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.
Substance Abuse Programs: Evaluating Cost Savings Achieved Through Enhanced Acess to State Substance Abuse Programs
Although substance abuse can result in substantial criminal justice and social service costs, expanding treatment is unlikely to achieve significant savings. We estimated an additional 4,500 to 7,000 individuals are eligible for state-funded treatment and likely to seek it. To provide that treatment, the state would spend between $7 million and $11 million during a three-year period. However, we estimated the state would only reduce spending on other services (i.e. prison, foster care, or state hospitals) by $500,000 to $6 million for those individuals, which would not offset the cost of their treatment. Our results are significantly different from other studies which found greater savings related to providing substance abuse treatment primarily because we focused only on savings to the state and because many of the studies included savings in their estimate that we do not think would be realized.
State Agency Information Systems: Reviewing Security Controls in Selected State Agencies – Department on Aging and Disability Services (CY 2015)
In 1994 the Legislature created an involuntary civil commitment program for sexual predators at Larned State Hospital. The goal of the Sexual Predator Treatment Program is to prevent sexual predators from reoffending after their release. The recommended practices for sexual predator programs emphasize individualized treatment. However, Kansas’ program generally did not adhere to the recommended practices, while other states programs we reviewed generally did. The Kansas’ program met many legal requirements, although there were several exceptions related to education and rehabilitation. In addition, residents may not have necessarily arrived at the reintegration facilities with the skills to be successful. Further, we found that program officials had not maintained appropriate records and documentation to effectively manage the program and policies and program guidance were outdated and not adhered to. Until recently, KDADS had not filed annual reports with the legislature as required by statute.
Unless changes are made, the Sexual Predator Treatment Program will exceed capacity at Larned in the next few years and will continue to grow for the foreseeable future. We evaluated the impact of six different options to potentially reduce the program’s resident population.
• Treat low-risk residents in a community setting, which would reduce the resident population at Larned State Hospital and reduce program costs.
• Treat medically infirm residents in a secured nursing facility, which would reduce the resident population at Larned but would not significantly affect program costs.
• Treat residents on the “parallel track” in a separate secured facility, which would reduce the resident population at the Larned facility, but potentially increase costs.
• Expand the number of reintegration slots at Osawatomie and Parsons State Hospitals from 16 to 32, which would not reduce the resident population at Larned.
• Limit the time a resident can occupy a slot in a reintegration facility, which would not significantly reduce the resident population at Larned.
• Begin sexual predator treatment before the offender is released from prison, which would not significantly impact resident population and could increase costs.
Finally, we found that statutory housing restrictions make it difficult for residents to leave the program.
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.
CDDOs: Reviewing Issues Related to Community Services Provided for Individuals with Disabilities
The Kansas Department for Aging and Disability Services (KDADS) is responsible for administering the developmental disability waiver system. This includes providing oversight of the state’s 27 community developmental disability organizations (CDDOs). CDDOs act as gatekeepers because they are the single point of entry, eligibility determination, and referral for any individual seeking developmental disability waiver services.
In addition to the gatekeeping function, 21 of 27 CDDOs also provide direct services through their own community service provider, which creates an inherent conflict of interest. CDDOs have made some efforts to mitigate this inherent conflict of interest, but stakeholders still cite unfair advantages. For the areas we assessed, we found no direct evidence that CDDOs are taking advantage of this inherent conflict. We did find that the Kansas Department for Aging and Disability Services provides weak oversight for CDDOs in several areas. A bill currently pending would prohibit CDDOs from providing direct services, which could eliminate the inherent conflict of interest. Lastly, the newly implemented KanCare system has added an additional layer to the developmental disability system, but on its own will not address the inherent conflict of interest.
In fiscal year 2014, CDDO regions will receive about $360 million to provide services to about 8,700 individuals with developmental disabilities. We found that consolidating CDDOs could reduce administrative costs by about $500,000 to $800,000 a year. Kansas also could increase federal revenues by up to $6.5 million a year by redirecting $5 million in state aid. However, this policy choice would have significant impact on many Kansans. We found that several CDDOs spend funds on lobbying-related activities, which appears to violate federal and contractual requirements. Finally, KDADS does little to monitor CDDOs’ administrative expenditures for the developmental disability waiver.
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.
Larned State Hospital: Reviewing the Operations of the Sexual Predator Treatment Program
The Sexual Predator Treatment Program at Larned State Hospital provides treatment for sex offenders who have completed their prison sentence but who have been determined by the courts to be sexual predators. Overall, the Sexual Predator Treatment Program appears to have done a good job of addressing staff and resident safety and security, although we did identify a few safety and security issues that could affect staff and resident safety. Specifically, the program did not have adequate policies or controls to ensure keys and doors were secure and to prevent and detect prohibited items. Also, despite participating in conflict avoidance training, some staff did not feel adequately prepared for resident altercations. In addition, a significant number of staff positions responsible for ensuring safety, security, and treatment of residents were vacant. Even though program staff worked a significant amount of overtime, the program often failed to meet its internal minimum staffing levels needed to provide safety, security, and treatment.
Department on Aging: Evaluating the Effect of Increasing Minimum Nursing Hours on Resident Care and State Costs
Although the results are mixed, the most thorough research generally shows a positive relationship between staffing levels and quality of care outcomes in nursing facilities. Further, according to the federal Centers for Medicare and Medicaid Services (CMS), increasing staffing levels up to 4.1 hours of nursing care per resident day improved health outcomes. In addition to staffing levels, researchers also identified a number of other staff-related factors that are important in improving quality of care, such as staffing levels on different shifts or units and staff training. We were unable to detect a clear relationship between nursing hours and quality of care outcomes for Kansas’ nursing facilities, though this may be due to limitations in the data we were able to use.
Senate Bill 184, which was introduced but not passed during the 2011 legislative session, would have increased minimum nursing staff requirements in Kansas nursing facilities over a three-year period. However, the bill’s third year staff level requirements of 4.44 nursing hours per resident day are beyond the level the Centers for Medicare and Medicaid Services identified as leading to improved quality of care. We estimated it would cost the state up to $43 million annually to fully implement Senate Bill 184’s requirements. Although increasing staffing levels may improve health outcomes, better outcomes are unlikely to result in meaningful savings for the state. This is because the most significant costs associated with negative health outcomes are paid for with federal funds. As a result, most savings achieved through better outcomes will benefit the federal government, but not the state.
State Benefit Programs: Identifying Disincentives for Marriage
Most of the benefit programs we reviewed have income-based eligibility criteria that could discourage marriage in some situations, or have no effect at all. That’s because programs vary in how household income is defined. Some programs don’t distinguish between the income of married and cohabitating couples. Other programs may consider two unmarried people living together to be two separate households. Very few of the frontline program staff we interviewed think program eligibility rules have a significant effect on clients’ decision to marry. Further, the majority of clients we spoke with told us eligibility criteria have little to no effect on their decision to marry. Lastly, literature acknowledges that programs with income-based eligibility rules have built-in disincentives, but there’s little information about whether those disincentives actually cause people to avoid getting married.
Health-Care Related Services: Reviewing Opportunities for Better Coordinating the State's Health-Care Related Programs
By changing Medicaid billing practices, the State could save money spent on inpatient care for Department of Correction’s inmates. Although State agencies could also better coordinate a number of other health-care related programs, service gap issues such as lack of affordable health insurance for low-income single adults can only be addressed through State-level policy decisions. Of more importance is the upcoming federal health care reform, which will greatly affect how health-care related services are provided in Kansas. Its primary goals are to reduce the number of uninsured, slow increases in health care costs, and increase access to health care services and providers. Implementing those reforms will require significant coordination among State agencies. Some State agencies that traditionally have provided health care services will have added responsibilities, while other State agencies—such as the Kansas Insurance Department—will start having a role. At this point, it is too early to know whether State agencies are on track to implement the various provisions of federal health care reform.
Health-Care Related Programs in Kansas: Determining What Funding Kansas Receives and Who Administers It
Our inventory focused on three types of government-funded health-care related programs in Kansas--State administered, federally administered, and research--and on programs that were clearly medical in nature or related to substance abuse and mental health. Health-care related programs administered by seven State agencies accounted for about $2.5 billion of the nearly $6 billion in spending we identified for 2006, including $1.6 billion on health care programs and $.8 billion on long-term care. Federally administered health-care related programs accounted for $3.3 billion in spending, nearly all of which was for Medicare. Health-care related research spending totaled about $131 million, with most of that being spent by the University of Kansas.
Medicaid Waivers: Reviewing Differences in Rates and Hours of Service for Self-Directed and Agency-Directed Care, Part I: The Department on Aging’s Frail Elderly Waiver Program
Medicaid is paying more for clients with self-directed care than for clients who choose agency-directed care. From our review of records from January 2005, we estimate that Medicaid will pay about $926 per month for each client with self-directed care and about $654 per month for each client with agency-directed care. This difference in costs is happening for several reasons, including that clients with self-directed care tend to be more disabled and poorer. However, when we compared clients with similar disability scores, the main factor influencing the cost difference is that clients with self-directed care don’t rely nearly as much on volunteers to provide help with the services they need. If these clients received about the same number of volunteer hours as clients with agency-directed care (about 17 hours more per client, per month), Kansas would save about $2 million each year in State funding. In addition, we found that other factors–including whether clients live in rural areas or live alone–aren’t increasing costs for clients with self-directed care. Finally, we found that Kansas could take additional steps to try to control costs, including not using Medicaid to pay for services when clients turn down voluntarily-provided services, limiting the number of hours family members can be paid to provide services, reducing pay rates to family members, and not allowing payroll agents or attendant care providers to pressure case managers to add service hours to clients’ care plans.
Medicaid Cost Containment: Controlling Costs of Long-Term Care
Kansas' spending on Medicaid-funded long-term care rose by $157 million between 1998 and 2001, or about 33%. Rising reimbursement rates for nursing facilities-primarily driven by higher direct-care salary costs-accounted for almost $47 million of that increase. Spending for "waiver" services provided in the home or community-primarily driven by significantly more people receiving services-accounted for $110 million of the increase. Factors driving up waiver costs to a lesser extent: relatively small increases in reimbursement rates and in the average amounts of services clients received. Among the reasons why so many more people are getting services in the community: the "woodwork" effect, a change in financial eligibility requirements, the closing of several long-term care institutions for the developmentally disabled, additional funds being provided to serve more people, and a new program for severely emotionally disturbed children.SRS and the Department on Aging need to analyze data already available to them to identify and manage areas where costs need to be controlled. Cost control measures we identified include serving only the neediest by raising the minimum scores required to qualify for the program, tightening financial eligibility requirements, and taking better steps to ensure that people haven't purposefully sheltered assets in order to qualify for Medicaid. The Departments also could limit the number of eligible people who can receive services by using waiting lists, paying less for services by limiting the amount spent per consumer, and stepping-up their efforts to identify and recoup payments that shouldn't have been made. Also, they could roll back or delay nursing home rate increases scheduled to go into effect for fiscal year 2003. Finally, the Departments could work with the Legislature to develop ways to encourage people to pay for their own long-term care.
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.
Reviewing In-Home Services to Elderly Kansans: A K-GOAL Audit of the Department on Aging
The Department on Aging does a thorough job of evaluating the services provided to elderly Kansans in their own homes when those services are paid for with Medicaid moneys. For in-home services funded through non-Medicaid programs, however, the Department does too little monitoring to provide enough information about the quality of those services. Instead, it relies heavily on the Area Agencies to evaluate the service providers they contract with. Expanded Department oversight would provide more conclusive assurance for these programs that spending is appropriate and that the quality of services is acceptable. Although the State requires most agencies and individuals that provide in-home services to be licensed or certified, some of those agencies aren't being inspected as required by law because of budget shortfalls at the Department of Health and Environment. Further, State law mandates little regulation of the people who provide "hands-on" attendant care services. Finally, two of the three Area Agencies we visited weren't tracking the complaints they received about service quantity and quality, and the Department on Aging's resolution of complaints wasn't well documented. In both situations, there's a greater risk that problems won't be resolved or that patterns of recurring problems won't be identified.
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.
The Department on Aging and the Department of Social and Rehabilitation Services fund or provide essentially the same long-term-care services, but offer their programs to different groups of elderly individuals. When more than one agency provides or funds essentially the same services, there is considerable duplication of administrative effort, which can result in client confusion, clients falling through the cracks if coordination is inadequate, and in money being spent for administrative activities that otherwise could be spent for direct services. The State might gain some cost efficiencies from consolidating all its long-term-care programs in one agency, as two comparison states have done, but some disadvantages also would result. For an individual client, the State generally can provide home and community-based long-term-care services at a lower cost than nursing home services. However, the total cost to the State of providing those services may not decrease significantly, particularly in the short-run, because states’ new long-term-care programs tend to expand the number of people eligible for services, and because the Medicaid-Waiver Programs may be serving elderly individuals who would not be getting services in the absence of such Programs.
Public Transportation Services for the Elderly and Handicapped in Kansas
Because State agencies do not require local transportation providers to take any specific coordination actions, the current Kansas system results in significant overlap and inefficiency at the local level. All parts of the State apparently have unmet needs for transportation services for the elderly and handicapped. Some Department of Transportation policies are more restrictive than federal requirements, and may limit local agencies’ flexibility to meet the transportation needs of their clients.
Management Audit of State Funded Pharmacies and Drug Rooms