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
Reviewing Operations of the State Treasurer’s Office, Fiscal Year 2005
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 no deficiencies.
Kansas Public Employees Retirement System: Financial Audit of Fiscal Year 2005
This financial-compliance audit of the Kansas Public Employees Retirement System, covering fiscal year 2005, 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 System fairly presented its financial statements, met applicable legal requirements, and had no significant weaknesses in its financial management procedures.
Kansas Lottery: Financial Audit of Fiscal Year 2005
This audit of the Kansas Lottery for fiscal year 2005 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.
Compliance and Control Audit: Juvenile Correctional Facilities
In general, SRS followed a logical and consistent process for reorganizing service areas and determining which local offices should be closed. Some of the conditions staff have reported as leading to low morale have some basis in fact. For example, the process for filling new or vacated positions wasn’t always consistent across regions, the reorganization resulted in more management positions and fewer staff who directly serve clients, caseloads have increased significantly in some programs while the number of caseworkers in those programs has been relatively static, the Department has done away with many of the workers who helped caseworkers by filing documents and answering telephones, some job descriptions apparently weren’t always finalized before vacancies were posted, and some employees were downgraded or received pay cuts.SRS staff expressed many concerns about the reorganization’s impact on clients, including difficulties accessing services and delays in processing applications for service. Clients responding to a telephone survey SRS commissioned from Fort Hays State University expressed less dissatisfaction. Still, 9 of 13 high-needs clients we spoke with complained about the difficulty in obtaining services. Also, officials from a sample of the new “access points” across the State reported clients didn’t seem to be having much trouble getting materials, but expressed concerns about other access issues related to transportation and clients’ ability to use the computers or fax lines or get their questions answered. We didn’t find any evidence of widespread or significant delays in processing applications. Finally, because other budget reductions were happening at the same time, savings from the reorganization are difficult to pinpoint. But they’re likely to be less than $1.4 million to-date.
Medicaid Waivers: Reviewing Differences in Rates and Hours of Service for Self-Directed and Agency-Directed Care, Part I: The Department on Aging’s Frail Elderly Waiver Program
Medicaid is paying more for clients with self-directed care than for clients who choose agency-directed care. From our review of records from January 2005, we estimate that Medicaid will pay about $926 per month for each client with self-directed care and about $654 per month for each client with agency-directed care. This difference in costs is happening for several reasons, including that clients with self-directed care tend to be more disabled and poorer. However, when we compared clients with similar disability scores, the main factor influencing the cost difference is that clients with self-directed care don’t rely nearly as much on volunteers to provide help with the services they need. If these clients received about the same number of volunteer hours as clients with agency-directed care (about 17 hours more per client, per month), Kansas would save about $2 million each year in State funding. In addition, we found that other factors–including whether clients live in rural areas or live alone–aren’t increasing costs for clients with self-directed care. Finally, we found that Kansas could take additional steps to try to control costs, including not using Medicaid to pay for services when clients turn down voluntarily-provided services, limiting the number of hours family members can be paid to provide services, reducing pay rates to family members, and not allowing payroll agents or attendant care providers to pressure case managers to add service hours to clients’ care plans.
Department of Labor: Reviewing the Effectiveness of Accident Prevention Programs Required Under the Workers’ Compensation Law (limited-scope audit)
The Legislature created the Accident Prevention Program in 1993 to improve workplace safety and reduce accident claims. In our 1999 audit of the Program, we concluded that the Department of Human Resources (now Labor) was doing almost nothing to ensure that insurance companies complied with this aspect of the State’s workers’ compensation law. As a result, the 2000 Legislature imposed a higher standard on insurance companies and strengthened the Department’s oversight role for the Program. However, this audit found that the Department still is providing inadequate oversight regarding the Accident Prevention Program. Department officials haven’t made any significant changes to their oversight of insurance companies’ accident prevention services since the law was changed in 2000.
The Regents Institutions: Reviewing Proposals for Increased Maintenance Funding at the State’s Colleges and Universities (limited-scope audit)
The 1996 Legislature authorized bonds that funded nearly $179 million for construction and renovation projects for the State’s six universities known as the “Crumbling Classrooms Initiative.” In 2004, a new Board of Regents study showed that $584 million would be needed to cover deferred maintenance needs at the six State universities. Based on information in the study, about $95 million would be needed to address maintenance and repair issues for buildings and utilities and infrastructure components rated as “critical.” Most buildings that had projects funded under the crumbling classrooms initiative are shown in the current study as needing additional work. Because the study doesn’t list specific projects, staff couldn’t do a project-by project comparison between moneys spent with crumbling classrooms initiative and the proposed spending. Of the 138 buildings that received funding under the crumbling classrooms initiative, 134 are identified in the 2004 study as needing funds to fix maintenance backlogs.
Highway Construction: Reviewing KDOT’s Plans for Construction on Highway 183 South of Plainville (limited-scope audit)
In 2006, KDOT plans to spend about $9.4 million to reconstruct 6 miles of U.S. Highway 183 south of Plainville. It plans to leave the existing road open while parallel lanes are constructed approximately 130 feet to the west of the existing lanes. Some local residents have suggested that closing the road during construction and expanding the existing roadbed by only about 50 feet to the west would avoid the cost of moving some utilities and allow less right-of way to be acquired from landowners. It appears that the local residents’ approach may have cost about $434,000 less to construct if it had been considered and selected by KDOT during the initial planning for the road. KDOT did not hold public meetings to solicit input from local residents before designing the project. However, KDOT officials told us they wouldn’t have selected that approach had it been proposed during the initial planning because it would require extremely long detours between Plainville and Hays, affecting things like medical response times, local businesses, and the motoring public. If the design plan were changed now, redesign costs, additional inflation, and the sunk costs already incurred for the project would raise the cost of the locals’ plan to about $10.1 million.
Board of Regents’ Information Systems: Reviewing Computer Security at Various Universities
Universities must balance the need for computer security in an extremely complex environment with the need for a free and open exchange of information. Our review of computer security policies at Kansas State and Emporia State Universities and the University of Kansas showed that in many areas the security procedures described were adequate, but hadn’t been adopted as official written policies. Written policies are important in security because they help ensure consistency and communicate the intent of upper-level management. We also noted many instances of no or inadequate policies in such areas as encrypting confidential data, having disaster recovery plans, and planning for security in new systems. The policy-setting process at these universities can be lengthy and cumbersome, requiring review and sometimes approval by many campus committees. The security function is strongest at the two larger universities. They both have taken a proactive approach to managing computer security by developing policies and incident response teams, actively promoting security awareness to their users, and protecting computers belonging to students living in the residence halls from computer viruses.Because of security considerations, specific problems with security policies were not discussed in any detail in this report. We provided separate confidential reports and recommendations to each university.
Larned State Hospital: Reviewing the Growth In the Sexual Predator Treatment Program
Since 1998, the number of residents in Kansas’ Sexual Predator Treatment Program has increased from 16 to 136. The Program is growing because more sex offenders are being committed (2-3 per month in recent years, compared with about 1 per month in 1999), and few are leaving (some haven’t been in the Program long enough to complete it, some aren’t progressing, and some never will). Under an optimistic scenario, the population could increase by 100 residents over the next 10 years and nearly triple over the next several decades before leveling off. Under less optimistic assumptions, it could grow to more than 800 residents before leveling off. Staffing and funding for the Program grew by about 340% and 480% over the past 5 years, respectively, to handle the increase in population, but Kansas staffing levels and operating costs seemed reasonable compared with other states. Most comparison states’ programs were similar, but some have more lenient criteria for releasing residents. Options that exist for curbing the Program’s growth will require Kansas to accept a higher level of risk.
This audit, conducted by RedSiren, Inc. under contract with Legislative Post Audit, looked at 14 different aspects of security at the Kansas Lottery. These areas ranged from ensuring the security of database and system issues to addressing risks related to ticket counterfeiting and alterations. The Lottery’s overall security is very satisfactory, but the audit did identify several areas where improvements are needed. Because of the sensitive nature of the audit’s subject, the audit resulted in a public report that provides general findings and a confidential report that provides more detailed findings and recommendations to address the risks identified.
State of Kansas: OMB Circular A-133 Audit of Fiscal Year 2004
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 2004.
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. Ten findings are reported.
Compliance and Control Audit: Corporation Commission
State law requires all real property subject to taxation to be appraised uniformly and equally as to class, and at its fair market value, except agricultural land, which is valued at “use” value. All the differences in value in our within-county comparisons of 18 pairs of commercial buildings and eight pairs of agricultural structures seemed justified. Differences in property values across counties reflect appraisers’ decisions about market conditions; some seemed justified, but others were questionable. Land classified as agricultural receives a significant tax break, and getting land reclassified to agricultural is relatively easy because of Kansas’ broad definition of agriculture. Tax receipts in Johnson and Butler Counties were reduced by at least $204,000 for 2004 after 64 plots of vacant land were reclassified as agricultural. Kansas may want to consider implementing a tax roll-back policy to recoup property taxes when agricultural land is reclassified. Concerns about agricultural land being purchased for recreation, yet continuing to be classified as agricultural, is an issue in southeast Kansas. But because the uses aren’t mutually exclusive (that is, land purchased for hunting can be used during most of the year for growing hay or grazing cattle) it’s unlikely this situation will change unless the Legislature chooses to significantly narrow the State’s definition of agriculture.
Kansas Department of Transportation: Reviewing the Costs Associated with Recent Bond Issues (limited-scope audit)
In November 2004, KDOT issued two types of variable-rate bonds totaling $347 million to fund highway construction. These bonds are re-marketed weekly to take advantage of lower short-term interest rates. The agents who re-market the bonds receive fees that generally are about one quarter of 1% of the amount of bonds outstanding or about $771,000 a year. For $147 million of the bonds, KDOT entered into an agreement with an investment banking firm that will “synthetically” fix the rate of interest on those bonds at about 3.6%. That will save KDOT an estimated $1 million a year after all fees associated with the bonds have been paid. For the other $200 million, KDOT didn’t do a cost-benefit analysis. KDOT officials indicated that over the last 20 years variable-rate bonds have always produced interest savings of at least one percentage point, which would more than offset the fees they would pay on these bonds. If interest rates should rise over the next few years, those interest cost savings are less certain. The fees KDOT paid to issue and maintain these bonds are in line with fees paid by other bond issuers.
School Finance: Putting District Budgetary Data into a More Accessible Database (limited-scope audit)
Each year, the Department of Education collects detailed revenue and expenditure data from school districts, loads it into a mainframe computer system, and uses it to produce a number of reports that are available on its website. Even so, the detailed information districts submit isn’t readily accessible, and it’s difficult to make comparisons between districts. We converted one year of revenue and expenditure data from school district budgets to a more flexible data format. The new format could allow legislative staff to analyze the data to answer legislators’ revenue and expenditure questions, and would be the first step toward creating an on-line system like the one maintained by the Wisconsin Department of Public Instruction.
Unemployment Benefit Payments: Reviewing Benefit Payouts and Changes in the Number of Employees Determined To Be Eligible (limited-scope audit)
From 2002 to 2004, unemployment benefit payments in Kansas increased dramatically. In 2003, when the unemployment rate was 5.3%, payments peaked at $375 million or more than twice the amount paid out in 1994, the last time the unemployment rate was similar. Concerns had been expressed that the increase in payments was attributable to the Department of Labor adopting a more employee-friendly philosophy in deciding claims and appeals. This does not appear to be the case. There were no significant increases in recent years in the rate at which applicants were granted benefits, or in the rate of appeals being decided in favor of employees. More likely, the increase was caused by the combination of more people being unemployed, their benefits being based on higher wage levels, and their periods of unemployment lasting longer than in the past.
Wyandotte County: Reviewing the Use of STAR Bond Moneys Associated With the Kansas Speedway and the Village West Tourism District
As of December 2004, the Unified Government of Wyandotte County and Kansas City, Kansas, had authorized $305 million in STAR bonds for the Kansas Speedway and Village West redevelopment projects. The Unified Government’s cost of issuing the STAR bonds was in line with other bond issues we looked at. We found about $1.5 million in unallowable uses of STAR bond moneys, most of which was money the Unified Government withdrew from the bond accounts to cover expenditures, but never spent. Another $28 million in actual or planned expenditures appeared to go beyond what legislators envisioned, including payments for museum exhibits, electronic dinosaurs, and payments to consultants hired by the businesses locating in the redevelopment. We also found that the Unified Government had entered into a number of questionable agreements that, among other things, essentially have resulted in the State and local governments paying the cost of building Cabela’s store. Businesses in the development provided discounts on food, merchandise, and hotel rooms to employees of the Unified Government and the Board of Public Utilities. Officials from the Unified Government also have had free use of suites and hospitality tents at the Speedway and Community America Ballpark. Finally, we noted that the proposed cost of constructing a movie theater in the development greatly exceeds typical theater construction costs, and the company that will manage the theater gets half the net income even though it has no significant financial risk.
Foster Care: Determining Whether Adoptions Are Being Finalized As Quickly As Possible, Once An Adoptive Family Is Located
Most children adopted in fiscal year 2004 already had a potential adoptive family identified by the time they were referred to KCSL. On average, these adoptions took the shortest time to complete, but they still took more than a year to finalize. Two-thirds of the adoption cases we reviewed experienced at least one delay in the adoption process that seemed to be unreasonable or unexplained. Adoptive parents appear to have caused most of the unreasonable or unexplained delays. 50% of the unnecessary delays financially benefitted the party that caused the delay. Under the current system, adoptive parents and KCSL can benefit financially from delays in the adoption process. New contracts for adoption and foster care services will reduce contractors’ financial incentives to delay adoptions.
State of Kansas: Financial Audit of Fiscal Year 2004
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 2004. The State’s financial condition for fiscal year 2004, as shown in the CAFR, is presented fairly and in conformity with generally accepted accounting principles. The auditors reported one deficiency in internal control over financial reporting. The current accounting system was designed to provide information primarily related to budget compliance and, therefore, generally omits non-cash assets and liabilities. The second part, the Report on Federal Awards in Accordance with OMB Circular A-133, will be issued subsequently.