Audit of the Office of the State Treasurer and Receiver General Objectives, Scope, and Methodology

An overview of the purpose and process of auditing the Office of the State Treasurer and Receiver General.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor (OSA) has conducted a performance audit of certain activities of the Office of the State Treasurer and Receiver General (OST) for the period January 1, 2019 through December 31, 2020.

OST does not keep a record of changes it makes to the tax identification number (TIN) list of all state agency bank accounts. Because no record of changes to the list is maintained, we obtained versions of the TIN list of all state agency bank accounts in use as of June 30, 2019 and June 30, 2020 and adjusted the audit period to June 30, 2019 through June 30, 2020 for Objective 1.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is a list of our audit objectives, indicating each question we intended our audit to answer; the conclusion we reached regarding each objective; and, if applicable, where each objective is discussed in the audit findings.

Objective	Conclusion
Does OST ensure that state agencies use qualified, approved banks when maintaining bank accounts established under Section 34(a) of Chapter 29 of the General Laws?	No; see Finding 3
Does OST submit a semiannual report in accordance with Section 10B of Chapter 10 of the General Laws?	Yes
Does OST maintain and update a list of qualified banks in accordance with its “Bank Account Maintenance Policy”?	Yes
Does OST publish and transmit the list of qualified banks to the Office of the Governor at least every six months as required by Section 34(a) of Chapter 29 of the General Laws?	No; see Finding 2
Does OST, consistently with its mission, have procedures in place to monitor whether all civil process fees that are received by sheriffs’ departments pursuant to Section 8 of Chapter 262 of the General Laws, and are required to be transmitted to OST for deposit in the General Fund, are transmitted to OST?	No; see Finding 1

 

To achieve our audit objectives, we conducted interviews with OST staff members and management and reviewed agency policies and procedures to gain an understanding of internal controls that were relevant to the objectives. Additionally, we performed the procedures described below.

Agency Use of Qualified Banks

We obtained from OST two versions of the TIN list: one reflecting all state agency bank accounts in use as of June 30, 2019, and one reflecting this information as of June 30, 2020. We identified 14 banks associated with these accounts. Because no record of changes to the TIN list is maintained, we had to adjust the audit period to June 30, 2019 through June 30, 2020 for this objective. To determine whether all 14 banks were qualified and approved to do business with the Commonwealth, we traced all 14 banks to OST’s published lists of qualified banks that were in effect during our audit period (published May 3, 2018 and September 30, 2019).

Semiannual Lists of Banks Doing Business with the Commonwealth

To determine whether OST provided the House and Senate Committees on Ways and Means and the Joint Committee on Revenue with semiannual lists of banks in which funds from the Commonwealth were deposited during our audit period, we inspected copies of signed transmittal letters sent with the required lists. We also verified that the four lists from the audit period were published on the OST website.

List of Qualified Banks

To determine whether OST maintained and updated a list of qualified banks in accordance with its “Bank Account Maintenance Policy,” we compared OST’s most recent list of qualified banks, dated June 30, 2020, to the corresponding VERIBANC Inc. report. We did this to determine whether all the banks on OST’s list of qualified banks were listed on the VERIBANC Inc. report as well capitalized or adequately capitalized according to the Federal Deposit Insurance Corporation Improvement Act of 1991. Additionally, we confirmed that all the banks on OST’s list of qualified banks had a Community Reinvestment Act rating of “satisfactory” or higher listed on the Federal Financial Institutions Examination Council’s⁶ or the Division of Banks’ website.

Qualified Bank List Published and Transmitted to the Governor

To determine whether OST published and transmitted a list of qualified banks approved to do business with the Commonwealth to the Governor at least once every six months during our audit period, we checked the signed transmittal letter to the Governor and the OST website to verify that there was evidence of all OST’s submissions to the Governor during the audit period.

Civil Process Fee Transmittals

To determine whether OST had a process in place to ensure that all civil process fees that were received by sheriffs’ departments pursuant to Section 8 of Chapter 262 of the General Laws, and required to be transmitted to OST for deposit in the General Fund, were transmitted to OST, we reviewed OST cash management policies and procedures and interviewed OST officials. To identify which sheriffs’ departments transmitted civil process fees to OST, we compared the dollar amounts recorded in each of the 68 letters that sheriffs submitted with fees collected during our audit period to the dollar amounts in a Massachusetts Management Accounting and Reporting System (MMARS) report that OST management provided to us. The MMARS report represented all civil process fees collected by sheriffs’ departments during our audit period, transmitted to OST by sheriffs’ departments, and deposited by OST in the General Fund.

Data Reliability Assessment

In 2018, OSA performed a data reliability assessment for MMARS for the period April 1, 2017 through March 31, 2018. The assessment focused on reviewing selected system controls, including access, security awareness, audit and accountability, configuration management, identification and authentication, and personnel security.

Based on our 2018 assessment, and our ability during this audit to trace the sheriff’s department transmittal letters to and from the MMARS report of civil process fee transactions that OST provided to us, we determined that the MMARS report was sufficiently reliable for the purposes of this audit.

To determine the reliability of the TIN lists that OST provided to us, we conducted interviews with agency officials who had knowledge about the data on the lists and compared the two lists (one showing information as of June 30, 2019 and one showing information as of June 30, 2020) to identify new accounts opened during fiscal year 2020. We then traced all New Account Request Forms to the list of new accounts to assess the completeness of the populations of forms and new accounts opened during fiscal year 2020. Based on these procedures, although we identified some issues (described in Finding 3), we determined that the TIN lists we obtained from OST were sufficiently reliable for the purposes of this audit.

6.    Publicly available Community Reinvestment Act ratings are consolidated on the Federal Financial Institutions Examination Council’s website and updated quarterly.

Date published:	February 28, 2022