State law specifically authorizes tuition reductions for some non-resident students, and allows schools to enact other reductions. In Fall 2005, about 12,000 of the nearly 27,000 non-resident students at Kansas public colleges and universities (46%) received some type of waiver or discount, which resulted in tuition reductions of nearly $26 million. Specific statutory authorizations, such as those for active military members and employees of the school, accounted for 40% of the students and 56% of the money. Policies approved by boards of regents and trustees accounted for the remainder. These school policies included tuition reductions for residents of certain counties in bordering states, online students, and victims of Hurricane Katrina. Even with the rate reductions, tuition paid by non-resident students at State universities more than covered the estimated cost of teaching those students. This wasn’t true at community colleges, where non-resident tuition rates are far lower than the cost per credit hour to begin with. Beginning in the late 1990s, Congress enacted several tax deductions or credits. After these tax benefits took effect the average out-of-pocket tuition costs per student actually decreased in Kansas. Since 2002, however, average out-of-pocket tuition costs in Kansas have been rising rapidly. One factor influencing this rise – tuition at State universities increased rapidly after changes made by the 2001 Legislature. By 2004, out-of-pocket tuition costs had climbed past the 1998 level, and continue to rise.
K-12 Education: Reviewing Free-Lunch Student Counts Used as the Basis for At-Risk Funding, Part II
The Department of Education doesn’t have a reliable count of students who receive at-risk services, because the Department hasn’t given school districts clear guidance on what to report. Based on the at-risk student data we gathered directly from a sample of districts, districts received at-risk funds for a different number of students than they served, and generally provided at-risk services to a different group of students than they received funding for. However, an actual student-to-student relationship can’t be expected between funding and services because at-risk funding primarily is based on the “stand-in” measure of free-lunch students. Of the 41 states for which information was available, only one distributes at-risk funding based on the number of students who actually receive at-risk services. In 39 states, some measure of poverty—primarily the free- and reduced-price lunch count—is used to distribute some or all at-risk funding. Ten states, including Kansas, distribute at-risk funding through a “poverty-plus” mechanism that combines a measure of poverty with additional at-risk indicators, such as low assessment scores.
Reviewing Operations of the State Treasurer’s Office, Fiscal Year 2007
This audit of the State Treasurer’s Office is required by the Legislative Post Audit Act. It was conducted by the joint venture of Allen Gibbs & Houlik and Berberich Trahan & Co., audit firms under contract with Legislative Post Audit. The audit addresses 10 questions about selected financial management responsibilities of the Treasurer’s Office, mainly those involving that Office’s custodial responsibilities for State moneys. The audit found only one deficiency. The interest rate charged to one lender under the Agricultural Loan Deposit Program didn’t match the approved rate. The Treasurer’s Office has taken steps to prevent future occurrences.
Reviewing Operations of the Pooled Money Investment Board
This audit of the Pooled Money Investment Board is required by the Legislative Post Audit Act. It was conducted by the joint venture of Allen Gibbs & Houlik and Berberich Trahan & Co., audit firms under contract with Legislative Post Audit. The audit addresses four questions about selected financial management responsibilities of the Pooled Money Investment Board, mainly those involving the Board’s fiscal accountability for moneys. The audit found no deficiencies.
Kansas Public Employees Retirement System: Reviewing Active and Passive Investment Management Approaches and the State’s Pension Obligation Bonds
This performance audit of the Kansas Public Employees Retirement System is required by State law. The work was done by Berberich Trahan & Co., a certified public accounting firm under contract with Legislative Post Audit. The audit looked at the System’s use of different investment management styles and the State’s experience with pension obligation bonds. The audit found that the Retirement System uses both passive and active investment management styles. For the periods reviewed, the System earned more investment income using a combination of styles than it would have using only a passive style. In addition, the System’s proportional use of investment management styles has been similar to those of other states reviewed. Finally, regarding pension obligation bonds, the State has earned 9.9% to date from investing the bond proceeds. Over the life of the bonds, the debt cost will be about 5.4%.
K-12 Education: Reviewing Free-Lunch Student Counts as the Basis for At-Risk Funding
Based on our Statewide random sample, about 23,000 (17%) of the approximately 135,000 free-lunch students counted for at-risk funding in 2005-06 weren’t eligible for free lunches. As a result, the State overpaid nearly $19 million in at-risk funds. At the same time, according to survey responses from district officials, about 6,900 students may have been eligible for free lunches but their families didn’t apply. The free-lunch count used for at-risk funding also may include a number of students the Legislature didn’t intend to fully fund, such as adults attending alternative education schools, and free-lunch students who don’t attend full-time. We also identified problems with the Department of Education’s free-lunch reviews that, if addressed, could produce a more accurate count.In 2003-04, Kansas had 54,000 more free-lunch students Statewide than comparable U.S. Census Bureau estimates would suggest. Ineligible students would account for almost half that difference. However, the Census Bureau’s district-level poverty estimates also have several limitations, including difficulties in accurately measuring important populations, significant lag time in publishing figures, and decreasing accuracy as the estimates get further away from the 10-year Census count.
Kansas Lottery: Financial Audit of Fiscal Year 2006
This audit of the Kansas Lottery for fiscal year 2006 is required by State law. The work was done by Berberich Trahan & Co., a certified public accounting firm under contract with Legislative Post Audit. The audit found that the Lottery fairly presented its financial statements, met applicable legal requirements, and had no significant weaknesses in its financial management procedures.
Foster Care: Reviewing Decisions To Remove Children From Their Homes
Legislators have heard numerous complaints from families who thought there wasn’t sufficient reason to remove their children and place them in foster care, or to keep them away once removed. In our review of a small sample of those cases, we concluded that removal and reunification decisions generally were handled reasonably. We did find some problems with other aspects of the cases. Some examples include SRS’s contractors not following court orders to obtain drug tests for family members, and not always documenting the results of those tests. Also, in two cases SRS didn’t interview individuals who may have been able to provide relevant information about a case. Within the court system, we found several problems or potential problems with the handling of cases in Montgomery County, including the appearance of potential bias in one case, faulty recording devices in a courtroom, and adoption being used as a case goal far more frequently than for all foster care cases Statewide. Finally, we found several instances where there appeared to be deficiencies in the level or quality of legal representation provided to parents. Given everything else that was going on in these cases, for the most part we think it is unlikely that any of these individual problems would have affected the removal and reunification decisions made about these children.
Board of Healing Arts: Reviewing Issues Related to Complaint Investigations, Background Investigations, and Composition of the Board
The Board of Healing Arts has some elements of a good complaint-handling system, but we identified significant weaknesses in several areas. For example, by policy the Board’s staff don’t investigate all allegations of substandard patient care. Board staff also have inadequate processes for tracking and monitoring the progress of complaint investigations, and of investigated cases that have been forwarded to the Board’s Review Committee. In two long-open cases, Board staff failed to obtain expert opinions, which had been recommended, and those cases have languished for years while the doctors in question remain licensed. Disciplinary outcomes for the 30 closed cases we reviewed seemed reasonable. The Board generally collects and verifies the appropriate amount and type of information for medical doctors and osteopaths, but staff don’t verify all they could for chiropractors and podiatrists, and aren’t authorized to conduct FBI criminal history checks on applicants. The Board’s composition is set in statute and hasn’t changed in 20 years, even though many allied health professions– such as physical therapists– have come under its regulatory authority since then. Of 14 professions it regulates, 10 don’t have a seat on the Board, but most are represented on advisory councils to the Board. Although other states’ regulatory structures vary in the number of professions regulated or members on the board, their boards’ makeup typically is limited to doctors and members of the public.
Animal Health Department: Reviewing Issues Related to a Recent Animal Tracking Technology Project (limited-scope audit)
State law requires agencies to report all information technology (IT) projects costing more than $250,000 to the Chief Information Technology Officer (CITO), but officials from the Animal Health Department didn’t report a 2004 research and development project for the USDA because they didn’t think they were developing a system for agency operations. The CITO has determined that this project, along with two other Department projects, are covered by the law. Bringing research projects such as these under the IT approval and monitoring system could result in a major increase in the number of agency and university projects monitored. About $750,000 of the project’s $1.5 million budget was spent before the project was terminated–about $500,000 of federal funds and $250,000 of in-kind efforts. Although the project didn’t achieve the desired outcomes, USDA officials say the project proved that this technology could work. As a result, it’s unlikely USDA will ask that any of the spent federal funds be returned. USDA officials did tell us they will ask the Department to return the $38,000 in unspent federal funds.
Kansas Technology Enterprise Corporation: Reviewing Bonuses Paid to Employees of KTEC and Its Subsidiaries (limited-scope audit)
KTEC will have paid its employees more than $550,000 in additional compensation from 2004 to 2006, including nearly $333,000 in annual bonuses and up to $224,000 in supplemental payments for work done for the Kansas Bioscience Authority. All additional compensation was paid from KTEC Holdings, Inc., a wholly owned subsidiary of KTEC. Parts of the 2006 bonuses paid to three KTEC employees–about $3,000 in total–appear to be contrary to State law because the bonuses were based on work done for a subsidiary of KTEC, which is prohibited. KTEC pays bonuses for achieving performance goals and to make compensation more competitive with the private sector. Although records aren’t routinely kept, the 2006 records show that employees who received bonuses achieved 93% or more of the performance goals established for them. KTEC also provided two studies which officials said show the need for enhanced salaries to be competitive. The Mid-America Manufacturing Technology Center, a KTEC subsidiary, also paid about $437,500 in bonuses to its employees. None of those bonuses were prohibited by law. MAMTC pays bonuses to reward employees for achieving corporate and individual performance goals. Because those goals were not met, only minimal bonuses were paid to four employees.
Workforce Development: Reviewing the Use of Workforce Investment Act Moneys in Kansas
Overall, Kansas’ administrative structure conforms to the requirements of the Workforce Investment Act. Issues we identified at the State level: the State board that is supposed to advise the Governor about workforce development programs has rarely met, program monitoring hasn’t been carried out well in recent years, the Department of Commerce’s administration of programs in two local areas conflicts with its State-level oversight and monitoring role, and most of the Department’s current workforce development contracts weren’t competitively awarded. At the local level: three of five local areas don’t have comprehensive One-Stop centers as required, federal reviews have identified numerous instances of spending problems and weak financial controls, and performance goals haven’t always been met. Most local area contracts were competitively bid, and we found no situations that appeared to financially benefit board members or employees.Statewide, 11% of the Workforce Investment Act moneys spent in fiscal years 2003 and 2004 was for administration; the rest was for programs and services for workers and employers. Total spending and the percent spent on administration varied significantly among the five local areas. Local Area 4 (Wichita) recently increased its annual building lease costs by more than $500,000 when it more than doubled the amount of space leased for its comprehensive One-Stop center.Programs and activities that fit the Joint Committee on Economic Development’s definition of workforce development included 35 State and federally funded programs primarily operated by State agencies that received $129 million in funding for 2006, nearly 680 training partnerships between businesses and post-secondary educational institutions, and numerous specialized certifications, associate degree programs, and short courses aimed at qualifying persons for a specific type of job without having to fulfill additional general education requirements.
Insurance Auto Salvage Auctions in Kansas: Reviewing the System for Regulating the Sale of Vehicles Acquired Through These Auctions (limited-scope audit)
Kansas has very limited oversight of salvage vehicle pools compared with four other states we contacted. In Kansas, salvage vehicle pools aren’t licensed or regulated–the only requirements are that they register with the Division of Vehicles, pay a one-time registration fee of $50, and have available a certificate of title (or facsimile or photocopy of the complete title) for salvage vehicles they sell. The Division has no authority to review those titles. In contrast, the four states we reviewed generally require salvage pools or their operators to be licensed, require background checks for salvage pool operators, allow state officials to request and review sales records of the pools, and limit who can purchase vehicles from the salvage auctions. Kansas could implement any of these requirements. A federal database created more than 20 years ago to help decrease title fraud, including fraud associated with salvage vehicles, still is not fully functional, and Kansas is not a participant in that system.
K-12 Education: Reviewing Issues Related to Developing and Retaining Teachers and School Principals
Only 0.5% of all teaching positions were vacant in 2005-06, but an additional 5.4% of all positions weren’t filled by a fully qualified teacher. Shortages are most severe in districts with high poverty, those in southwest Kansas, and in subjects like math and foreign language. Annually, about 9% of teachers leave the Kansas public school system, while another 7% move within the school system. Shortages may worsen over the next several years, as the number of teachers eligible to retire increases and the number of potential new teachers remains flat.After adjusting for regional cost differences, Kansas’ average teacher salary ranked 33rd nationally in 2004-05. Salaries for beginning teachers ranked 6th, but salaries for experienced teachers only ranked 36th. Annual teacher salaries rank very low compared to other professions, but hourly pay is much more competitive. Researchers have found a positive relationship between teacher salaries and retention, but not between salaries and student performance.Best practices for attracting, retaining, and developing teachers include improving compensation and working conditions, reducing barriers to entry, implementing mentoring programs, and dedicating adequate resources for targeted training. Best practices for attracting, retaining, and developing principals include identifying individuals with management skills and providing practical training, peer support, and coaching. However, there’s very little empirical evidence to support most of these strategies.
Medicaid Waivers: Reviewing Differences in Rates and Hours of Service for Clients Receiving Self-Directed and Agency-Directed Care, Part II: SRS’s Physical Disability Waiver
Physically disabled clients with self-directed care cost about $82 per month (7%) more than their counterparts with agency-directed care. That difference is significantly less than the $272 per month difference (41%) we saw in Part I between frail elderly clients with self-directed care and those with agency-directed care. Physically disabled clients who self-direct their care tend to be slightly more disabled and poorer, and to use more of the services (81%) they are authorized than clients with agency-directed service (77%). However, the differences between these two groups aren’t great, and likely aren’t anything the State can control for. Clients with self-directed care received only about 1 hour less per month in volunteer services than clients with agency-directed care. Had they received the same number of volunteer hours, we estimate the State would have saved about $128,000 in Medicaid costs. In this audit, we saw the same variability in authorized hours of care for physically disabled clients with the same assessed need for service as we did in Part I for frail elderly clients. For example, clients with the same assessed level of need for ‘hygiene and grooming’ were authorized anywhere from 2.5 hours to 35 hours per month of assistance. Finally, we found SRS doesn’t have readily available basic management information about the waiver, and some existing data are inaccurate and incomplete.
Office of the Attorney General: Reviewing Its Role in Overseeing Enforcement of State Architectural Accessibility Laws (limited-scope audit)
The State aligned its accessibility law with the Americans with Disabilities Act in 1994. Various State and local agencies are assigned to enforce the Act; the role of the Attorney General’s Office is to oversee enforcement. Our work focused on the Attorney General’s handling of written complaints, which are referred to State and local enforcement agencies for investigation. Our review of the 12 written accessibility complaints the Office received from July 2004 to December 2005 found that the Office’s actions weren’t always timely or thorough. Three-fourths of the complaints weren’t referred to the enforcement agency for more than 30 days after they were received. For three complaints, the Office didn’t take appropriate action when the enforcement agency failed to report back to it. Most complaints reportedly resulted in some changes to facilities’ accessibility, but the Attorney General’s Office can’t always tell from the information the enforcement agencies send back whether complaints were resolved in accordance with State law.
Regulation of Credit Unions: Reviewing the Department of Credit Unions’ Procedures for Ensuring Institutions’ Safety, Soundness, and Compliance with the Law
Since 1995, financial institutions operating in Kansas have dropped by 20% – from 648 to 517. Credit unions were about one-fourth of those institutions. These credit unions’ assets, deposits, and loans have remained at about 5%-6% of the total held by all Kansas-based financial institutions. Over the years, more credit unions have begun offering more of the services they historically have been authorized to provide, including checking accounts, mortgage loans, and credit cards. Some smaller credit unions have accomplished this by merging with larger credit unions. The Department of Credit Unions also has allowed some credit unions to expand their fields of membership beyond what Kansas law appears to allow. For the most part, the Department has and follows adequate procedures to ensure credit unions’ safety and soundness. However, improvements are needed to strengthen its monitoring efforts and the follow-up procedures it takes to ensure that credit unions comply with laws and regulations. Between 1998 and 2005, eight Kansas-chartered credit unions merged with six out-of-State credit unions; the surviving credit unions are regulated by either the regulatory agency of the chartering state or the National Credit Union Association. We didn’t identify a significant competitive advantage for out-of-State credit unions that operate in Kansas, and 97% of credit union officials responding to our survey agreed the Department does enough to ensure that they don’t operate at a competitive disadvantage.
Compliance and Control Audit: EI Dorado Correctional Facility Benefit Fund
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…” The audit was conducted by the joint venture of Allen, Gibbs & Houlik, L.C. and Berberich Trahan & Co., P.A. under contract with Legislative Post Audit. The results of the Statewide audit are presented in two parts. The first part was the report on the Division of Accounts and Reports CAFR for fiscal year 2005.
This second part, the Report on Federal Awards in Accordance with OMB Circular A-133, reports on compliance with laws and regulations and provisions of contracts and grant agreements. The State complied, in all material respects, with the requirements applicable to each of the federal programs audited. Six findings are reported, one of which is repeated from prior years.
Homeland Security: Reviewing Contracts To Provide Equipment Under the Homeland Security Grant Program (limited-scope audit)
When federal homeland security grant moneys became available in July 2002, the Highway Patrol, as grant administrator, required counties to buy grant-funded equipment through an existing, competitively bid State contract with Fisher Scientific. That April 2001 contract was for laboratory supplies and equipment, but Patrol officials concluded the contract was broad enough to supply the types of equipment authorized to be bought with homeland security grants. From 2002 to 2004, the scope and nature of purchases under the contract changed significantly. Purchases grew from about $4 million to more $20 million a year, and the equipment being purchased included communications systems and response trucks and trailers. Because of these changes, and complaints from Kansas vendors, the State renegotiated the contract in 2004 to obtain volume discounts. The contract was then renewed in 2005 using the first of two one-year extensions. A third-party vendor system instituted after the 2004 renegotiations allows counties to select the vendor they want to buy equipment from. However, those purchases still must flow through Fisher’s web-based purchasing system, and Fisher adds a 5%-12% fee depending on the price of the item. We estimated those fees may have amounted to nearly $1 million in calendar year 2005.
VIPS and CAMA: Reviewing Availability and Use of Funding Earmarked To Improve These Computer Systems (limited scope audit)
The Legislature created the VIPS/CAMA Hardware Fund and the Electronic Databases Fee Fund to provide funding for computer systems in the Department of Revenue. Originally, moneys from both funds could be spent only for specific purposes. Since 2003, the Legislature has allowed money in the funds to be used for the operation and administration of the Department of Revenue. During the past five years, more than $36 million has been deposited into these funds and $40.8 million has been spent or transferred out of the funds. Most of the money has been spent for Department salaries, telecommunications charges, consulting fees, and equipment, which are allowed by law. About $57,000 was spent during fiscal years 2001 and 2002 for travel and advertising – items that weren’t allowable at the time. Concerns have been expressed that VIPS doesn’t compute the tax due on salvage vehicles based on true market value. Changing VIPS to do that would cost about $30,000, and would reduce tax collections to counties by as much as $7 million. However, State law doesn’t currently allow an adjustment for salvage vehicles.
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.
State of Kansas: Financial Audit of Fiscal Year 2005
The cost studies we conducted were designed to identify the estimated costs for K-12 public education in several areas. Besides regular education, we also identified and analyzed additional costs for serving students who were at-risk, bilingual, or in special or vocational education, as well as costs for transporting students and regional variations in teacher salaries. Our estimates showed the additional amount of foundation-level funding needed in 2006-07 would be at least $316.2 million using an input-based approach, and $399.3 million using an outcomes-based approach. Any increase in foundation-level funding also increases the State’s share of districts’ local option budgets and its contributions to KPERS on districts’ behalf. For at-risk programs, there’s little consistency in which students districts identify as at-risk or the types of services districts classify as at-risk. In addition, the State’s funding for at-risk services has little relationship to the individual students actually served. For bilingual programs, the State’s basis for funding doesn’t link funding with need. Finally, scholars have differing opinions about whether more resources improve educational outcomes; recent literature calls for improvements in research to better answer questions about these relationships.