|
Discrepancies were
noted in estimating liabilities
Net overstatement
of liabilities of approximately $900,000 identified
Understatement
of liabilities of approximately $1,200,000
identified
Department relied
on information provided to record liabilities
Department accepted
the recommendation
Centralized
oversight not maintained
Weaknesses with inventory counting noted
at 7 locations
Weaknesses in
segregation of duties during counting noted at 3 facilities
Failure to provide
documentation of who made counts and when
Errors noted in
systems used to reconcile inventory for reporting purposes
Department
indicated they have established a centralized oversight for commodities
Department accepted
the recommendation
Lost revenue from
decertification of Howe estimated to be $30,000,000 annually
Department has
proposed closing Howe
Department accepted
the recommendation |
INTRODUCTION
The Department of Human Services
(Department) is a part of the executive branch of the State of
The financial statements of the Department are intended to present the financial position and changes in financial position of only that portion of the governmental activities, the major fund, and the aggregate remaining fund information of the State that is attributable to the transactions of the Department. FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
LIABILITIES PAYABLE FROM FUTURE APPROPRIATIONS ARE MISSTATED
The Department records
liabilities payable from future appropriations in its financial statements
based on estimates supported by methodologies and historical analyses
provided by program personnel. After
reviewing subsequent payments related to these liabilities, we noted
discrepancies resulting in over and understated liabilities at June 30, 2008. A $4.5 million liability
was estimated by increasing the prior year amount by 3% for a cost of living
increase. This entire liability was
erroneously recorded in the DHS Special Purposes Trust Fund (Fund 0408). In prior years, this liability was split
between the General Revenue Fund (Fund 0001) and Fund 0408. The allocation used in fiscal year 2008 was
not consistent with prior years. As a
result, the future year liability recorded in Fund 0408 was overstated by approximately
$4.1 million and the future year liability recorded in Fund 0001 was
understated by approximately $3.2 million.
The net effect was an overstatement of approximately $900,000. The General Revenue Fund also recorded an
estimate for the future year liability for prior year Medicaid bills of $4.0
million. Actual payments made through
December 2008 were $5.2 million, resulting in an understated liability of $1,200,000. The Fiscal Control and Internal Auditing
Act (Act) notes State agencies shall establish and maintain a system of
internal fiscal and administrative controls, which shall provide assurance
that revenues, expenditures, and transfers of assets, resources, or funds
applicable to operations are properly recorded and accounted for to permit
the preparation of accounts and reliable financial and statistical reports
and to maintain accountability over the State’s resources. Department personnel stated the liability
that was erroneously recorded in Fund 0408 instead of being split between the
funds was due to oversight. Subsequent
to the submission of the fund financial information (GAAP package) to the
Comptroller, additional information to evaluate the liabilities became
available, it was then determined the amount originally reported for the
liabilities should have been different. We recommended the Department’s GAAP
coordinator continue to work with program personnel to assist them in
evaluating and revising, if necessary, the methodologies used to estimate the
Department’s liabilities. In cases
where the GAAP package preparer is relying on information submitted by program
personnel, the Department should develop a historical analysis to determine
the reasonableness of estimated liabilities and the methodology used. (Finding 08-02, pages 53-54) Department officials accepted the recommendation and indicate the net affect of the two estimation differences is that Agency liabilities were understated by $300,000. The Department’s GAAP coordinator will continue to work with program personnel to assist them in evaluating and revising those methodologies as necessary. Inadequate controls over commoditiesThe Department does not maintain an
adequate centralized oversight function over commodities, resulting in
inadequate controls. Inventory control
includes responsibilities at individual facilities, multiple warehouses, and
Central Office locations. We noted several exceptions and weaknesses
over commodities inventories during our testing, specifically:
·
Weaknesses
for periodic inventory counting performed during the year were noted at seven
of twenty-three (30%) locations.
·
Weaknesses
in segregation of duties for annual inventory counting were noted at three of
twenty-three (13%) locations.
·
The
Bureau of Pharmacy and Clinical Support Services failed to provide any
documentation for who counted the inventory during the year end count and
when the count was completed.
·
We
noted the Department had several errors on the Summary of Commodity Control
System and Other Inventories, which was used to reconcile to the inventory
balance reported for year end GAAP reporting purposes. The Fiscal
Control and Internal Auditing Act (Act) notes State agencies shall establish and maintain a system of
internal fiscal and administrative controls, which shall provide assurance
that revenues, expenditures, and transfers of assets, resources, or funds
applicable to operations are properly recorded and accounted for to permit
the preparation of accounts and reliable financial and statistical reports
and to maintain accountability over the State's resources. The Department stated they have established
a centralized oversight for commodities; however, the Department still has
more than one person responsible for commodities. We recommended the Department continue
establishing a centralized oversight position related to commodities to allow
for strengthened controls.
Additionally, we recommended the Department establish a standardized
way to perform periodic counts. (Finding 08-03, pages 55-57) This finding was first reported in 1999. Department officials accepted our recommendation and indicated they will continue to strengthen controls over the centralized oversight of commodities and establish a procedure requiring periodic counts. (For the previous Department response, see Digest Footnote #1) FAILURE TO COMPLY WITH MEDICARE AND
MEDICAID CERTIFICATION REQUIREMENTS One of the Department facilities, On September 5, 2008, the Department
announced a proposed closure of Howe.
In compliance with the State Facilities Closure Act, the Department
submitted its formal recommendation to the Commission on Government
Forecasting and Accountability (CGFA).
After compliance with the public comment period and the public
hearing, the CGFA convened on January 12, 2009 to vote on the advisory
opinion for the closure of Howe, but decided to delay the vote. The The Department was not aware of any other
facilities with certification issues as of January 15, 2009. We recommended the Department continue its
efforts to recertify Department officials accepted our
recommendation and noted
AUDITORS' OPINION Our auditors state the Department's June 30, 2008 financial statements are fairly presented in all material respects. ___________________________________ WILLIAM G. HOLLAND, Auditor General WGH:RPU:pp SPECIAL ASSISTANT AUDITORS Sikich LLP were our special assistant auditors for this audit. DIGEST FOOTNOTE #1 - INADEQUATE controls over commodities – Previous
Department Response 2007: Agree.
The Department has made significant effort and progress regarding the
commodity inventories. |
