The Derby school district has taken a number of positive steps to become more efficient and control costs, but it lacks a systematic approach for evaluating and managing its efficiency. We identified several significant opportunities for the district to operate more efficiently and reduce costs, which if addressed could save the district just more than $1 million per year. The most significant of these—and the one that would require the most change to implement—involves moving the high school from a block schedule to a traditional schedule and filling high school classes to capacity, thus eliminating the need for as many class sections. We also identified opportunities for consolidating two administrative buildings and for better controlling the district’s use of overtime.
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.
Reviewing Operations of the Pooled Money Investment Board, Fiscal Year 2009
This audit of the Pooled Money Investment Board is required by the Legislative Post Audit Act. It was conducted by Allen Gibbs & Houlik, an audit firm under contract with Legislative Post Audit. The audit addresses five 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.
Reviewing Operations of the State Treasurer’s Office, Fiscal Year 2009
This audit of the State Treasurer’s Office is required by the Legislative Post Audit Act. It was conducted by Allen Gibbs & Houlik, an audit firm 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 three deficiencies:• The Pooled Money Investment Board does not have procedures in place to ensure the depository and custodial banks do not share common controlling shareholders, a common majority of the board of directors, or common directors with the ability to control or influence as required by statute and, therefore, should develop procedures to address this.• Some unclaimed property items received had not been recorded on the inventory listing and, therefore, procedures should be re-evaluated in this area.• Some abandoned property received had not been sold within the statutorily required time frame and, therefore, procedures should be re-evaluated in this area.The Treasurer’s Office has taken steps to prevent future occurrences.
Kansas Public Employees Retirement System: Financial Audit of Fiscal Year 2009
State law requires this financial-compliance audit of the Kansas Public Employees Retirement System. The work was done by Berberich Trahan & Co., a certified public accounting firm under contract with Legislative Post Audit. The audit found that the System fairly presented its financial statements, met applicable legal requirements, and had no significant deficiencies in its financial management procedures.
Kansas Lottery: Financial Audit of Fiscal Year 2009
This audit of the Kansas Lottery for fiscal year 2009 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 and met applicable legal requirements. The auditors reported two significant deficiencies in internal controls over financial reporting.
K-12 Education: Reviewing Issues Related to Catastrophic Funding for Special Education
Claims submitted to cover the “catastrophic” costs for very expensive special education students—those costing more than $25,000 per year—jumped from 276 to 758 between 2008 and 2009, and catastrophic aid doubled, from $6 million to $12 million. Historically, districts submitted claims only for very expensive students who required full-time teachers, expensive contracted services, etc. The big increase in 2009 occurred because the Shawnee Mission district decided to prorate costs for all special education students, even its less-expensive ones. Several other large districts have begun prorating costs as well, and many others are likely to follow suit so they won’t lose out on funding. We estimated claims would jump to 5,500 and aid to nearly $48 million for 2009-10 if the law didn’t change and if all districts and cooperatives prorated costs and submitted all the claims they could. Proposed changes to the requirements for catastrophic aid—including increasing the threshold for qualifying and requiring districts and cooperatives to deduct other forms of special education aid they receive in computing their costs, would reduce catastrophic aid claims significantly. That would leave more money available to be distributed to all districts as special education teacher aid. Finally, for about 100 claims filed in 2009, districts or cooperatives received nearly $1 million in aid above the actual cost of providing special education services to these students.
Adult Correctional Agencies: Determining Whether Functions Could Be Combined To Gain Cost Efficiencies
From an efficiency standpoint, we found no benefit to merging the 3-member Parole Board into the Department of Corrections. Board members already are co-located with the Department, the two agencies share a conference room, and Department employees provide both the direct and indirect administrative support Board members need. Merging the Sentencing Commission staff function into the Department of Corrections would save about $152,000 a year ($760,000 over five years) by eliminating duplicate administrative functions—including agency management, payroll, IT support, and the like—and the staff positions and other costs associated with them. That represents about 20% of the Commission’s current annual operating costs. If only the administrative functions of the Commission's staff were merged into the Department, and not research functions, the savings would be reduced to about $48,000 a year. Commission staff raised a number of concerns related to merging their functions within the Department, but we think those concerns can be reasonably addressed. Further, many other states perform these functions through a correctional agency.
State Universities: Can State Universities Provide Postsecondary Education More Efficiently To Reduce Costs? (A K-GOAL Audit)
Our focus was on general-use operating expenditures funded with State General Fund and tuition revenues; we excluded restricted funds like federal grants and student fees, the University of Kansas Medical School, and Kansas State’s Veterinary Medicine School and Extension Programs. In fiscal year 2008, general use operating expenditures per FTE student ranged from $8,330 at Fort Hays State to $14,191 at the University of Kansas. Overall, Emporia State and the University of Kansas spent about $2,000 more per FTE student than their in-State counterparts. The vast majority of the universities’ general use operating expenditures were for education-related expenditures (72% to 85% of the total). Most of the differences in the amounts spent for educational programs appeared to be caused by differences among the six universities in staffing and salary levels. Numerous options exist for delivering universities’ academic programs and courses more economically or efficiently. Actions that universities in other states have reported taking to help reduce academic spending include eliminating or combining low-enrollment course sections, academic departments, or degree programs within universities; collaborating across universities to share course content, teachers, and instructional programs; increasing the number of courses offered online or through distance learning; and increasing faculty workloads. Actions they’ve reported taking to help reduce their institutional spending include maximizing the use of existing classroom and laboratory space to reduce the need for additional space; consolidating or changing administrative functions or processes—both within and across universities; outsourcing some non-academic services such as food service and grounds maintenance; sharing purchasing costs, and reducing energy costs. The State’s six universities have implemented some of these ideas to varying degrees, but there are numerous opportunities for additional efficiencies. Given recent budget cuts, the universities already may have taken some of the actions described in this report.
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.
Child-Care Assistance: Determining Whether SRS’ Procedures Limit the Risk of Improper Payments
Overall, SRS has reasonable procedures in place to reduce improper payments in the Child-Care Assistance Program, and those procedures caught most of the potentially improper payments we identified. However, we identified a few cases that SRS hadn’t found involving clients using their benefits cards to pay themselves. We also identified ten instances in which clients were paying each other to watch each other’s children--something SRS doesn’t routinely check for. We also noted some accuracy problems with the data contained in the databases used to manage the program, such as the same social security number being assigned to more than one person, or wrong birth dates. Finally, we noted that 571 families whose incomes appeared to significantly exceed the Program’s basic guidelines received $1.8 million in child-care assistance in 2007. Among those 571 were 30 families whose income exceeded $100,000. Certain exceptions in SRS’ current eligibility guidelines allowed these families to participate in the Program.
This audit was limited to a review of available data on the non-instructional operational spending for 121 school districts to identify trends or patterns that could shed light on districts’ efficiency. While our review showed that per-student spending generally was driven by economies of scale--the more students there were in a district, the less they tended to spend--there was still a lot of variation in spending among similar-sized districts. When districts spent more per student than their peers in various areas, it tended to be in the area of staffing costs. In addition, we found that school districts didn’t always report expenditure and staffing data consistently, making meaningful comparisons difficult. We concluded that efficiency audits that are more in-depth than this one can serve a vital role in helping districts identify additional efficiencies. NOTE: Appendix B of the report contains detailed information on the non-instructional operating costs for the 121 districts included in our review.
K-12 Education: Reviewing Issues of the Kansas State High School Activities Association
We compared the Kansas State High School Activities Association to associations in six other comparison states. The primary areas of difference: Kansas’ 78-member Board of Directors is larger than all comparison states; Kansas’ Association shares 30% of ticket sales with schools that host playoff games while practices in the comparison states ranged between covering host schools’ actual costs to giving them 100% of ticket sales; the Association has significantly more cash reserves than associations in comparison states; and the Association’s policy limiting out-of-State travel to 500 miles from the Kansas border is more restrictive than that of most comparison states. We surveyed more than 6,500 school coaches and administrators--of which 3,100 (48%) responded. We also surveyed the 86 Association Board members--of which 45 (52%) responded. Those who responded generally were satisfied with the Association and its policies. However, about one-fourth of Association Board members responding thought the Board was too large, about two-thirds of school administrators and one-third of Board members responding thought host schools should be allowed to keep more than 30% of playoff ticket sales revenue, and about one-third of coaches responding thought the 500-mile out-of-State travel limit was too restrictive.
State Data Systems: Reviewing for Evidence of Inappropriate Payments (January - June 2009)
We used data-mining techniques to analyze several State data systems, including a focus on overtime. The State paid a total of $13.1 million in overtime pay in fiscal year 2008, including $4.4 million in overtime premiums. Agencies with very high overtime costs could reduce their costs by as much as $240,000 a year if they could hire additional employees, rather than paying so much overtime to existing employees. However, for some agencies recruiting qualified employees is a problem, or existing employees want the overtime pay to make their low-paying jobs more attractive. We also looked at several specific cases where employees worked significant amounts of overtime, or where State agencies paid their employees as contractors, and found that agencies generally had reasonable explanations for these situations. Finally, we identified an instance at the Department of Health and Environment where a manager is married to a subordinate, and the Department hasn’t acted to limit the potential conflict of interest.
State Agency Information Systems: Reviewing Selected Security Controls in State Agencies
Each of the five agencies we reviewed could do a better job of controlling passwords. Three of the five agencies had weak password policies. Although most of the agencies had good password settings on their servers, we still were able to crack 23% to 58% of their passwords--primarily because many users create passwords that meet the network’s requirements for strong passwords, but still are relatively easy to crack. In general, the agencies did a good job of installing security patches on server and workstation operating systems (such as Microsoft Windows), but 30 of 133 servers (23%) were significantly behind on application patches (such as Adobe Reader and Java).
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.
State of Kansas: OMB Circular A-133 Audit of Fiscal Year 2008
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 2008.
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. Except for the Public Assistance Grant, the State complied, in all material respects, with the requirements applicable to each of the federal programs audited. Fourteen findings are reported, seven of which are repeated from prior years (one material weakness, five significant deficiencies, and eight control deficiencies).
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 Inspection Functions: A K-GOAL Audit Determining the Cost Savings or Efficiencies from Automating Inspection Processes
In general, automating an agency’s processes for preparing, storing, sharing, and retrieving inspection reports can increase an agency’s efficiency levels through both cost and time savings. Only two of the seven inspection programs we reviewed within the Department of Health and Environment--Confined Animal Feeding Operations and Drinking Water--were fully automated. By fully automating the other programs in our sample, KDHE could achieve annual net savings of about $28,600 in staff and postage costs. About $6,800 of the savings would be State General Fund moneys. In addition to being able to eliminate a half-time position within the Wastewater Program, KDHE also could eliminate an estimated 1,770 hours of staff work currently performed in other unautomated programs. Once those inspection programs are automated, that time could be spent on other needed work. Even greater efficiencies--and cost and time savings--could be gained by fully automating the entire regulatory processes for these programs. Finally, automating KDHE’s inspection processes also could improve its data integrity and use of management information.
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.
Regents’ Information Systems: Following Up On Computer-Security Issues at Various Universities
This audit followed up on a 2005 computer-security audit of Kansas State University, Emporia State University, and the University of Kansas. That audit included a large number of recommendations related to missing or inadequate security policies, and to non-policy areas such as the authority of the security officer position and the efficiency of the policy-setting process. In this audit, we found that the three universities have fully implemented very few of the policy recommendations from the 2005 report. While ESU did the best, fully complying with 28 of 41 recommendations, KSU complied with only 7 of 33, and KU complied with only 5 of 33. In testing some of the areas, we found significant access control problems at one university. Finally, we found that the universities have implemented most of the non-policy recommendations from the 2005 audit report.
Low-Priority Programs in Kansas: Identifying Them and the Costs Associated With Operating Them
To help identify programs that had the lowest priority in relation to their agencies’ core missions and objectives, staff asked officials representing 47 State entities to prioritize the programs and subprograms they administer into “buy first,” “buy next,” “buy last,” and “don’t buy” categories. This approach was intended to provide a different look at reducing State spending – through potential elimination of programs, rather than more traditional expenditure reductions such as across-the-board staff cuts. Agencies placed programs and subprograms accounting for about $500 million in State spending into the “buy last” category. About $11.5 million of that program spending already had been slated to be eliminated in its entirety, and parts of another $77.4 million had been proposed for elimination in agencies’ reduced budgets for fiscal years 2009 or 2010. Included in the “buy last” category were such diverse programs and subprograms as correctional facilities or other program sites, substantial highway maintenance projects, and grants for various services. Many agency officials cautioned that the programs and subprograms they put into the “buy last” category were critical to their missions or to the people of Kansas, but that they had categorized them there to fulfill the audit instructions. Agencies also pointed out about $23 million in State spending for items they wouldn’t fund even if money were available. Included in that amount were payment inefficiencies within the Medicaid Program and the costs associated with a juvenile correctional facility. These items had already been factored into agencies’ FY 2009 or FY 2010 budgets.
State of Kansas: Financial Audit of Fiscal Year 2008
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 state-wide audit are presented in two parts. This first part is the report on the Division of Accounts and Reports CAFR for fiscal year 2008. The State’s financial condition for fiscal year 2008, as shown in the CAFR, is presented fairly and in conformity with generally accepted accounting principles. The second part, the Report on Federal Awards in Accordance with OMB Circular A-133, will be issued subsequently.