Kansas Industries for the Blind was scheduled for privatization on July 1, 1996, but that didnít happen for a number of reasons. Recent allegations have been made that, to keep the scheduled privatization from going smoothly, certain equipment and records of the operation had been discarded. Our interviews and corroborating testwork generally didnít substantiate these allegations. We found that employees disposed of some old, broken equipment stored at the workshop, discarded blank State forms, and purged their files of records and documents more than two years old. However, we found nothing to indicate that these actions werenít logical or well intentioned. Rather, these things seemed to have been done to facilitate the scheduled change to private sector operation. Further, once privatization didnít take place, we saw no significant adverse impact of these actions on the ongoing operations of Kansas Industries for the Blind.
Reviewing the Vehicle Information Processing System and the Computer-Assisted Mass Appraisal System after Changes in State Law
The 1996 Legislature earmarked certain funds for improving the Stateís Vehicle Information Processing and Computer-Assisted Mass Appraisal Systems. In general, those funds arise from certificate of title fees and fees from the sale of public records. During the first three months of fiscal year 1997, the Department of Revenue collected $278,454 for upgrading the Systemsí hardware and $315,865 for operation, maintenance, and improvement of these and the Departmentís other electronic data base systems. These amounts are reasonably close to estimates provided to the 1996 Legislature. During the first three months of fiscal year 1997, the Department spent about $8,900 to begin hardware procurement for upgrading the Vehicle Information Processing System.
Reviewing the Operations of the Kansas Highway Patrol Motor Vehicle Program
The Highway Patrol generally appears to be operating its fleet in an efficient and effective manner. The Patrol acquires the proper type of vehicles, and given recent changes in the police package market those acquisitions are made at a reasonable cost. At this time, it seems that purchases of large numbers of vehicles at one time may be the only reasonable option. Amounts the Patrol receives from the resale of fleet vehicles are also reasonable. Although the Patrolís current policy of replacing vehicles after theyíve been driven about 49,500 may not result in the lowest possible fleet costs, itís preferable to the previous policy of replacing vehicles after 85,000 miles.
Reviewing Sales Tax Enforcement and Collection Efforts at the Department of Revenue: A K-GOAL Audit
Based on comparisons with other states, the Division of Collections doesnít appear to be very cost-efficient or effective. Further, the Division doesnít routinely produce and review the basic management information it needs to track its effectiveness and efficiency. Our review of a sample of delinquent sales tax accounts identified several problems with collection activities, including inconsistency and lack of timeliness. The Departmentís Audit Bureau appears to be a cost-efficient part of its collection efforts; during fiscal year 1996, the Bureauís auditors assessed additional taxes due of about $24, and collected $12, for every dollar the Bureau spent. The current approach for handling sales tax exemptions--which makes the seller responsible for determining whether a particular sale is exempt from sales tax--is the same approach used in most other states. Parts of the sales tax law are difficult to interpret, which can result in inconsistent treatment of taxpayers. The Department could adopt additional administrative regulations to interpret the law, but Department officials contend it would be better for the law to be changed.
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 Programís fees, limitations, and restrictions. Finally, according to State law, the State isnít 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 participantsí 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 the Conservation Commissionís Effectiveness at Meeting the Goals Established Under the State Water Plan: A K-GOAL Audit
The Conservation Commission has done a good job of awarding program moneys for the types of projects and in the areas of the State that were targeted as priorities in the State Water Plan. However, the ways in which the Annual Implementation Plan is developed and projects are approved may not ensure that compliance with Water Plan goals will always be as high in the future for Commission-funded programs. This is primarily because the people who are setting the priorities are different from the people who are deciding where the moneys actually are spent. In addition, no one at the State level systematically reviews program spending after the fact to see how well it addresses needs identified by the State Water Plan. We also found that, although the Commission collects some information about whether moneys being spent are effective at meeting Water Plan goals, part of that information may not be reliable. Finally, the Commissionís programs could be transferred to other State agencies and the Commission abolished, but there didnít appear to be a compelling reason to do so, and the savings that could be achieved are unclear.
Reviewing Benefits Provided by the Kansas Public Employees Retirement System: A K-GOAL Audit
The Retirement Systemís benefits and employee contribution rates are about average compared to other state retirement systems we reviewed. On the other hand, Kansas provides a smaller health insurance subsidy and fewer cost-of-living increases for its retirees than many other states. The amount the State pays to fund the system is among the lowest employer contribution rates we found. The System wasnít as well funded as other retirement systems, in part because the Legislature has chosen to phase in increases in employer contributions needed to fund benefit increases granted in 1993. Compared to four private-sector employerís defined-benefit retirement plans, the Retirement Systemís benefits were just about in the middle. However, each employer provided additional benefits to their employees through a defined-contribution plan which substantially increased their overall retirement benefit. Defined benefit plans--like the Stateís-- arenít portable and tend to provide smaller total retirement benefits to employees who change jobs frequently. To increase portability, some states have made it easier for employees to withdraw at least part of the employer contributions when they change jobs. Other states are giving employees some options for how their retirement moneys can be invested, and still others are providing flexibility in computing retirement benefits that can provide an advantage to the employee. Most of these options require some cost to the State.
Verifying Information Provided by the Department of Social and Rehabilitation Services On Its Compliance With the Terms of the Foster Care Lawsuit Settlement Agreement, Monitoring Report #4
We concluded the Department had complied with 17 of the 47 requirements reviewed during this monitoring period, and had not complied with 23 of those requirements. The areas of noncompliance related to protective services, the assessment of needs for services and placements, information on placement providers, staffing, and information systems. We couldnít determine whether the Department was in compliance with seven additional requirements, related to protective services, assessment of needs for services and placements, information on placement providers, and staffing, because the Department and Childrenís Rights, Inc., havenít yet agreed on what the Department can do in future monitoring periods to resolve the partiesí ongoing disagreement regarding compliance. All of these areas will be followed up during the next monitoring report.
Reviewing the Compensation of Executives of the Stateís Economic Development Agencies
The compensation for economic development executives is set by the boards or officials they report to, and their compensation usually is based on studies of salaries for similar positions. Most economic development executives in Kansas receive compensation thatís comparable to what officials in other states receive. We identified relationships between economic development agency staff and 13 of the 61 technology-based companies we reviewed. Some of those relationships appeared to represent a conflict of interest. State law is unclear about whether some employees are subject to the Stateís ethics laws. Also, most economic development agencies donít have written policies and procedures in this area, and university conflict-of-interest forms donít require full disclosure. Unlike in some other states, Kansasí economic development employees arenít prohibited from having an interest in companies that receive assistance from the agencies they work for.
Reviewing the Department of Health and Environmentís Regulation of Nursing Homes
The Departmentís system for handling complaints is well designed. However, we thought about 10% of the complaints we reviewed were more serious, and the Departmentís staff should have given them a higher investigation priority. Given the priorities assigned, the Departmentís staff investigated most complaints on time, and those investigations appeared to be thorough. However, a recent decision to rely on nursing homesí own investigations of certain complaints may not comply with State law. The Departmentís nursing home inspection system also is well designed and should uncover significant violations of laws and regulations. All but a handful of homes were inspected as often as required, and inspections for homes that werenít timely were only a few days late. Inspections we looked at appeared to be complete and comprehensive. The Health Care Financing Administrationís 1995 review of Kansasís inspection program generally was positive, but it noted the Department needed to improve its identification of regulatory violations. The Departmentís efforts to get problem homes to correct deficiencies werenít always effective, in part because it didnít always issue correction orders when it should have, it didnít make full use of the fining authority it has, and it didnít appear to have appropriate remedies to deal with less-serious infractions.
Verifying Information Provided by the Department of Social and Rehabilitation Services on Its Compliance with the Terms of the Foster Care Settlement Agreement: Monitoring Report #3
We concluded the Department had complied with 16 of the 45 areas reviewed during this monitoring period, and had not complied with 18 of those requirements. The areas of non-compliance related to protective services, the assessment of needs for services and placements, staffing, training, and information systems. In addition, the Monitoring Unit reported that the Department wasnít in compliance with six other requirements. However, we concluded the Unitís assessment couldnít be relied on because the reading of case files wasnít accurate enough to determine whether the Department was in compliance or not. Finally, we identified five areas, related to protective/medical services, the revised Family Emergency Assistance Program, Flexible Fund Dollars, equitable workload distribution, and maintaining staffing levels, where we werenít able to determine whether the Department was in compliance, primarily because the Department and Childrenís Rights, Inc., hadnít yet agreed on what the Department was required to do to comply. All of these areas will be followed up during the next monitoring report.
Reviewing Certain Aspects of Utility Regulation by the Kansas Corporation Commission
In general, we found that the Corporation Commission hasn't developed written procedures for granting certificates of convenience and necessity, but it does have standard practices. The Commission applied these practices consistently in all cases except for when Rural Telephone Company applied to serve an area that was already served by United Telephone Company. Treatment of this application may have been different in part because this was the first application that would allow competition within a local telephone service area. The Commission also hasn't developed written procedures for handling ratepayer complaints. Nonetheless, the complaints we reviewed appeared to be handled well. Although our review of the staffís follow up on Commission orders identified only three instances where follow-up appeared to be deficient, those instances occurred on fairly major issues. In addition, we identified some instances where the Commission cited serious and ongoing problems with the services a utility provided, but never required the utility to take corrective action. The Commission hasnít established any controls to prevent conflicts that might arise from hiring employees who've worked for utilities. Commissioners told us they are currently working on policies to address potential conflicts of interest.
Assessing Selected School Districtsí Use of General Fund Revenues and Lease-Purchase Arrangements for Capital Improvement Projects (100-hour audit)
During fiscal year 1995, Kansas school districts transferred more than $14 million from their general funds to their capital outlay funds. However, we couldnít tell how the transferred moneys were spentóon land and buildings or other capital outlay projects. In addition, 19 school districts reported spending about $3.5 million of their general fund moneys during fiscal year 1996 for 23 separate lease-purchase agreements to buy buildings or additions to existing buildings. Although allowed by law, the use of lease-purchase agreements has been a concern because they can be used to circumvent the wishes of a districtís voters. We saw five instances where school districts entered into lease-purchase agreements after voters defeated related bond issues. Although none of these five districts were required by law to publish their intent to enter into lease-purchase agreements, four of the districts did publish notice. Finally, we saw two instances where State law could be clarifiedóone regarding the maximum length of time for a lease-purchase agreement, and one regarding when a lease-purchase agreement is subject to public notice.
Compliance and Control Audit: Department of Agriculture
The State assessment tests were designed to measure studentsí average performance at individual schools over time. Officials from the Department of Education and the University of Kansasí Center for Educational Testing and Evaluation said the assessment test results shouldnít be used as the sole factor in comparing individual studentsí performance or in making comparisons between schools or districts, because of the many other factors that can affect such comparisons. Most school officials are using the assessment test scores appropriately, but confusion about how the test results should be used has caused some school officials to use the results for purposes they werenít designed for. Recent actions by the Legislature also could contribute to such uses. Some school officials expressed positive opinions about the tests, while others expressed concerns that the tests didnít provide any new information, that scoring was inconsistent, or that the tests took too long to administer. Teachers generally liked the performance component of the writing assessment test, but disliked that aspect of other tests. Assessment tests in other states we reviewed generally were similar to those in Kansas, except that their tests generally are scored centrally and other standardized tests are required.
Reviewing the Effect of Student Expulsions on School Districts and Students
Schools did not appear to be expelling students immediately after September 20th- the day when they are counted for State aid purposes. But they did expel more students in October and November than during other months of the school year. Typically, students were suspended or expelled for multiple infractions, and were removed from school for a period of about three months. Most students who were allowed to return to their school later in the year did so. About half the students we were able to track in the community were involved with some type of educational program while they were suspended or expelled, and most of those programs were supported by State aid. In a few cases, students were home schooled, or attended a private school at their familiesí expense. Slightly less than half the students stayed home or worked during the time they were out of school.
Determining Whether Kansasí Medicaid Program Makes Maximum Use of Third-Party Insurers
The Medicaid computer system has a number of good edits built into the system. Out of about $875 million in claims processed during calendar year 1995, those edits reportedly identified more than $69 million worth of claims that needed to be billed first to other insurance. We looked at a sample of claim where the Medicaid client had other insurance, but the other insurance didnít pay any of the claim. We found a significant number of cases were the health-care providers didnít bill other insurance companies because they werenít aware other coverage existed. In other cases, the providers didnít handle claims according to program regulations. Based on our sample, if other insurance paid only 5% of the estimated number of problem claims, Medicaid might save $10,000-$460,000 during fiscal year 1996. One reason so many claims hadnít been billed to other insurance was that the Department didnít have adequate procedures to identify when Medicaid recipients have other insurance, and didnít always enter insurance information onto the computer system on a timely basis. We also found that EDS hadnít done some of the reviews it was required to do to make sure claims were handled appropriately, and that EDS and the Department havenít aggressively followed up to collect potential overpayments. Finally, we found that Blue Cross and Blue Shield could have a conflict of interest when it takes over as the Departmentís fiscal agent later in 1996.
Compliance and Control Audit: Department of Health and Environment
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 vendorsí performance. In the absence of centralized guidance, thereís a significant risk agencies wonít 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 arenít 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 donít include all costs. Some privatization efforts currently under way may increase State costs.
Reviewing U.S. Army Corps of Engineers Records Supporting the Stateís Share of Development Costs for El Dorado State Park
The Corps of Engineers has said the State owes $8.5 million for its share of the development of El Dorado State Park. The amount increased significantly over the years because of changes to original design plans and inflation. We found that the Corpsí worksheets and accounting records generally support its final cost figures. Some cost issues still need to be resolved, but the effect of these on the amount owed by the State is relatively minor. Although original supporting documents such as contracts and invoices may no longer be available, the Park Authority (later the Department of Wildlife and Parks) provided oversight throughout the project, and was actively involved in planning the Park, making changes to those plans, monitoring construction, and reviewing contracts. If the State makes annual payments to the Corps for the next 32 years, total payments with interest will amount to about $15 million.
Summary Report on the Audits of Parimutuel Racing In Kansas
This report contains a summary of the findings, conclusions, and recommendations from six performance audits of the racing industry in Kansas conducted by the Division and by certified public accounting firms. The audits summarized include: Reviewing the Operations of the Woodlands, Reviewing the Operations of Wichita Greyhound Park, Reviewing the Operatios of Camptown Greyhound Park, Reviewing the Computerized Betting Systems Operated by United Tote Company at Three Kanas Racetracks, Reviewing the Regulatory Activities of the Kansas Racing Commission, and Reviewing the Impact of Parimutuel Racing On the Horse and Greyhound Breeding Industries and on Agribusinesses that Serve the Breeding and Racing Industries.
Reviewing the Impact of Parimutuel Racing In Kansas On the Kansas Racehorse and Greyhound Industries
We estimated that the total impact of parimutuel on breeders and associated agribusinesses was about $21.6 million in 1995. About $1.4 million of that amount was estimated to come from the sale of Kansas-bred racehorses and dogs to supply parimutuel racetracks in Kansas. Another $15.2 million was spent with Kansas agribusinesses such as food suppliers, veterinarians, and animal trainers for goods and services related to raising, training, and racing race animals. The remaining $5 million was comprised of $4 million in prize money paid to Kansas residents, and about $1 million in purse supplements and breed awards provided by the Kansas Horse Breeding Development Fund and the Kansas Greyhound Breeding Development Fund. Kansas residents received about 47% of the total prize money paid out in 1995.
Reviewing the Department of Revenueís Mail-Opening and Cash-Depositing Procedures
In fiscal year 1995, the Department of Revenue collected $4.1 billion in taxes and fees. Some of those moneys were deposited electronically, but most arrived in the mail and were processed by hand. Although the Department generally deposits tax revenues in a timely manner, we found that during the 1995 income tax season, it lost nearly $200,000 in interest income because of delays of up to 22 days in depositing checks from taxpayers. Department officials told us that as part of the Kansas Tax 2000 project, they expect to purchase equipment to automate the mail-handling and check-depositing functions, which should significantly reduce the delays. They expect to have this equipment in place for the 1997 income tax season.
Examining Child Support Enforcement Activities in Kansas
In fiscal year 1994, Kansas collected about 55% of the current child support owed, about the same as the national average. However, within SRS area offices, this rate varies from 41% to 67%. Shortcomings were identified in about 1 in 5 cases we reviewed, including six that simply ďfell through the cracks.Ē The report identified factors that hamper collection efforts in Kansas, such as high caseloads, lack of equipment, the lack of access to information to locate absent parents, difficulty in getting management information from the Departmentís computer system, and conflicts between the courts and the Department.Kansas spends more than the national average and nearby states for each dollar of child support collected. No comparisons on the cost-efficiency of the various area offices could be made because no data were available. The Department spent about the same per dollar of child support collected as the court trustees on enforcement services, but what it costs the Department to have court trustees handle enforcement services varies significantly. Except for some duplication between the Department and the district court clerks, no inherent inefficiencies in the Programís structure were apparent. Other states contract with private agencies for a more extensive range of child support services than Kansas. It appears Kansas may be able to reduce its expenditures for enforcement services in certain areas of the State where those services arenít being provided as efficiently as they could be.
UNITED TOTE: A Report of Policies and Procedures Placed in Operation and Tests of Operating Effectiveness
United Tote Companyís parimutuel systems are suitably designed to provide adequate controls, with some exceptions. Those systems were operating effectively at the two Kansas tracks still in operation at the time of the audit. While the exceptions noted dealt mainly with the need for better documentation, the auditors found that United Tote and the tracks didnít adequately control access to the parimutuel systems, including such things as limiting access to the system to authorized personnel through user identification numbers or passwords. Further, system commands are documented and readily available in the computer room. As a result, a serious security risk exists for unauthorized access or sabotage. In fact, United Tote personnel have noted unauthorized access outside normal operating hours. Although only this one deficiency appears to pose a major risk to the integrity of parimutuel operations, it does seem to represent a serious and significant risk.
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 Printerís estimated charges were less to print most items than commercial printers or other State agencies, even though the other State agencies donít include all costs of operation in their estimated charges.
Reviewing the Department of Agricultureís Weights and Measures Enforcement Program: A K-GOAL Audit of the Department of Agriculture
The Department of Agricultureís Weights and Measures Program hasnít been effective at ensuring the accuracy of the Stateís measuring devices. The Departmentís own recent tests found a significant number of inaccurate devices. With literally billions of dollars worth of products sold every year using these devices, the economic impact of such inaccuracies can be significant. Factors that have contributed include inadequate oversight by the Department of private companies doing inspections, and lack of sufficient enforcement actions when the Department found problems. In the past, some Department officials overstated the effectiveness of the Program and the extent of its regulatory activities. That could have helped hide the problems that existed, and contributed to their continuation. In a related area, the Department has done very limited testing for octane levels, which probably is the most financially significant risk area of gasoline quality. Further, the Department hasnít always responded effectively to address problems it found in this area--either by enforcement action or by expanding its regulatory activities in this area. Based on current gasoline prices, the report notes that a gas station owner might collect an extra $17,000 a year from just one pump by selling regular grade gasoline at premium gasoline prices.
Reviewing the Regulatory Activities of the Kansas Racing Commission
The Commission has adopted reasonable practices in a number of areas related to the regulation of parimutuel racing, but its enforcement in several areas--including timely completion of background reports, testing winning greyhounds for controlled substances, licensing of judges, having written policies and procedures, and oversight of oral contracts--was weak. Differences of philosophy among past Commissioners and Executive Directors, and the failure to fill some key positions, may have contributed to weaknesses in the Commissionís operations. Finally, the Commission had taken some actions that, in our opinion, conflict with the intent of the Legislature when it passed the Kansas Parimutuel Racing Act.
Reviewing the Operations of the Camptown Greyhound Park
Camptown Greyhound Park has closed and many of its personnel have been laid off because attendance and betting at the track has been far less than was projected before the track was constructed. Money invested in Camptown Greyhound Racing Inc. has totaled $13.8 million, which includes $4 million worth of stock purchased by 27 shareholders (all but two or which are Kansans) and $9.8 million worth of debt. About $6.6 million of the debt has been loaned to the track by individuals, and $3.2 million has been loaned by Boatmanís Bank and guaranteed by Kansas Gaming Partners--a joint venture formed by Casino Magic Corp. and United Gaming Inc. In return for guaranteeing the loan, those two corporations and two other individuals that have loaned money to the track will receive the rights to construct and operate a casino at the racetrack if the Legislature authorizes casino gaming. To date, some interest has been paid on loans, but otherwise the shareholders or debt holders have not seen any significant financial benefit from the track. The track has complied with most regulatory requirements, except that it had not filed all contracts with the Kansas Racing Commision as required.
Reviewing the Operations of Wichita Greyhound Park
Wichita Greyhound Park Inc. was formed in 1988 to construct and operate a racetrack in the Wichita area. To date, the primary financial beneficiaries of track operations have been the nine original shareholders who invested a total of $1 million to purchase 100,000 shares of stock. In 1991, those shareholders sold their shares at a profit of about $8.5 million. In addition, some of the current and former shareholders have received financial benefit through consulting contracts, loan guarantee fees, legal fees, and payments to companies they own. Most of the current shareholders live outside Kansas. The track has complied with most regulatory requirements, except that it had not filed all contracts with the Kansas Racing Commission as required.
Compliance and Control Audit: Public Safety Agencies