Department of Family Services financial-compliance audit for the two fiscal years ended ...

98 Pages·1991·2.1 MB·English

by  Montana. Legislature. Office of the Legislative Auditor

S Department of
1351. 7232Family Services
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1993
w^^ce of the Legislative Auditor
State of Montana
Report to the Legislature
Financial-Compliance Audit
April 1994
For the Two Fiscal Years Ended June 30, 1993
STATF DOCUMENTS COLLECTION
SEP 2 n 1994
MONTANA STATE LIBRARV
Department of Family Service1s515MEO.N6TtAhNAAVE5.9620
This report contains 20 recommendations to the Department of
Family Services which includes one recommendation to the
Governor's Office for improvement in the department's opera-
tions. Items addressed in the report include:
Lack of effective management controls.
Inability to effectively monitor budgets.
Errors in accounting records.
Incorrect calculation and recovery of indirect costs.
Unreconciled Special Revenue Fund balances.
Ineffective procedures for monitoring subrecipients.
Noncompliance with federal regulations which resulted in
more than $24 million in federal questioned costs.
Request to the Governor to assign a team of individuals to
develop and ensure implementation of an effective manage-
ment control system at the department
Direct comments/inquiries to:
Office of the Legislative Auditor
Room 135, State Capitol
PO Box 201705
MT
93-12 Helena 59620-1705
n
Hi
MontanaSlaieL;brary
3 0864 1005 0426 8
FINANCIAL-COMPLIANCE AUDITS
Financial-compliance audits are conducted by the Office of the Legislative Auditor to deter-
mine ifan agency's financial operationsare properly conducted, the financial reportsare pre-
sented fairly, and the agency has complied with applicable laws and regulations which could
have a significant financial impact. In performing the audit work, the audit staff uses stand-
ards set forth by the American InstituteofCertified Public Accountants and the United States
General Accounting Office. Financial-compliance auditstaff members hold degrees with an
emphasis in accounting. Most staff members hold Certified Public Accountant (CPA) cer-
tificates.
The Single Audit Act of 1984 and 0MB Circular A-128 require the auditor to issue certain
financial, internal control, and compliance reports regarding the state's federal financial
assistance programs, including all findings of noncompliance and questioned costs. This
individual agency audit report is not intended to comply with the Single Audit Act of 1984
or OMB Circular A-128 and is therefore not intended for distribution to federal grantor
agencies. The Office of the Legislative Auditor issues a statewide biennial Single Audit
Reportwhichcomplies withthe reportingrequirements listed above. TheSingle Audit Report
for the two fiscal years ended June 30, 1991 has been issued. Copies of the Single Audit
Report can be obtained by contacting:
Office of the Legislative Auditor
Room 135 State Capitol
PO Box 201705
MT
Helena 59620-1705
MEMBERS OF THE LEGISLATIVE AUDIT COMMITTEE
Senator Greg Jergeson, Chairman Representative JohnCobb, Vice Chairman
Senator Gerry Devlin Representative Ernest Bergsagel
Senator Eve Franklin Representative Linda Nelson
Senator Tom Keating Representative Robert Pavlovich
STATE OF MONTANA
STATECAPITOL
POBOX201705
HELENA,MONTANA 59620-1705
DEPUTYLEGISLATIVEAUDITORS:
406/444-3122
FAX[phone] MARYBRYSON
Operationsand EDPAudit
LEGISLATIVEAUDITOR: JAMESGILLETT
SCOTTA. SEACAT Financial-ComplianceAudit
LEGALCOUNSEL: JIM PELLEGRINI
JOHNW.NORTHEY PerformanceAudit
April 1994
The Legislative Audit Committee
of the Montana State Legislature:
This report is the result of our financial-compliance audit of the Depart-
ment of Family Services for the two fiscal years ended June 30, 1993. Included in
this report are 20 recommendations for the department to improve management
controls, monitor its budget, account for financial activity in accordance with state
law, establish procedures to monitor subrecipients, and recover indirect costs in
accordance with state law and federal regulations.
The written responses to the audit recommendations are included at the end
of the audit report. We thank the director and department staff for their assistance
and cooperation.
Respectfully submitted.
AJ^I
Scott A. Seacat ^~^J
Legislative Auditor

Office of the Legislative Auditor
Financial-Compliance Audit
For the Two Fiscal Years Ended June 30, 1993
Department of Family Services
Members of the audit staff involved in this audit were Mark C. Barry,
Jody Brandt, Pete Brustkern, Scott Hoversland, Maureen G. Leo, Paul J.
O'Loughlin, and Lorry Parriman.

Table of Contents
List of Tables iii
Appointed and Administrative Officials iv
Summary of Recommendations v
Introduction Introduction
1
Background
1
Prior Audit Prior Audit Recommendations 4
Recommendations
Findings and Management Controls 6
Recommendations
Monitoring of Budgets 6
Proper Recording of Expenditures 7
Inter-Entity Loan Obtained Without Sufficient Repayment
Source 10
Special Revenue Fund Balances 11
Approved Operating Budget 13
Accuracy of Accounting Records 14
Recording Revenue and Expenditure Activity 15
Completeness of Accounting Records 18
Authorization to Record Transactions on SBAS 19
Property, Plant, and Equipment 20
Internal Control 21
Segregation of Duties 22
SBAS and Data Base Reconciliation 24
Cash Accounts Held Outside the State Treasury 25
Compliance with Federal Regulations 29
Procedures for Determining Title IV-E Foster Care
Eligibility 29
Subrecipient Monitoring 31
Procedures for Recovering Foster Care Overpayments ... 34
Administrative Cost Recovery 35
Allowability of Federal Cost Recoveries 36
Indirect Costs not Recovered to Fullest Extent 37
Indirect Costs not Recovered by Mountain View School 38
. .
Summary 39
State Compliance 39
Sick Leave Benefits for Teachers 40
Notification to County Attorney of Abuse or Neglect .... 41
Periodic Visits to Day-Care Facilities by the Department 42
.
Page
Table of Contents
Accounting, Control, and Compliance Team to Design
and Implement an Effective Control System 44
Independent Auditor's Summary of Independent Auditor's Report A-2
&
Report Agency
Financial Schedules Independent Auditor's Report A-3
Schedule of Changes in Fund Balances for
the Two Fiscal Years Ended June 30, 1993 A-5
Schedule of Budgeted Revenue and Transfers
In - Estimate and Actual for the Two Fiscal
Years Ended June 30, 1993 A-6
Schedule of Budgeted Program Expenditures
by Object and Fund - Budget and Actual for
the Fiscal Year Ended June 30, 1993 A-7
Schedule of Budgeted Program Expenditures
by Object and Fund - Budget and Actual for
the Fiscal Year Ended June 30, 1992 A-8
Children's Trust Accounts, Pine Hills
School Resident Trust Accounts, and Mountain
View School Resident Trust Accounts Combined
Schedule of Additions and Deductions to Agency
Fund Property Held in Trust for the Two Fiscal
Years Ended June 30, 1993 A-9
Notes to the Financial Schedules A-10
Agency Responses Department of Family Services B-3
Governor's Office B-14
Page
ii
List of Tables
Table Full-time Equivalent Employees 2
1
Table 2 Accounting Record Misstatements 17
Page
iii
Appointed and Administrative Officials
Department of Family Hank Hudson, Director
Services
Administrators Jack Ellery, Management, Planning, and Support Services
Division
Shirley Brown, Program Management Division
Allan Davis, Juvenile Corrections Division
Jim Bauch, Superintendent of Mountain View School
Steve Gibson, Superintendent of Pine Hills School
Page iv