The Kansas Highway Patrol (KHP) maintains and operates the state’s executive airplane which the Governor and other state officials use for various in-state and out-of-state travel. Of the 18 state agencies that used the executive plane to travel in fiscal year 2016, the Governor’s Office and the University of Kansas were the most frequent users. KHP spent more than $290,000 to maintain and operate the executive airplane in fiscal year 2016, which was equivalent to about $4.50 per mile traveled or $2,400 per flight. Finally, state agencies paid approximately $80,000 to $100,000 in fees to use the executive airplane from fiscal years 2014 to 2016, but those fees were not sufficient to cover KHP’s full maintenance and operating costs or even the direct cost of a flight.
Office of the Governor: Comparing Staffing and Expenditure Levels for Three Commissions
The Governor’s Office houses three entities that act as a liaison between the state and specific racial or ethnic groups: the Kansas African American Affairs Commission, the Kansas Native American Affairs Office, and the Kansas Hispanic and Latino American Affairs Commission. Each liaison office is staffed by a single director whose time spent on the position and compensation vary primarily depending on whether the director is full- or part-time. The mission of the Native American Affairs Office differs slightly from the other two commissions we evaluated in that its duties are defined by the Governor and are primarily focused on governmental legal issues. All three liaison offices had similar expenditures for salary, rent, information technology, and travel and all three spent less than $100,000 in fiscal year 2016. Finally, we identified two items for further consideration. We initially had difficulty contacting liaison office directors, which could also affect their constituent groups. We also noted that the liaison offices are paying large fees to OITS for hosting their web sites.
K-12 Education: Efficiency Audit of the Bucklin School District
We identified a number of opportunities for the district to operate more efficiently and improve the effectiveness of its financial controls and IT controls. In the low impact category, the district could save between $20,000 and $40,000 annually by reducing food service staff and implementing better management practices. The district could also save between $10,000 and $15,000 annually by outsourcing its IT support. Additionally, it could save between $4,000 and $8,000 annually by seeking bids or competitively shopping for insurance services. Further, the district could generate up to $3,000 in additional revenue annually by maximizing the use of its cash-back procurement cards.
We identified one option that would have a moderate impact on students or the community. The district could save between $25,000 and $30,000 annually by switching to another distance learning option.
Finally, we identified one option that would have a significant impact on students or the community. The district could save between $50,000 and $55,000 annually by consolidating or eliminating low-enrollment classes and reducing one teaching position.
In addition to the savings and revenue options listed above, we also found an absence of written policies and procedures and poor financial controls that put the district at high risk of waste, fraud, and abuse. Last, we found that past audits of the district’s financial statements found significant problems with the district’s accounting practices.
Department of Corrections: Comparing the Merits of Lease and Bond Options For Improving or Replacing the Lansing Correctional Facility
The Kansas Department of Corrections (KDOC) plans to rebuild the Lansing correctional facility and is considering both state financing (bonding) and contractor financing (leasing) for the project. We used a Life-Cycle Cost Model to estimate which financing option would be most cost effective. Our analysis found bond financing with contracted maintenance would likely be the most cost-effective option. These two financing options for rebuilding Lansing create some additional risks and benefits for the state, primarily related to contract terms and project costs.
Kansas Department of Revenue: KanDrive IT Project - Quarter Ending March 31, 2017
As of March 31, 2017, we consider the KanDrive IT project within the Kansas Department of Revenue (KDOR) to be in caution status. The purpose of the KanDrive project is to replace KDOR’s old mainframe driver’s license system. The KanDrive project started as another project in 2007, as the DMV project. Phase one of the DMV project, which included the new motor vehicle titling and registration system, was deployed in May 2012. However, the department stopped the project in November 2015, before completing the driver’s license system in phase two. The KanDrive project was created to complete that project phase at an estimated $6 million and with a scheduled completion date of December 2017. We selected the KanDrive project for continuous monitoring due to its prior problems, criticality, and cost.
During this quarter, KDOR decided to close and recast both the project and its separate enhancement project. This decision was made in response to significant concerns that were raised in a separate technical report the department received from its contractor. As a result, we found the project scope to be in caution status because the project scope for KanDrive has changed and was not yet formalized as of the end of the quarter. We also considered the project schedule in caution status because a key contractor, MorphoTrust, has missed a second major deadline by delivering equipment that does not work properly. Additionally, we could not evaluate whether the new major milestones KDOR established for the recast project were realistic. Lastly, the new milestones have the project “go live” by the end of December with a change in how the project will be deployed across the state, but we could not determine whether the timeline for this new approach is realistic. In addition, we considered project cost in caution status because combining the KanDrive and its enhancement project made it impossible for us to evaluate whether changes in cost estimates are appropriate. Finally, we considered project quality in caution status because the project has suffered from several quality issues which were identified by a technical review released during this period. However, project staff have made progress completing a security plan and mitigated additional security issues during this quarter which is an improvement from our previous findings in this area.
State Agency Information Systems: Reviewing Security Controls in Selected State Agencies - Kansas State Department of Education (CY 2017)
The Kansas Department of Wildlife, Parks and Tourism (KDWPT) own 121 rental cabins located in state parks, wildlife areas, and the Kansas State Fair. In recent years, cabin revenues (more than $1 million annually) appear to more than offset the costs of the cabin rental program. Although we could not isolate exact costs of the cabin rental program, since fiscal year 2014, cabin fee fund revenues have outpaced expenditures from the fund by nearly $350,000. Occupancy rates are significantly higher and nightly rental rates are slightly higher during the peak season, as compared to the off-peak season. Finally, KDWPT officials supported recently proposed legislation which would have given them more flexibility in setting cabin rental rates.
The Office of Information Technology Services is responsible for providing information technology services including data processing and telecommunications services to state agencies. It is also the agency primarily responsible for working with the FirstNet Authority, a federal agency in charge of developing, building, and operating a nationwide, broadband network for first responders. Federal law gives states the option of selecting who builds the network in each state through an opt in or opt out process. Although the state could face some potential risks by opting in to FirstNet, it would have to overcome several significant challenges in order to successfully opt out. Opting in and allowing the FirstNet Authority to build and manage the state’s radio access network requires little effort, but does have some risks. Conversely, opting out would require the state to develop an alternative plan in about 6-9 months, which is a deadline the state is unlikely to meet. In addition, opting out would require Kansas to navigate an extensive approval process with multiple points of potential failure. Finally, opting out would require Kansas to develop a financing plan and negotiate with a third-party vendor to operate the state’s radio access network.
Kansas Department of Revenue KanDrive IT Project Quarter Ending December 31, 2016
As of December 31, 2016, we consider the KanDrive IT project within the Kansas Department of Revenue (KDOR) to be in caution status. The purpose of the KanDrive project is to replace KDOR’s old mainframe driver’s license system. The KanDrive project started as another project in 2007, as the DMV project. Phase one of the DMV project, which included the new motor vehicle titling and registration system, was deployed in May 2012. However, the department stopped the project in November 2015, before completing the driver’s license system in phase two. The KanDrive project was created to complete that project phase at an estimated $6 million and with a scheduled completion date of December 2017. We selected the KanDrive project for continuous monitoring due to its prior problems, criticality, and cost.
During this quarter, we found the project scope is satisfactory, based on a clearly defined scope and controls to handle additional major improvements ideas in a separate project. Similarly, we considered project cost satisfactory because the team re-baselines the project quarterly to approve any changes (increases and decreases) in the estimated cost of the project. However, we considered the project schedule to be in caution status because certain work segments are behind schedule and other work has been delayed. Additionally, the contractor MorphoTrust has delayed the deadline for a milestone by three weeks. We again considered project quality in caution status because the project continues to lack adequate security planning, despite being well into its execution phase. Many of the security plan items remain mostly incomplete.
Lastly, although outside of this assessment period, we learned that KDOR is making significant changes to the KanDrive project scope and overall management, which the Legislature and stakeholders should be aware of. We will continue to monitor and report how these changes affect the progress of the project.
State Agency Information Systems: Reviewing Security Controls in Selected State Agencies – Office of the Attorney General
State Law requires the Kanas Department of Health and Environment (KDHE) to provide newborn screening services to detect certain genetic diseases, including Phenylketonuria (PKU). For individuals with PKU, treatment is lifelong and involves a restrictive diet and specialized nutritional products to mitigate increasing damage from the disease. KDHE provides financial assistance to income-eligible individuals to help them purchase a variety of nutritional treatment products and services. We interviewed eight individuals receiving financial assistance through the program and found that most appeared to have no problems purchasing the nutritional formula they needed. However, a couple of individuals reported some difficulty affording low-protein food items and several individuals told us the application and renewal process for the program can be redundant and that it can sometimes be difficult to provide proof of income.
K-12 Education: Efficiency Audit of the Garden City School District
We identified a number of opportunities for the district to operate more efficiently and improve the effectiveness of its financial controls and IT controls. In the low-impact category, the district could potentially save up to $390,000 annually by implementing various energy savings strategies. The district could save $270,000 to $330,000 annually by reducing information technology positions. We estimated the district could save between $260,000 and $470,000 by eliminating several custodial positions. Further, the district could save $175,000 to $215,000 annually by eliminating several elementary school clerical positions. The district could save $30,000 to $100,000 annually by reducing or eliminating its sick leave buy-back policy. Additionally, it could save between $25,000 and $60,000 annually by changing its policies on cell phones. The district could generate one-time revenues of about $300,000 and about $8,000 in ongoing savings and revenues by selling a storage building. Finally, the district could save money by paying actual mileage for in-district travel rather than a flat stipend.
We also identified one option that would have a significant impact on students or the community. The district could save between $180,000 and $325,000 annually by closing a small rural school and having those students attend other schools.
In addition to the savings and revenue options listed above, we also found that the district lacked comprehensive policies and procedures to adequately protect its assets. This included a lack of written policies and procedures and inadequate tracking of physical assets and procurement cards.
Foster Care and Adoption in Kansas: Reviewing Various Issues Related to the State's Foster Care and Adoption System, Part 3
Kansas’ foster care system is administered by the Department for Children and Families (DCF) and is designed to protect children who are victims of abuse or neglect. The system has been privatized since 1997 with two contractors—KVC Behavioral Healthcare and Saint Francis Community Services—currently providing placement and case management services statewide. As part of this audit, we reviewed the privatized system’s capacity and performance over time, as well as how the costs would compare to a state-run system. We found the state’s foster care system may not have sufficient capacity to provide necessary foster care services, but insufficient data prevented a clear determination. First, the information we reviewed showed both of the state’s case management contractors had challenges employing enough case management staff. Second, while the children in foster care received most of the physical and mental health services they needed, there were exceptions. Third, our analysis showed many Kansas counties and cities appeared to lack enough licensed foster homes. We also found that DCF could be more proactive in monitoring and collecting management information about the foster care system. For example, the information DCF maintained was not adequate to ensure children were placed in appropriate foster homes.
Additionally, we reviewed 11 federal outcomes for children and families and found Kansas’ overall performance did not change significantly during federal fiscal years 2000-2013. While these measures may provide useful insights into Kansas’ performance, they are self-reported and cannot be compared to other states.
Finally, we estimate the state would incur up to $8 million more in on-going costs as well as significant start-up costs for DCF to provide foster care and adoption services instead of private contractors. Specifically, we estimated DCF would have spent between $164 million and $169 million in on-going costs in fiscal year 2016, compared to the $161 million reported by the contractors. We also found there may be other factors to consider when comparing privatization to a state-run system.
Department of Commerce: Evaluating the Department's Compliance with Statutory Caps for the PEAK Program
The Department of Commerce administers the Promoting Employment Across Kansas (PEAK) program, which allows eligible businesses to retain some of their employees’ state income tax withholdings. Our 2013 audit found that the department had exceeded statutory limits on the amount of benefits that could be given to expanding businesses. In 2014, the Legislature clarified the law, creating more specific limits for both expanding businesses and retaining jobs in Kansas. We reviewed PEAK benefit records to determine compliance with statutory benefit limits. We found PEAK benefits paid to expanding businesses have stayed within the statutory limits. Benefits paid to retain existing jobs exceeded the statutory cap slightly in fiscal year 2015, but remained within the cap in other years. Finally, the Department of Commerce has authorized benefits for job retention to be paid in fiscal year 2019 – beyond the date currently allowed by state law.
Statewide Single Audit: State of Kansas, Fiscal Year 2016
State law calls for an annual financial-compliance audit of the general purpose financial statements and “the financial affairs and transactions of a state agency required to comply with federal government audit requirements…” CliftonLarsonAllen, under contract with Legislative Post Audit, conducted this two-part audit. The first part was the report on the state’s Comprehensive Annual Financial Report (report R-16-016, released in December 2016). This second part, the Report on Federal Awards Required by the Uniform Grant Guidance, reports on compliance with laws, regulations, and provisions of contracts and grant agreements.
The auditors concluded that the state complied, in all material respects, with the requirements applicable to each of the federal programs audited. The auditors reported 15 deficiencies in internal control, of which 13 were significant deficiencies and two were material weaknesses. The auditors also identified questioned costs for two federal programs. Six of the findings were repeated from prior years.
K-12 Health Insurance: Evaluating the Financial Impact of Establishing a Consolidated K-12 Health Insurance Plan
Depending on the plan design, consolidating K-12 health insurance plans for the 101 districts in our sample could save an estimated $63 million a year. Specifically, consolidation would generate an estimated $38 million in annual savings through increased plan efficiencies regardless of plan design. Additionally, consolidation would also generate $25 million a year in savings for districts by shifting costs to employees. Also, we found that joining the state employee health plan is just one of several consolidation options available and that any savings from consolidation would be realized by school districts unless a mechanism is developed to transfer them to the state. The Legislature has several decisions to make regarding the implementation and savings associated with consolidating K-12 health insurance statewide. For example, the Legislature would need to decide whether the state or school districts keep the potential savings from consolidation and would need to make several other key decisions that could affect how much is saved. We also noted that the time needed to implement a consolidated K-12 health insurance plan and several other factors will make it difficult for the state to achieve savings outlined in the Governor’s Budget. Finally, we identified two other issues that should be considered if the state decides to consolidate K-12 health insurance.