interviews

confi rmed that two University employees misused

University networks by downloading movies,

music, games, soft ware, and pornography. Th e

Data Base Administrator and Information Tech-nology

Manager used the higher- speed Univer-sity

network and servers to download these items

from unauthorized sources. In addition, these

employees distributed these copyrighted materi-als

to friends and business associates in potential

violation of federal copyright law. Investigators

also determined that the Information Technology

Manager was granted access to servers at North

Carolina State University to download music. Un-authorized

access of government computers vio-lates

North Carolina General Statutes.

In compliance with State

law, the State Auditor no-tifi

ed the North Carolina

Attorney General and ap-propriate

law enforcement

agencies of apparent in-stances

of malfeasance, mis-feasance,

or nonfeasance by

an offi cer or State employee.

Auditors recommended

University management

take strong disciplinary ac-tion

against these employ-ees,

determine the extent of

potential security breaches,

off er training to employees,

and work with law enforce-ment

as appropriate. Th e University released these

individuals from employment.

Other fi ndings in the report included the lack

of adequate controls over fi xed assets, absence of

requirements for employees to complete second-ary

employment forms, and inadequate verifi ca-tion

of education and employment credentials

when hiring and promoting employees. Auditors

recommended improved procedures to track fi xed

assets, additional training, and a course of action

for any discrepancies noted during the application

process.

North Carolina State University

During the course of a review at North Carolina

Employees within the

University’s Information

Technology Services

Department misused the

University’s networks and

computers by downloading

copyrighted and

pornographic materials

Annual Report 2008 | Investigative Division

18 Increasing Efficiency... Exposing Fraud

Central University, auditors became aware of a

connection between an information technology

employee at North Carolina State University and

employees under investigation at North Carolina

Central University. Allegedly, the North Carolina

State University employee allowed individuals ex-ternal

to the organization to access the University

computer network to share music files. In addition,

we received allegations that the employee was in-volved

in illegal downloading and distribution of

copyrighted materials.

Forensic analysis of computers and interviews

confirmed that the Operations and Systems Ana-lyst

misused University networks by downloading

movies, music, games, software, pornography, and

violent images. Some of these files were buried

deep within sub- folders indicating an apparent at-tempt

to conceal the content from detection. The

Operations and Systems Analyst used the Univer-sity

servers because of the faster connection speed.

In addition, he admitted to distributing copyright-ed

materials to friends and business associates as

well as using software to break encryption that

protects copyrights.

The investigation also revealed that the Opera-tions

and Systems Analyst intentionally deleted all

information contained on his University- issued

laptop to conceal inappropriate use. Further, he

attempted to notify co- workers to delete suspi-cious

activity. Intentional damage to a govern-ment

computer and obstruction of an audit are

violations of State law.

In addition, the Operations and Systems Ana-lyst

provided access to a University server to al-low

a friend to download music files. State law

prohibits the unauthorized granting of access to a

government computer.

In compliance with State law, the State Audi-tor

notified the North Carolina Attorney General

and appropriate law enforcement agencies of ap-parent

instances of malfeasance, misfeasance, or

nonfeasance by an officer or State employee. Au-ditors

recommended University management take

strong disciplinary action against the employee,

determine the extent of potential security breach-es,

offer training to employees, and work with

law enforcement as appropriate. The University

placed the employee on investigative leave and he

subsequently terminated employment.

North Carolina General Assembly

Investigators received a complaint through the

State Auditor’s Hotline related to a potential con-flict

of interest involving a North Carolina Sena-tor

and his involvement with the day- to- day op-erations

of a stock car racing team owned by his

son and whose major sponsor at the time was Blue

Cross Blue Shield of North Carolina ( BCBSNC).

A review of the allegations confirmed the relation-ship

between the Senator’s son’s racing team and

BCBSNC and revealed that another company the

Senator co- owns with his son has a direct financial

relationship with the racing team. The racing team

used property owned by a company co- owned by

the Senator as collateral to secure a $ 150,000 line

of credit.

Because BCBSNC is a major sponsor of the rac-ing

team and is a company that does business be-fore

committees upon which the Senator presides

( including one which he co- chairs), this situation

is a potential conflict. Furthermore, the potential

conflict of interest was not properly disclosed on

the Statement of Economic Interest filed with the

State Ethics Commission as required. Auditors

recommended that the Senator include all busi-ness

and personal relationships that may create an

North Carolina Office of the State Auditor

Increasing Effi ciency... Exposing Fraud

actual or potential confl ict of interest explicitly as

required by the Statement of Economic Interest.

Piedmont Community College

Th e Offi ce of the State Auditor received an al-legation

that the Director

of the Educational Op-portunity

Center ( EOC)

at Piedmont Community

College ( College) forced

her staff members to submit

false Annual Performance

Reports to the U. S. Depart-ment

of Education. Th e in-vestigation

confi rmed that

the EOC Director submit-ted

Annual Performance

Reports that included in-eligible

individuals to meet

program goals. Intentional

misrepresentation on these

reports is a violation of fed-eral

law.

Th e review also found

that the Director submit-ted

a fi ctitious hotel receipt for reimbursement of

$ 1,646.87, allowed ineligible family members of

staff to attend retreats at a cost of $ 7,668.33, and

gave special benefi ts to family members through

the EOC program. Th e Director included her

son and daughter- in- law as program participants

without proper documentation and provided her

son a cellular phone purchased with grant funds.

Investigators recommended the College reim-burse

the federal granting agency, seek restitution

from the Director, revise the Annual Performance

Reports, and take disciplinary action against the

EOC Director. Th e EOC Director resigned eff ec-tive

March 31, 2008. Pursuant to State law, the

results of the investigation were forwarded to ap-propriate

law enforcement authorities.

University of North

Carolina At Greensboro

Th e Offi ce of the State

Auditor received a com-plaint

through the State Au-ditor’s

Hotline concerning

the improper contracting

for services and related em-ployment

issues at the Uni-versity

of North Carolina at

Greensboro ( UNC- G). Au-ditors

found that the Vice

Chancellor for Information

Technology Services ( ITS)

used $ 431,925 in State funds

to bypass University policy

and inappropriately hire a

contractor referred through

an associate. Th e Vice Chan-cellor

also authorized a pay

increase from $ 150 to $ 200 per hour aft er the con-tractor

requested a higher rate despite the lack of

written justifi cation. Further review revealed a

lack of competition for other contracts for services.

State purchasing policy requires documentation

when competition is not obtained, and University

procedure requires UNC- G legal counsel to review

all outside contracts before they are signed by the

appropriate University employee. Auditors recom-mended

tightening the University’s internal con-trols

and maintaining appropriate documentation.

Th e review also revealed that over $ 65,000 of

Annual Report 2008 | Investigative Division

Th e review also found that

the Director submitted a

fi ctitious hotel receipt for

reimbursement of $ 1,646.87,

allowed ineligible family

members of staff to attend

retreats at a cost of $ 7,668.33,

and gave special benefi ts to

family members through the

EOC program.

20 Increasing Effi ciency... Exposing Fraud

the ITS contract costs related to the contractor’s

commutes from Los Angeles and Las Vegas and

that UNC- G provided excessive reimbursements

for the contractor’s meals including two purchas-es

of alcoholic beverages,

which is prohibited by State

policy. Further, $ 212,000 of

the ITS contract was paid

with student fees. Auditors

recommended ensuring ex-penses

are reasonable and

necessary and that funds are

only used for their intended

purposes.

North Carolina

Department of

State Treasurer

Th e Offi ce of the State

Auditor received a written

request from the Lieutenant

Governor’s General Coun-sel

regarding the possible

misuse of state computers

within the Department of State Treasurer ( State

Treasurer) for political purposes. Allegedly, a pri-vate

citizen used a state computer to send a pub-lic

records request to conduct political campaign

opposition research. Th e investigation confi rmed

that the Senior Advisor to the State Treasurer sent

the public records request through State Treasurer

computers via a private e- mail account belonging

to her father- in- law.

Analysis of State computers assigned to four

State Treasurer employees, who also work part-time

for the State Treasurer’s campaign for gover-nor,

revealed signifi cant evidence of political ac-tivity

using state resources. Auditors found these

employees accessed political websites belonging to

political action committees, polling consultants,

and the North Carolina Democratic Party’s on-line

voter database. In addi-tion,

our review discovered

53 political documents in-cluding

campaign speeches

and donor lists and ap-proximately

60 emails re-garding

campaign activity.

State law prohibits political

activity by State employees

while on duty or using State

resources. Auditors recom-mended

disciplinary action

against the four employees

and improved training for

all State Treasurer staff .

Offi ce of the Lieutenant

Governor

Th e State Treasurer’s

campaign manager sent a

letter to the State Auditor requesting an investiga-tion

into potential political operations within the

Offi ce of the Lieutenant Governor. Th e allegations

concerned state property, including computers,

being used for campaign activity and the use of

the North Carolina State Highway Patrol for trans-portation

to campaign events. Th e investigation

revealed that a private internet connection and

wireless internet router were installed in the Lieu-tenant

Governor’s offi ce in May 2005 for her em-ployees’

personal use. Th e Lieutenant Governor’s

campaign committee paid for the equipment and

internet service.

North Carolina Office of the State Auditor

Analysis of State computers

assigned to four State

Treasurer employees, who

also work part- time for the

State Treasurer’s campaign for

governor, revealed signifi cant

evidence of political activity

using state resources.

Increasing Effi ciency... Exposing Fraud 2

Auditors discovered a lack of policies govern-ing

the use of personal computers and inadequate

monitoring of computer and router use. In ad-dition,

the review found that there are no North

Carolina General Statutes, rules, or regulations

that specifi cally address the security protection

provided the Lieutenant Governor. Auditors

recommended the removal of the private inter-net

access, communication of policies regarding

personal use of computers, and the issuance of an

executive order by the Governor that formally au-thorized

the security protection for the Lieutenant

Governor.

Department of Public Instruction / State

Board of Education

Th e Offi ce of the State Auditor received a com-plaint

through the State Auditor’s Hotline con-cerning

the arrangement that allowed the Chair-man

of the State Board of Education ( State Board)

to rent a car to use while conducting State Board

business. Th e investigation revealed that the rent-al

car arrangement was not the most economical

option. Investigators calculated that leasing the

same vehicle rather than renting it on a monthly

basis would have resulted in a savings of approxi-mately

$ 0.39 per mile or $ 26,445 in total. Further,

the review found that the Chairman was eligible

to drive a state vehicle. Analysis of costs associ-ated

with the assignment of a state vehicle indi-cated

that cost savings of $ 32,695 could have been

achieved. Auditors recommended that alternative

options be pursued and that management monitor

the costs of each option.

Th e investigation also revealed that $ 9,523

related to meals expense was improperly paid

to the State Board Chairman. Auditors recom-mended

the clarifi cation of policies regarding the

reimbursement of expenses for board members

and that the State Board seek re- payment of the

improper meals expenses. Aft er receiving the

draft report, the State Board Chairman repaid the

Department of Public Instruction for meals for

which he was improperly reimbursed.

Annual Report 2008 | Investigative Division

22 Increasing Effi ciency... Exposing Fraud

Performance Audit Division

T he Offi ce of the State Auditor’s

Performance Audit Division is designed

to allow for fl exible deployment of

resources while upholding strict auditing standards.

Unlike prescheduled fi nancial audits, the subjects

of performance audits are chosen at the discretion

of the State Auditor upon

consideration of two

factors: greatest risk

potential and greatest

opportunity for impact.

Upon release, performance

audits provide the public,

agency managers and

program managers with

an objective analysis of

whether State agencies

effi ciently and eff ectively

manage their programs and

activities. Furthermore,

these audits are of particular

value to legislators who must

consider the eff ectiveness

of State programs in funding decisions and to the

taxpayers who pay for those programs.

Th e Performance Audit Division was recognized

by the National State Auditors Association for best

2008 performance audit less than 2000 hours. Th e

audit entitled Internal Auditing in North Carolina

Agencies and Institutions is an example of the

valuable contribution the Performance Audit

Division makes to the Offi ce of the State Auditor

and State government in general.

During 2008, the State Auditor’s Performance

Audit Division continued to produce reports that

are narrow in scope and target specifi c programs

or areas where the State is at greatest risk. Training

for the Division’s auditors and staff focused

on performance- based management, business

process improvement, and contract management.

Training sessions instructed

auditors how to evaluate

the relationship between

program results and the

resources used to achieve

those results, how to

identify opportunities to

make government operate

more effi ciently, and

how to identify contract

management practices that

do not protect the interests of

the State. Th e Performance

Audit Division continues

to concentrate on value-added

and proactive audits

that strengthen the State

Auditor’s watchdog function in State government.

Th e following are summaries of the more notable

cases in Fiscal Year 2007- 2008. A complete list of

Performance Audit Division audits ( prefi x PER) is

detailed in Appendix A.

North Carolina Education Lottery

Th e audit objectives were to determine whether

the North Carolina Education Lottery ( NCEL) uses

performance management best practices, whether

NCEL management compensation is comparable

Th e Performance Audit

Division was recognized

by the National State

Auditors Association for

best 2008 performance

audit less than 2000

hours.

North Carolina Office of the State Auditor

Increasing Effi ciency... Exposing Fraud 2

to lotteries in other states, and whether NCEL

employee and vendor ethnic diversity refl ects

the ethnic diversity of North Carolina’s general

population.

Th e audit found that NCEL suff ers from

four performance management weaknesses: no

documented revenue forecasting methodology;

no formal strategic plan; no ongoing marketing or

operational research; and no full- cost accounting

of promotional events. Th e audit also found

that NCEL management compensation is in line

with lottery management

compensation of bordering

states, and the ethnic

diversity of NCEL

management and staff

is similar to that of

North Carolina’s general

population.

Albemarle Mental

Health Center

Th e audit objective was

to determine whether the

resources provided by

the State were used for

their intended purpose

in a prudent business manner and with proper

oversight.

Th e audit found that the Area Program Director’s

$ 282,663 base salary and the Special Assistant’s

$ 142,848 base salary were excessive. Th e audit also

found that the Center’s Board member expenses

were excessive, and the Board did not monitor

operations and ensure public funds were used in

the most eff ective and effi cient manner to fulfi ll

the Center’s mission.

Academically or Intellectually Gifted

Program

Th e audit objective was to determine whether the

Exceptional Children Division of the Department

of Public Instruction ( DPI) adequately monitors

the use of state funding for the Academically or

Intellectually Gift ed ( AIG) Program.

Th e audit found that the AIG Program was not

monitored at the state level to ensure that local

programs are operated according to documented

plans. Also, DPI did not

monitor local AIG program

expenditures or determine

the quality and eff ectiveness

of local programs.

Department of

Transportation

Highway Project

Schedules And Costs

Th e audit objective was

to determine the extent

to which Transportation

Improvement Program

highway projects are having

schedule delays and cost

increases and the major

categories contributing to these problems.

Th e audit found that the Department of

Transportation ( DOT) did not successfully meet

planned construction schedules, resulting in

$ 152.4 million of additional infl ation related

construction costs. Th e audit also found that DOT

was defi cient in key performance management

control activities and does not have meaningful

and reliable highway performance objectives and

measures.

Th e audit found that the

Area Program Director’s

$ 282,663 base salary and

the Special Assistant’s

$ 142,848 base salary

were excessive.

Annual Report 2008 | Performance Audit Division

24 Increasing Efficiency... Exposing Fraud

Department of Juvenile Justice And

Delinquency Prevention – Juvenile Crime

Prevention Council- funded Programs

The audit objectives were to determine whether

Juvenile Crime Prevention Council ( JCPC) mem-bers

have conflicts of interest, whether JCPC-funded

programs were adequately monitored,

and whether reliable data was available to evaluate

JCPC program effectiveness.

The audit found that some JCPC members ap-pear

to have financial and program evaluation

conflicts of interest between their duty as a council

member to fairly select programs to fund and their

interest as a program manager to maximize fund-ing

for the programs they manage. The audit also

found that the Department of Juvenile Justice and

Delinquency Prevention and County JCPCs did

not adequately monitor JCPC- funded programs,

some JCPC program participation data was inac-curate,

and there were no standardized measurable

performance objectives for each program type.

Department of Health And Human Services

Division of Medical Assistance

The audit objectives were to determine whether

Division of Medical Assistance ( DMA) properly

developed and managed the utilization review

contract for mental health services, and whether

proper protocols were established to ensure that

the authorizations for services were managed

effectively.

The audit found: DMA management disabled

critical controls designed to prevent unauthorized

payments; DMA’s plan for administering

the contract was inadequately documented;

improvement was needed in DMA’s contract

monitoring processes; and DMA may have

overpaid for services under the contract due to not

resolving a settlement agreement.

Department of Environment And Natural

Resources – Division of Air Quality

The objective of the audit was to determine

whether the Division of Air Quality ( DAQ) Title

V air quality permit review process could be more

efficient.

The audit found that by implementing “ LEAN,” a

process improvement technique modeled after the

Toyota Production System, DAQ could increase

the number of air quality permit applications

processed by 52%, thus causing applicants to

receive permits approximately 40% sooner. This

efficiency increase should effectively eliminate the

current backlog of 229 air quality permits by 2009,

as opposed to 2015 using the current process.

DAQ could see an efficiency gain of $ 572,000, the

cost of hiring seven new full- time staff.

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud 25

T he Information Systems ( IS) Audit

Division’s responsibilities include

analyzing State agency computer

systems to ensure that they are properly secured,

produce accurate financial reports and comply

with State regulations. Staff in this division

conduct their own audits of computer systems

across the State. In addition, they provide IS audit

assistance to financial audit teams to ensure that

agency computerized accounting systems can be

relied upon to produce accurate financial reports.

Without those assurances, financial audit teams

would be unable to issue unqualified opinions on

the accuracy of agency financial statements.

IS auditors are in a unique position to think pro

actively about discovering suspicious data trends

flowing from an agency’s information systems.

The State Auditor’s goal for Fiscal Year 2007-

2008 was to continue the collaboration between

IS auditors and the Financial and Investigative

audit teams and to increase proactive auditing by

providing computer forensic assistance and data

mining analyses of agency financial data.

The IS Audit Division continues to perform

Strategic Audit Reviews that are issued separately

from IS audits. These reviews are used to uncover

fraud, waste or abuse of taxpayer resources by

following suspicious State agency data trends.

While initiated and coordinated by the IS Audit

Division, these reviews involve auditors from all

divisions of the Office of the State Auditor.

Strategic Audit Reviews build a bridge from an

abstract proactive policy to the actual practice of

being proactive. By conducting Strategic Audit

Reviews through the use of data mining analysis,

the State Auditor’s office is in the forefront of

auditing trends. To improve innovation and

effectiveness, the State Auditor continues to work

with leading experts in data mining and plans to

continue to increase the number of Strategic Audit

Reviews to bring more accountability to State

government.

In Fiscal Year 2008- 2009, the IS Audit Division

is implementing an upgrade to the Office of

the State Auditor’s existing audit software. This

software will allow easier access to auditee data

by auditors in other sections of the office and will

allow the use of a built in “ Extract, Transmit, and

Load” ( ETL) technology that will expedite the

acquisition of agency data to be used by Financial

auditors in financial audits and by IS auditors in

their strategic reviews.

The following is a summary of IS Audit

Division’s audits and reviews conducted during

Fiscal Year 2007- 2008. A complete list of IS Audit

Division’s audits and reviews ( prefixes ISA and

SAR) is detailed in Appendix A.

Strategic Audit Review: North Carolina

Division of Social Services

The purpose of this Strategic Audit Review was

to identify invalid Social Security Numbers ( SSNs)

Information Systems Audit

Division

Annual Report 2008 | Information Systems Audit Division

26 Increasing Efficiency... Exposing Fraud

in the North Carolina Division of Social Services.

This review found 1,906 SSNs that were invalid.

The review also found 1,237 SSNs that belonged

to the deceased person’s category on the Social

Security Administration’s Death File. Finally,

the review found 69 food stamp recipients with a

certification date equal to or greater than 45 days

after their date of death.

Strategic Audit Review: North Carolina

State University

The purpose of this Strategic Audit Review was

to identify improper use of procurement cards

( P- Cards) by University employees. This review

found that two University employees used their P-Cards

for personal use. The University had taken

appropriate action on these employees by the time

of our audit.

IS Audit: Community Colleges – General

Controls Reviews

IS Audit staff conducted Information System

audits at the following Community Colleges:

Edgecombe Community College, Blue Ridge

Community College, Wilson Technical Community

College, Rowan- Cabarrus Community College,

Halifax Community College, Piedmont

Community College, Gaston Community College,

Cleveland Community College, Guilford Technical

Community College, Randolph Community

College, Robeson Community College, Catawba

Valley Community College, Central Carolina

Community College, Stanly Community College,

Roanoke- Chowan Community College, Johnston

Community College, Asheville- Buncombe

Community College, Carteret Community College,

James Sprunt Community College, Haywood

Community College, Bladen Community

College, Martin Community College, Brunswick

Community College, McDowell Technical

Community College, Pamlico Community

College, Wilkes Community College, Richmond

Community College, Surry Community College,

Mayland Community College, Fayetteville

Technical Community College, and Wake

Technical Community College.

The primary objective of these audits was to

evaluate the colleges’ IS general controls. The

scope included general security, access controls,

systems software, physical security, and disaster

recovery. Weaknesses noted in access controls

were conveyed to management in a private letter

because of the sensitive nature of the findings,

while the weaknesses that we noted in general

security, systems software, physical security, and

disaster recovery are noted in individual public

reports for each college available to the public on

the State Auditor’s website ( www. ncauditor. net).

IS Audit: North Carolina Information

Technology Services – General Controls

Review

IS audit staff audited North Carolina Information

Technology Services ( ITS). The primary objective

of this audit was to follow- up on the findings

noted in the prior year’s general controls review.

IS audit staff also performed a limited information

systems audit of the application controls for the

ITS MICS Billing System and a review of the ITS

Service Level Agreement process. We found that

ITS was not meeting their targeted resolution time

and target percentage of calls resolved on- time as

stated in the signed Service Level Agreements.

North Carolina Office of the State Auditor

Increasing Effi ciency... Exposing Fraud 2

IS Audit: North Carolina Department of

Health And Human Services – Application

Controls Review

IS audit staff conducted an application

controls review of the County Administration

Reimbursement System at the North Carolina

Department of Health and Human Services. Th e

scope of the audit included

data completeness,

data accuracy, table

maintenance, user access,

processing, and data

backup and recovery. We

did not note any signifi cant

weaknesses in this

application.

IS Audit: North

Carolina Department

of Transportation

– Application Controls

Review

IS audit staff conducted

an application controls review of the Federal

Highway Billing System at the North Carolina

Department of Transportation. Th e scope of the

audit included data completeness, data accuracy,

table maintenance, user access, processing, and

data backup and recovery. We did not note any

signifi cant weaknesses in this application.

IS Audit: North Carolina Department of

Health And Human Services, Division of

Social Services – Application Controls

Review

IS audit staff conducted an application controls

review of the Food Stamps Information Systems

( FSIS) at the North Carolina Department of Health

and Human Services, Division of Social Services.

Th e scope of the audit included data completeness,

data accuracy, data validity, and data authorization.

In the data completeness area we noted that a

SAS 70 Report was not available for a third party

vendor. In the data accuracy area we noted that

there was a lack of program

change controls and a lack

of program run books,

programmer’s manual, and

restart procedures. In the

data validity area we noted

that there was a lack of

segregation of duties in the

recording and approval of

applications through the

FSIS system. In the data

authorization area we noted

that there was information

leakage on the internet

webpage, an inadequate

review of UAudit and

excessive activity reports, and a lack of source

code comparison.

IS Audit: North Carolina Department of

Health And Human Services, Division of

Social Services – Application Controls

Review

IS audit staff conducted an application controls

review of the Eligibility Information Systems ( EIS)

at the North Carolina Department of Health and

Human Services, Division of Social Services. Th e

scope of the audit included data completeness, data

accuracy, data validity, and data authorization. In

the data accuracy area we noted that a budget

  e review found 69 food

stamp recipients with a

certi   cation date equal to

or greater than 45 days

a   er their date of death.

Annual Report 2008 | Information Systems Audit Division

28 Increasing Efficiency... Exposing Fraud

calculation was performed outside of the EIS

application, there was a lack of review of the error

and attention report, there was a lack of program

change controls and a lack of program run books,

programmer’s manual, and restart procedures. In

the data validity area we noted that there was a

lack of segregation of duties in the recording and

approval of applications through the EIS system. In

the data authorization area we noted that there was

information leakage on the internet webpage, an

inadequate review of UAudit and excessive activity

reports, and a lack of source code comparison.

Information Security Vulnerability

Assessments

Funded by lapsed salaries, the Office of the

State Auditor contracted with a private firm to

conduct vulnerability assessments on the North

Carolina Department of Corrections, the North

Carolina Department of Environment and Natural

Resources, and the North Carolina Department

of Public Instruction. The purpose of these

assessments were to gauge the entity’s security

posture at a given point in time, identify security

risks that might make an entity vulnerable to

attack, and determine appropriate procedures to

mitigate the identified risks. The detailed results

of the assessments are kept confidential as to

not announce control weaknesses to would- be

intruders. General results containing the numbers

of high, medium and low weaknesses are released

to the public through the State Auditor’s website

and email notification service.

North Carolina Office of the State Auditor

Office of the state audi tor main office and branc h loca tions

Morganton

Asheville

Charlotte

Fayetteville

Wilmington

Greenville

Edenton

Raleigh

Winston- Salem Greensboro

Increasing Efficiency... Exposing Fraud 29

Personnel

To be a proactive State agency, the Office of the

State Auditor must be a responsible manager of

its personnel. After selecting the best qualified

applicants, the State Auditor’s Office must then

provide quality training to employees and a quality

control review of employees work product.

The Office of the State Auditor continues to work

towards the goal of more effective and efficient audits.

These efficiency gains allow the State Auditor’s Office

to spread out its resources to do more with current

auditor and staff positions.

The follow- up to the 2006 AuditWatch efficiency

curriculum was completed in 2007. Efficiency

levels were analyzed and AuditWatch provided the

State Auditor with feedback in areas that needed

improvement. In 2005, the Office of the State Auditor

used 103,703 audit hours in the Financial Audit

Division alone. After the AuditWatch efficiencies

were in place, the Financial Audit Division used only

87,358 audit hours. This equates to a total efficiency

gain of 15,980 audit hours or $ 1,358,300 ( audit hours

x billing rate).

Recruiting

The State Auditor’s goal is to build relationships with

the right applicants. This will reduce turnover and

eliminate the waste that frequent turnover creates.

The Office of the State Auditor continues its efforts

to hire talented, skilled staff by recruiting on university

campuses across the state. We work with campus

faculty to participate in Beta Alpha Psi meetings,

accounting classes and other events. Significant

effort is made to identify applicants who want to be

challenged yet are looking for a good work- life balance

and want to make an impact as a public servant.

In addition, the State Auditor’s Office has made

great strides in its internship program. Internships

provide individuals an opportunity to perform

meaningful, career- related work with our Agency

prior to their final year in school. If the internship is

successful, the intern may be invited to begin their

career in the State Auditor’s Office. This program

has enabled the State Auditor to hire very talented

individuals who are looking for a long- term

relationship with our office.

Training

In Fiscal Year 2007- 2008, the State Auditor

refined the annual training standard from 65

hours to closer to the CPA Board requirement of

40 hours annually per person. This action saved

taxpayers over 2000 work hours that are now used

for audits, and resulted in the Training Department’s

restructuring. What once required four full- time

staff positions totaling $ 230,741 in Fiscal Year 2006-

2007, now takes one full- time professional in Fiscal

Year 2008- 2009.

In 2008, the State Auditor’s Office became an

authorized continuing professional education ( CPE)

sponsor recognized by the NC State Board of CPA

Examiners. This is part of the ongoing commitment

by the State Auditor to conduct quality continuing

education. The Agency has streamlined the training

process to better focus training in needed areas while

maintaining the flexibility to respond and react to

specific needs. In addition, training competencies

now allow for training needs and also for maximum

audit productivity in line with industry standards.

Quality Controls

The Office of the State Auditor’s work product

is governed by strict adherence to professional

standards promulgated by government agencies

General Administration

Annual Report 2008 | General Administrtion

30 Increasing Efficiency... Exposing Fraud

and professional organizations including the

Governmental Accounting Standards Board, the

Financial Accounting Standards Board, the Federal

Office of Management and Budget, the Government

Accountability Office, the American Institute of

Certified Public Accountants, and various state and

federal laws and regulations. These standards require

that auditors remain independent, be technically

proficient and receive continuing professional

education, obtain sufficient appropriate evidence to

support conclusions, and issue reports that clearly

communicate audit results.

The State Auditor’s Office has a control system

to ensure the quality of audit work. The system

includes supervisory review of all work product and

management review of audit reports and critical

supporting workpapers. The Agency monitors the

effectiveness of its quality control system by having

staff who did not participate in an audit periodically

review the work. To uphold the standards of the

supervisory review, the State Auditor’s goal is that

all newly hired Supervisor level employees and

above in the Financial Audit Division have a valid

CPA license, or the merit- based equivalent in work

experience.

In another layer of review, the Agency receives a

peer review every three years under the direction

of the National State Auditors Association. During

the peer review, members of audit staffs from other

states review the office’s quality control system and

workpapers for compliance with auditing standards.

The most recent peer review was performed in July

2006 and resulted in a clean opinion on the quality

control system.

Processing & Publication

With close to 200 employees in the Office of

the State Auditor, the publishing of audits, reports

and reviews is a complicated and time consuming

process. Magnified by the sensitive nature of the audit

subject matter, the Agency’s administrative staff must

be detail minded and highly organized. The goals of

accuracy and timeliness are the staff’s top priorities.

However without effective publication, the audit,

report or review would go unnoticed.

Publication of the audits, reports and reviews

is an essential part of Agency’s proactive posture.

A report exposing an instance of fraud, waste or

abuse of taxpayers’ resources, if publicized by the

statewide news media, becomes an effective tool

for the deterrence of future fraud, waste or abuse

of taxpayers’ resources. The State Auditor’s Office,

through a positive relationship with the news media,

can pro actively deter others from committing similar

acts of fraud, waste and abuse of taxpayer money.

Budgeting & Purchasing

The Office of the State Auditor is the taxpayers’

watchdog against wasteful spending of State

resources. To be an effective messenger, the Agency

must ensure that its resources are spent as wisely as

possible.

The State Auditor’s budget is approximately $ 18.9

million and the agency bills approximately $ 5.2

million for federal audit work. In addition to the

central office in Raleigh, the Agency has 9 branch

offices throughout the State which our budget office

is responsible for managing financially.

Budgeting and purchasing are governed by strict

rules and regulations. An independent CPA firm

annually conducts a financial audit of the office

and routinely issues a clean opinion of its financial

statements.

Management Information Systems ( MIS)

The Management Information Systems Division

( MIS) of the Office of the State Auditor is charged

with four primary objectives:

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud 31

• Provide Information Technology services

including Operational Support, Application

Development, Infrastructure Management and

Information Security to Agency Personnel

• Oversight of Senate Bill 991 compliance

• Enterprise Information Technology strategic

planning for the Agency

• Information Technology tactical implementation

in order to increase productivity, efficiency and

security of critical business functions.

In addition to providing for the daily operational

support for Agency personnel, the MIS Division

completed a number of major projects to enhance

the efficiency, quality of service, and security of the

Agency.

MIS worked closely with the Office of the State

Controller to ensure the Agency met all technical

requirements for the Beacon Project ( statewide

payroll application implemented in March 2008).

MIS also worked with ITS and the Enterprise Data

Warehouse service, as the first customer of the

new Statewide Enterprise level service, to complete

the Management Services and Nongovernmental

Compliance Division’s Grants Compliance online

application ( GIC).

MIS has completed an internal upgrade of the

Agency Intranet, completing a change over from

a dynamic site to an industry standard portal

technology site designed to encourage collaboration

among personnel and to enable a more efficient

workflow during audits. In 2008, MIS has been

applying portal technology to reduce administrative

paperwork by developing on- line forms, workflow,

and email alerts. In conjunction with the portal

upgrade, MIS piloted an e- Learning initiative to

make training more efficient and cost effective.

In addition, MIS has upgraded the Agencies

network infrastructure to meet ESAP requirements.

MIS will continue to work closely with ITS

to securely merge the State Auditor’s network

infrastructure into the State of North Carolina’s

architecture. The Agency servers and software have

been upgraded to the latest versions. Finally, the

Business Continuity Plan ( BCP) / Continuation of

Operations Plan ( COOP) was reviewed and tested

to meet State requirements and to address Pandemic

Influenza planning requirements.

In 2009, the MIS Division will continue to provide

quality operational support to Agency personnel.

In addition, the MIS Division will aggressively work

to provide technologies to Agency personnel that

will improve the efficiency and quality of Agency

critical business functions. MIS will continue

to work with the Beacon Project Team to help

develop guidelines and requirements for additional

Beacon initiatives including the SAP Grants

module implementation. The GIC application for

the Management Services and Nongovernmental

Compliance Division will be enhanced to improve

both usability and functionality. Agency personnel

will complete comprehensive training on the new

internal portal. The e- Learning system will be

expanded to incorporate an advanced Learning

Management System solution. This will lead to

expanded education and training opportunities

including the ability to make vital information

available via web casting. In addition, an Agency

wide e- Recruiting solution will be designed and

implemented to assist in the recruitment and hiring

of quality candidates for open Agency positions.

An improved Intrusion Prevention System ( IPS)

will be installed and configured and infrastructure

and security needs will continue to be assessed and

improved where feasible. Finally, the Agency has

been scheduled for ITS consolidation in 2009 and

MIS will work with ITS to ensure that required IT

services are smoothly transitioned to ITS while

maintaining the operational functionality required

for the Office of the State Auditor to perform its

mission.

Annual Report 2008 | General Administrtion

32 Increasing Efficiency... Exposing Fraud

Appendix A

The following reports are listed by report number which correspond to individual agency divisions. These

reports were issued from July 1, 2007 through September 2008.

Report Number Report Title Release Date

FCA- 2007- 2109 Brunswick County Clerk of Superior Court - Fiscal Control Audit 9/ 26/ 07

FCA- 2007- 2126 Currituck County Clerk of Superior Court - Fiscal Control Audit 1/ 29/ 08

FCA- 2007- 2127 Dare County Clerk of Superior Court - Fiscal Control Audit 7/ 10/ 07

FCA- 2007- 2137 Graham County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 07

FCA- 2007- 2141 Halifax County Clerk of Superior Court - Fiscal Control Audit 11/ 6/ 07

FCA- 2007- 2157 Martin County Clerk of Superior Court - Fiscal Control Audit 9/ 12/ 07

FCA- 2007- 2178 Rockingham County Clerk of Superior Court - Fiscal Control Audit 9/ 25/ 07

FCA- 2007- 2186 Swain County Clerk of Superior Court - Fiscal Control Audit 11/ 26/ 07

FCA- 2007- 2193 Washington County Clerk of Superior Court - Fiscal Control Audit 10/ 12/ 07

FCA- 2008- 2106 Beaufort County Clerk of Superior Court - Fiscal Control Audit 1/ 29/ 08

FCA- 2008- 2132 Edgecombe County Clerk of Superior Court - Fiscal Control Audit 2/ 27/ 08

FCA- 2008- 2151 Jones County Clerk of Superior Court - Fiscal Control Audit 9/ 11/ 08

FCA- 2008- 2171 Perquimans County Clerk of Superior Court - Fiscal Control Audit 1/ 7/ 08

FCA- 2009- 2101 Alexander County Clerk of Superior Court - Fiscal Control Audit 9/ 15/ 08

FCA- 2009- 2111 Burke County Clerk of Superior Court - Fiscal Control Audit 9/ 15/ 08

FCA- 2009- 2149 Jackson County Clerk of Superior Court - Fiscal Control Audit 9/ 17/ 08

FIN- 2006- 6070 North Carolina Agricultural and Technical State University -

Financial Statement Audit 8/ 23/ 07

FIN- 2006- 6086 Elizabeth City State University - Financial Statement Audit 9/ 14/ 07

FIN- 2006- 6088 Fayetteville State University - Financial Statement Audit 12/ 10/ 07

FIN- 2006- 6090 North Carolina Central University - Financial Statement Audit 8/ 17/ 07

FIN- 2006- 6801 South Piedmont Community College - Financial Statement Audit 11/ 14/ 07

FIN- 2006- 6807 Brunswick Community College - Financial Statement Audit 8/ 7/ 07

FIN- 2006- 6822 College of The Albemarle - Financial Statement Audit 7/ 27/ 07

FIN- 2006- 6876 Sampson Community College - Financial Statement Audit 7/ 12/ 07

FIN- 2006- 6878 Sandhills Community College - Financial Statement Audit 8/ 7/ 07

FIN- 2007- 3400 Department of State Treasurer - Statewide Financial Audit Procedures 2/ 5/ 08

FIN- 2007- 3510 Department of Public Instruction - Statewide Financial Audit Procedures 3/ 14/ 08

FIN- 2007- 3700 Department of Agriculture and Consumer Services -

Statewide Financial Audit Procedures 4/ 2/ 08

FIN- 2007- 4160 Office of the State Controller - Statewide Financial Audit Procedures 2/ 1/ 08

FIN- 2007- 4200 Department of Transportation - Statewide Financial Audit Procedures 4/ 2/ 08

FIN- 2007- 4205 North Carolina Turnpike Authority - Financial Statement Audit 5/ 30/ 08

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud 33

FIN- 2007- 4300 Department of Environment and Natural Resources -

Statewide Financial Audit Procedures 2/ 5/ 08

FIN- 2007- 4410 North Carolina Department of Health and Human Services -

Statewide Financial Audit Procedures 4/ 3/ 08

FIN- 2007- 4600 Department of Commerce - Statewide Financial Audit Procedures 3/ 10/ 08

FIN- 2007- 4620 North Carolina State Ports Authority - Financial Statement Audit 4/ 16/ 08

FIN- 2007- 4650 Employment Security Commission - Statewide Financial Audit Procedures 4/ 2/ 08

FIN- 2007- 4670 North Carolina Education Lottery - Financial Statement Audit 12/ 6/ 07

FIN- 2007- 4700 Department of Revenue - Statewide Financial Audit Procedures 2/ 4/ 08

FIN- 2007- 4900 North Carolina Department of Crime Control and Public Safety -

Statewide Financial Audit Procedures 3/ 27/ 08

FIN- 2007- 6020 University of North Carolina at Chapel Hill - Financial Statement Audit 3/ 25/ 08

FIN- 2007- 6030 North Carolina State University - Financial Statement Audit 2/ 1/ 08

FIN- 2007- 6040 The University of North Carolina at Greensboro - Financial Statement Audit 1/ 29/ 08

FIN- 2007- 6050 University of North Carolina at Charlotte - Financial Statement Audit 2/ 5/ 08

FIN- 2007- 6055 The University of North Carolina at Asheville - Financial Statement Audit 5/ 28/ 08

FIN- 2007- 6060 University of North Carolina Wilmington - Financial Statement Audit 2/ 20/ 08

FIN- 2007- 6065 East Carolina University - Financial Statement Audit 3/ 12/ 08

FIN- 2007- 6070 North Carolina Agricultural and Technical State University -

Financial Statement Audit 5/ 30/ 08

FIN- 2007- 6075 Western Carolina University - Financial Statement Audit 5/ 9/ 08

FIN- 2007- 6080 Appalachian State University - Financial Statement Audit 1/ 2/ 08

FIN- 2007- 6082 The University of North Carolina at Pembroke - Financial Statement Audit 6/ 2/ 08

FIN- 2007- 6084 Winston- Salem State University - Financial Statement Audit 4/ 3/ 08

FIN- 2007- 6086 Elizabeth City State University - Financial Statement Audit 7/ 2/ 08

FIN- 2007- 6088 Fayetteville State University - Financial Statement Audit 5/ 30/ 08

FIN- 2007- 6090 North Carolina Central University - Financial Statement Audit 7/ 15/ 08

FIN- 2007- 6092 North Carolina School of the Arts - Financial Statement Audit 5/ 1/ 08

FIN- 2007- 6095 University of North Carolina Hospitals - Financial Statement Audit 11/ 14/ 07

FIN- 2007- 6801 South Piedmont Community College - Financial Statement Audit 5/ 21/ 08

FIN- 2007- 6802 Asheville Buncombe Technical Community College - Financial Statement Audit 5/ 28/ 08

FIN- 2007- 6804 Beaufort County Community College - Financial Statement Audit 3/ 7/ 08

FIN- 2007- 6807 Brunswick Community College - Financial Statement Audit 5/ 20/ 08

FIN- 2007- 6810 Cape Fear Community College - Financial Statement Audit 5/ 14/ 08

FIN- 2007- 6812 Carteret Community College - Financial Statement Audit 5/ 9/ 08

FIN- 2007- 6814 Catawba Valley Community College - Financial Statement Audit 4/ 14/ 08

FIN- 2007- 6820 Cleveland Community College - Financial Statement Audit 5/ 28/ 08

FIN- 2007- 6830 Edgecombe Community College - Financial Statement Audit 4/ 2/ 08

FIN- 2007- 6832 Fayetteville Technical Community College - Financial Statement Audit 6/ 13/ 08

Annual Report 2008 | Appendix A

34 Increasing Efficiency... Exposing Fraud

FIN- 2007- 6836 Gaston College - Financial Statement Audit 5/ 30/ 08

FIN- 2007- 6838 Guilford Technical Community College - Financial Statement Audit 5/ 21/ 08

FIN- 2007- 6842 Haywood Community College - Financial Statement Audit 3/ 14/ 08

FIN- 2007- 6843 Blue Ridge Community College - Financial Statement Audit 3/ 19/ 08

FIN- 2007- 6846 James Sprunt Community College - Financial Statement Audit 2/ 21/ 08

FIN- 2007- 6847 Johnston Community College - Financial Statement Audit 6/ 9/ 08

FIN- 2007- 6850 Martin Community College - Financial Statement Audit 3/ 14/ 08

FIN- 2007- 6851 Mayland Community College - Financial Statement Audit 5/ 22/ 08

FIN- 2007- 6852 McDowell Technical Community College - Financial Statement Audit 3/ 14/ 08

FIN- 2007- 6853 Mitchell Community College - Financial Statement Audit 3/ 12/ 08

FIN- 2007- 6854 Montgomery Community College - Financial Statement Audit 5/ 22/ 08

FIN- 2007- 6860 Pamlico Community College - Financial Statement Audit 5/ 9/ 08

FIN- 2007- 6861 Piedmont Community College - Financial Statement Audit 5/ 20/ 08

FIN- 2007- 6866 Richmond Community College - Financial Statement Audit 5/ 30/ 08

FIN- 2007- 6874 Rowan- Cabarrus Community College - Financial Statement Audit 5/ 20/ 08

FIN- 2007- 6880 Southeastern Community College - Financial Statement Audit 5/ 14/ 08

FIN- 2007- 6882 Southwestern Community College - Financial Statement Audit 5/ 28/ 08

FIN- 2007- 6883 Stanly Community College - Financial Statement Audit 5/ 21/ 08

FIN- 2007- 6884 Surry Community College - Financial Statement Audit 5/ 21/ 08

FIN- 2007- 6890 Wake Technical Community College - Financial Statement Audit 5/ 28/ 08

FIN- 2007- 6896 Wilkes Community College - Financial Statement Audit 5/ 22/ 08

FIN- 2007- 6898 Wilson Technical Community College - Financial Statement Audit 5/ 28/ 08

FIN- 2007- 8303 USS North Carolina Battleship Commission - Financial Statement Audit 5/ 28/ 08

FIN- 2007- 8410 NC Teachers and State Employees Comprehensive Major Medical Plan 1/ 29/ 08

FIN- 2007- 8530 North Carolina Global Transpark Authority 1/ 2/ 08

FIN- 2007- 8550 North Carolina Agricultural Finance Authority 5/ 14/ 08

FIN- 2007- 8560 Wireless Emergency Telephone System Fund - Financial Statement Audit 5/ 29/ 08

FIN- 2007- 8730 Statewide Single Audit 4/ 8/ 08

GRA- 2007- 0014 Review of North Carolina Fair Housing Center State Grant 7/ 20/ 07

GRA- 2007- 0028 Review of Carolyns Little Castle State Grant 9/ 13/ 07

GRA- 2007- 0031 Review of The Kids Place Day Care State Grant 8/ 22/ 07

GRA- 2007- 0032 Review of United Community Ministries State Grant 7/ 16/ 07

GRA- 2007- 0033 Review of Wayne Memorial Hospital State Grant 7/ 19/ 07

GRA- 2007- 0037 Review of East Spencer New Beginning Community Development State Grant 11/ 29/ 07

GRA- 2007- 0038 Review of Operation Sickle Cell Inc. State Grant 2/ 18/ 08

GRA- 2008- 0039 Review of Teaching Academics for Life Learning Outreach Ministries State Grant 9/ 13/ 07

GRA- 2008- 0040 Review of Wee Care Inc. State Grant 2/ 1/ 08

GRA- 2008- 0041 Review of Primary Colors Day Care Center State Grant 11/ 13/ 07

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud 35

GRA- 2008- 0042 Review of North Hills Child Care Center State Grant 9/ 13/ 07

GRA- 2008- 0043 Review of Hoke County Youth & Family Services Inc. State Grant 3/ 13/ 08

GRA- 2008- 0044 Review of Healthy Mothers Healthy Babies Coalition of Wake County State Grant 11/ 1/ 07

GRA- 2008- 0045 Review of Durham Nursery & Preschool State Grant 2/ 1/ 08

GRA- 2008- 0046 Review of Infants Palace Day Care Inc. State Grant 8/ 23/ 07

GRA- 2008- 0047 Review of JSL Development Center State Grant 11/ 14/ 07

GRA- 2008- 0048 Review of Appletree Day Care Inc. State Grant 8/ 30/ 07

GRA- 2008- 0049 Review of Life After Life Inc. State Grant 9/ 11/ 07

GRA- 2008- 0050 Review of the Boys and Girls Club of Wake County State Grant 4/ 25/ 08

GRA- 2008- 0051 Review of Mediation Services of Forsyth County State Grant 11/ 13/ 07

GRA- 2008- 0052 Review of Microenterprise Loan Program of Winston- Salem State Grant 3/ 3/ 08

GRA- 2008- 0053 Review of The Salvation Army Charlotte State Grant 9/ 17/ 07

GRA- 2008- 0054 Review of Sandhills Community Action Program Inc. State Grant 6/ 11/ 08

GRA- 2008- 0055 Review of Tar Heel Volunteer Rescue Squad State Grant 8/ 17/ 07

GRA- 2008- 0058 Review of Windows of the World CDC State Grant 11/ 13/ 07

GRA- 2008- 0060 Review of Stem Community Fire Department EMS State Grant 4/ 25/ 08

GRA- 2008- 0061 Review of The Enola Group Inc. State Grant 5/ 29/ 08

GRA- 2008- 0062 Review of Prevent Blindness North Carolina State Grant 7/ 28/ 08

GRA- 2008- 0065 Review of Martin County Community Action State Grant 9/ 4/ 08

GRA- 2008- 0068 Review of the North Carolina Pottery Center State Grant 7/ 17/ 08

INV- 2006- 0307F Follow- up to Tire Retread Contract 3/ 11/ 08

INV- 2007- 0318F University of North Carolina Hospitals/ University of North Carolina

School of Pharmacy - Follow- up 2/ 28/ 08

INV- 2007- 0319 University of North Carolina at Greensboro 7/ 11/ 07

INV- 2007- 0320 North Carolina Department of Transportation 8/ 28/ 07

INV- 2007- 0321 North Carolina Department of Administration 9/ 4/ 07

INV- 2007- 0322 East Carolina University 9/ 7/ 07

INV- 2007- 0323 North Carolina Department of Transportation 9/ 12/ 07

INV- 2007- 0324 North Carolina Department of Commerce 10/ 1/ 07

INV- 2007- 0325 North Carolina Department of Environment and Natural Resources 10/ 23/ 07

INV- 2007- 0326 Department of Public Instruction 11/ 27/ 07

INV- 2007- 0327 “ The Conflict Resolution Center, Inc.” 11/ 28/ 07

INV- 2008- 0328 Office of the Lieutenant Governor 1/ 31/ 08

INV- 2008- 0329 North Carolina Department of State Treasurer 1/ 31/ 08

INV- 2008- 0330 North Carolina Central University 2/ 12/ 08

INV- 2008- 0331 Piedmont Community College 3/ 24/ 08

INV- 2008- 0332 North Carolina Department of Health and Human Services 4/ 29/ 08

INV- 2008- 0333 North Carolina General Assembly 5/ 27/ 08

Annual Report 2008 | Appendix A

36 Increasing Efficiency... Exposing Fraud

INV- 2008- 0334 North Carolina State Board of Elections 5/ 13/ 08

INV- 2008- 0335 University of North Carolina at Greensboro 5/ 29/ 08

INV- 2008- 0336 North Carolina State University 6/ 17/ 08

INV- 2008- 0337 North Carolina Central University 6/ 17/ 08

INV- 2008- 0338 North Carolina Department of Health and Human Services 7/ 31/ 08

INV- 2008- 0339 Autism Society of North Carolina 8/ 21/ 08

INV- 2008- 0340 North Carolina State Ethics Commission 9/ 18/ 08

INV- 2008- 0341 Robeson Community College 9/ 23/ 08

ISA- 2007- 4300 North Carolina Department of Environment and Natural Resources 9/ 17/ 07

ISA- 2007- 4410 North Carolina Department of Health and Human Services/

County Administration Reimbursement System 9/ 7/ 07

ISA- 2007- 4500 North Carolina Department of Corrections 7/ 3/ 07

ISA- 2007- 4660 Information Technology Services 9/ 4/ 07

ISA- 2007- 6802 Asheville- Buncombe Technical Community College 10/ 22/ 07

ISA- 2007- 6806 Bladen Community College 11/ 30/ 07

ISA- 2007- 6807 Brunswick Community College 1/ 2/ 08

ISA- 2007- 6812 Carteret Community College 11/ 7/ 07

ISA- 2007- 6814 Catawba Valley Community College 9/ 14/ 07

ISA- 2007- 6816 Central Carolina Community College 9/ 18/ 07

ISA- 2007- 6820 Cleveland Community College 8/ 22/ 07

ISA- 2007- 6830 Edgecombe Community College 7/ 3/ 07

ISA- 2007- 6836 Gaston College 8/ 22/ 07

ISA- 2007- 6838 Guilford Technical Community College 9/ 7/ 07

ISA- 2007- 6840 Halifax Community College 7/ 20/ 07

ISA- 2007- 6842 Haywood Community College 11/ 29/ 07

ISA- 2007- 6843 Blue Ridge Community College 7/ 13/ 07

ISA- 2007- 6846 James Sprunt Community College 11/ 7/ 07

ISA- 2007- 6847 Johnston Community College 10/ 2/ 07

ISA- 2007- 6850 Martin Community College 12/ 13/ 07

ISA- 2007- 6852 McDowell Technical Community College 1/ 2/ 08

ISA- 2007- 6860 Pamlico Community College 1/ 3/ 08

ISA- 2007- 6861 Piedmont Community College 7/ 20/ 07

ISA- 2007- 6864 Randolph Community College 9/ 14/ 07

ISA- 2007- 6868 Roanoke- Chowan Community College 10/ 2/ 07

ISA- 2007- 6870 Robeson Community College 9/ 14/ 07

ISA- 2007- 6874 Rowan- Cabarrus Community College 7/ 18/ 07

ISA- 2007- 6883 Stanly Community College 9/ 18/ 07

ISA- 2007- 6896 Wilkes Community College 1/ 3/ 08

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud 37

ISA- 2007- 6898 Wilson Technical Community College 7/ 16/ 07

ISA- 2008- 4200 North Carolina Department of Transportation 2/ 15/ 08

ISA- 2008- 4440A Department of Health and Human Services 3/ 27/ 08

ISA- 2008- 4440B Department of Health and Human Services 3/ 27/ 08

ISA- 2008- 4700 North Carolina Department of Revenue 9/ 12/ 08

ISA- 2008- 6832 Fayetteville Technical Community College 3/ 3/ 08

ISA- 2008- 6851 Mayland Community College 1/ 25/ 08

ISA- 2008- 6866 Richmond Community College 1/ 7/ 08

ISA- 2008- 6884 Surry Community College 1/ 23/ 08

ISA- 2008- 6890 Wake Technical Community College 3/ 6/ 08

NGV- 2006- 9101 North Carolina Partnership for Children Inc. - Financial Statement Audit 7/ 16/ 07

NGV- 2006- 9110 Mecklenburg Partnership for Children - Financial Statement Audit 7/ 30/ 07

NGV- 2006- 9127 Buncombe County Partnership for Children Inc. - Financial Statement Audit 6/ 29/ 07

NGV- 2007- 9101 North Carolina Partnership for Children Inc. - Financial Statement Audit 5/ 30/ 08

NGV- 2007- 9102 Burke County Smart Start Inc. - Financial Statement Audit 2/ 11/ 08

NGV- 2007- 9103 Caldwell County Smart Start A Partnership for Young Children -

Financial Statement Audit 5/ 20/ 08

NGV- 2007- 9104 Cleveland County Partnership for Children Inc. - Financial Statement Audit 2/ 1/ 08

NGV- 2007- 9108 Hertford County Partnership for Children Inc. - Financial Statement Audit 2/ 11/ 08

NGV- 2007- 9109 Jones County Partnership for Children - Financial Statement Audit 4/ 4/ 08

NGV- 2007- 9111 Orange County Partnership for Young Children - Financial Statement Audit 3/ 3/ 08

NGV- 2007- 9114 Ashe County Partnership for Children - Financial Statement Audit 2/ 11/ 08

NGV- 2007- 9115 Avery County Smart Start: A Partnership for Children - Financial Audit 5/ 1/ 08

NGV- 2007- 9117 Chatham County Partnership for Children - Financial Statement Audit 2/ 21/ 08

NGV- 2007- 9119 Durham Partnership for Children - Financial Statement Audit 3/ 4/ 08

NGV- 2007- 9122 Lenoir/ Greene Partnership for Children Inc. - Financial Statement Audit 2/ 13/ 08

NGV- 2007- 9124 Person County Partnership for Children - Financial Statement Audit 3/ 20/ 08

NGV- 2007- 9126 Alleghany Partnership for Children Inc. - Financial Statement Audit 5/ 21/ 08

NGV- 2007- 9129 Pamlico Partnership for Children Inc. - Financial Statement Audit 4/ 14/ 08

NGV- 2007- 9130 Randolph County Partnership - Financial Statement Audit 2/ 20/ 08

NGV- 2007- 9132 Rutherford/ Polk Smart Start Partnership - Financial Statement Audit 5/ 9/ 08

NGV- 2007- 9136 Tyrrell- Washington Partnership for Children Inc. - Financial Statement Audit 1/ 15/ 08

NGV- 2007- 9137 Wilson County Partnership for Children - Financial Statement Audit 5/ 20/ 08

NGV- 2007- 9138 Anson County Partnership for Children - Financial Statement Audit 2/ 15/ 08

NGV- 2007- 9139 Smart Start of Brunswick County Inc. - Financial Statement Audit 6/ 4/ 08

NGV- 2007- 9140 The Bertie County Partnership for Children Inc. - Financial Statement Audit 5/ 1/ 08

NGV- 2007- 9143 Guilford County Partnership for Children - Financial Statement Audit 3/ 3/ 08

NGV- 2007- 9144 Hoke County Partnership for Children and Families - Financial Statement Audit 2/ 27/ 08

Annual Report 2008 | Appendix A

38 Increasing Efficiency... Exposing Fraud

NGV- 2007- 9146 Lee County Partnership for Children - Financial Statement Audit 4/ 25/ 08

NGV- 2007- 9150 Alamance Partnership for Children - Financial Statement Audit 2/ 1/ 08

NGV- 2007- 9151 Alexander County Partnership for Children - Financial Statement Audit 3/ 20/ 08

NGV- 2007- 9152 Beaufort Hyde Partnership for Children - Financial Statement Audit 2/ 15/ 08

NGV- 2007- 9153 Bladen Smart Start A Partnership for Childern Inc. - Financial Statement Audit 5/ 21/ 08

NGV- 2007- 9155 Carteret County Partnership for Children - Financial Statement Audit 3/ 19/ 08

NGV- 2007- 9157 The Chowan/ Perquimans Smart Start Partnership - Financial Statement Audit 3/ 19/ 08

NGV- 2007- 9160 Smart Start of Davie County Inc. - Financial Statement Audit 4/ 4/ 08

NGV- 2007- 9161 Franklin- Granville- Vance Partnership for Children Inc. -

Financial Statement Audit 2/ 15/ 08

NGV- 2007- 9163 Harnett County Partnership for Children - Financial Statement Audit 2/ 27/ 08

NGV- 2007- 9164 Smart Start of Henderson County Inc. - Financial Statement Audit 5/ 2/ 08

NGV- 2007- 9166 Partnership for Children of Johnston County Inc. - Financial Statement Audit 3/ 19/ 08

NGV- 2007- 9167 Partnership for Children of Lincoln Gaston Counties Inc. -

Financial Statement Audit 1/ 16/ 08

NGV- 2007- 9168 Madison County Partnership for Children and Families Inc. -

Financial Statement Audit 2/ 11/ 08

NGV- 2007- 9170 The Mitchell Yancey County Partnership for Children Inc. -

Financial Statement Audit 5/ 2/ 08

NGV- 2007- 9171 Northampton Partnership for Children Inc. - Financial Statement Audit 2/ 15/ 08

NGV- 2007- 9176 Montgomery County Partnership for Children - Financial Statement Audit 7/ 28/ 08

NGV- 2007- 9180 Smart Start of Transylvania County - Financial Statement Audit 5/ 28/ 08

NGV- 2007- 9182 Union County Partnership for Children - Financial Statement Audit 4/ 4/ 08

NGV- 2007- 9184 The Partnership for Children of Wayne County Inc. - Financial Statement Audit 3/ 4/ 08

NGV- 2007- 9185 Smart Start of Yadkin County Inc. - Financial Statement Audit 2/ 13/ 08

NGV- 2007- 9186 Richmond County Partnership for Children - Financial Statement Audit 4/ 25/ 08

PER- 2007- 7226 Enterprise Project Management Office 7/ 26/ 07

PER- 2007- 7227 State Childrens Health Insurance Program Claims Processing 7/ 24/ 07

PER- 2007- 7229 Department of Transportation Highway Project Schedules and Costs 2/ 7/ 08

PER- 2007- 7229A Attachments to Dept. of Transportation Highway Project Schedules and Costs 2/ 7/ 08

PER- 2007- 7230 North Carolina Department of Transportation Funding Allocation Practices 6/ 3/ 08

PER- 2007- 7231 Albemarle Mental Health Center 10/ 9/ 07

PER- 2007- 7232 Academically or Intellectually Gifted Program 2/ 14/ 08

PER- 2007- 7233 North Carolina Education Lottery - Performance Audit 4/ 10/ 08

PER- 2007- 7236 Department of Environment and Natural Resources - Division of Air Quality 4/ 17/ 08

PER- 2007- 7801 Information Technology Services & Wildlife Resources Commission 3/ 26/ 08

PER- 2008- 7223F Follow- up to Office of Indigent Defense Services 2/ 8/ 08

SAR- 2007- 4440 North Carolina Division of Social Services 12/ 12/ 07

SAR- 2008- 6030 North Carolina State University 6/ 4/ 08

SAR- 2008- 6040 University of North Carolina at Greensboro 9/ 4/ 08

North Carolina Office of the State Auditor

Increasing Efficiency... Exposing Fraud 39

Appendix B

The Office of the State Auditor independently

evaluates the state’s fiscal accountability

and public program performance for North

Carolina’s citizens and others. The office strives

to assure that state government is executing its

management responsibilities in compliance with

applicable laws, rules, regulations, and policies.

The office also evaluates whether sufficient

management controls and policies exist to enable

state agencies to most efficiently and effectively

use public resources.

STATUTORY AUTHORITY

North Carolina General Statutes § § 147- 64.1-

64.14 set forth the duties and responsibilities of

the State Auditor, and requires the State Auditor

be independent of the organizations being audited.

These statutes mandate that all state agencies and

entities partially or entirely supported by public

funds be subject to audit by the state auditor. These

audits independently evaluate public program

performance for the General Assembly, Governor,

executive departments and agencies, governing

bodies, and the general public. Specifically, the

State Auditor independently examines and makes

findings of fact on whether State agencies:

■ established adequate operating and administrative

procedures, reporting systems, and elements of

management control

■ provided financial and other reports that disclose

fairly, consistently, fully, and promptly all

information necessary to demonstrate program

performance

■ collected, deposited, and properly accounted for

all revenues and receipts arising from activities

■ conducted programs and expended funds in an

efficient and economical manner as well as in

compliance with applicable laws and regulations

■ determined that programs effectively served the

legislative intent.

The Office of the State Auditor is also statutorily

mandated to conduct certain audits, including the

largest audit, the State’s Comprehensive Annual

Financial Report ( CAFR). These audits are required

to be conducted in accordance with appropriate

professional standards.

The Investigative staff is statutorily mandated to

investigate allegations of improper activities, which

may occur as a result of misfeasance, malfeasance or

nonfeasance by governmental employees or those

receiving state money. Investigators are required

to protect complainants who provide information

to the State Auditor related to these charges. This

section operates under the supervision of the Chief

Deputy State Auditor.

CONSTITUTIONAL AGENCY

The State Auditor is a constitutional officer listed

in the North Carolina Constitution under Article III,

§ 7. The State Auditor is elected statewide every four

years and is a member of the Council of State which

also includes the Governor, Lieutenant Governor,

Secretary of State, State Treasurer, Superintendent

of Public Instruction, Attorney General,

Commissioner of Agriculture, Commissioner of

Labor, and Commissioner of Insurance.

Statutory and Constitutional Authority

Annual Report 2008 | Appendix B

40 Increasing Efficiency... Exposing Fraud

SENIOR MANAGEMENT TEAM

Leslie W. Merit, Jr., CPA, CFP

State Auditor

Leslie_ Merritt@ ncauditor. net

( 919) 807- 7500

Kris Bailey, J. D.

Chief Deputy

Kris_ Bailey@ ncauditor. net

( 919) 807- 7665

Jef Henderson, CPA, CISA,

Deputy State Auditor

Jeff_ Henderson@ ncauditor. net

( 919) 807- 7513

Charles K. Ducket

Personnel Officer

Charles_ Duckett@ ncauditor. net

( 919) 807- 7617

James L. Forte

Director of Internal Operations and

Legislative Affairs

James_ Forte@ ncauditor. net

( 919) 807- 7642

Rene Gelerson

Executive Assistant to the Chief Deputy

Renee_ Gellerson@ ncauditor. net

( 919) 807- 7628

Cindy Giliam

Controller

Cindy_ Gilliam@ ncauditor. net

( 919) 807- 7553

Timothy J. Hoegemeyer, J. D.,

MPA

General Counsel

Tim_ Hoegemeyer@ ncauditor. net

( 919) 807- 7670

Christopher F. Mears, J. D., MPP

Director of Public Affairs

Chris_ Mears@ ncauditor. net

( 919) 807- 7566

Pat Stusie

Executive Assistant to the Auditor

Pat_ Stussie@ ncauditor. net

( 919) 807- 7676

Leny Supervile , Ph. D.

Chief Information Officer

Lenny_ Superville@ ncauditor. net

( 919) 807- 7625

AUDIT MANAGEMENT TEAM

Keneth Barnete, CPA, MBA

Specialty: Performance Audits

Kenneth_ Barnette@ ncauditor. net

( 919) 807- 7540

Joyce Flowers, CPA

Specialty: Single Audit

Wilmington Branch

Joyce_ Flowers@ ncauditor. net

( 919) 807- 7550

Janet Hayes , CPM, CICA, MBA

Specialty: Services to nongovernmental

groups

Janet_ Hayes@ ncauditor. net

( 919) 807- 7558

Linda Holar, CPA

Specialty: Universities, UNC, UNC

Hospitals, NCSU

Linda_ Hollar@ ncauditor. net

( 919) 807- 7565

Lee Linker, CPA

Specialty: Quality Control

Lee_ Linker@ ncauditor. net

( 919) 807- 7583

David Nance, CPA

Specialty: Health Issues

David_ Nance@ ncauditor. net

( 919) 807- 7660

Frank L. Pery

Specialty: Investigative Audits

Frank_ Perry@ ncauditor. net

( 919) 807- 7604

Lyne Sanders, CPA

Specialty: CAFR

Lynne_ Sanders@ ncauditor. net

( 919) 807- 7615

Carol Smith, CPA

Specialty: Community Colleges

Asheville Branch

Charlotte Branch

Morganton Branch

Winston- Salem Branch

Carol_ Smith@ ncauditor. net

( 336) 585- 2513

Faye Stele, CPA

Specialty: Clerks of Court

Fayetteville Branch

Greensboro Branch

Greenville Branch

Edenton Branch

Faye_ Steele@ ncauditor. net

( 919) 807- 7589

Charles Wiliford, CPA, CITP,

CISA, CFE, CPM

Specialty: Information Systems Audits

Charles_ Williford@ ncauditor. net

( 919) 807- 7627

Copies of reports issued by the Office of the State

Auditor may be requested through the email link on

the web site at www. ncauditor. net or by calling the

main phone number. Other inquiries, comments,

and suggestions may be made by contacting the

main office or one of the staff members listed below.

N. C. Office of the State Auditor

2 South Salisbury Street

20601 Mail Service Center

Raleigh, NC 27699- 0601

Main Phone Number: ( 919) 807- 7500

Hotline Number: ( 800) 730- 8477

Fax Number: ( 919) 807- 7600

Contact Information

North Carolina Office of the State Auditor

North Carolina Office of the State Auditor

2 South Salisbury Street

20601 Mail Service Center

Raleigh, NC 27699- 0601

Main Phone Number: ( 919) 807- 7500

Hotline Number: ( 800) 730- 8477

Fax Number: ( 919) 807- 7647

OSA printed this report in- house as a cost saving measure for taxpayers.