School Land Office To Be Audited After Theft

Friday, July 10th 2009, 1:37 pm
By: News On 6

Associated Press

OKLAHOMA CITY -- Commissioners of the School Land Office made plans Thursday for a comprehensive audit to look at its security practices and internal controls.

Land Office commissioners asked four companies competing for an audit contract to resubmit proposals to include a more aggressive look at agency practices. The move comes after a multi-county grand jury indicted former employee Roger Q. Melson on accusations he embezzled nearly $1.16 million from the office.

Melson created an entity called the "Commissioner of the Land Office" at the Secretary of State's Office. He is accused of taking checks from the School Land Office's mail room and depositing them for personal use.

Melson also lists himself on documents at the Secretary of State's Office as the owner of several Texas oil companies that made royalty payments to the office. Those entities are still being investigated.

"We really need somebody to scour through this agency," said Gov. Brad Henry, chairman of the commission. "We need the most comprehensive, high-level audit as possible."

The School Land Office makes money from surface and mineral leases on trust land. The income is invested and proceeds help payfor the state's public education system. Overall, the office manages about $1.4 billion in assets.

Investments at the School Land Office are audited every year, but those audits do not look at the entire department and its practices, said State Auditor and Inspector Steve Burrage, a member of the commission.

Those cursory audits would not have uncovered the missing money Melson is accused of taking. When he left the agency after 21 years, Melson was the director of the royalty audit division.

"The auditor was checking his own work," Burrage said. "There was a lack of internal controls and prevention in the agency."

Burrage's office cannot audit the School Land Office because he sits on the board that oversees operations. A full-scale audit could cost the state about $50,000, Burrage said.

The proposals for audits vary in price from $22,000 to $63,300, depending on the hours a company would spend combing through records.

Doug Allen, acting secretary of the School Land Office, recommended commissioners approve the most expensive auditing firm.

It would spend nearly twice as much time on the audit as its competitors.

"It's fairly obvious the agency has some control problems," Allen said. "It's important to me to have this done right."

Commissioners are expected to decide on an auditing firm next month.