State law calls for an annual financial-compliance audit of the general purpose financial statements and “the financial affairs and transactions of a state agency required to comply with federal government audit requirements…” CliftonLarsonAllen, under contract with Legislative Post Audit, conducted this two-part audit. The first part was the report on the state’s Comprehensive Annual Financial Report (report R-16-016, released in December 2016). This second part, the Report on Federal Awards Required by the Uniform Grant Guidance, reports on compliance with laws, regulations, and provisions of contracts and grant agreements.
The auditors concluded that the state complied, in all material respects, with the requirements applicable to each of the federal programs audited. The auditors reported 15 deficiencies in internal control, of which 13 were significant deficiencies and two were material weaknesses. The auditors also identified questioned costs for two federal programs. Six of the findings were repeated from prior years.
Federal Funds: Evaluating State Spending Required by Federally Funded Programs
In recent years, Kansas agencies spent about $5 billion annually in monetary and nonmonetary support from federally funded programs. Federally funded programs will require Kansas agencies to spend an estimated $2 billion on cost-sharing obligations in fiscal year 2016. Beyond that, we did not identify any significant unfunded mandates, although there are restrictions tied to the use of federal funds. Federally funded programs typically impose administrative requirements on state agencies, although most of these costs can be paid for with program funds. They also often include conditions on how state agencies can spend federal funds. Most programs have penalty or repayment clauses if state agencies fail to meet these conditions or program requirements. In addition, we found examples where the federal government has tied some national policy objectives to federal funds and states’ efforts to challenge those policies have had mixed results.
State of Kansas: OMB Circular A-133 Audit of Fiscal Year 2014
State law calls for an annual financial-compliance audit of the general purpose financial statements and “the financial affairs and transactions of a state agency required to comply with federal government audit requirements…” CliftonLarsonAllen, under contract with Legislative Post Audit, conducted this two-part audit. The first part was the report on the state’s Comprehensive Annual Financial Report (report R-14-018, released in December 2014). This second part, the Report on Federal Awards in Accordance with OMB Circular A-133, reports on compliance with laws, regulations, and provisions of contracts and grant agreements.
The auditors concluded that, except for the Foster Care program, the state complied, in all material respects, with the requirements applicable to each of the federal programs audited. The auditors found material non-compliance in the requirements regarding subrecipient monitoring in the Foster Care program. The auditors reported 27 deficiencies in internal control, including five material weaknesses. The auditors also identified questioned costs for a number of programs. Five of the findings were repeated from prior years.
State of Kansas: Financial Audit of Fiscal Year 2014
State law calls for an annual audit of the general purpose financial statements and “the financial affairs and transactions of a state agency required to comply with federal government audit requirements…” CliftonLarsonAllen, under contract with Legislative Post Audit, conducted this two-part audit. This first part is the report on the state’s Comprehensive Annual Financial Report (CAFR). The second part, the Report on Federal Awards in Accordance with OMB Circular A-133, will be issued as a separate report.
The auditors expressed an unmodified opinion on the financial statements, meaning that, financial statements present the state’s financial position fairly and in conformity with generally accepted accounting principles in all material respects. However, the auditors did emphasize two matters. First, at the end of fiscal year 2014, the state had a deficit in the unassigned fund balance of $5.4 million which raises concerns about the state’s ability to meet its financial obligations. Second, the financial statements reflect the state having adopted new accounting guidance in accordance with generally accepted accounting principles.
The audit disclosed no instances of noncompliance with applicable legal requirements that were material to the state’s financial statements. However, the auditors reported three material weaknesses and three significant deficiencies in the state’s internal control over financial reporting. The material weaknesses included various issues related to not reconciling and reporting cash balances in accordance with generally accepted accounting principles, not providing the financial report and certain supporting schedules in a timely fashion, and not providing accurate information from the universities, all of which required numerous and significant revisions after they were provided. The auditors identified the need for several material adjusting entries as a result of these deficiencies, and several previous fund balances were found to be misstated.
State Agency Information Systems: Sensitive Datasets and IT Security Resources
Overall, we identified most state agencies maintain computer systems which hold a variety of sensitive data or process payments that must be protected. Although the state is responsible for these sensitive data or payment systems, it lacks an enterprise-level approach to IT security. We also found that 17 of 45 agencies (38%) that process payments or maintain large amounts of highly sensitive data have not had an independent evaluation of their security measures in the past three years. In addition, we learned the state lacks a complete set of three-year IT Plans as required by law, and that agencies’ submitted plans have been made public despite containing sensitive security information.
We also reviewed IT security resources at 10 selected agencies. As part of that review, we found the reporting structures at seven agencies created a risk that important security issues may not be communicated to top management. Additionally, three agencies’ lead IT security positions were not filled with sufficiently qualified staff, and two agencies lacked enough staff to perform necessary IT security tasks. Lastly, IT security software products agencies reported using in five security categories appeared to be adequate except for one agency, which lacked software to back up its system databases and electronic files stored on its network since November 2013.
State of Kansas: OMB Circular A-133 Audit of Fiscal Year 2013
State law calls for an annual financial-compliance audit of the general purpose financial statements and “the financial affairs and transactions of a state agency required to comply with federal government audit requirements…” RubinBrown, under contract with Legislative Post Audit, conducted this two-part audit. The first part was the report on the state’s Comprehensive Annual Financial Report (report R-13-016, released in December 2013). This second part, the Report on Federal Awards in Accordance with OMB Circular A-133, reports on compliance with laws, regulations, and provisions of contracts and grant agreements.
The auditors concluded that the state complied, in all material respects, with the requirements applicable to each of the federal programs audited. However, the auditors reported 26 deficiencies in internal control. The auditors also identified questioned costs for a number of programs. Six of the findings were repeated from prior years.
Office of Information Technology Services: Reviewing the Office’s Service Rates and Viable Alternatives for Its Services
OITS’ rates for many individual services do not reflect the actual costs of providing them. The rates agencies pay for some OITS services are inflated because they include costs for other underfunded, discounted or waived services. Although OITS has developed a complex rate model to help ensure rates reflect actual costs, it does not use the model to set most rates and instead relies on staff to manually set them. That is because instead of setting rates to reflect actual service costs, OITS sets its rates to ensure budget and funding stability. Further, OITS operates and sets rates with almost no oversight or accountability. Due to the absence of good cost information for OITS and the differences in the way services are typically tracked and delivered we were unable to make valid private sector comparisons for the rates OITS charges for its largest services. We also identified problems with the way OITS has reported profits for individual services to the federal government that appear to violate several federal reporting requirements. Finally, we identified two issues that are indicative of an unstable fiscal situation at OITS. Many of these issues appear to be longstanding issues, some of which current management is trying to address.
Potential options for reducing the state’s IT costs include outsourcing, cloud computing, and consolidation. Outsourcing can provide many benefits including better service and cost savings, but requires strong contracts and vendor oversight. While cloud computing is a specialized form of outsourcing that typically involves web-based services and offers many opportunities for savings it carries significant security risks. Although the state has already consolidated some IT services, consolidating others may achieve further savings. However, OITS does not have a process to ensure that costs are minimized and its rates are competitive.
State Agency Information Systems: Reviewing Security Controls in Selected State Agencies (CY2013)
Agency staff continue to struggle with two key areas we have audited before: ensuring servers and workstations are patched to prevent vulnerabilities, and having an adequate plan in place to be able to continue operations in the event of an emergency. Overall, we reviewed seven IT security processes across eight agencies and saw that some agencies are more committed to IT security than others. While all agencies could make improvements to their processes to help ensure confidential information is protected, agencies most committed to IT security were the agencies more likely to have strong IT security processes in place protect their confidential information.
State of Kansas: Financial Audit of Fiscal Year 2012
State law calls for an annual audit of the general purpose financial statements and “the financial affairs and transactions of a state agency required to comply with federal government audit requirements…” RubinBrown, under contract with Legislative Post Audit, conducted this two-part audit. This first part is the report on the state’s Comprehensive Annual Financial Report (CAFR). The second part, the Report on Federal Awards in Accordance with OMB Circular A-133, will be issued as a separate report.
The auditors concluded that the basic financial statements present the state’s financial position fairly and in conformity with generally accepted accounting principles and disclosed no instances of noncompliance with applicable legal requirements that were material to the state’s financial statements. However, the auditors did report four material weaknesses in internal control over financial reporting. The material weaknesses included not having sufficient controls to identify and correct potential misstatements and incomplete disclosures, not being able to accurately and completely reconcile the pooled cash account in a timely manner, not capturing and properly depreciating many capital assets, and not preparing an accurate Schedule of Expenditures of Federal Awards. The auditors identified the need for several material adjusting entries as a result of these deficiencies, and several prior year balances had to be restated.
State Asset Management: Evaluating the Possibility of Cost Savings and Revenue Enhancements through Property Sales.
Our targeted review identified eight surplus properties that could be sold for an estimated $1.5 million to $2.2 million. We found that identifying surplus real property is a subjective, lengthy, and sometimes difficult process. That is because property use must be periodically evaluated, the owner and boundaries of land are not always clear, and lease agreements can make it more difficult to determine whether land or buildings are surplus. Additionally, the Department of Administration has not proactively identified surplus real property as required by law and lacks the authority to independently designate what properties are surplus. Moreover, the process for selling surplus real property includes several disincentives for state agencies. Finally, delays in selling the Atchison Juvenile Correctional Facility highlight problems with the surplus real property disposal process. We also found that the State Surplus Property program is not an efficient way of disposing of surplus personal property. In each of the past two years, the program operated at a net loss of approximately $50,000. Further, the state’s contractor for online auctions is better equipped to maximize agencies’ revenues from selling surplus items and several state agencies prefer to use the state’s contractor instead of the state’s program. Finally, agencies do not want to sell surplus vehicles because they are hard to replace once sold, and agencies have few negative consequences for holding onto surplus personal property.
The Board of Veterinary Examiners: Evaluating Issues Related to the Board’s Management
In fiscal year 2011, the board authorized two unconventional personnel actions; one was appropriate and one was not. The first was an almost 1,000 hour furlough of the director, which was not appropriate because it was not expressly allowed by law, was not submitted to the Department of Administration for approval, and did not appear to be necessary for budgetary reasons. It also coincided with a period when the director worked a second job in the veterinary field. However, the impact of the furlough on the state was relatively small because the director’s pay was reduced during the furlough and his other benefits remained largely unaffected. The second action was the board’s decision to reduce the director’s pay to give the other two agency staff pay raises. This action appeared to have been approved appropriately.
The director’s general lack of proper oversight resulted in poor management of board activities and staff. While the director was on furlough in 2010 and 2011, the other two agency staff were inadequately managed. In addition, we found problems with the agency’s cash handling process which is poorly designed and inadequately supervised, putting the agency at risk for fraud or abuse. The agency’s inspection process also has a number of deficiencies and appears superficial. Finally, the agency lacks written policies and procedures and does not maintain appropriate management data.
State of Kansas: Financial Audit of Fiscal Year 2011 (Reissued)
State law calls for an annual audit of the general purpose financial statements and “the financial affairs and transactions of a state agency required to comply with federal government audit requirements…” RubinBrown, under contract with Legislative Post Audit, conducted this two-part audit. This first part is the report on the state’s Comprehensive Annual Financial Report (CAFR). The second part, the Report on Federal Awards in Accordance with OMB Circular A-133, will be issued as a separate report.
The auditors concluded that the basic financial statements present the state’s financial position fairly and in conformity with generally accepted accounting principles and disclosed no instances of noncompliance with applicable legal requirements that were material to the state’s financial statements. However, the auditors did report four material weaknesses and one significant deficiency in internal control over financial reporting. The material weaknesses included not having sufficient controls to identify and correct potential misstatements, not reconciling the pooled cash account until after the fiscal year closed, not properly recording certain revenues, receivables, and payables, and not capturing and properly depreciating all capital assets. The auditors identified the need for several material adjusting entries as a result of these deficiencies, and several previous fund balances had to be restated.
State Employee Residence: Assessing Potential Increases in Revenues by Requiring State Employees to Reside in Kansas
We estimate that about 3,600 state and school district employees live outside Kansas. Imposing a residency requirement for state employees would only generate new tax revenues if out-of-state employees move to Kansas. If 25% of all out-of-state employees move to Kansas, a residency requirement could generate approximately $2 million a year in state and local tax revenues. This includes $1.4 million in new taxes paid by the employees, and another $650,000 in indirect tax revenues from increased economic activity. However, in order to generate meaningful revenues, a residency requirement would need to be implemented aggressively, which would significantly affect out-of-state employees. If the requirement was put into effect in the near term, employees would have to move or seek new employment. Grandfathering in current out-of-state employees would remove the impact on them, but would essentially eliminate the new tax revenue. Finally, adopting a residency requirement would limit the labor pool for state agencies and could be expensive to administer.
State Agency Information Systems: Reviewing Selected Personnel Security Controls in State Agencies.
Overall, we found that all five agencies we reviewed could improve their personnel-related security policies. Three of five agencies did not conduct adequate background checks before hiring employees and none of the agencies consistently trained employees on security awareness and the acceptable use of information technology resources. All five agencies appropriately removed terminated employees’ computer access rights, but need to make other improvements to the termination process including documenting equipment recovery and conducting exit interviews. We also found that the Information Technology Executive Council (ITEC) does not adequately communicate its security standards to all State agencies and it does not have adequate mechanisms or resources to enforce its security standards.
Accounts Receivable: Reviewing Agencies' Efforts To Collect Amounts Owed to the State (A K-GOAL Audit)
For the State, accounts receivable represent moneys expected to be collected for unpaid taxes, overpayments, fines, or goods and services provided. Our survey of 53 State agencies with significant accounts receivable found that many State agencies could improve their debt collection efforts if they strengthened their collection policies and adopted other collection best practices. Four of the six programs we reviewed in detail failed to meet many of the collection best practices applicable to their operations; three of those four also had inadequate collection policies. Overall, the four poor-performing programs had deficiencies in some or all of the following areas: monitoring receivables, aggressively pursuing debts, using enforcement tools, and using outside collection options, including the State’s Setoff Program. If those four programs improve their collection efforts, they might be able to collect a significant amount of additional revenue: collecting just 5% more of those programs’ delinquent receivables would generate almost $3 million in one-time revenues. We also noted that not all of the $2 billion accounts receivable shown in the State’s financial report is collectible because it includes aged, and therefore doubtful, receivables for a number of agencies.
State Hiring Practices: Determining Whether Requirements Related To Veterans’ Preferences Are Being Met
State law provides that eligible veterans who meet the minimum and preferred qualifications for a State classified job be offered an interview. Of the 426 veterans’ applications reviewed, there were only two instances where a veteran should have been interviewed, but wasn’t—both times because of an oversight acknowledged by agency officials. The reasons most veterans weren’t interviewed were because they didn’t meet minimum and preferred qualifications for the job or submitted incomplete application materials. In addition, we couldn’t conclude whether agencies mailed a certified letter to each veterans’ preference applicant as required by State law and identified several smaller issues that need to be addressed to make the veterans’ preference law more efficient and cost effective. These include considering eliminating the statutory requirement that State agencies have to mail certified letters to veterans not hired, giving guidance to State agencies on what documentation they should keep to show they mailed a certified letter to each veteran applicant, and advising State agencies to wait a certain period of time after a job closes to print a list of applicants to be considered for the job.
American Recovery and Reinvestment Act: A Review of Reporting
The State has implemented ARRA reporting requirements fairly well. Agencies generally have done a good job of filing their Section 1512 reports timely, and all agencies required to report have done so. All but two of 74 reports flagged by federal reviewers were satisfactorily resolved. The methodology agencies used to calculate jobs created and retained was consistent with federal guidance. However, two of the four programs we reviewed inaccurately calculated and reported the number of jobs created. We were able to reconcile expenditures listed on the Section 1512 report to the State’s accounting system for 16 of 18 programs we reviewed. However, the differences were relatively minor.
Division of Purchases: Reviewing Issues Related To Its Acquisition of Goods and Services
We identified a number of areas where the Division of Purchases didn’t adequately document its actions during contract negotiations, increasing the risk for errors, noncompliance, and fraud. We also found two areas where the Division didn’t comply with statute or best practices by not requiring appropriate documents. Because of legislative concerns, we reviewed the negotiation process for a Statewide copier contract that was mistakenly awarded to the wrong vendor, primarily because the Division didn’t follow its usual process for awarding contracts. However, because of a compromise between the Division and the two vendors, this mistake likely didn’t cost the State much money. Finally, we identified at least $27 million in goods and services that the State purchased through multi-state consortiums in 2009, and estimate that the State paid $122,000 in consortium fees associated with those purchases. While Division appears to conduct some informal analysis to determine if these consortiums are in the best financial interest of the State, it is not systematic. However, for the consortium contracts the State currently uses, it appears that the consortium fees are less than the resources the Division would need to negotiate similar contracts on its own.
Agency Data Centers: A K-GOAL Audit Assessing the Potential Savings of Consolidation
As of 2007, at least 27 states were pursuing data center consolidation, and 22 states had completed or were partially done with consolidation. Kansas and four other states were proposing data center consolidation in 2007, and Kansas currently is still in the planning stage. The 2010 Legislature directed the Division of Information Systems and Communications (DISC) to complete an information technology consolidation study by the 2011 legislative session. Data center consolidation is an expensive and difficult process, but server virtualization—replacing several physical servers with a single host server that simulates several—is a relatively new step agencies can take to save money and prepare for future data center consolidation. We selected five large agencies that have about half the physical servers in the State, and found those agencies already had virtualized many servers, saving an estimated $600,000 to date. We estimate these five agencies could save an additional $400,000 to $1 million over three years by virtualizing their remaining servers. Additionally, we estimate the State potentially could save about $1.3 million over three years if smaller and mid-sized agencies leased virtualized servers from DISC, rather than maintaining their own physical servers. However, these savings depend on agencies’ willingness to participate, and agency officials have expressed concerns with DISC’s costs and customer service.
Fiscal Notes: Determining Whether the Process for Preparing Fiscal Estimates in Kansas Could Be Improved
Fiscal note estimates we reviewed often were significantly different from the actual fiscal effect, but for different reasons. For the eight fiscal notes we reviewed for bills that passed, the dollar estimates were off from relatively small amounts to nearly $15.3 million. Most differences we saw were because the Legislature, Governor, or agency significantly changed the scope or funding for the program or participation in the program was significantly different than projected . We also reviewed 56 fiscal notes and found they didn’t always meet statutory requirements and didn’t always meet best practices in terms of including assumptions, providing details on the methodology used, and estimating all costs and revenues. Five other states we contacted also operate under short timeframes; however, they tend to have standardized forms for preparing fiscal note estimates, update their estimates as bills progress, solicit input from more entities when generating estimates, and include more information in fiscal notes. Like Kansas, other states generally don’t include estimates of economic benefits in fiscal notes related to economic development bills. Although economic models are available, they often are costly, take too much time to meet deadlines, and depend on the assumptions analysts use and data available.
Sole-Source Contracts: Determining Whether Sole Sourcing Is Being Used When Other Vendors Could Supply the Goods or Services
Division of Purchases’ records show that, over the last five calendar years, it has authorized more than $900 million in sole-source purchases. However, we have reservations about the accuracy of the Division’s sole-source reports. In all, 14 of 18 non-emergency sole-source purchases we reviewed appeared to be reasonable, but two were not and two were questionable because of lack of documentation. The Division authorized all 12 emergency sole-source purchases we reviewed appropriately, but in three instances the agency created problems. The Division of Purchases doesn’t follow some best practices related to sole-source purchases, including having written policies and procedures. The Division Director reported only two sole-source purchases greater than $100,000 have been challenged in the last eight years. We reviewed both challenges and found they appeared to be reasonable as sole-source purchases.
American Recovery and Reinvestment Act: A Preliminary Assessment of the Risk That Recovery Act Moneys Won’t Be Appropriately Accounted for or Spent
The $787 billion American Recovery and Reinvestment Act of 2009 (ARRA) requires unprecedented accountability and oversight of federal moneys being spent at the State and local levels. State agencies in Kansas will receive more than $2 billion in formula grants under the Act through 2011. The 2008 Statewide Single Audit had identified procedural or control weaknesses in four State programs that will be receiving ARRA moneys. Correction of those weaknesses, which related to things like reconciling records, improving eligibility determinations, and implementing computer edits to prevent improper payments, will be checked during the 2009 Single Audit. In eight other programs reviewed for this audit, the risk that agencies won’t comply with the requirements of ARRA appears to be relatively small. We found no weaknesses in the way that agencies are accounting for the ARRA moneys. However, in areas of monitoring and quarterly reporting, we found that officials from several of the programs needed to commit their procedures to writing to ensure consistency and, in a few cases, needed to further develop procedures or hire additional staff to ensure that monitoring or reporting functions could be carried out effectively. In separate work, we found that the Department of Transportation’s process for selecting highway projects to fund appears to comply with Recovery Act requirements.
Children In Need Of Care: Reviewing Selected Issues Related to Handling Their Cases
Statewide, about 80% of social workers responding to our survey said they’ve never felt unduly pressured by county or district attorneys to include or exclude facts in documents they prepare for attorneys that they felt could distort the circumstances of a case. However, at least one social worker in all six SRS regions told us they had felt unduly pressured at some point to include or exclude information. Responses from social workers in Wichita were more negative, and interviews with social workers and judges revealed several past issues may be largely to blame. Filing a petition to remove a child from the home is decided by the county or district attorney’s office. However, social workers across the State clearly feel frustrated that attorneys don’t always respect or follow their recommendations. All SRS social workers we reviewed met the licensure requirements of the State. However, initial and ongoing training social workers receive on writing legal documents, working with attorneys and the courts is sparse and insufficient. On average, social workers were responsible for about 35 open cases during fiscal year 2009. Average caseloads Statewide have remained relatively stable over the last three years, but vary quite a bit among the six SRS regions. Caseloads are somewhat higher than they otherwise would be because of a large number of vacancies that currently exist.
Vehicle Travel: Determining Whether the State Is Becoming More Cost Efficient With Its Vehicle Fleet
Overall, State employees have increased the number of miles they drive for work by 2% since 2003. Fuel expenditures have increased by $6.8 million since 2003, which represents a 3.5% increase adjusted for inflation. The use of ethanol has gone from 11% of fuel purchases to about 35% during that period. The Governor and the Department of Administration have taken steps to improve the average gasoline fuel efficiency (as measured by M.P.G. ratings) of vehicles available through the State's vehicle contract since 2007. However, the State has more “flexible-fuel” vehicles that can use either ethanol or gasoline available on the contract now, which likely will reduce the State fleet's overall fuel efficiency. That's because ethanol is much less fuel efficient than gasoline. For the 140 vehicles we reviewed in which flexible-fuel vehicles replaced gasoline-only vehicles, we estimate that fuel efficiency could decrease by as much as 5.3 M.P.G., or 25.5%, if agencies use only ethanol fuel. Finally, 6.4% of the State's vehicle purchases in fiscal year 2008 were used vehicles. Our review of 251 commonly purchased new vehicles in fiscal year 2008 showed the State potentially could save up to $112,000 a year (9%) by purchasing those vehicles used instead of new. However, this level of savings assumes agencies would buy a used 2007 vehicle instead of a 2009 vehicle of the same make and model, and that they could buy the used vehicle at 20% below market value. If they couldn't achieve that level of discount, bought different or better-equipped used vehicles, or bought used vehicles that needed significant maintenance, any or all potential savings could evaporate.
Business Procurement Cards: Expanding Their Use To Increase Cash Rebates to the State
For fiscal year 2008, we estimated that $27 million of the non-procurement-card purchases agencies made from the 37 highest-volume vendors potentially could have been charged to a procurement card. Charging all those purchases would have generated more than $380,000 in cash-back rebates. Agencies also made $327 million of similar non-procurement-card purchases from the thousands of other vendors we didn’t analyze. If just 20% of these purchases could have been charged, agencies would have generated $940,000 in additional cash-back rebates, for a total of $1.3 million. Among other things, agency officials told us they didn’t always use their procurement cards when they could because of concerns about the complexity of tracking such purchases, and the perceived lack of thorough controls over procurement card purchases.
State Contracts: Determining Whether the State’s Office-Supply Vendor Is Providing Products to State Agencies at Agreed-Upon Prices
Corporate Express is the State’s office-supply vendor. State agencies spent $3.6 million on Corporate Express purchases during the last six months of 2007. We tested a sample of purchases and found a significant number of items for which prices couldn’t be verified on any price list. Without a complete price list, there’s no way agency officials can tell whether they are paying the correct prices. For items that were on price lists, we projected State agencies were undercharged 2% or $65,000 for the six-month period. Most of the agencies we contacted didn’t report encountering pricing issues with either the State office-supply contract or any other State contract. Agencies reporting pricing issues told us vendors generally resolved them, and problems tended to be infrequent.
Wireless Enhanced 911: Reviewing Implementation of the 2004 Act
In 2004 and 2006, the Wireless Enhanced 911 Act and the Voice-over Internet Protocol (VoIP) Enhanced 911 Act were passed to encourage local Public Safety Answering Points (PSAPs) to update their emergency phone systems to handle calls from wireless phones and VoIP calls. In all, officials from 100 of the State’s 115 PSAPs said they expected to have fully implemented a wireless E-911 system by the end of 2008, and all said they would complete implementation by 2010. Fees imposed on wireless subscribers under the Acts generated approximately $40 million between July 2004 and June 2008. Through June 2008, PSAPs reported spending almost $23 million of grant and local fee money, with the biggest category of spending being for equipment. We identified very few problems with the way fee moneys were spent. An early assessment of the adequacy of wireless E-911 funding had to involve many estimates, projections, and assumptions. Within the limitations those factors create, it appears that, on a Statewide basis, revenues generated between now and December 2012 would far exceed E-911 estimated expenditures. However, projected revenues may not be enough to cover anticipated radio maintenance and upgrades. Our analysis showed seven individual PSAPs will have difficulty covering all their estimated expenditures through 2010. Further, after the funding change in July 2010, at least 10 PSAPs will have difficulty covering monthly operating expenses.
Surplus Computer Equipment: Determining Whether State Agencies Effectively Remove Software and Agency Data From Surplus Computers
Agencies often don’t remove data from computers that are sold to the public through Surplus Property. We obtained computers from Surplus Property that had belonged to at least six Topeka-based State agencies and found data on 10 computers from four of those agencies. Of the 10 computers that still had data, seven had confidential documents, including thousands of Social Security numbers. It appeared that data weren’t properly removed because agencies lacked policies, relied on Surplus Property to do their work, or did a poor job of keeping track of which computers had been processed and which hadn’t. The State needs to strengthen its policy for removing data from computers and take appropriate steps to ensure that agencies are educated about the policy and are following it.
Kansas Use Law: Reviewing Issues Related to the Quality and Price of Goods and the Compensation of Executives
The State Use law requires State agencies and school districts to purchase goods and services from certain non-profit companies benefiting people who are blind or disabled. Between fiscal years 2006 and 2007, State Use Program sales increased from $5.7 million to $6.3 million, or by about $632,000 according to data reported by qualified vendors. Sales attributed to school districts increased by 85% during the same period from $553,000 to $1.0 million. About a third of those who responded to our survey rated the quality of State Use products as fair or poor, and about a third rated the price as more expensive than other options. Most concerns were related to toner cartridges, pens/pencils, and binders. The Division of Purchases staff take little action in tracking or handling complaints. The State Use Law Committee recently formed a subcommittee to look at pricing. We found some State Use products and services were more expensive, while others were the same or less than State contract prices. Finally, most top-ranking executives of companies who are State Use vendors are paid a higher salary than comparable State agency heads are paid.
Foster Care: Reviewing Selected Issues Related to State Contracts for Foster Care and Family Preservation Services
SRS and the Division of Purchases didn’t follow appropriate procedures during the latest foster care and family preservation contract negotiations in 2004. Late in the negotiations, an SRS employee appears to have inadvertently disclosed information to The Farm Inc., which allowed that organization to raise its bids. That disclosure ended up costing the State an additional $2.9 million during the first two years of the contract. With a few minor exceptions, SRS and the Division of Purchases officials handled other aspects of the negotiated procurement process appropriately.The Farm’s outcomes were similar to other contractors in 2006 and 2007. The money the Farm spent from the $23.5 million it received in fiscal year 2007 generally went for items that that seemed reasonably related to providing foster care and family preservation services. In accordance with best practices for non-profits, The Farm didn’t directly compensate its board members, its management compensation was in line with other contractors, and we didn’t see any extravagant travel expenses. We did identify two issues related to a board member that represent a potential conflict of interest. In addition, The Farm donated $500,000 of its fiscal year 2007 net revenues to one of its affiliates. It reported that donation to SRS as an expense rather than a transfer, which made its financial position appear less positive than it was.
Business Procurement Card Program: Reviewing for Fraud and Abuse
The Division of Accounts and Reports offers a business procurement card program to State agencies. In fiscal year 2006, the program had about 5,500 cards and total expenditures of more than $36 million. While the State’s adopted policies and procedures for the program are generally in-line with best practices, we identified several problem areas in the program’s implementation. In three instances, fraudulent charges were made on cards, but were later caught by the agency and not paid. In another instance, a cardholder was allowed to finance her personal computer with a loan from State funds. We also identified numerous instances where cardholders didn’t follow program guidelines, including: 141 cases where cardholders split purchases to avoid transaction limits, four cases where cardholders made purchases from blocked vendors, and 50 cases where cardholders didn’t get prior approval for their purchases as required. Finally, sometimes cards were not cancelled in a timely manner when cardholders left State employment, which contributed to about $30,000 in purchases being made on cards of former employees, mostly by their successors.
State Hiring Practices: Determining Whether Requirements Related to Veterans’ Preferences Are Being Met
State regulations implementing the Kansas Civil Service Act create a veterans’ preference for classified positions. The regulations require State agencies to interview eligible veterans who apply for a classified position and who meet the minimum requirements of the position. Our review of 144 veterans who applied for 61 classified positions at four State agencies during 2006 found that in all but three cases, the veterans either were given an interview or there was a valid reason the interview didn’t occur. During our review, we saw no evidence that veterans received only “token” interviews. State regulations are silent regarding a veterans’ preference for unclassified positions.
Providing Vehicles for Official State Travel: Reviewing the Impact of Decisions To Disband the State’s Motor Pool
In late 2003, the Department of Administration eliminated the Central Motor Pool, placed a moratorium on vehicle purchases for two years, and identified and sold unneeded or underused vehicles in the State fleet. These policy changes resulted in one-time savings of about $24.5 million (during 2004 and 2005), mainly from buying fewer cars during the moratorium. On an ongoing basis, the State’s overall cost of providing vehicles (adjusted for inflation) isn’t much different than it was before the vehicle policies were changed. Cost reductions from having a smaller fleet and eliminating the Motor Pool offset increased costs in private car mileage and costs for renting vehicles. Because State employees are driving more miles, the average cost per mile has declined by about 1.4 cents. Other issues: agencies were renting cars from Enterprise on a long-term basis at a cost that far exceeds the cost of leasing or owning a car, Enterprise hasn’t always adhered to the terms of the contract with the State, and the Department hasn’t adequately monitored the contract. Some agencies said they’ve had to hire or use more staff to handle fleet management activities since the vehicle policy changes. They also pointed out issues with inaccurate billings from Enterprise and difficulties reconciling charges with the invoices Enterprise provides. Overall, State employees who’ve used Enterprise rated it favorably in many areas. But a significant number said they had to make other arrangements because the car they reserved wasn’t available.
Wireless Enhanced 911: Reviewing Implementation of the 2004 Act
In 2004, the Wireless Enhanced 911 Act was passed to encourage local Public Safety Answering Points (PSAPs) to update their emergency phone systems to handle calls from wireless phones. In all, officials from 61 of the State’s 115 PSAPs said they expected to have fully implemented a wireless E-911 system by the end of 2006, and all but one said they would complete implementation by 2010. Fees imposed on wireless subscribers under the Act generated approximately $21 million between July 2004 and November 2006. Through June 2006, PSAPs reported spending $6.7 million of that fee money, slightly more than half of which was spent on equipment, monitors, and software. We identified very few problems with the way fee moneys were spent. An early assessment of the adequacy of wireless E-911 funding had to involve many estimates, projections, and assumptions. Within the limitations those factors create, it appears that, on a Statewide basis, revenues generated between 2007 and June 30, 2010 (when the funding structure for the system changes) would far exceed estimated expenditures. Although many individual PSAPs would have difficulty covering all their estimated expenditures, there’s likely to be more than enough money in the Wireless Enhanced 911 Grant Fund to cover those shortfalls.
The Wireless Enhanced 911 Act: Reviewing the Use of Revenues Generated To Fund State Grants (limited-scope audit)
Of the $6.3 million in Wireless Enhanced 911 grant revenues generated since July 2004, about $130,000 or 2% has been spent on administration. This is less than the 5% allowed by law. About 80% of the money spent on administration has been for salaries for the 1.5 full-time-equivalent staff involved in administering the grant program. Although provisos to the appropriations bills allow spending on conferences and hospitality, very little money was spent on conferences, and of the $313 spent on food, only a small portion could be considered hospitality. Administrative expenses appeared to be reasonable and made in accordance with the Wireless Enhanced 911 Act.
Department of Administration’s SHaRP System: Reviewing the Department’s Upgrading of That System
SHaRP is State government's personnel and payroll computer system. This audit focused on how security was handled during the recent major upgrade to make the system web-based, and how well the Department of Administration controls access to the system. The Department did a good job of considering security throughout the upgrade project, but it never conducted a security risk assessment, and its method of distributing initial passwords to employees wasn't very secure. With a few exceptions, SHaRP had good controls to keep unauthorized people out of the system, and to control what people could do after entering the system. When SHaRP went into production, many people had difficulty with its strict password requirements. When the SHaRP steering committee asked the Department for an exemption to some of the requirements, the Department weakened password requirements for all its applications. We also found that the help desk wasn't asking callers who wanted their passwords changed for enough information to adequately confirm their identity. Finally, we pointed out some ways to improve accountability in the system.
State Prescription Drug Plan: Reviewing the Accuracy of Payments Made Under the Program
In 2003, the State prescription drug plan paid 1.5 million claims totaling $55 million. For the most part, payments made to Kansas' pharmacy benefits manager, AdvancePCS, appeared to be accurate and in accordance with the terms of the contract. However, we identified some problems relating to payments for claims for ineligible people and inaccurate dispensing fees, which may result in AdvancePCS not meeting the accuracy standard of 99.9% required by its contract with the State. The most significant problem (paying claims for ineligible people) also was identified in a 2001 audit as a problem area. Even though we found relatively few problems, we recommend that the State improve its routine oversight and monitoring of the claims payments. Given the amount of money involved, better monitoring reduces the likelihood that the State will lose significant amounts to inappropriate claims payments.
Taxation of Contractor Equipment: Determining Whether Kansas’ System of Taxes and Fees Is Similar to Surrounding States
Local governments in all the states we contacted assess personal property taxes against construction equipment, but Kansas, Colorado, New Mexico, and Texas will collect property tax even if a contractor already has paid in another state. With few exceptions, Kansas and its neighboring states don't impose motor vehicle registration fees on construction equipment, primarily because such equipment isn't regularly driven on state roads or highways or the interstate highway system. All contractors have to pay oversize/overweight permit fees in Kansas and all 4 of the surrounding states we contacted, but those fees are much lower in Kansas. Kansas could generate about $1 million or more of new revenues each year by imposing some fees that other states already collect, and by increasing existing fees to bring them in line with what other states charge.
Kansas’ Central Motor Pool: Determining Whether All Significant Costs and Savings Were Considered In Decisions To Change This Function (limited-scope audit)
Changes the Governor announced to the Central Motor Pool will free up an estimated $9.3 million for other uses. But that decision wasn't based on a cost-benefit analysis. Rather it was based on policy and budgetary considerations that involved such things as eliminating redundancy in the way the State owned and issued vehicles, identifying and eliminating underused vehicles, and freeing up moneys set aside or requested to buy replacement vehicles to be used for other purposes. Actual costs or cost savings aren't known because reducing vehicles might not actually reduce travel costs, agencies may incur additional costs because of the changes, and most agencies still are going to need to replace their aged vehicles that normally would have been replaced during the moratorium. Finally, the Department's decision to terminate the Van Pool Program because it wasn't self-supporting was based on revised assumptions about what costs should have been allocated to the program over the years. The cost impact of those revised assumptions was applied retroactively, and Pool participants were never given an opportunity to cover those costs.
Federal Funds: Determining Whether Opportunities May Exist To Leverage State Spending To Draw Down More Federal Funds
This audit involved a fairly high-level review of opportunities that may exist for the State to draw down additional federal funds. We identified 6 opportunities that appeared to have a high potential for generating as much as $20 million in additional federal revenues. Most of these opportunities involved federal reimbursements through the Medicaid program that could be claimed by school districts or community developmental disability organizations. We also identified 8 additional opportunities in social services areas (such as increasing targeted Medicaid rates and auditing agencies' cost allocation plans) that warrant further investigation to determine whether additional federal revenues could be generated. Finally, we observed that Kansas could benefit from a more coordinated effort to identify and secure more federal funds. One possibility would be a centralized office to coordinate federal funding and develop an overall strategy to maximize federal moneys.
General Fund Cash Balance: Reviewing the Projected Fiscal Year 2003 Ending Cash Balance for the State’s General Fund (100-hour audit)
Based on the most recent estimates of revenues and expenses, the projected ending cash balance in the State General Fund for fiscal year 2003 would be a negative $111.5 million. Because the General Fund can't have a negative cash balance, something will need to be done to increase revenues or decrease expenditures. Before the end of the fiscal year, the General Fund will have to repay the $450 million certificate of indebtedness it currently owes to other funds. Not doing so would violate State law, and because of the way such certificates are accounted for, would result in the State's year-end financial statements showing more cash balances than the State actually has.
The State Health Benefits Program, Part 2: Reviewing the Staffing and Structure of the Current Program
Currently the State Health Benefits Program's structure is appropriate since 98% of the Program's members are active or retired State employees. However, considering the program may be expanded to include other public entities, such as cities and counties, the Legislature and Commission should address how the Program is to be managed in the future. Other states we contacted that, like Kansas, serve only or predominately state employees tend to be located in a multi-function state agency, and are equally likely to be governed either by the head of the agency or by a commission. It also appears that given the new positions added for 2002, the Health Benefits Program has enough staff to handle most of its current workload. Commission staff identified several important responsibilities, such as reconciling insurance carriers' bills, they thought they weren't able to adequately address with their existing staffing levels, but the new positions will help fill these needs. Lastly, we found that Kansas already has enough participants in its health insurance plans to benefit from economies of scale, and lower costs would be unlikely if a plan was eliminated. While Kansas is using most of the strategies that experts mentioned are important in controlling the cost of health insurance, the Commission will have to make tough choices if it is to minimize cost increases in the future because it can no longer rely on money in the reserve fund.
The State Health Benefits Program, Part 1: Reviewing Issues Relating to Premium Costs and Management
Premiums for the Kansas employee health care program are somewhat higher than average when compared to the surrounding states and Iowa, Sedgwick and Shawnee counties, and the Topeka and Wichita school districts, but usually fell well within the middle of the range. Kansas' premiums may be higher than average because Kansas employees pay far less out of pocket for their health care costs than employees in most of those other groups surveyed. No problems were found stemming from specific concerns that the State's self-funded program isn't being properly managed and overseen. The most recent Health Benefits Administrator appeared to be well qualified for the job; the Program's funds are being properly deposited into the State Treasury and the interest being earned on them stays with the Program; and the use of the "incurred cost" method when projecting future program costs is reasonable. In addition, the duties and responsibilities of Blue Cross and Blue Shield as the State's third-party administrator appear to be no different from the responsibilities of contractors in other states that have self-funded plans.
Centralized Administrative Hearings: Reviewing the Advantages and Disadvantages
Transferring the Department of Social and Rehabilitation Services' administrative hearings to the newly created Office of Administrative Hearings in the Department of Administration eliminated the conflict of interest that existed when the hearing officers worked for and were answerable to the Secretary of SRS. Hearings are being conducted in a timely manner, and most people we surveyed had a favorable opinion of the Office. The transfer has not resulted in any cost savings, but the Office needs to improve its budgeting and billing practices. Centralizing more agencies' hearings is the best way for the State to eliminate the inherent conflict of interest that occurs when the agencies select their own hearing officers. Officials in 8 states with centralized hearing agencies said eliminating conflict of interest was the primary benefit of centralizing, but they also cited time and cost efficiencies, as well as increased professionalism of hearing officers. If the Legislature wants to increase centralization of administrative hearings, it will need to consider such issues as which agencies and which types of hearings to bring under the Office, and how best to fund the centralized function.
Private-Sector Input: Ways to Foster Such Input If the Kansas Performance Review Board Is Abolished
If the Kansas Performance Review Board is abolished, as proposed by Senate Bill 180, options for fostering private-sector input into improving the efficiency and cost-effectiveness of State agency operations include contracting directly with private-sector consulting firms, requiring agency heads to identify activities that the private sector could do better and at lower cost, developing specific goals for each agency for improving efficiency and cost-effectiveness, or incorporating some of the Board's functions into the Legislative Division of Post Audit. To be successful, any initiative would require political backing, independence of function, and sufficient funding. If the Performance Review Board isn't abolished, the Legislature may wish to have the Board report directly to the Governor or expand the Board's membership to include stakeholders from the legislative and executive branches.
Centralized State Purchasing: Determining the Best Way to Fund It (100-hour audit)
Although funding centralized purchasing with General Fund appropriations requires the least amount of cost and record keeping, Division of Budget officials have indicated their desire to substitute user fees for General Fund dollars to fund part of the Division of Purchases' budget. Given that choice, it appears that the most reasonable method of determining and collecting those fees is to estimate agencies' use of Statewide contracts and bill the agencies directly. This method doesn't rely on vendors to collect and remit the fee, and doesn't require major changes to the way the State accounts for and reports expenditures. In developing such an approach, caution will need to be exercised so that fee-funded agencies aren't double-billed for their share of central purchasing costs.
Reviewing State Agencies’ Adherence to State Requirements for Out-of-State Travel
We questioned about $11,800 of the $266,000 spent on the 241 executive and judicial branch trips we reviewed, or about 4%. About $2,500 of that was for things that clearly aren't allowed under the State travel requirements, such as staying extra days at State expense when attending a conference. The remaining $9,300 represented unnecessary expenses or items that could have cost less. For example, using a shuttle service to go from the airport to the hotel usually is less expensive than renting a car. Almost half the reimbursement amounts we questioned were at the Department on Aging. State travel requirements don't address or aren't clear about some of the issues we identified. We recommended the Department of Administration clarify the Travel Reimbursement Handbook in a number of areas, provide guidance on documentation agencies should keep, and consider making the State Travel Agency responsible for providing information about ground transportation at employees' destination cities.
Reviewing State Agencies’ Adherence to State Laws and Policies for Grants and Contracts
State agencies generally are complying with requirements to use a contract instead of a grant when acquiring goods or direct services. Our review of 144 grant payments from 14 different agencies included only one instance in which a grant was used when a contract was appropriate. That was the much-publicized grant between the Department on Aging and its former Deputy Secretary, Terry Glasscock. Most State employees are complying with ethics laws that place restrictions on employees who've been involved in developing or awarding a contract. However, we identified 2 situations that appeared to meet the definition of conduct prohibited by those laws, and we referred those cases to the Ethics Commission for further review. Our review of the circumstances surrounding the grant to Mr. Glasscock raised questions about why the grant didn't go through the Department's normal grant procedures, and also about the amounts of compensation Mr. Glasscock was initially offered and allowed to keep. Finally, we found that the Division of Purchases still had not implemented 2 of 6 major recommendations from our 1996 audit, citing lack of staff as the reason.
High-Capacity Telecommunications Services: Examining Local Telephone Companies’ Compliance with the 1996 Telecommunications Act
The Telecommunications Act of 1996 required local phone companies to promise to provide existing and newly ordered broadband services at discounted rates. The Act didn't require phone companies to provide uniform rates to school districts, or to build a network that would interconnect all school districts. The Commission's actions haven't been sufficient to ensure that local phone companies provide broadband services at discounted rates. The amounts school districts pay for access to the Internet vary considerably, but recently charges have dropped and become more uniform. The KAN-ED proposal and the Telecommunications Act both would allow school districts to obtain broadband services, but they are very different in other ways. The proposed KAN-ED network is more likely to achieve the goal of getting all districts hooked up with high-speed lines to the Internet.
Assessing the Benefits of Leasing Versus Owning Office Space for State Employees
Whether it's more cost-effective to build new buildings, lease space in existing buildings, or buy existing buildings depends on a number of economic factors in effect at the time a decision is being made. Also, many non-economic factors may influence that decision. Our analysis showed it wouldn't be cost-effective for the State to build another major office building, unless it could be built for less cost than the Signature Building. However, it may be cost-effective to consider buying an existing building. Some agency officials expressed concerns that having a single agency responsible for negotiating all office leases could result in their specialized needs not being met. However, it appears that the potential benefits of centralized leasing, such as getting volume discounts or other lease concessions, outweigh the risks cited by agency officials.
Examining Issues Related to Community Developmental Disability Organizations, Part II: Reviewing Implementation and Funding Issues
The Developmental Disability Reform Act created an inherent conflict of interest by making CDDOs the single point of application, eligibility determination, and service referral for clients seeking services, while at the same time allowing them to continue providing services. Many parents and guardians think they haven't received adequate information from CDDOs about the availability of services in their areas. The law requires the Department to establish an open and equitable contracting process, and some independent service providers are dissatisfied with the process and certain contractual terms. The Act also requires the rates used to reimburse service providers to be independently reviewed every two years. We identified several flaws with the way the Department used cost data in making its 1997 rate recommendations to the Legislature. Developmental disability funds generally are allocated among CDDOs on a reasonable basis, but some moneys–discretionary State aid and fiscal year 2000 waiting list funds–may not have been allocated equitably. The State's system doesn't have enough money to fund all the services eligible people are requesting. The Legislature has increased funding significantly over the last few years, but those funds haven't kept up with the number of clients coming into the system. In addition, some services for existing clients are underfunded. We couldn't tell whether the State could save administrative costs by reducing the system's administrative structure, and most people think there would be more disadvantages than advantages to consolidating CDDO areas.
Examining the Statutory Requirements and Funding Sources for Background Investigations in Kansas
At least 25 new statutory provisions for records checks and background investigations have been enacted in the past decade. Most deal with the racing and gaming industries. These new provisions have had little impact on the number of criminal history records checks performed by the Kansas Bureau of Investigation, but they’ve nearly quadrupled the number of background investigations performed by State agencies. About 29 more people work on records checks and background investigations than five years ago. Most State agencies that request a significant number of records checks or background investigations budget and pay for them—two notable exceptions are the Governor’s Office and the Kansas Department of Health and Environment. As of March 1, 1998, more than 800 requests for background investigations were pending, and about 10,000 requests for criminal history records checks were backlogged. Other than a few optional background investigations which the Governor can request, there doesn’t appear to be much opportunity for scaling back records checks and background investigations.
Reviewing State Agencies’ Use of Cost Savings From the Kansas Quality Program (100-hour audit)
The Legislature first enacted the Kansas Quality Program in 1994, which allowed participating agencies to give employees cash and non-cash awards for improving State operations through specific quality initiatives. A second program was started the following year, which allowed agencies participating in the first program to keep half the money they were appropriated but didn’t spend. Agencies have retained about $5.3 million that they didn’t spend in fiscal years 1995 and 1996. Most of their purchases with those moneys have been for capital outlay items, such as computers or parole office automation technology. In fiscal year 1997 five agencies spent $38,000 for employee bonuses. Most of the expenditures we reviewed were appropriate; however, bonuses paid by two agencies didn’t meet the program requirements, and one of those agencies exceeded the $1,000 limit established by the Legislature. The Governor proposes expanding the program to all agencies and eliminating any tie to the original Kansas Quality Program. Positive aspects to this proposal include increased spending flexibility for agencies and less incentive to spend all moneys at year-end. Examples of risks include possible overbudgeting, the potential for cutting back on needed services to generate savings, and less up-front accountability for expenditures.
Reviewing the Effectiveness of the State’s Workplace Health and Safety Program
We couldn’t tell whether the Workplace Health and Safety Program was effective at reducing accidents because not enough time has passed since training was done to see a discernible difference in accident numbers. Nonetheless, agency officials told us the training their agencies got was useful and met their needs. The Program isn’t very effective at providing training to State employees for several reasons: training isn’t targeted to agencies with the greatest needs, agencies can decide not to participate in training, and the Program has only one professional staff. In addition, Program officials haven’t done some things required by State law, such as developing procedures for identifying and controlling workplace hazards. It appears that the Division of Personnel Services is using staff paid with Self-Insurance Fund money to do general work unrelated to accident prevention according to Program staff. However, Division officials disagree with some of Program staff’s estimates.
Reviewing the Kansas Public Employees’ Deferred Compensation Program
The State exercises limited oversight of the Deferred Compensation Program, with essentially no monitoring of Aetna Investment Services. This level of oversight is significantly less than that provided by other states we contacted. However, our reviews showed that customer services were adequate, that investment performance was comparable to the general market, and that costs were comparable to other similar programs we reviewed. Also, State employees we surveyed generally were satisfied with the services provided under the Program and the performance of their investments, but need more information about the Program’s fees, limitations, and restrictions. Finally, according to State law, the State isn’t liable for any loss incurred by an employee under the Program, including losses from insolvency or mismanagement of funds. However, we think State law is unclear as to whether participants’ moneys in fixed-return accounts are covered by the Kansas Life and Health Insurance Guaranty Association if Aetna were to become insolvent. Aetna operates in a highly regulated industry with controls in place to monitor its operations, which should minimize the likelihood of insolvency or mismanagement.
Reviewing State Contracting for Consultants and Other Professional and Technical Services
In fiscal year 1995, the State spent about $221 million on contracted professional services--an increase of 56% from fiscal year 1991. Nine agencies accounted for 75% of recent spending on professional services. We found that Kansas has no written procedures on acquiring professional services, and no policies to guide State agencies on monitoring contracts or on handling problems with vendors’ performance. In the absence of centralized guidance, there’s a significant risk agencies won’t get the services they need, or will pay too much for the services they get. Lastly, while many agencies say they assess the need for the programs and services they offer, we found those assessments often aren’t systematic or designed specifically to determine whether these activities should be continued. Many agencies also say they assess whether the programs and services they offer could be provided more cost effectively by contracting with private entities, but we found those assessments often don’t include all costs. Some privatization efforts currently under way may increase State costs.
Reviewing the Efficiency of State Printing Plant Operations (100-hour audit)
With few exceptions, standard jobs (such as letterhead, envelopes, and business cards) being printed at State agencies with their own printing facilities could be done by the State Printing Plant or a private-sector printing firm. For our limited sample of such printing jobs, the State Printer’s estimated charges were less to print most items than commercial printers or other State agencies, even though the other State agencies don’t include all costs of operation in their estimated charges.
Reviewing the Progress of the Statewide Human Resource and Payroll System Project (SHARP) (100-hour audit)
The Statewide Human Resource and Payroll System Project is scheduled to go on-line for the October 1995 benefit enrollment period, and it is scheduled to produce State paychecks on January 12, 1996. The current Project budget is $11.5 million, which includes the direct costs of modifying the software and making it operational. We found that the Project is essentially on schedule and on budget. However, the Project budget excludes such other costs as the cost of State employees working with the consultants to develop the system, and microcomputers agencies will need to buy to access the system. The Division of the Budget currently estimates this latter figure will total about $362,000 in fiscal years 1995 and 1996. This figure will increase after the Department of Social and Rehabilitation Services’ needs are defined.
Reviewing Personnel Services for Kansas’ State Employees: A K-GOAL Audit of the Department of Administration
To fulfill the requirements of the Kansas Governmental Accountability Law, we reviewed the operations of the Division of Personnel Services to determine whether its activities were carried out in an efficient and effective manner. In general, we found that many personnel functions provided by the Division of Personnel Services and personnel staff in State agencies were carried out efficiently and effectively. However, we found that the hiring process, the performance evaluation system, and the pay plan used by the State were not serving all of the State’s needs. We also found that the Division of Personnel Services approves several fairly routine personnel actions performed by the agencies. This means that such routine actions require more effort and involve more processing than should be necessary. Finally, the State pays its employees more overtime pay than required by law. The Division of Personnel Services estimates that the State spends about $2 million a year more than it needs to on overtime pay. While this estimate may be overstated, the amount involved still is likely to be substantial. We recommended that the State’s personnel practices could be made more efficient by increasing the flexibility and authority of the State agencies to take appropriate actions.
Reviewing the Process for Providing Health Insurance Benefits for State Employees
Premiums for State employee health insurance in Kansas were generally higher than in nearby states we reviewed. Variations in deductibles and co-insurance amounts employees must pay make it difficult to make blanket statements about how our benefits compare, but generally Kansas' benefits compare favorably. Also, Kansas had the lowest annual maximum out-of-pocket costs for employees who use health insurance a lot. Steps the State Employees Health Care Commission has taken to obtain benefits at the lowest cost include things like soliciting multi-year bids and negotiating rates before signing health insurance contracts. All State employees do not have equal access to the same insurance plans across the State. But employees covered under the State's conventional health insurance plan have access to most general practice doctors, dentists and hospitals in their cities. Finally, if the Regents' employees had been a separate group within the 1993 State employee health insurance plan, that group's claims experience would have resulted in 18 percent lower premiums for that group and 14 percent higher premiums for other employees. When such differences have occurred in the past the Health Care Commission has acted to equalize premiums for all employees.
Reviewing the Capacity and Use of the State’s Mainframe Computers
Four of the nine mainframes reviewed were operating at or near capacity. The five remaining computers, which generally were in the early to middle years of their life expectancy, appeared underused at this time. In those cases, agency officials generally indicated that planned applications would increase mainframe use in the future or that federal funding used to acquire and operate their computers limited the possible uses. Finally, available data storage for several main frames was full or nearly full, and the affected agencies may need to take some action to acquire more storage capacity soon.
Examining Problems Implementing the Kansas Financial Information Systems (KFIS)
The Department of Administration did not determine what it needed before it bought ready-made software for the State's new centralized accounting, personnel/payroll, and purchasing systems. As a result, it underestimated the software modifications that would be needed or called for, and overestimated the amount of work its own staff could do. When in-house infighting broke out over the need to modify those software packages, the Department was unable to stop it. The Department also did not require the consulting firm to provide a finished product. The procurement negotiating process was not of benefit in this case because the Department did not follow the steps required by that process. Options for completing the System include finishing the new personnel/payroll system or fixing the problems with the current system. Before any course of action is chosen, a full needs assessment must be done. In the future, the State needs to make one person or agency responsible for ensuring that agencies conduct proper planning, provide strong project management, and commit sufficient resources to major computer projects.
Reviewing the Cost of Operating the State’s Unisys Computer Center
It will cost about $6.7 million to operate the Unisys computer center for fiscal years 1989, 1990, and 1991. The Division of Information Systems and Communications analyzed a vendor proposal to contract for operation of that system, and its analysis correctly concluded that it would be less costly to continue operating the system in-house, but the Division understated those cost savings. No alternatives to the current operation of the State’s personnel, payroll, and accounting systems appear to exist, other than contracting with a private vendor.
Vendor Discounts to State Agencies (100-hour audit)
State agencies sometimes fail to take advantage of vendor discounts available to them, but the magnitude of the discounts lost does not appear to be significant overall. Out of a sample of 213 purchases totaling approximately $194,000, the auditors found that State agencies failed to take advantage of 12 discounts, representing a cost of $160. Most discounts lost were prompt payment discounts for which the agency failed to meet the payment deadline. If the auditors’ sample were representative of the State as a whole, the auditors estimate that the fiscal year 1987 loss to the State for the types of goods included in the sample would have been about $70,000 out of approximately $53 million in purchases.
Reviewing the Way State Agencies Collect Delinquent Accounts
Statewide requirements for collecting, reporting, and writing off amounts owed to the State have improved somewhat in the past 11 years, but complete information about agencies’ accounts receivable is just beginning to be collected. Most of the six agency programs reviewed are required to follow additional collection procedures that go beyond the State’s minimum requirements, and all of them use the State’s set-off program as part of their collection procedures. Statewide procedures for the management of delinquent accounts and specific agencies’ collection procedures can both be improved.
The State currently employs about 221 classified and unclassified attorneys---55 more than it did five years ago. Most of the additional attorneys were hired to defend indigent clients and to enforce child support laws. Expenditures for contracted legal work have risen from about $4.6 million to slightly more than $7 million in the past five years. In some cases, agencies could have employed a full-time attorney or part-time attorney for the amount they spent for relatively few hours of legal work. The report recommends that the Department of Administration and the Attorney General’s Office jointly review the legal needs of State agencies to ensure that services are obtained in the most cost-effective manner.
Improving the Efficiency of the Central Motor Pool
Compared with other states, the Motor Pool appears to have a reasonable number of vehicles. The Motor Pool sometimes has more unassigned vehicles on hand than it needs, but it generally buys only as many vehicles each year as it expects to have to replace. Although some permanently assigned vehicles may not meet the requirements for permanent assignment, in some instances their assignnment appeared to be appropriate. Finally, the Motor Pool’s costs are about the same as other states, although some cost savings might result if State employees were encouraged to purchase gasoline from Department of Transportation facilities when possible.
Although State agencies use the contracts established, more contracts could be established if the information provided by the State’s accounting system allowed the Division of Purchases to determine which goods and services were purchased in larger quantities. Some bid specifications are written more restrictively than necessary, but surveyed vendors indicate that restrictive language in specifications does not deter them from bidding.
Job Training Programs in Kansas, Part II: Longer-Term Results For Program Participants
The audit shows that the Work Incentive Training program increased the likelihood that successful clients would be working, but it did not improve the wages of those who were employed. Clients who successfully completed the Job Training Partnership Act program were more likely to be employed two years later than individuals who did not successfully complete the program, and they also earned higher wages. Parolees who completed vocational training while they were in prison were no more likely to be employed after two years, and their wages were no higher. And companies that received assistance from the Kansas Industrial Training program were well pleased with its results. Changes can be made to improve the occupational information available to agencies that provide training, and to improve the quality of information those agencies gather to evaluate program results.
Acquiring Maintenance Services for Computer Equipment
State agencies will spend about $5.2 million for computer maintenance contracts in fiscal year 1987, and about $6.1 million the next year. Such contracts are not cost-effective for microcomputers, and although they may be cost-effective for word processors, such equipment could be effectively replaced with microcomputers. In fiscal year 1987, maintenance contracts on microcomputers and word processors total about $520,000. Maintenance contracts for mainframes and minicomputers, which are considered to be essential, account for the bulk of the contract costs.
Blind Industries has cost money in recent years because product prices were based on outdated cost estimates. Blind Industries will likely continue to lose money because recently adjusted prices for some products do not cover the actual cost to produce the goods in the most recent year. Blind Industries needs to improve the frequency and quality of accounting reports produced for management, and management needs to make better use of some of the information that is already available.
Out-of-State Travel Reimbursements for Elected Officials
Statewide elected officials took 30 out-of-State trips in fiscal year 1986 that were reimbursed by organizations other than the State. No inappropriate payments were found; however, controls need to be strengthened to ensure that duplicate payments do not occur. The audit also discusses the legal requirements for signing municipal bonds and the associated trips taken for bond signings.
The center’s purchases generally complied with all purchasing and bidding requirements, but compliance problems occurred in two of the 20 purchases reviewed. It took an average of nine weeks to order equipment for the Centers of Excellence, but the centers were not significantly hampered by any delays caused by the Department of Administration in Topeka. Most concerns raised by the Centers of Excellence could be addressed within current State laws and regulations.
Postage Costs for State Agencies That Do Not Use Central Mail Services (100-hour audit)
Within Shawnee County, 19 agencies and divisions within agencies do not use the central mail services provided by the Department of Administration, as required. These groups pay from $26,000 to $52,000 in equipment costs. The audit recommends that each agency and division be evaluated for possible inclusion in the Central Mail Services system.
Wage Rates for Construction of the Coliseum at Kansas State University
For Riley County, some of the specific hourly wage rates developed through surveys by the Department of Human Resources are significantly higher or lower than rates for surrounding and similar counties. Several rates also changed significantly from 1985 to 1986. The use of data supplied by one contractor for individual rate determinations and other weaknesses in the Department’s methodology have helped cause such variations.
Student Wage Expenditures at the Regents’ Institutions
Universities’ actual expenditures for student wages may differ significantly from the amount authorized by the General Fund line-item appropriation for student salaries and wages because student wages can be paid from other funds. Controls on student wage expenditures also vary between the universities and have different purposes. The audit presents options for increasing legislative control and oversight in this area.
Only one company has qualified to bid on the sheeting specified by the Department of Revenue to reflectorize license plates, but Kansas officials were unaware of a firm that successfully competed in another state. In 1986 Kansas also began packaging all bids for license plate sheeting, stickers, and decal, which effectively eliminated competition for the stickers and decals. For highway signs, the Department of Transportation has adopted a policy of using a more expensive high-intensity sheeting on certain signs and in construction work zones for visibility, durability, and safety reasons. However, that policy was based on a limited evaluation of the cost and useful life of the materials.
Using Inmate Labor for Construction and Remodeling Projects
Using inmate labor for construction and remodeling projects saved 40-45 percent of the projects’ estimated cost. Despite limitations to using inmate labor outside correctional facilities, the audit identifies several planned State projects where the use of inmate labor might be practical.
Most of the sample government buildings and private apartment complexes were at least partially accessible to physically handicapped individuals. Despite State and local enforcement efforts, many buildings did not fully comply with the State’s accessibility requirements. Private apartment buildings had the lowest level of compliance. The audit recommends changes to ensure better enforcement and compliance.
Four State agencies lease space in the Wichita State Offie Building. A large percentage of employees are dissatisfied with the building’s overcrowding, noisiness, temperature, and parking lot. In a related issue, the Department of Human Resources’ acquisition of office space in Wichita was consistent with the permitted uses of the funds spent. That acquistion consolidated most of the Department’s employment security programs in one central location in Wichita.
Contracting with a travel agency to make all official out-of-State travel arrangements may be the most cost-effective way to obtain the lowest available rates. Based on one estimate, this option could have cut State travel costs by 14 percent in fiscal year 1985, or as much as $655,000. Other options discussed in the report are less cost effective.
The number and dollar amount of claimed losses have increased rapidly since 1981, primarily at the universities. Improvements by State agencies to tighten controls should help minimize losses, if those controls are consistently followed. The audit presents alternatives for controlling escalating surety bond premium costs.
Based on volume of calls, many WATS lines are not cost justified. But State and federal laws mandating their use, the emergence of “hotlines,” and other factors dictate that alternatives be evaluated on a case-by-case basis. The audit examines some of these alternatives.
Personal use of the KANS-A-N telephone system is significant and widespread. Based on random samples of calls, the auditors estimate that the State pays at least $158,000 annually for unauthorized personal calls. No regulations governing KANS-A-N have ever been adopted and no criminal statutes prohibit personal use of the system. Abuse could be minimized by adopting rules and regulations specifying sanctions against personal use, and by setting up central audit procedures to monitor the system.
Inventory of Computer Equipment: Department of Revenue
Nearly all of the Department’s computer equipment is leased, much of it directly from the Division of Information Systems and Communications. Major ongoing costs are for salaries and wages and data processing services. The Department submits an annual inventory of computer equipment to the Division. That inventory was quite accurate.
Alternatives to State Ownership of the Santa Fe Office Building
This audit reviews the costs to the State of owning and operating the building, and the possible advantages of allowing a private developer to buy and renovate the building and lease it back to the State. It appears the lease option could be a less costly alternative and is worth investigating further.
KANS-A-N Telephone Calls at Winfield State Hospital (100-hour audit)
Allegations that the Superintendent of Winfield State Hospital made improper long distance telephone calls on the KANS-A-N system were substantiated by this audit. The report recommends procedures to ensure proper usage of KANS-A-N lines in the future.
Inventory of Computer Equipment: Emporia State University
Emporia owns rather than leases most of its computer equipment. The annual property inventory of purchased equipment it submits to the Division of Accounts and Reports is substantially accurate and complete. The Division of Information Systems and Communications is in the process of developing a Statewide computer inventory. Requiring the universities to submit a listing of thier computer equipment, and related suggestions can help in that effort.
Duplication of Computerized Accounting Systems (CASK)
Many State agencies continue to duplicate the accounting work done by the State’s central accounting system (CASK). For the most part, this independent information does not appear to be necessary, resulting in duplicated equipment, programming, and data entry effort and time. Steps taken by the division of Accounts and Reports have not been very effective at eliminating that duplication.
Declassifying Management Positions in the Civil Service
Agency officials indicate a reluctance to dismiss poor-performing professional or managerial employees in the classified service because of the difficulities involved. At the management level, there are inconsistencies between agencies as to whether positions are classified or unclassified.
The audit found that existing inventories of State-held land were inadequate. Although the Secretary of State’s Office and the Division of Accounts and Reports, the two agencies with responsibility for parts of the inventory, were in compliance with existing statutes, neither maintained adequate records for effective management. State agencies didn’t always comply with procedures for establishing the inventory, and they often submitted insufficient information.The audit found that although the State lacked any clear policy regarding the use of potentially surplus land, the individual agencies holding the land were making reasonably good use of it for the State.
In this audit each state agency will be requested to submit a one time inventory report listing all state owned property and leased land including legal descriptions. After review of results by the Post Audit Committee, the inventory reports are to be forwarded to the Department of Administration for permanent record.
Twenty Percent Assessments on Fee Funds to Reimburse the General Revenue Fund
At the September 11, 1972 meeting of the Legislative Post Audit Committee, discussion was given to the fact that certain fee funds are not being assessed a percentage of their gross receipts for payment to the general funds to cover administrative cross-servicing costs of other agencies in support of fee fund transactions. Those fee funds which are assessed are levied at the rate of 20 percent of their gross receipts. As directed, this report needs to identify the non-20 percent fee funds and presents a comparative discussion covering all fee funds in regard to assessments for indirect costs. The disposition of fees and monies paid into the state treasury are governed by statute; therefore, unless the statute pertaining to a particular fee fund so specifically provides, no assessment on the fund for indirect costs is made.