LEGISLATIVE DIVISION OF POST AUDIT

Transcription

1 LEGISLATIVE DIVISION OF POST AUDIT Annual Report to the 2017 Legislature

2

3 LEGISLATURE OF KANSAS LEGISLATIVE DIVISION OF POST AUDIT 800 SOUTHWEST JACKSON STREET,SUITE 1200 TOPEKA,KANSAS TELEPHONE (785) FAX (785) To: All Legislators This annual report is intended to provide you and your staff with the information you need to get the most from the Legislature s audit function. It describes how the audit process works, how to request an audit, and the results of recent reports. It provides brief background information about the division, a staff directory, and a list of the hundreds of audit reports we ve issued over the past 40+ years. Our hope is that you will refer to this book often throughout the session and the rest of the year. If you would like more information about the division or a particular audit or topic, or if you want to request an audit or schedule a presentation, please contact Legislative Post Audit at (785) Best wishes for a productive 2017 session. Scott Frank Legislative Post Auditor

4

5 LEGISLATIVE DIVISION OF POST AUDIT Annual Report to the 2017 Legislature CONTENTS I. The Legislative Division of Post Audit... 1 A. Introduction to the Work of Legislative Post Audit... 3 B. Types of Audits... 4 C. Selecting Audits... 5 D. Legislative Post Audit Staff... 7 II The Legislative Post Audit Committee... 9 A. The Legislative Post Audit Committee III. Recent Work A. Summary of Key Audit Findings in Recent Years B. Audit Reports Issued in C. Follow-Up on Audit Recommendations IV. Reference A. Staff Photo Directory B. Audit Reports Issued, 1972 Present... 89

6

7 I. The Legislative Division of Post Audit Legislative Division of Post Audit 1 ANNUAL REPORT TO THE 2017 LEGISLATURE

8 ANNUAL REPORT TO THE 2017 LEGISLATURE 2 Legislative Division of Post Audit

9 A. Introduction to the Work of Legislative Post Audit The mission of Legislative Post Audit is to inform policy makers by providing accurate, unbiased information through our audit work. Our audits help the Legislature by focusing on three core areas oversight, insight, and foresight. We help the Legislature provide oversight of state government by evaluating whether agencies are following laws, achieving the intended results, and operating effi ciently. We also help legislators develop a better understanding of state government by providing insight into how agencies and programs actually work. Finally, in some cases, we provide legislators with foresight by predicting how changing current government structures and systems might affect state costs and program outcomes. The Legislative Post Audit Committee directs the work of our 25-person staff. We receive audit requests from legislators and work with each requestor to develop an audit proposal that explains what questions the audit would answer and how much staff time would be needed. Once a year, we compile a list of all the audit proposals, and the committee selects the audits it wants us to conduct for the coming year. The results of our work are available in a variety of formats to best suit legislators needs. Our printed reports are available in two forms a full audit report and a brief highlights sheet. The audit report fully explains our audit methodology, fi ndings, and conclusions. It frequently includes additional background material on the agency or HOW TO REQUEST AN AUDIT The Legislative Post Audit Committee directs all of the division s audit work. However, it selects most of the audit topics from requests made by legislators and legislative committees. In fact, any legislator or legislative committee can request a performance audit by contacting us directly. Here is how the process works: Contact Legislative Post Audit if you have a concern that might be addressed through an audit. You may contact any staff member, but the person in charge of developing and tracking audit requests is Justin Stowe, the Deputy Post Auditor. You can contact Justin directly by at justin.stowe@ lpa.ks.gov or by telephone at (785) One of our staff members will work with you to develop an audit proposal that summarizes your request. The audit proposal will include background information on your concerns, a list of specifi c questions the audit would answer, a brief description of the methodology we think we would use to answer the questions, and an estimate of the time and resources the audit would require. Once you are satisfi ed that the proposed audit would adequately address your concerns, we submit it on your behalf to the Legislative Post Audit Committee. Once a year, we present the proposed audits to the Legislative Post Audit Committee so it can select the audits for the coming year. If your proposal is selected by the committee, we will add it to the audit plan for the coming year. If it is not selected by the committee, you will need to resubmit it for the committee s consideration. There is no limit to the number of times a request can be resubmitted. program, as well as charts, graphs, and appendices that provide more detail on the audit fi ndings. The highlights sheet condenses the fi ndings and conclusions from our full reports into only a few pages to make it easier for legislators to read them quickly. In addition, our staff present audit fi ndings or other testimony to legislative committees as requested. The work of Legislative Post Audit often complements the work of the Legislative Research Department. Legislative Research s role is to quickly gather, package, and present information pertinent to the numerous public policy questions that legislators have to consider. On the other hand, Legislative Post Audit s role is to delve deeper into select issues, offering up our evaluations and policy recommendations. Our staff work closely with the staff at Legislative Research to help ensure legislators get the information they need. Legislative Division of Post Audit 3 ANNUAL REPORT TO THE 2017 LEGISLATURE

10 The Legislative Post Audit Act provides for a variety of different types of audits. Most of our audit work is directed by the Legislative Post Audit Committee, although some audits are required by state statute. Also, while most of our work focuses on state agencies and programs, the Legislative Post Audit Act authorizes us to conduct audits of local units of government, entities that receive grants or contracts from the state, and entities regulated by the state. Section III-B includes a list of all of our calendar year 2016 audit reports. Legislative Post Audit conducts performance audits to answer questions raised by legislators about potential problem areas in state government. Through performance audits, we objectively and systematically look at the performance of state agencies, programs, activities, and functions. We provide legislators and management with information that can be used to create, manage, oversee, modify, and occasionally eliminate agencies or programs. Performance audits typically answer the following types of questions: Is the agency or program complying with the law? Is the agency or program accomplishing what it is supposed to accomplish? Could the agency or program be operated more effi ciently? What might happen if the agency or program were changed? In 2016, the division issued 16 performance audits. B. Types of Audits We also conduct IT audits that focus on agencies computer-security practices and the implementation of IT projects. A major responsibility of agencies is to safeguard sensitive data through policies, software applications, and physical security. These audits look for security weaknesses in selected agencies computer systems. In 2016, the division issued fi ve computer-security audit reports. These reports are considered confi dential under the Kansas Open Records Act, and may only be heard by legislative committees in executive session, but a three-year summary report describing the fi ndings is publicly available. In addition, 2015 House Bill 2010 authorized for the fi rst time continuous audits of ongoing state information technology projects. The bill authorizes the division to communicate the fi ndings of these audits, outside of the regularly scheduled meetings, to the Legislative Post Audit Committee, the Joint Committee on Information Technology, and the governmental branch Chief Information Technology Officers in certain circumstances. In 2016, the division issued two projectmonitoring audit reports of the Department of Revenue s KanDrive system. As we gain more experience in this area, we will expand and monitor more projects. External CPA firms under contract with Legislative Post Audit conduct financial audits of several state agencies. Since the early 1980s, nearly all of the state s traditional fi nancial audits have been contracted out to external audit fi rms. These include annual audits of the fi nancial statements for the state, KPERS, the Kansas Lottery, the highway fund (KDOT), and certain water funds (KDHE). In addition, federal law requires an annual audit of the programs that spend a signifi cant amount of federal funds to ensure they follow federal requirements. Finally, contractors perform audits of the security at the Kansas Lottery and the state 911 system every three years. ANNUAL REPORT TO THE 2017 LEGISLATURE 4 Legislative Division of Post Audit

11 C. Selecting Audits All of our audits are conducted at the direction of the Legislative Post Audit Committee. Audit topics come before the committee from a variety of sources. Most of the audits we conduct are requested by legislators or committees. Under the Legislative Post Audit Act, individual legislators, legislative committees, or the Governor can request a performance audit, but the Legislative Post Audit Committee decides which audits we will conduct. The process for requesting and approving these audits is as follows: An interested legislator contacts our staff when they want an audit. One of our staff members works with the requestor to develop an audit proposal that summarizes the audit request. The proposal will include background information on the requestor s concerns, a list of specifi c questions the audit would answer, a brief description of the methodology we think we would use to answer the questions, and an estimate of the time and resources the audit would require. Once the requestor is satisfi ed that the proposed audit would adequately address his or her concerns, we submit it to the Legislative Post Audit Committee for consideration. Once a year, we present the audit proposals to the Legislative Post Audit Committee so it can select the audits for the coming year. If an audit proposal is selected by the committee, we add it to the audit plan for the coming year. If it is not selected by the committee, we remove it from the list. Legislators always have the option of renewing their requests. Committee rules require that, during the interim, any new or renewed requests will be considered by the committee at its next meeting. Other audits come from staff suggestions. Legislative Post Audit Committee rules require that we develop a list of audit proposals focused on efficiency or cost savings for the committees consideration. In developing these proposals, our staff is allowed to contact agency offi cials, current or former state employees, or members of the public to identify those with the most potential to result in efficiencies or cost savings. Some audits are required by statute. For example, state law requires the division to conduct effi ciency audits of three school district each year through June The law also requires performance audits of KPERS and the state s 911 system every three years. LPA Received the Highest Rating on Its Most Recent Peer Review Government auditing standards require that Legislative Post Audit undergo a peer review every three years. This review, conducted by auditors from other states under the auspices of the National State Auditors Association, ensures that the division s system for producing highquality audit work conforms with the highest standards. In October 2016, the peer review team reviewed the division s processes, as well as a series of audit projects, and gave the division the highest rating. The review team s opinion letter is posted on our website at kslpa.org/assets/files/peer_review.pdf. Our next peer review is scheduled for October Legislative Division of Post Audit 5 ANNUAL REPORT TO THE 2017 LEGISLATURE

12 THE PERFORMANCE AUDIT PROCESS For our performance audit work, we follow Generally Accepted Government Audit Standards (GAGAS), published by the U.S. Government Accountability Office. These standards govern our auditors professional qualifi cations and training, the quality of our audit work, and the characteristics of timely and meaningful audit reports. In order to comply with these standards, we have developed the following process for our performance audits: Selecting the audit. Audit topics are selected by the Legislative Post Audit Committee from lists of topics suggested by legislators or staff. Planning the audit. When an audit topic is authorized by the committee, the auditors spend a couple of weeks learning about the program and planning the work they will do to answer the audit questions. Conducting the fieldwork. Fieldwork comprises interviews of the audited program s staff, experts, and others; review of records; data analysis; and other data-gathering activities. This is the bulk of the time for an audit and takes anywhere from a few weeks to a few months. Writing the draft report. Based on their analysis of the data gathered during fi eldwork, the auditors draft a report that details their fi ndings. Reviewing the draft report. After detailed review by the audit managers and the Post Auditor, the draft report is sent to the audited agency for review and comment. Agency offi cials have two weeks to review and respond to the draft report, and their official written response is included as an appendix to the fi nal report. Presenting the final report. The fi nished report is confi dential until it is presented to the members of the Legislative Post Audit Committee at a public meeting. Afterwards, it s published on the division s website, along with a brief summary called the Audit Highlights. Legislative Post Audit also provides paper copies of the full report and Highlights sheets to legislators and others as requested. Reviewing the quality of the audit work. Audit quality is of great concern throughout the process, and the division s processes are designed to ensure accuracy of the data, thoroughness of the analysis, and reasonableness of the conclusions. Supervisors and managers review the work throughout the process, and each project receives additional review before and after release to ensure that all procedures were followed correctly. In addition, the division is peer-reviewed every three years by auditors from other states to ensure it follows government auditing standards. Following-up on the recommendations. Legislative Post Audit Committee rules require the division to follow up to see whether agencies are complying with previous audit recommendations. We contact audited agencies four times a year to get an update on their progress on implementing the recommendations and assemble the results into a quarterly report to the Legislative Post Audit Committee. The fourth-quarter report for 2016 appears in Section III-B. ANNUAL REPORT TO THE 2017 LEGISLATURE 6 Legislative Division of Post Audit

13 D. Legislative Post Audit Staff The Legislative Division of Post Audit is under the direct supervision of the Legislative Post Auditor. Our current organization, as authorized by the Legislature and approved by the Legislative Post Audit Committee, provides for 25 professional and support positions. Our staff come from a wide variety of backgrounds and disciplines, including public administration, law, political science, and other social sciences. All of our employees are in the unclassifi ed service. Our regular performance audit work is conducted by a 14-person staff headed up by the Deputy Legislative Post Auditor and the Performance Audit Manager. The three-person IT audit staff is directed by the IT Audit Manager. Another audit manager is responsible for our fi nancial-compliance audit activities. This includes preparing audit specifi cations, reviewing and evaluating audit bid proposals, monitoring audit work by contractors, and reviewing and accepting completed audit reports and audit documentation. Our staff is organized as shown in the chart below. A photo directory of all our staff appears in Section IV-A. Legislative Division of Post Audit 7 ANNUAL REPORT TO THE 2017 LEGISLATURE

14 ANNUAL REPORT TO THE 2017 LEGISLATURE 8 Legislative Division of Post Audit

15 II. The Legislative Post Audit Committee Legislative Division of Post Audit 9 ANNUAL REPORT TO THE 2017 LEGISLATURE

16 ANNUAL REPORT TO THE 2017 LEGISLATURE 10 Legislative Division of Post Audit

17 A. The Legislative Post Audit Committee Organization. The Legislative Post Audit Committee, authorized under K.S.A , is a joint committee consisting of 10 members fi ve from each house. Of the ten members, the two majority caucuses each have three members, while the two minority caucuses each have two members. Members serve for the duration of their legislative term. Each year, within the fi rst 15 calendar days of the legislative session, the committee meets to elect a chair and vice-chair, one from each chamber. By committee rule, the chair is a representative in odd-numbered years and a senator in even-numbered years. Members. During calendar year 2016, the members of the Legislative Post Audit Committee were: Senate Senator Michael O Donnell (R-Wichita), Chair Senator Anthony Hensley (D-Topeka) Senator Laura Kelly (D-Topeka) Sentor Jeff Longbine (R-Emporia) Senator Julia Lynn (R-Olathe) House Representative Virgil Peck (R-Tyro), Vice-Chair Representative John Barker (R-Abilene) Representative Tom Burroughs (D-Kansas City) Representative Peggy Mast (R-Emporia) Representative Ed Trimmer (D-Winfi eld) You can fi nd links to the official pages of the committee s current members by going to the Legislative Post Audit website at Meeting agendas and minutes. Approved committee meeting agendas usually are available one to two weeks before the meeting date, or when approved by the chair. Meeting minutes are posted in draft form within a few days after a meeting, and generally are approved by the committee at the following meeting. You can fi nd committee meeting agendas and minutes at Legislative Division of Post Audit 11 ANNUAL REPORT TO THE 2017 LEGISLATURE

18 ANNUAL REPORT TO THE 2017 LEGISLATURE 12 Legislative Division of Post Audit

19 III. Recent Work Legislative Division of Post Audit 13 ANNUAL REPORT TO THE 2017 LEGISLATURE

20 ANNUAL REPORT TO THE 2017 LEGISLATURE 14 Legislative Division of Post Audit

21 A. Summary of Key Audit Findings in Recent Years Legislative Post Audit conducts performance audits to address legislators concerns about potential problems in state government. These audits typically focus on issues of efficiency, effectiveness, and compliance. Our audit reports provide legislators and agency management with information that can be used to create, manage, oversee, modify, and occasionally eliminate agencies or programs. The following examples highlight some of the work we have conducted in recent years. Foster Care (2016) In January 2016 the Post Audit Committee directed us to conduct a multi-part audit of the state s foster care system. The fi rst part of the audit was released in July 2016 and focused on children s safety during the removal and placement process. We found that the Department for Children and Families (DCF) had not yet implemented several recommendations from a 2013 evaluation of its child protective services function and had not responded to all report-center calls in a timely manner. We also found that DCF did not ensure required background checks happened as often or as thoroughly as they should. In addition, DCF did not ensure monthly in-person visits happen for children in foster care, adoptive homes, or for children reintegrated with their family. Additionally, DCF s child placement process did not ensure children were placed in foster care homes with sufficient living and sleeping space and fi nancial resources. The fi nal part of the audit will focus on the state s privatized foster care system and is scheduled for release in May Information Technology Audits (2016) K.S.A allows our office to conduct information technology audits as directed by the Legislative Post Audit Committee. These include two broad classes of IT audits IT security audits and continuous project monitoring. IT security audits assess the security controls agencies have established to protect their IT systems. In 2016 we released a report summarizing our key IT security fi ndings from audits of 20 state agencies conducted over the past three years. Of the 20 agencies, 13 did not substantively comply with applicable IT security standards, and the audits revealed numerous security problems, including software vulnerabilities, inadequate physical security for data centers, and insufficient security awareness training for agency employees. Continuous project monitoring audits evaluate ongoing IT projects to help ensure agencies comply with project-management requirements and best practices, and to help identify projects that are at risk of failure. In 2016 we began our fi rst project monitoring audit of the Department of Revenue s KanDrive system. We anticipate adding more projects in the coming year. Kansas Eligibility Enforcement System (KEES) (2015) In August 2011, Kansas signed a contract with Accenture to design a new eligibility determination system for medical and social service benefi ts. Known as the Kansas Eligibility Enforcement System (KEES), the project was originally estimated to take about two years to complete and cost about $138 million to build and $50 million to maintain for fi ve years. We found the main functions of the KEES project appeared to have been included as planned, but the project suffered from signifi cant delays, additional costs, and unrealized savings Legislative Division of Post Audit 15 ANNUAL REPORT TO THE 2017 LEGISLATURE

22 and functionality. Specifi cally, as of November 2015, the core of the KEES project was approximately two and a half years behind the original schedule. Moreover, we projected the project likely would exceed its original budget by at least $46 million. Finally, we found the state was unlikely to realize all the estimated savings expected from KEES because those estimates were based on faulty assumptions. Sexual Predator Treatment Program at Larned State Hospital (2015) - Legislators have expressed consistent concerns about the growing size of the offender population, employee workload, and working conditions at the Larned facility. We found that as of December 2014, the program was at about 92% of its physical capacity. The population continues to grow because far more sex offenders are committed to the program each year and few residents ever exit the program. Based on current trends, we projected the program population will exceed its current space limits in the next few years and will continue to grow into the foreseeable future. Further, we estimated program costs would more than double by 2025 from $14 million a year to between $26 million and $34 million. K-12 School Efficiency Audits (2016) K.S.A requires our office to conduct a series of school district efficiency audits at the direction of the Legislative Post Audit Committee. The law requires us to audit three districts a year (one small, one medium, and one large) until fi scal year In 2016 we conducted the fourth round of effi ciency audits under the recent requirements, looking at the operations of the Attica (small), Frontenac (medium), and Maize (large) school districts. Those audits identifi ed a number of potential savings opportunities for districts in such areas as food service, class scheduling, procurement cards, fi nancial controls, and student transportation. ANNUAL REPORT TO THE 2017 LEGISLATURE 16 Legislative Division of Post Audit

23 Report Number Month Issued B. Audit Reports Issued in 2016 Report Name L July Osawatomie State Hospital: Reviewing the Hospital s Recent Loss of Federal Funding... Highlights on page (a) R February K-12 Education: Evaluating the Costs and Benefi ts of Smoky Hill Education Service Center Membership R March Kansas Department of Wildlife, Parks and Tourism: Evaluating a Jefferson County Land Purchase R April Kansas Corporation Commission: Evaluating Savings Achieved through the Facility Conservation Improvement Program... (a) R April Statewide Single Audit--Fiscal Year Part 2 Report on Federal Awards in Accordance with OMB Circular A R July K-12 Education: Effi ciency Audit of the Attica School District R July K-12 Education: Effi ciency Audit of the Frontenac School District R July K-12 Education: Effi ciency Audit of the Maize School District R July Seized and Forfeited Property: Evaluating Compliance with State Law and How Proceeds Are Tracked, Used, and Reported R July Foster Care and Adoption in Kansas: Reviewing Various Issues Related to the State s Foster Care and Adoption System, Part R September Foster Care and Adoption in Kansas: Reviewing Various Issues Related to The State s Foster Care and Adoption System, Part R September Kansas Department of Revenue KanDrive IT Project Quarter Ending June 30, (a) R December Kansas Department of Revenue KanDrive IT Project Quarter Ending September 30, (a) R September KanCare: Reviewing the Timeliness of Medicaid Eligibility Determinations R December K-12 Federal Education Funds: Evaluating the Costs and Benefi ts Associated with K-12 Federal Education Funding (continued on next page) Legislative Division of Post Audit 17 ANNUAL REPORT TO THE 2017 LEGISLATURE

24 Report Number Month Issued Report Name Highlights on page R December State of Kansas: Financial Audit of Fiscal Year R December Kansas Public Employees Retirement System: Fiscal Year R December Kansas Lottery: Fiscal Year R December Examining Selected Financial Management Practices of the State Treasurer s Office: Fiscal Year R December Examining Selected Financial Management Practices of the Pooled Money Investment Board: Fiscal Year R December The Kansas 911 Act: Reviewing Implementation of the 2012 Act R December Security in the Operation of the Kansas Lottery... (b) R December State Agency Information Systems: Three-Year Summary Report... NOTE: This report summarizes three years of conf dential computer-security audits, including the reports listed below: State Agency Information Systems: Reviewing Security Controls in Selected State Agencies... R a September Kansas University Medical Center (Kansas City Campus) (CY 2016) 61 (b) R b September Kansas University Medical Center (Wichita Campus) (CY 2016) R September Emporia State University (CY 2016) R September Wichita State University (CY 2016) R December Kansas State University (CY 2016) (a) No Highlights document is produced for limited-scope or project-monitoring reports. (b) Because they deal with agency-specifi c security issues, these audits have neither a publicly available report nor a Highlights document. ANNUAL REPORT TO THE 2017 LEGISLATURE 18 Legislative Division of Post Audit

25 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights February 2016 R Summary of Legislator Concerns Legislators were interested in whether school districts are receiving enough benefits from Smoky Hill membership to justify the costs. K-12 Education: Evaluating the Costs and Benefits of Smoky Hill Education Service Center Membership QUESTION 1: Do the financial benefits of Smoky Hill Education Service Center membership outweigh the costs? Smoky Hill is one of several education service centers in Kansas that offer support services to school districts. Any district in the state (as well as private schools) can become a member of the Smoky Hill service center. Smoky Hill provides services to school districts such as training, information technology support, and curriculum access. Members pay annual membership fees in exchange for pricing discounts and other benefits. For a sample of districts we reviewed, the cost of membership in the Smoky Hill Education Service Center was greater than the financial benefit. Background Information Education service centers provide a variety of services to school districts that would be difficult or more expensive for districts to provide independently. School districts can join any of the state s seven service centers on a voluntary basis and may utilize multiple service centers for different purposes. In the school year, Smoky hill served 52 member districts and 47 non-member districts. We compared the cost of membership to the discounts districts received for 10 school districts. The membership fees for four of the five member districts we reviewed were greater than the financial benefits. Similarly, the potential membership fees for four of the five non-member districts we reviewed were also greater than the potential financial benefits. Membership fees did not appear to be cost effective for the districts we reviewed because they did not purchase enough discounted items. Comparison of Membership Fees and Membership Savings for Selected Districts District Member Districts Membership Fee ( ) Savings Because of Membership Difference % of District Expenditures Analyzed Chapman $4,789 $9,134 $4,345 89% Pawnee Heights $1,833 $752 ($1,081) 100% Salina $12,156 $1,087 ($11,069) 99% Southern Cloud $2,162 $1,840 ($322) 100% WaKeeney $996 $912 ($83) 98% Non-Member Districts (a) Brewster $678 $347 ($331) 100% Durham-Hillsboro $1,181 $6 ($1,175) 100% Erie $1,187 $1,498 $ % Goddard $5,368 $450 ($4,918) 100% Norton $1,404 $327 ($1,077) 87% (a) Because these districts are not Smoky Hill members, we estimated their membership fees based on a formula provided by Smoky Hill officials. Further, the savings are based on the discounts the district would have received if it had been an associate member of the service center. Source: LPA analysis of data provided by Smoky Hill Education Service Center officials. Legislative Division of Post Audit 19 ANNUAL REPORT TO THE 2017 LEGISLATURE

26 The results of our comparison of Smoky Hill s vendor prices to other vendors for certain technology purchases had mixed results. We compared the prices Smoky Hill s vendors offered for 18 technology-related products to the prices we could find online through other vendors. We only evaluated technology items because they are sold by a large number of private sector vendors and include numerous technical specifications that facilitate accurate comparisons. Smoky Hill had lower prices than other vendors for a little more than half of the technology items we reviewed. Price Comparison of Smoky Hill Prices and Other Vendors Total $ Districts Smoky Hill Other Vendor % More/Less Spent Price Price Than Other Item ( ) (Per Unit) (Per Unit) Vendor Prices Smoky Hill's Prices Were Less LCD Projector $4,896 $612 $849 (28%) Internet Security License $4,088 $9 $12 (21%) Wireless Access Point $4,800 $800 $985 (19%) ipad Protective Case $1,745 $32 $39 (16%) Acer Chromebook Laptop (4 GB) $5,809 $244 $278 (12%) Surveillance Camera $5,824 $208 $229 (9%) Headphones $598 $10 $11 (9%) ipad Charging Cable $947 $16 $17 (7%) License for Camera Software $3,384 $94 $100 (6%) Computer Monitor $14,999 $100 $106 (6%) Smoky Hill's Prices Were Similar Projector $4,843 $837 $859 (3%) Acer Chromebook Laptop (2 GB) $17,080 $244 $240 2% Network Camera $5,828 $1,457 $1,387 5% Smoky Hill's Prices Were More Headphones $1,496 $8 $7 8% Keyboard for ipad $2,074 $48 $44 10% Lenovo Desktop Computer $4,800 $600 $458 31% HP Flash Drive $1,745 $44 $32 36% 48 Port Internet Switch $8,459 $2,820 $1,735 63% (a) Prices for technology equipment can fluctuate over short periods of time. The prices in this table reflect the prices w e found at the time of our search in November Source: Data provided by Smoky Hill officials (audited) and Internet searches by LPA. SUMMARY OF RECOMMENDATIONS The five member districts we reviewed should evaluate whether continued membership in the service center is cost effective. AGENCY RESPONSE Smoky Hill officials disagreed with our finding because they thought our definition of financial benefit was too narrow and that our analysis had not included a variety of services that Smoky Hill provides. We considered this information but determined our finding remained accurate. Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) For more information on this audit report, please contact Heidi Zimmerman (785) heidi.zimmerman@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 20 Legislative Division of Post Audit

27 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights March 2016 R Summary of Legislator Concerns Legislators have expressed concern that the Kansas Department of Wildlife, Parks and Tourism (KDWPT) may not have complied with all the necessary legal requirements related to a 2014 land purchase in Jefferson County. Background Information In 2014 KDWPT purchased more than 800 acres of land in Jefferson County for about $1.1 million. According to KDWPT reports, the land will increase hunting, fishing, and other recreational opportunities, and will allow KDWPT to better manage any threatened and endangered species located in the area. KDWPT used both state and federal funds to pay for the land. The federal Pittman-Robertson grant will be dispersed in annual installments and will reimburse 75% of the $1.1 million purchasing cost for the Jefferson County land by KDWPT will use state wildlife funds to pay for the remaining 25% of the purchasing cost. Kansas Department of Wildlife, Parks and Tourism: Evaluating a Jefferson County Land Purchase QUESTION 1: Did the Kansas Department of Wildlife, Parks and Tourism Comply with All Legal Requirements in its 2014 Land Purchase in Jefferson County? We identified several state legal requirements the Kansas Department of Wildlife, Parks and Tourism (KDWPT) needed to comply with prior to purchasing the land in Jefferson County. It needed to receive legislative approval to purchase the land, have a plan to manage the property and control noxious weeds, and agree to make payments in lieu of taxes to the county. State law also required the land be acquired by June 30, KDWPT also needed to comply with several federal requirements in order to receive a grant to help pay for the Jefferson County land. For example, KDWPT needed to ensure appraisals of the land conformed to specific federal standards. KDWPT complied with most state and federal requirements related to the Jefferson County land purchase. It received prior legislative approval for this purchase. It agreed to pay property taxes directly to the county. According to federal officials, it complied with all federal requirements. KDWPT did not fully meet the requirement to acquire the land by June 30, KDWPT and the landowners signed the purchase agreements in May However, KDWPT did not finish closing on the property until September 2014, and the deeds were not all filed until October Additionally, KDWPT could not demonstrate it complied with the state s requirements related to noxious weeds and management plans prior to the date of purchase. It was unable to show the land was in compliance with state noxious weed laws prior to purchasing the land. It was also unable to show its management and noxious weed plans were in place prior to the purchase date. Although KDWPT paid for all nine tracts of land, it mistakenly omitted a single 14- acre tract from the acquisition. It paid about $20,000 for a 14-acre tract of land as part of the acquisition, but never actually acquired legal ownership of the property. Officials had no explanation for why the tract was included in the purchasing price but never acquired. Legislative Division of Post Audit 21 ANNUAL REPORT TO THE 2017 LEGISLATURE

28 KDWPT s land purchase procedures lacked guidance on how to comply with state legal requirements. For example: Its procedures did not reference state statutory requirements on developing a management plan, controlling and managing noxious weeds, or making payments in lieu of taxes on exempt property. Its guidance on other purchasing requirements was vague. For example, guidance on the purchasing process included the following steps: make offer to landowner, develop agreement, and get title work started. That was the extent of guidance in those areas. SUMMARY OF RECOMMENDATIONS We recommended KDWPT take action to address the issue concerning the tract of land the department paid for but never legally acquired. We also made a series of recommendations intended to strengthen KDWPT s land acquisition procedures. AGENCY RESPONSE Agency officials generally concurred with the findings and have taken steps to implement all of our recommendations. However, KDWPT disagreed with one finding related to whether the land was purchased within the timeframe provided in statute. We considered their arguments but determined our finding remained accurate. Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Matt Etzel (785) Matt.Etzel@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 22 Legislative Division of Post Audit

29 k Legislative Post Audit Financial Audit Report Highlights Highlights State of Kansas: Federal Compliance (A-133) Audit of Fiscal Year 2015 Report Highlights April 2016 R Summary of Legal Requirements The federal government requires organizations that receive a significant amount of federal funding to undergo a single audit in accordance with OMB Circular A-133. The Single Audit combines the audit of the state s financial statements with an organizationwide audit of compliance with federal regulations and award agreements. The Single Audit is presented in two parts. The first part was the audit of the state s basic financial statements for fiscal year 2015 (R released in December 2015). This second part is the report on state agencies compliance with federal awards requirements. Background Information CliftonLarsonAllen, a CPA firm under contract with the Legislative Division of Post Audit, conducted this audit. Reported federal expenditures for fiscal year 2015 were $5.0 billion. AUDIT OBJECTIVES: The federal A-133 audit has three major objectives: (1) evaluate state agencies compliance with federal laws, regulations, contracts, and other requirements; (2) evaluate agencies internal controls over compliance; and (3) identify any questioned costs associated with non-compliance. The auditors reported that the state was in material compliance with the applicable requirements for all federal programs audited. The auditors reported a total of 21 problem findings related to the federal awards including one material weakness (the most significant type of problem finding). The material weakness was for the Medicaid program, where the managed care organizations (MCOs) did not have agreements for eight of the 40 providers tested. The auditors estimated questioned costs as a result of some of the findings at just over $25,000. Although the auditors initially identify the questioned costs, the applicable federal agency ultimately decides if the state will have to reimburse the federal government and how much. The questioned costs are listed in the separate document, Summary of Problem Findings from the FY 2015 OMB Circular A-133 Audit. SUMMARY OF RECOMMENDATIONS: The auditors made recommendations to address the problem findings identified. AGENCY RESPONSE: Each agency responded to its respective findings with a corrective action plan. Legislative Division of Post Audit 23 ANNUAL REPORT TO THE 2017 LEGISLATURE

30 Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Julie Pennington (785) Julie.Pennington@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 24 Legislative Division of Post Audit

31 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights July 2016 R Summary of Legislator Concerns K.S.A requires the Legislative Division of Post Audit to conduct a series of efficiency audits of Kansas school districts. The audits are to include one small, one medium, and one large school district each year. The Attica school district was selected for an audit in September 2014 in the smallsized school district category. Background Information The Attica school district is located in south central Kansas in Harper County. The district served about 155 FTE students and had 30 FTE staff in the school year. In the school year, the districts expenditures were almost $2.8 million. Five-year trend data show the district s student enrollment and staffing have increased by 6%. However, the district s expenditures per FTE student have declined by about 3% over the past four years. K-12 Education: Efficiency Audit of the Attica School Districts QUESTION 1: Could the Attica school district achieve significant cost savings by improving resource management, and what effect would those actions have? Savings Options That Would Have Little to No Impact on Students or the Community and Should be Implemented The district could save up to $20,000 annually by reducing information technology support to peer levels. In the school year, Attica spent about twice as much on IT support for students and staff than its peer districts. District officials were concerned about potentially not having any in-house staff to quickly address problems. The district could save $13,000 annually by reducing food service staff to peer levels. Attica s food service operations are overstaffed by almost 1.0 FTE when compared to its peers. District officials expressed concern that the district only appeared inefficient because of its small size. The district could save between $6,000 and $10,000 annually in food service costs by changing several purchasing practices. The district could potentially save approximately $5,000 to $9,000 by soliciting bids or competitively shopping for the best food supply prices. The district could save, on average, about $900 a year by purchasing a dishwasher instead of renting one. Although it may not save the district money, the district should make the food service director aware of the district s food service budget. The district may be able to save up to $12,000 annually by seeking bids or competitively shopping for building insurance. The district s building insurance costs were about $19,000 more than its peer average, in part because it has filed several claims and because it does not solicit bids or competitively shop for insurance services. The district could generate up to $4,300 in revenue annually by switching to a cashback procurement card and maximizing its usage. Legislative Division of Post Audit 25 ANNUAL REPORT TO THE 2017 LEGISLATURE

32 Savings Options That Could Have a Moderate Impact on Students or the Community, but Should be Considered The district could save $40,000 annually by incorporating sixth graders into the junior high school and eliminating one teacher position. Because of the small number of students at the junior and senior high school (68) many teachers have multiple planning periods. Incorporating the sixth graders into the junior high would better utilize junior and senior high teachers time and save the district $40,000. It is not uncommon for sixth graders to be part of a junior high school, and the impact on the students would be moderate. Although district officials would prefer to keep the teaching position and offer more electives, we identified several elective courses that currently do not have any enrolled students. Other Findings The district has several weak accounting practices that increase the risk for fraud and abuse. Weak district accounting practices have resulted in several significant recordkeeping errors and increase the district s risk for fraud and abuse. These errors also reduce the district s transparency and accountability. A lack of written policies, inadequate training, and recent turnover has contributed to the district s weak accounting practices. The district lacks practices and policies to adequately protect its assets. The district has one individual administer all aspects of cash handling, which increases its risk of fraud and abuse. The district does not have a functional inventory that allows it to appropriately monitor its physical assets. The district also lacks written procurement card policies, which could result in cards being misused. Finally, the district s purchasing practices do not ensure prudent use of its financial resources. The district appears to have accepted the donation of a new gymnasium without considering the long-term cost obligations. SUMMARY OF RECOMMENDATIONS We made several recommendations to the Attica school districts to either implement, or consider implementing, the cost savings options we identified. AGENCY RESPONSE District officials generally concurred with the report s findings, conclusions, and recommendations. HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor For more information on this audit report, please contact Heidi Zimmerman (785) heidi.zimmerman@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 26 Legislative Division of Post Audit

33 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights July 2016 R Summary of Legislator Concerns K.S.A requires the Legislative Division of Post Audit to conduct a series of efficiency audits of Kansas school districts. The audits are to include one small, one medium, and one large school district each year. The Frontenac school district volunteered for an audit the medium-sized school district category. Background Information The Frontenac school district is located in southeast Kansas in Crawford County. The district served about 876 FTE students and employed about 96 FTE staff in the school year. In the school year, the districts expenditures were about $10.1 million. Five-year trend data show the district s student enrollment and staffing have remained relatively constant. However, the district s expenditures per FTE student have increased by 13% over the past four years. K-12 Education: Efficiency Audit of the Frontenac School District QUESTION 1: Could the Frontenac school district achieve significant cost savings by improving resource management, and what effect would those actions have? Savings Options That Would Have Little to No Impact on Students or the Community and Should be Implemented The district could save up to $30,000 annually by limiting routine food service transfers. The district has routinely transferred $30,000 from its general fund to its food service fund each of the last four years without evaluating how much it actually needed to cover its expenses. Limiting the $30,000 annual transfer would free up money for other uses such as classroom supplies, information technology upgrades, or paraprofessional salaries. Given the district s relatively small size and the uncertainties related to food service costs and revenues, the district may need to transfer some funds in future years. The district could generate $5,000 to $14,000 annually in revenue by increasing meal prices to the peer or state average. District officials were concerned about the financial affect an increase in meal prices would have on students families. Savings Options That Could Have a Moderate Impact on Students or the Community, but Should be Considered The district could save up to $180,000 annually by switching to a traditional eightperiod schedule and fillings its core high school classes. The district s use of a block schedule and its practice of not filling core high school classes to capacity means the district has more teachers than necessary. If the district switched to a traditional schedule and filled core high school classes to capacity, it could reduce the number of teachers by two to three FTE in the middle and high school. Converting to a traditional schedule would create some challenges for the district, but many schools use a traditional schedule which includes several benefits. Legislative Division of Post Audit 27 ANNUAL REPORT TO THE 2017 LEGISLATURE

34 Savings Options That Could Have a Significant Impact on Students or the Community, but Should be Considered The district could save $20,000 annually by ending its practice of busing students who live less than 2.5 miles from their school. The district currently chooses to bus 55 students who live less than 2.5 miles from school. If the district no longer bused these 55 students it could eliminate one bus route. District officials expressed concerns about student safety if the district were to stop busing students who live within 2.5 miles of school. Another option is for the district to charge students who want to ride the bus but live less than 2.5 miles from school. Other Findings The district lacks certain practices and policies to adequately protect its assets. Although two individuals are involved in cash handling, their duties are not sufficiently segregated to reduce the district s risk of fraud and abuse. The district does not have a functional inventory that allows staff to appropriately monitor the district s physical assets. The Kansas Association of School Boards (KASB) offers a variety of policy development services and could assist the district as it develops its own policies. The district has offered an expensive and unique retirement bonus that cannot be easily eliminated. Until recently, the district offered a unique retirement bonus to staff who worked for the district for at least 15 years. The district has spent almost $586,000 on this retirement bonus since 2004 and will likely spend an additional $490,000 over the next four years. Districts should consider the long-term liabilities they may create when negotiating similar salary benefits. SUMMARY OF RECOMMENDATIONS We made several recommendations to the Frontenac school districts to either implement, or consider implementing, the cost savings options we identified. AGENCY RESPONSE District officials generally concurred with the report s findings, conclusions, and recommendations. Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) For more information on this audit report, please contact Heidi Zimmerman (785) heidi.zimmerman@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 28 Legislative Division of Post Audit

35 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights July 2016 R Summary of Legislator Concerns K.S.A requires the Legislative Division of Post Audit to conduct a series of efficiency audits of Kansas school districts. The audits are to include one small, one medium, and one large school district each year. The Maize school district was randomly selected for an audit in September 2015 in the largesized school district category Background Information The Maize school district is located in south central Kansas in Sedgwick County. The district served about 6,485 FTE students and had about 667 FTE staff in the school year. In the school year, the districts expenditures were about $71.1 million. Five-year trend data show the district s student enrollment and staffing have increased. Additionally, the district s expenditures per FTE student have increased by 1.6% over the past four years. K-12 Education: Efficiency Audit of the Maize School District QUESTION 1: Could the Maize school district achieve significant cost savings by improving resource management, and what effect would those actions have? Savings Options That Would Have Little to No Impact on Students or the Community and Should be Implemented The district could save up to $370,000 annually by reducing 9.0 FTE information technology staff. Maize has twice as many IT staff as peer districts. Factors such as the presence of a virtual school and the number or type of computer equipment maintained, did not explain why Maize has more staff than its peers. By centralizing its IT staff, Maize could reduce staff and save money. District officials thought the district could reduce some IT staff, but not to the same level as its peers. The district could save $100,000 by eliminating its leave buy-back policy. The Maize school district offers a leave buy-back benefit that pays staff for accumulated leave days over a certain threshold. This is not a standard policy, and if the district eliminated this leave policy it would save about $100,000 annually. District officials told us the policy helps retain staff but we had concerns about its effectiveness. The district could save $65,000 in general fund money by using food service funds to pay for lunch room supervisors. The district spends about $65,000 annually in general fund money to pay teachers to supervise the middle school and high school lunch rooms and to pay for their lunches. The district could pay for these costs out of its food service fund, which would save $65,000 in general fund money that could be used on additional items or programs for students. District officials had concerns about the additional training necessary to implement this option. However, we identified several reasons why we think the district should still consider the cost savings options despite its concerns. Legislative Division of Post Audit 29 ANNUAL REPORT TO THE 2017 LEGISLATURE

36 The district could save $11,000 by reducing its stipend or up to $21,000 per year by providing district-owned cell phones in place of its stipend. The district spends about $30,000 per year to pay cell phone stipends to certain teachers and administrators. The district s cell phone stipend seems excessive and is paid year round. District officials had concerns about offering staff a district-owned cell phone but did not have concerns about reducing its stipend. Savings Options That Could Have a Moderate Impact on Students or the Community, but Should be Considered The district could save up to $335,000 annually by reducing two or three assistant or associate superintendent positions. The district has about twice as many assistant and associate superintendents as similar peer districts on a per student basis. District officials disagreed that they could reduce the number of assistant and associate superintendents. Although some of the district s concerns were legitimate, a staffing reduction still appears to be feasible and worth considering. The district could save up to $300,000 annually by eliminating four elementary school assistant principal positions. Maize assigns an assistant principal to each of its elementary schools although none of its peer districts do. If Maize eliminated assistant principals at all but its largest elementary school, it would reduce four positions. District officials were concerned that eliminating assistant principals may make it difficult to operate certain programs and may reduce supervision. Savings Options That Could Have a Significant Impact on Students or the Community, but Should be Considered The district could save up to $477,000 annually by switching to a traditional schedule at the district s high schools. The district s use of a block schedule at two of its high schools results in the district having more teachers than necessary. If the district switched to a traditional schedule it could reduce the number of teachers by 7.0 or 8.0 FTE. Converting to a traditional schedule would create some challenges for the district, but many schools use a traditional schedule which includes several benefits. The superintendent was concerned this change would reduce student access to certain classes. The district could save $190,000 in transportation expenditures by establishing school boundaries. The Maize school district is unique in that it has not established school boundaries, which means students can generally attend the school of their choice. ANNUAL REPORT TO THE 2017 LEGISLATURE 30 Legislative Division of Post Audit

37 If the district establishing school boundaries, it could reduce an estimated seven bus routes and save about $190,0000 annually in driver salaries, fuel, and bus maintenance. The district is in the process of evaluating and implementing school boundaries. Other Findings The district has inadequate IT inventory and purchasing controls, which appear to have contributed to a 2014 fraud. In 2014, the district s review of a staff member s activities found evidence of fraud. We conducted a limited evaluation of the district s controls to identify some of the weaknesses that contributed to the fraud. We identified three control weaknesses that likely contributed to the previous fraud that have not been corrected. Those control weaknesses included problems with the district s inventory and a lack of sufficient oversight and evaluation of its major IT purchases. SUMMARY OF RECOMMENDATIONS We made several recommendations to the Maize school districts to either implement, or consider implementing, the cost savings options we identified. AGENCY RESPONSE Maize school district officials raised concerns about audit methodology for some findings. We considered their concerns but made no changes to our findings, conclusions or recommendations based on this information. Additionally, the district indicated it will not consider switching from a block schedule to a traditional eight-period schedule. Legislative Division of Post Audit 31 ANNUAL REPORT TO THE 2017 LEGISLATURE

38 Legislative Division of Post Audit HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor For more information on this audit report, please contact Heidi Zimmerman (785) heidi.zimmerman@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 32 Legislative Division of Post Audit

39 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights July 2016 R Summary of Legislator Concerns Legislators have expressed interest in knowing how Kansas compares to other states, and whether Kansas law enforcement agencies are following all requirements related to seized and forfeited property. Background Information The Kansas Standard Asset Seizure and Forfeiture Act allows law enforcement agencies to seize money or property used in certain crimes. Under the act, law enforcement agencies can seize an individual s property without charging or convicting the person of a crime. Instead, law enforcement agencies must have probable cause that the property was used in an offense. By law, all seized property that is forfeited becomes the property of the law enforcement agency. Under the Forfeiture Act, a judge determines that ownership of seized property may be transferred to a law enforcement agency through a process known as civil asset forfeiture. Seized and Forfeited Property: Evaluating Compliance with State Law and How Proceeds Are Tracked, Used, and Reported QUESTION 1: How Does Kansas s Property Seizure and Forfeiture Process Compare to Other States? We compared the seizure and forfeiture process in Kansas to Iowa, Nebraska, Missouri, New Mexico, and the federal government. Kansas is similar to the other states and the federal government in terms of what property can be seized by law enforcement agencies and under what conditions. All five states and the federal government allow law enforcement agencies to seize property based on probable cause. Like all four comparison states and the federal government, Kansas allows seizure of real and personal property including cash, guns, vehicles, land, and contraband. Requirements for forfeiting property, spending forfeiture proceeds, and reporting on forfeiture activity varied significantly. State and federal laws vary on whether property can be forfeited without a criminal conviction. o Kansas, Iowa, and the federal government do not require an individual be convicted of a crime before their property can be forfeited in a civil forfeiture case. o By contrast, Missouri, Nebraska, and New Mexico require that an individual be convicted of a crime before their property can be forfeited in a civil forfeiture case. States and the federal government vary in terms of how forfeiture proceeds can be used and who can spend them. o Kansas and Iowa allow law enforcement agencies to keep most forfeiture proceeds and to decide how to spend them. o In other states, most forfeiture proceeds are not kept by law enforcement and are used for other purposes. o The federal government allows federal law enforcement agencies to use forfeiture proceeds, but does not allow them to decide how to spend them. Reporting requirements vary across all five states and the federal government. o All states and the federal government require agencies to report on forfeitures, though the reporting method varies. o Missouri, Nebraska, New Mexico, and the federal government require centralized reporting on forfeited property. o Additionally, Iowa, Missouri, and the federal government have laws that penalize agencies for noncompliance with forfeiture reporting requirements. Legislative Division of Post Audit 33 ANNUAL REPORT TO THE 2017 LEGISLATURE

40 In 2016, the Legislature considered two bills that would have changed forfeiture requirements in Kansas, but neither bill passed. o House Bill 2638 would have required criminal conviction for forfeiture and changed where state and local law enforcement agencies deposit forfeiture proceeds. o House Bill 2699 also would have changed where local law enforcement agencies deposit forfeiture proceeds. QUESTION 2: Are Law Enforcement Agencies Following State Legal Requirements and Best Practices for Property Seizures and Forfeitures? We evaluated the following state and local law enforcement agencies processes for property seizures and forfeitures under the state s forfeiture act: Kansas Bureau of Investigation, Kansas Highway Patrol, Coffeyville Police Department, Iola Police Department, Salina Police Department, and the Sedgwick County Sheriff s Office. We looked at their processes for safeguarding, liquidating, tracking, using, and reporting seized and forfeited property. Overall, the six law enforcement agencies we reviewed adequately safeguarded property, though there were a few exceptions. All six agencies generally complied with major state laws and best practices for safeguarding property. However, Coffeyville and Iola did not issue notice of seizure as required by state law, did not periodically review their seized property inventory, and did not adequately secure their vehicle impound lots. Additionally, Salina s written inventory of seized items was not complete because it did not include vehicles. Although the six agencies we reviewed generally complied with state laws for liquidating forfeited property, several of the agencies were missing important controls surrounding this process. Salina did not deposit all forfeiture funds directly into its forfeiture fund as required by state law. At the time of our audit, the Kansas Highway Patrol had about $218,000 in its forfeiture fund that had not yet been ordered forfeited by a court. The four local law enforcement agencies we reviewed did not have a policy prohibiting their employees from purchasing forfeited property. Overall, the six agencies we examined lacked important controls for tracking forfeiture proceeds. All six agencies described an adequate segregation of duties in which different people collected, deposited, and reconciled forfeiture proceeds. However, none of the agencies conducted a periodic check to ensure all expected forfeiture proceeds were deposited or that all deposits were related to a forfeiture case. Most law enforcement agencies also comingled forfeiture funds with drug-tax proceeds. Agencies appeared to have good processes for appropriately using forfeiture proceeds. The six law enforcement agencies we reviewed spent forfeiture proceeds on a variety of items that appeared allowable under state law. Most agencies obtained written approval of expenditures by the agency head, but we were unable to evaluate two agencies (Kansas Bureau of Investigation and Salina) that sometimes relied on verbal approvals. Law enforcement agencies can keep, transfer, destroy, or sell property after a judge has ordered forfeiture. Law enforcement agencies can use forfeiture proceeds for nearly any law enforcement purpose except normal operating expenses. Because the Forfeiture Act does not define the term normal operating expense, it gives agencies wide discretion to determine appropriate uses of those funds. We compared the seizure and forfeiture process in Kansas to four states (Iowa, Nebraska, Missouri, and New Mexico) and the federal government. We selected Iowa, Nebraska, and Missouri because of their proximity to Kansas. We selected New Mexico because it has received national attention as having strong seizure and forfeiture laws. We also looked at the seizure and forfeiture processes of two state and four local law enforcement agencies in Kansas. The amount of forfeiture proceeds received by the law enforcement agencies varied. Kansas Highway Patrol had the largest volume with about $842,000 in deposits in Iola Police Department had the smallest volume with only $4,100 in deposits in Law enforcement agencies may also receive forfeited property under other federal or state laws outside the scope of this audit. For example, a Kansas law enforcement agency can receive forfeiture proceeds under federal law if there is a joint investigation with a federal agency, or if a federal agency adopts a state or local forfeiture case. Additionally, law enforcement agencies can receive forfeiture proceeds under the state s drug-tax laws (K.S.A et seq.). ANNUAL REPORT TO THE 2017 LEGISLATURE 34 Legislative Division of Post Audit

41 Our 2000 audit found law enforcement complied with most state laws, but did not appropriately handle or report forfeiture proceeds. The 2000 audit found all six agencies disposed of forfeited property and established a fund for forfeiture proceeds as required by state law. However, the audit also found that agencies had issues with depositing and accounting for forfeiture proceeds. Our 2000 audit also found that most local law enforcement agencies did not submit an annual report to their oversight authority as required by state law. State law enforcement agencies complied with reporting requirements in state law, but local agencies did not. None of the four local law enforcement agencies we reviewed prepared an annual report because officials told us either they were not aware of the requirements or thought other information they compiled was sufficient. Other Findings Agencies have broad discretion over how forfeiture proceeds can be used, which creates a risk agencies could begin to depend on them for operating funds. State law allows law enforcement agencies to spend forfeiture proceeds on special, additional law enforcement purposes, but not on normal operating expenses. Both the Kansas Highway Patrol and Salina spent forfeiture funds on what appeared to be normal operating expenses in However, in both cases officials told us the expenditures were for special and additional law enforcement purposes. o KHP spent approximately $413,000 on employee salaries from December 1, 2012 through June 30, They told us they used forfeiture proceeds to pay the salaries (or portion of the salaries) only for individuals involved in the forfeiture process. o Salina officials told us they used forfeiture proceeds to pay for the expenses (cell phone bills) of their special drug task force. Because the drug task force is a special unit within the police department, officials determined these costs to be appropriate. Allowing law enforcement agencies to use forfeiture proceeds for routine, reoccurring operating expenses significantly increases the likelihood agencies will become dependent on such proceeds in the future. Coffeyville s arrangement with the Montgomery County Attorney to handle forfeiture cases creates a conflict of interest. Law enforcement agencies may hire a private attorney to handle their forfeiture cases if a county or district attorney declines. The Montgomery County attorney who also operates a private law firm declined taking Coffeyville s forfeitures in his role as the county attorney, but instead agreed to take them in his alternative role as a private attorney. In his role as a private attorney, the Montgomery County Attorney collected an estimated $21,000 in legal fees from 2013 to 2015 that otherwise would have gone to the county attorney s office. This arrangement represents a conflict of interest we think would likely violate state ethics laws were the Montgomery County Attorney a state employee. Salina lacked important controls for money used for controlled drug buys. Officers were sometimes allowed to check out large amounts of cash, which they kept in potentially unsecure locations. Officers did not routinely return unused money. Although officials told us they conducted periodic reconciliations of the money officers withdrew, our review of that process revealed some issues. Salina s weak or missing controls are particularly problematic because of the inherent risks associated with drug-buy money. None of the law enforcement agencies we reviewed had complete and written policies and procedures for seized and forfeited property. Legislative Division of Post Audit 35 ANNUAL REPORT TO THE 2017 LEGISLATURE

42 SUMMARY OF RECOMMENDATIONS Recommendations for Executive Action: We made numerous recommendations to each of the six agencies in our sample regarding the specific deficiencies we identified. Agency specific recommendations are included in Appendix B of the report. To avoid any potential conflicts of interest, the Montgomery County Attorney should either handle Coffeyville s forfeiture cases as the county attorney or make alternative arrangements (e.g. have the county counselor or a different private attorney handle Coffeyville s forfeiture cases). Recommendations for Legislative Consideration: To address whether agencies should have the discretion to use forfeiture proceeds for ongoing and reoccurring operating expenses, the House and Senate Judiciary Committees should consider legislation to clarify K.S.A (d)(3). To address consistent problems with local law enforcement agencies not complying with the state legal requirement for an annual report, the House and Senate Judiciary Committees should consider introducing legislation to either require and enforce a more centralized reporting structure or consider eliminating the reporting requirement altogether. AGENCY RESPONSE Kansas Bureau of Investigation, Kansas Highway Patrol, Coffeyville Police Department, Iola Police Department, and the Sedgwick County Sheriff s Office generally concurred with the report s findings and conclusions. Salina Police Department officials and the Montgomery County Attorney both disagreed with some of the report s findings, but we did not modify our findings or conclusions as a result of these concerns. Salina officials had concerns with our finding on drug-buy funds because the report does not describe expenditure reports they use to document drug buys. The Montgomery County Attorney had concerns with our finding on the conflict of interest he has created because the report does not describe a state law that addresses the role of the county counselor. The County Attorney s response did not make it clear whether he intends to implement the recommendation associated with this finding and our attempts to clarify this were unsuccessful. However, given his disagreement with the finding, it seems unlikely he will implement the recommendation. HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor For more information on this audit report, please contact Kristen Rottinghaus (785) Kristen.Rottinghaus@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 36 Legislative Division of Post Audit

43 Legislative Post Audit Performance Audit Report Highlights Highlights Foster Care and Adoption in Kansas: Reviewing Various Issues Related to the State s Foster Care and Adoption System (Part 1) Report Highlights July 2016 R Summary of Legislator Concerns Legislators were interested in a comprehensive review of the foster care system. Part 1 of the audit focuses on the safety of children during the removal and placement process, whether foster homes had sufficient living space and financial resources, and whether the process is designed with a family preference. Background Information In fiscal year 2015, the Kansas Department for Children and Families (DCF) spent about $205 million to serve about 6,300 children in foster care. There are many agencies and individuals involved in the foster care system including the courts, case management contractors, and others. Foster care is complex and involves many steps. If a child is determined to be in need of care, case management contractors and child placing agencies work together to locate a home for the child. Case management contractors are responsible for providing services and monitoring the progress of children in foster care. C d d i S QUESTION 1: Is the Department for Children and Families (DCF) Following Adequate Policies and Procedures to Ensure the Safety of Children During the Removal and Placement Process? DCF has not yet implemented several recommendations for its child protective services function and has not responded to all report center calls in a timely manner. As of May 2016, DCF had only implemented one of nine safety-related recommendations from a 2013 assessment of its child protective services function. DCF has not yet implemented two recommendations that include developing clear guidance for child safety interventions and implementing new assessment tools, as well as six other recommendations. Our review found that a child s safety was not assessed timely in 5 of 40 investigations. DCF does not ensure that background checks of individuals in foster homes happen as often or as thoroughly as they should. For licensed foster homes, our review showed that background checks have not been completed as part of the annual renewal process. For relative placements, our review showed 12 out of 38 individuals did not have name-based or fingerprint-based checks completed, and other checks were not thorough. DCF does not always take steps to ensure that monthly in-person visits happen for children in foster care, adoptive homes, or for children reintegrated with their family. Monthly in-person visits are an important part of ensuring a child s safety whether they are in foster care, adopted, or reintegrated but remain in DCF custody. Our case file review showed monthly in-person visits of children in foster care do not always happen. For most cases we reviewed, because of poor documentation we also could not tell whether case management contractors and child placing agencies conducted some monthly visits. Poor documentation makes it difficult for DCF and case management contractors to monitor and ensure the safety of the children in foster care. Our review showed that monthly in-person aftercare visits of children in adoptive placements did not happen, likely because DCF s contracts and policies are not consistent. Legislative Division of Post Audit 37 ANNUAL REPORT TO THE 2017 LEGISLATURE

44 Because of poor documentation, we could not tell whether some monthly inperson aftercare visits happened once a child was reintegrated with their family. Our survey of case-management staff and guardians ad litem also indicate that monthly in-person visits do not always happen. Case-management staff and guardians ad litem responding to our survey said that caseloads keep case-management staff from completing monthly visits with children in foster care. About one-quarter of the guardians ad litem responding to our survey expressed concerns about aftercare services for adoptive children. Results from our surveys of case-management staff and guardians ad litem also showed some concerns about current practices and caseloads once a child is reintegrated with their family. Other findings Survey respondents expressed concerns with staff turnover, morale, and training. A significant portion of case-management staff and guardians ad litem indicated turnover has negatively affected case-management staff s ability to do their jobs. About half of case-management staff responses show morale among case workers is low. Some case-management staff cited training as a problem. Key Methodological Information Our test work was based in part on case file reviews of almost 200 children in foster care. We also surveyed all case management staff across the state, as well as all guardians ad litem (appointed by the court to represent the child s best interests). Our survey response rate is not sufficient to conclude that survey respondents statistically represent the population. However, they do give us insight into survey participant s opinions and experiences and are consistent with the evidence we obtained through the case file reviews for questions one and two. QUESTION 2: Does DCF s Child Placement Process Help Ensure that Children are Placed in Foster Care or Adoptive Homes with Sufficient Living Space and Sufficient Financial Resources? Findings related to foster care DCF allows nearly all requests for exceptions, which results in inadequate sleeping space for some children in foster care. Current licensing laws establish limits on the number of children in foster homes and require a certain amount of sleeping space for each foster child. Our review showed that during a 15-month period, DCF granted 98% of the approximately 1,100 requests by child placing agencies to waive the capacity or sleeping space requirements. While not widespread, allowing such exceptions has resulted in at least some children in foster care being placed in homes with inadequate sleeping space, and survey results corroborated this. DCF does not have an adequate process to ensure that licensed foster homes have sufficient financial resources. Current laws and DCF policies are vague about what it means for licensed foster care homes to have sufficient financial resources. DCF does not verify income information provided by foster families to determine if they have sufficient financial resources. ANNUAL REPORT TO THE 2017 LEGISLATURE 38 Legislative Division of Post Audit

45 Though not widespread, some case-management staff and guardians ad litem had concerns that at least sometimes children were placed in foster care homes without adequate financial resources. Findings related to adoptive placements Despite the lack of DCF requirements related to capacity, living space or financial resources for adoptive placements, few stakeholders had concerns. DCF does not have specific requirements related to number of children, sleeping space, or financial resource requirements for adoptive homes. Case-management staff told us most foster children are placed in adoptive homes with adequate sleeping space and financial resources though guardians ad litem were a little less positive. Other findings Child placing agencies both sponsor foster homes and regulate them, which may create a conflict of interest. Kansas two case management contractors rely on child placing agencies to sponsor foster homes and visit the homes monthly. DCF also relies on child placing agencies to help regulate licensed foster homes. Child placing agencies dual role may create a conflict of interest between their financial welfare and children s safety. QUESTION 3: Are DCF s Criteria for Recommendations Regarding the Removal and Placement of Children Designed with a Family Preference? Several aspects of the foster care and adoption system are designed to keep family members together. Federal law requires that states foster care and adoption programs have a formal preference to keep families together. DCF has operationalized this family preference throughout the foster care and adoption system. For example, DCF policies stress that efforts should be made to find a relative for placement, and that siblings should be placed together whenever possible. The majority of stakeholders indicated there was appropriate emphasis placed on keeping families together, but some indicated there was too much emphasis. The majority of stakeholders felt there was an appropriate emphasis on placing children with relatives. Even though most respondents stated appropriate emphasis is placed on keeping families together, some respondents thought there was too much emphasis. Legislative Division of Post Audit 39 ANNUAL REPORT TO THE 2017 LEGISLATURE

46 SUMMARY OF RECOMMENDATIONS Question 1 Recommendations: We made a series of recommendations aimed at addressing the problems regarding the Kansas Protection Report Center, background checks for individuals in foster homes, and monthly face-to-face visits for children in foster care, for children in adoptive placements, and for children reintegrated with family. Question 2 Recommendations: We made a series of recommendations aimed at addressing the problems regarding DCF approving nearly all exceptions to exceed capacity in foster homes or to allow insufficient sleeping space, and financial resource requirements. AGENCY RESPONSE DCF officials raised concerns about audit methodology for some findings, and the wording of one finding. We considered their concerns and altered the wording slightly, but this did not change our overall findings, conclusions or recommendations. Officials indicated they would implement the recommendations. Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Laurel Murdie (785) Laurel.Murdie@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 40 Legislative Division of Post Audit

47 Legislative Post Audit Performance Audit Report Highlights Highlights Foster Care and Adoption in Kansas: Reviewing Various Issues Related to the State s Foster Care and Adoption System, Part 2 Report Highlights September 2016 R Summary of Legislator Concerns Legislators were interested in a comprehensive review of the foster care system. Part 1 of the audit focused on safety concerns and was released in July Part 2 of the audit focuses on compliance with applicable state and federal laws governing the foster care system. Part 3 will examine foster care costs, resources and outcomes and will be released in Background Information In fiscal year 2015, the Kansas Department for Children and Families (DCF) spent about $205 million to serve about 6,300 children in foster care. Foster care is complex and involves many agencies and individuals, including the courts, case management contractors, and others. If a child is determined to be in need of care, case management contractors and child placing agencies work together to locate a home for the child. Case management contractors are responsible for providing services and monitoring the progress of children in foster care. QUESTION: Does DCF Ensure That All Applicable State and Federal Laws Governing the Foster Care System in Kansas are Followed? DCF has to meet many state and federal requirements for the foster care program. State requirements apply to such areas as licensing requirements, contractor expectations, and aspects of the foster home. Federal requirements include similar specific requirements as well as requirements for the overall system. DCF had not followed some of the safety and living condition requirements we reviewed in Part 1 of this audit (issued in July 2016). Initial background checks were completed for prospective foster parents, but not always for others in the home. Not all monthly case-management visits with the foster child were completed. DCF did not ensure that licensed foster homes had sufficient financial resources. According to the 2014 and 2015 statewide single audits, DCF materially complied with most, but not all federal requirements. The contracted auditors reviewed six general areas related to foster care and identified two areas with issues in both the 2014 and 2015 statewide single audits. These involved DCF controls related to monitoring and paying the contractors. DCF self-reported data shows Kansas met or exceeded about half of the federal outcome requirements for fiscal year 2016, but did not meet the others. As a condition of receiving federal funding, DCF must report data about children in its care known as outcome data. DCF has consistently met the requirements related to placing children with relatives and siblings, but has not consistently met those related to timeliness or stability. DCF must implement a program improvement plan to address issues identified by a 2015 federal review, called the Child and Family Service Review (CFSR). The review found that DCF was in compliance with about one-third of the categories assessed, but not in substantial compliance with the rest. DCF was required to submit a program improvement plan to address each problem area. Legislative Division of Post Audit 41 ANNUAL REPORT TO THE 2017 LEGISLATURE

48 SUMMARY OF RECOMMENDATIONS This report contains no recommendations. AGENCY RESPONSE The agency generally concurred with the audit findings. Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Chris Clarke (785) Chris.Clarke@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 42 Legislative Division of Post Audit

49 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights September 2016 R Summary of Legislator Concerns Legislators expressed concerns regarding the delay in eligibility determinations. Background Information Kansas administers Medicaid through the KanCare program. KanCare has about 400,000 individuals enrolled in the program. Currently Kansas contracts with three private managed-care organizations to manage Medicaid recipients health care. In 2015, Kansas launched a new computerized system used for processing Medicaid applications. The Kansas Eligibility Enforcement System (KEES) allows individuals to complete a single application for both medical and social service benefit programs. All KanCare applications are processed at a central processing center, which is run by a private contractor - Maximus. QUESTION 1: What Caused the Current Backlog of Medicaid Applications in the KEES System and What Are State Officials Doing to Address the Backlog? KanCare: Reviewing the Timeliness of Medicaid Eligibility Determinations KDHE officials told us implementation of KEES and an influx of applications contributed to a backlog of 14,000 Medicaid applications in June A Medicaid application (without a disability determination) is considered backlogged if it has not been processed in 45 days upon receipt. In June 2016, the number of backlogged applications was approximately 14,000. (In June 2016, KDHE officials acknowledged to the Federal Centers for Medicare and Medicaid Services (CMS) they significantly underreported the number of backlogged applications by 12,000.) Because of the complexity and sophistication of the database queries that generate the Medicaid backlog reports, we were unable to fully test the reports for accuracy. As a result, we cannot be assured the reported numbers by KEES are accurate. KDHE officials stated the three main factors causing the backlog were: KEES went live in July 2015 but had several technical glitches including problems with scanning documents and data entry. KDHE significantly underestimated the number of Kansans who would apply for Medicaid as a result of the Affordable Care Act. KDHE became responsible for all Medicaid eligibility determinations in January Prior to this date, some applications were processed by the Department of Children and Families (DCF). KDHE has increased staffing to address the backlog and is modifying KEES. KDHE and its contractor Maximus have both increased staffing to process the applications. KDHE is borrowing about 50 DCF staff to help process certain applications. KDHE is working to improve KEES performance including imaging and data entry. As of August 2016, these actions have cost about $2.3 million. According to KEES reports, KDHE has reduced the backlog by thousands in recent months and hopes to have it resolved by October Since June 2016, the number of backlogged applications has decreased from about 14,000 to 5,100. KDHE only has limited control in processing disability applications. The federal Social Security Administration is responsible for making the disability determination. KDHE officials hope to have the backlog resolved by October Legislative Division of Post Audit 43 ANNUAL REPORT TO THE 2017 LEGISLATURE

50 In its efforts to address the backlog, KDHE has stopped reviewing renewal applications. Each Medicaid beneficiary must be reviewed on an annual basis to ensure the individual still qualifies for Medicaid. As of mid-august 2016, there are nearly 35,000 reviews waiting to be processed. Kansas is not in compliance with federal law related to eligibility determinations. The federal Centers for Medicare and Medicaid Services (CMS) officials have been tracking the backlog of Kansas Medicaid applications since February Even though Kansas has not been in compliance, CMS officials told us they plan no further actions once the backlog is resolved. SUMMARY OF RECOMMENDATIONS None AGENCY RESPONSE Agency officials concurred with the report s findings. HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor For more information on this audit report, please contact Brad Hoff (785) ANNUAL REPORT TO THE 2017 LEGISLATURE 44 Legislative Division of Post Audit

51 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights December 2016 R Summary of Legislator Concerns Legislators were concerned about the requirements associated with accepting federal funds and expressed interest in knowing how the benefits compare to the costs. Background Information How we chose the program sample: We chose six federal programs that represent a majority (76%) of the total federal K-12 education funding the state receives and are typically received by most school districts. Although it is possible that the costs related to federal programs outside our sample differ significantly from the six we selected, we think this is unlikely because our selection included some of the largest and most common federal programs and because none of the more than 1,500 stakeholders we interviewed or surveyed identified other programs with significant costs or benefits. K-12 Federal Education Funds: Evaluating the Costs and Benefits Associated with K-12 Federal Education Funding QUESTION 1: What are the costs and obligations associated with federal K-12 education funds, and how do they compare to the benefits? Benefits Provided through Federal K-12 Education Funds Kansas received about $507 million in K-12 education funding from at least 60 federal programs in school year The state s 286 school districts received about $485 million, or 96% of the total federal K-12 education funding the state received. Federal funds accounted for just 8% of the total funding school districts received in school year KSDE received the remaining $22 million of federal K-12 funds to help administer statewide assessments and provide oversight and technical support to school districts. The main purpose of the six federal K-12 programs we reviewed are to help disadvantaged students and to provide funds for additional district services. Federal requirements for those six programs typically specify whether districts are to use the funds to provide additional services or to replace lost revenue. The six programs we reviewed give districts significant discretion in how they spend federal K-12 funds, and districts have used most of the funds for staff compensation. Costs and Obligations related to Federal K-12 Education Funds Accepting federal funds can limit budget flexibility because of maintenance-of-effort requirements. Accepting federal funds for the special education program (IDEA) imposes a $442 million maintenance-of-effort requirement on the state. Accepting federal funds for programs related to special education, students in poverty, English language learners, and teacher development also impose maintenance-of-effort obligations on school districts. In most years neither the state nor school districts has much difficulty meeting the maintenance-of-effort requirements, but these requirements can limit state and school district budget options, especially when budgets are tight. By accepting federal funds, the state agrees to adopt the federal government s K-12 education initiatives. Federal funds represent a relatively small, yet significant source of K-12 education funding for the state. The federal government has tied federal funding to national education initiatives. Legislative Division of Post Audit 45 ANNUAL REPORT TO THE 2017 LEGISLATURE

52 Failure to adopt these federal initiatives places a significant percentage of the state s federal funding at risk. Federal K-12 programs impose some administrative requirements, but the cost of meeting them is minimal and can be paid for with federal funds. In school year , KSDE spent $6.6 million to administer all federal education programs, all of which was paid for with federal funds. District officials consistently reported that the time and cost associated with administering federally funded programs were minimal. Although federal funds can be used to cover administrative costs, most districts chose to absorb these costs instead. The administrative tasks associated with meeting federal requirements for the six programs we evaluated fell almost entirely to school administrators and did not appear to significantly affect teachers. Only the National School Lunch Program imposes operational costs on school districts through its increased nutritional standards. The National School Lunch Programs imposes specific nutritional standards that may increase school districts food supply costs. In 2012, the federal government made those nutritional requirements more stringent, but in return offered an additional $0.06 reimbursement to help cover the increased food costs associated with the nutritional requirements. Officials from the 10 districts we reviewed, told us only a small portion of the cost of meeting the new federal nutritional requirements are covered by the $0.06 reimbursement. How we chose the district sample: We interviewed school district officials to understand the costs associated with federal funding and analyzed expenditure data provided by 10 school districts. These 10 districts represent a reasonable cross section of districts statewide in terms of size, percentage of students who receive free lunch, and percentage who receive special education services. Benefit and Cost Comparison of Federal K-12 Education Funds Administrative and operational costs associated with federal funding are small compared to the amount school districts receive (on average, costs represented only about 2% of the nearly $120 million the 10 districts received through the six programs we evaluated). School administrators overwhelmingly reported the costs associated with federal funding were worth the benefits. School district administrators reported the federal funding requirements were not burdensome and it was worth the costs to receive the funding. Districts officials also reported federal funding was significant in terms of district finances and benefits to students and were concerned that fewer resources could lead to reduced student achievement. We could not objectively quantify or compare the budget and policy restrictions that come with accepting federal funds to the benefits. Opting out of federal funding would result in increased state and local cost or reduced services for students. For Impact Aid and programs related to special education and English language learners, opting out of federal funding likely would result in increased state and local costs. For programs related to low-income students, staff training, and the school lunch program, opting out of federal funding would result in either increased state and local costs or reduced service levels. ANNUAL REPORT TO THE 2017 LEGISLATURE 46 Legislative Division of Post Audit

53 Conclusion Although federal funds accounted for less than 8% of the state s total K-12 education funding in , those funds have a disproportionate impact on K-12 education in the state by limiting some budget flexibility and pushing national policy initiatives on the state. Although school district officials overwhelmingly told us the benefits are worth the costs and obligations that affect them, it is ultimately up to the state s policymakers to determine whether those benefits outweigh the limits on budget flexibility and policy obligations that come with federal funds. Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor For more information on this audit report, please contact Heidi Zimmerman (785) heidi.zimmerman@lpa.ks.gov SUMMARY OF RECOMMENDATIONS This audit did not have any recommendations. AGENCY RESPONSE KSDE concurred with our audit findings. Because our report did not include recommendations, a written response from the school districts was optional and none of the districts chose to provide one. However, some districts provided informal feedback and indicated they concurred with our audit findings. HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Legislative Division of Post Audit 47 ANNUAL REPORT TO THE 2017 LEGISLATURE

54 ANNUAL REPORT TO THE 2017 LEGISLATURE 48 Legislative Division of Post Audit

55 k Legislative Post Audit Financial Audit Report Highlights Highlights State of Kansas: Financial Audit of Fiscal Year 2016 Report Highlights December 2016 R Summary of Legal Requirements State law requires an annual 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 results of the audit are presented in two parts. This first part is the report on the state s basic financial statements. The second part, the Independent Auditor s Report on Compliance for the Major Program and on Internal Control over Compliance Required by the Uniform Guidance, will be issued separately. Background Information CliftonLarsonAllen, a CPA firm under contract with the Legislative Division of Post Audit, conducted this audit. The Comprehensive Annual Financial Report (CAFR), including the Independent Auditor s Report and the Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters, may be found on the Department of Administration s website. AUDIT OBJECTIVES: Financial audits done in accordance with government audit standards assess (1) whether the audited organization s financial statements are fairly presented in accordance with applicable accounting principles, (2) whether there are any significant problems with the organization s internal controls, and (3) whether the organization complied with applicable legal requirements. The auditors expressed unmodified opinions on the state s basic financial statements, meaning that, after the restatements and adjusting journal entries were made, the financial statements present the state s financial position fairly and in conformity with generally accepted accounting principles in all material respects. The auditors emphasized two matters with regard to the financial statements: At the end of fiscal year 2016, the state had a deficit in its general fund balance of over $500 million. This is the result of an operating deficit over the past several fiscal years and raises concerns about the state s ability to meet its future financial obligations. Adjustments were made to the beginning net positions and fund balances to correct errors from prior years. The auditors reported two material weaknesses and two significant deficiencies in the state s internal control over financial reporting. As a result, restatements of previous fund balances were needed to correct the financial statements. The two material weaknesses were as follows: In 2015, the governmental activities total net position was overstated by approximately $168 million due to KDOT s net pension liability, deferred outflows of resources and deferred inflows of resources being omitted from the Statement of Net Position. In 2015, the General and Social Services funds balance was understated by approximately $31 million due to some of DCF s accounts receivables not being recorded. The audit disclosed no instances of noncompliance with applicable legal requirements that were material to the state s financial statements. SUMMARY OF RECOMMENDATIONS: The auditors made recommendations aimed at addressing each of the findings. AGENCY RESPONSE: The Department of Administration, Kansas State University, and University of Kansas Medical Center developed corrective action plans to address each of the findings. Legislative Division of Post Audit 49 ANNUAL REPORT TO THE 2017 LEGISLATURE

56 Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Julie Pennington (785) Julie.Pennington@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 50 Legislative Division of Post Audit

57 k Legislative Post Audit Financial Audit Report Highlights Highlights Kansas Public Employees Retirement System: Fiscal Year 2016 Report Highlights December 2016 R Summary of Legal Requirements State law requires an annual financial audit of the Kansas Public Employees Retirement System. This year s audit was conducted by CliftonLarsonAllen, a CPA firm under contract with the Legislative Division of Post Audit. AUDIT OBJECTIVES: Financial audits done in accordance with government audit standards assess (1) whether the audited organization s financial statements are fairly presented in accordance with applicable accounting principles, (2) whether there are any significant problems with the organization s internal controls, and (3) whether the organization complied with applicable legal requirements. The auditors expressed an unmodified opinion on the financial statements, meaning that the financial statements present KPERS financial position fairly in all material respects and in conformity with generally accepted accounting principles. The audit disclosed no significant deficiencies in KPERS internal control over financial reporting. The audit disclosed no instances of noncompliance with applicable legal requirements that were material to KPERS financial statements. Background Information KPERS provides three statewide defined-benefit retirement plans for more than 290,000 active, inactive and retired state and local public employees: Kansas Public Employees Retirement System Kansas Police and Firemen s Retirement System Kansas Retirement System for Judges SUMMARY OF RECOMMENDATIONS: The auditors made no recommendations. In addition to retirement benefits, KPERS provides basic and optional life insurance and disability benefits for active members. The Governmental Accounting Standards Board (GASB) has made significant changes in accounting standards in recent years regarding pension plans like KPERS. Legislative Division of Post Audit 51 ANNUAL REPORT TO THE 2017 LEGISLATURE

58 GASB 67 builds upon the existing framework for financial reports of defined benefit pension plans. The goal is to provide greater transparency, consistency, and comparability in the financial statements for similar types of pensions. GASB 67 became effective for KPERS for fiscal year 2014 and appeared on last year s financial report. The primary objective of GASB 68 is to better allocate responsibility for the net pension liability (an accounting version of the actuarial unfunded liability) among participating employers in a multi-employer pension plan (like KPERS). This does not affect the financial statements for KPERS, but it will require the state to recognize its share of the collective pension amounts (including the net pension liability) on its financial statements rather than less prominently in the notes to those statements. GASB 68 became effective for fiscal year 2015 and the changes are reflected in State of Kansas annual financial statements that were released in December Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Julie Pennington (785) Julie.Pennington@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 52 Legislative Division of Post Audit

59 k Legislative Post Audit Financial Audit Report Highlights Highlights Kansas Lottery: Fiscal Year 2016 Report Highlights December 2016 R AUDIT OBJECTIVES: Financial audits done in accordance with government audit standards assess (1) whether the audited organization s financial statements are fairly presented in accordance with applicable accounting principles, (2) whether there are any significant problems with the organization s internal controls, and (3) whether the organization complied with applicable legal requirements. Summary of Legal Requirements State law requires an annual financial audit of the Kansas Lottery. This year s audit was conducted by RubinBrown, a CPA firm under contract with the Legislative Division of Post Audit. Background Information Kansas Lottery products are sold at approximately 2,000 retail locations. The lottery sells scratch tickets and instant pull tab games. Players may also purchase online game tickets through the Multi-State Lottery Association. The auditors expressed an unmodified opinion on the financial statements, meaning that the financial statements present the Kansas Lottery s financial position fairly in all material respects and in conformity with generally accepted accounting principles. The audit disclosed no deficiencies in the Kansas Lottery s internal control over financial reporting and applicable compliance areas. The audit disclosed no instances of noncompliance with applicable legal requirements that were material to the Kansas Lottery s financial statements. The Expanded Lottery Act authorizes operation of one gaming facility in each of four gaming zones. The first casino opened in Dodge City in December The second casino opened in Kansas City in 2011 and the third in the Wichita area in The fourth casino is slated to open in Cherokee County in SUMMARY OF RECOMMENDATIONS: The auditors made no recommendations. Legislative Division of Post Audit 53 ANNUAL REPORT TO THE 2017 LEGISLATURE

60 Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Julie Pennington (785) Julie.Pennington@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 54 Legislative Division of Post Audit

61 -k Legislative Post Audit Examination Report Highlights Highlights Examining Selected Financial Management Practices of the State Treasurer s Office: Fiscal Year 2016 Report Highlights December 2016 R Summary of Legal Requirements AUDIT OBJECTIVES: The examination addresses several key areas of responsibility for the State Treasurer s Office. The auditors found that the management s assertions were fairly stated in all material respects, meaning that, for the areas examined, the State Treasurer s Office complied with the applicable statute. State law requires a biennial audit of the State Treasurer s Office. This year s examination was conducted by CliftonLarsonAllen, a CPA firm under contract with the Legislative Division of Post Audit. Background Information The Treasurer s Office handles several key financial responsibilities for the state. Those include: depositing receipts collateralizing deposits handling unclaimed property serving as a paying agent for bonds issued by the state or local governments distributing local taxes and state aid administering programs related to environmental remediation loans, agricultural production loans, housing loans, postsecondary education savings, and investments developing scholars SUMMARY OF RECOMMENDATIONS: The auditors made no recommendations. Legislative Division of Post Audit 55 ANNUAL REPORT TO THE 2017 LEGISLATURE

62 Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Julie Pennington (785) Julie.Pennington@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 56 Legislative Division of Post Audit

63 k Legislative Post Audit Examination Report Highlights Highlights Examining Selected Financial Management Practices of the Pooled Money Investment Board: Fiscal Year 2016 Report Highlights AUDIT OBJECTIVES: The examination addresses several key areas of responsibility for the Pooled Money Investment Board December 2016 R Summary of Legal Requirements State law requires a biennial audit of the Pooled Money Investment Board. This year s examination was conducted by CliftonLarsonAllen, a CPA firm under contract with the Legislative Division of Post Audit. Background Information The auditors found that the management s assertions were fairly stated in all material respects, meaning that, for the areas examined, the Pooled Money Investment Board complied with the applicable statute or policy. The portfolio weighted average monthly yield of 0.44% was comparable to the benchmark for the current year of 0.38%. The Pooled Money Investment Board has primary responsibility for investing moneys in the state treasury, including the following: calculating and publishing the investment rate providing periodic performance reports establishing and following investment policies establishing the market rate and awarding state deposits to banks granting expanded investment authority to governing bodies SUMMARY OF RECOMMENDATIONS: The auditors made no recommendations. Legislative Division of Post Audit 57 ANNUAL REPORT TO THE 2017 LEGISLATURE

64 Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Scott Frank Legislative Post Auditor For more information on this audit report, please contact Julie Pennington (785) Julie.Pennington@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 58 Legislative Division of Post Audit

65 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights December 2016 R Summary of Legislator Concerns State law requires an audit of the 911 system to evaluate the status of 911 service implementation, whether the fees collected through the act are adequate, and whether the moneys received by Public Safety Answering Points (PSAPs) are being used appropriately. This audit was conducted by Bauknight Pietras & Stormer, P.A., under contract with the Legislative Division of Post Audit. Background Information In 2011, the Legislature created the 911 Coordinating Council to monitor the delivery of 911 services, develop strategies for future enhancements to the 911 system, and distribute funds to the 117 PSAPs in Kansas. Kansas currently is converting to Next Generation 911 (NG911) which will gradually replace the legacy 911 system over the coming years. NG911 is an Internet Protocol (IP)-based system that allows digital information (e.g., voice, photos, videos, text) to flow seamlessly from the public, through the 911 network, and on to emergency responders. The Kansas 911 Act: Reviewing Implementation of the 2012 Act OBJECTIVE 1: Determine the Status of 911 Service Implementation as of July 1, 2016 The 911 Coordinating Council began offering subscriptions to the centralized NG911 service system hosted by AT&T in early Advantages of a centralized NG911 system include: o 911 calls to one PSAP may be answered remotely by a different PSAP in times of disaster, excessively high call volume, or staffing issues. o Call handling equipment is centralized so individual PSAPs are no longer responsible for maintaining or replacing this equipment. Disadvantages of a centralized NG911 system include: o PSAPs that do not subscribe to the state-hosted system will not be allowed on the network due to security and software compatibility concerns. o Unless all PSAPs join the state-hosted system, there will continue to be a mixture of NG911 technologies across the state. o Larger PSAPs may find the subscription price too high. o Currently, NG911 services such as text-to-911 have not been deployed. Progress on migration to NG911 is as follows: 69 PSAPs have joined or have committed to join the state-hosted system. PSAPs consistently gave positive feedback on the performance, service, and transition process for the state system. 21 PSAPs have joined other centralized NG911 systems or have implemented their own stand-alone NG911 system. 25 PSAPs are undecided, with 10 of these leaning toward the state-hosted system. Two PSAPs did not provide this information. OBJECTIVE 2: Determine Whether Moneys Received by PSAPs in Calendar Year 2015 Pursuant to the Kansas 911 Act Were Used Appropriately The auditors tested 128 expenditures from 26 different PSAPs The PSAPs provided adequate documentation to support 123 of the 128 expenditures. Of the five expenditures that were not adequately supported: Three were not questioned by the 911 Coordinating Council during its review process. The total in question is $1,458. Legislative Division of Post Audit 59 ANNUAL REPORT TO THE 2017 LEGISLATURE

66 Two were questioned by the 911 Coordinating Council, which has worked with the PSAPs to recoup the questioned amounts. These are not considered to be problem findings because they were caught during the normal review process. OBJECTIVE 3: Determine Whether the Amount of Money Collected Pursuant to the Kansas 911 Act Is Adequate The auditors surveyed the 117 PSAPs. 115 PSAPs responded. Not all responding PSAPs provided information for each question asked. Of the PSAPs that responded regarding adequate funding, 42% believe that current funding is adequate and 42% believe that it is not. Counties with less than 75,000 in population averaged $0.62 in funding for every $1.00 of expense while counties with more than 75,000 in population averaged $1.18 in funding for every $1.00 of expense. PSAP funding increased only marginally from 2012 to Costs are expected to rise and PSAPs expressed concerns about adequate funds. PSAPs that have not yet transitioned to NG911 were asked to estimate their costs for doing so. Those estimates ranged from nearly $12,000 to $500,000. SUMMARY OF RECOMMENDATIONS Objective 1 Recommendations: The auditors made several recommendations to address efficiency, operational and technical improvements, and NG911. Objective 2 Recommendations: The auditors did not make recommendations for objective 2. Objective 3 Recommendations: The auditors made recommendations to address funding gaps, to begin a reserve fund for major upgrades and other items, and to collect additional information regarding reserve funds and NG911. State law also established a monthly 911 fee on all phone lines. The 911 Coordinating Council has set the fee at the statutory maximum of $0.60 per post-paid account per month, or 1.20% for prepaid wireless transactions. These fees generated nearly $21 million in Most of the fees are distributed to PSAPs based on a formula, with each county receiving a minimum of $50,000 annually. PSAPs may use the fee for any of the following purposes: implementing 911 services purchasing 911 equipment and upgrades maintenance and license fees for 911 equipment training personnel monthly service provider charges installation, service establishment and nonrecurring start-up charges from the service supplier capital improvements and equipment or other physical enhancements to the 911 system acquisition and installation of road signs designed to aid in the delivery of emergency service AGENCY RESPONSE The 911 Coordinating Council generally agreed with the auditors findings, and addressed each of the recommendations in its response. HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor For more information on this audit report, please contact Julie Pennington (785) julie.pennington@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 60 Legislative Division of Post Audit

67 Legislative Post Audit Performance Audit Report Highlights Highlights Report Highlights December 2016 R State Agency Information Systems: Reviewing Security Controls in Selected State Agencies (CY ) QUESTION: Do Selected State Agencies Have Adequate IT Security Processes to Ensure That Confidential Information is Protected? About two-thirds of the agencies (13 of 20) we reviewed during did not substantively comply with all applicable IT security standards. Audit Concerns Kansas Information Technology Executive Council (ITEC) has developed standards addressing various security areas. However, agencies have a significant amount of autonomy in how they develop, apply, and monitor controls in these areas. K.S.A directs our office to conduct information technology audits as directed by the Legislative Post Audit Committee. Background Information Most state agencies maintain confidential or sensitive information. Because of this, they are consistently targeted by hackers. Insufficient security controls have led to lost or stolen information from agencies in a number of states. Agencies should use a multilayered approach to protect their confidential information. That way, even if one layer is compromised, the system is still protected. Few agencies properly scanned their workstations and servers or patched known vulnerabilities, which increased the number of weaknesses hackers might exploit. Most agencies had too many unpatched vulnerabilities. Agencies often lacked the knowledge, resources, or management support to adequately scan and patch computers. Without a systematic approach to identify and patch vulnerabilities, agencies leave their systems open to attack from hackers. Many agencies used software that was no longer supported by the vendor with security updates. Agencies also had vulnerable websites. Both of these risks can be difficult to mitigate. More than half of the agencies continued to use at least some computers with unsupported operating systems or software applications. At least four agencies had websites with known vulnerabilities, leading to high or critical security risks. Unsupported operating systems and software as well as unsecured websites can allow attacks such as compromised websites or data breaches. Half of the agencies had poor access or environmental controls for their data centers, which increased their risk of data loss. Agencies typically use data centers to house critical information system hardware. Ten agencies did not properly restrict access to their data centers, resulting in critical or high vulnerabilities. In several instances, agency IT staff did not know who had access to the data center, or had not reviewed or updated their lists to ensure only authorized personnel had access. Several agencies data centers lacked proper environmental controls to protect against damage from fire, water, or humidity. Data center controls were inadequate because agencies did not have sufficient policies or procedures and did not sufficiently consider the risks for potential compromises. Poor or non-existent physical data center controls increase the risk that agencies data center assets or information could get lost, stolen, or damaged. Legislative Division of Post Audit 61 ANNUAL REPORT TO THE 2017 LEGISLATURE

68 Several agencies did not adopt strong password controls which require staff to use hard-to-crack passwords. Seven agencies had inadequate password settings, such as lacking sufficient password length or complexity or not locking out users who type in a wrong password too many times. When fewer controls are in place, the risk increases that an agency s network could be hacked through brute force attacks in which hackers try many passwords until one works. Longer and more complex passwords, as well as lockout features, make such attacks much more difficult. IT staff frequently cited pushback from users as the reason why sufficient password controls were not implemented. Several agencies did not adequately protect their network or did not sufficiently protect their systems from viruses or malware. At least four agencies did not set up their firewalls properly. At least six agencies had poor anti-virus protection, such as not protecting all machines or allowing users to disable their computers anti-virus software. Each of these problems creates a hole in an agency s security position because infected machines could lead to unauthorized access or data compromise. Several agencies did not conduct background checks or follow security protocols for departing staff. At least four agencies did not background check everyone who had access to their data centers. Several agencies did not have processes to retrieve badges, keys, or computers from departing staff. Several agencies did not disable or deactivate building or computer access in a timely fashion. Too much trust in staff, poor processes, and insufficient communication contributed to problems in these areas. Improper personnel protocols increase the risk that employees might steal or otherwise compromise sensitive data. Agencies must use limited resources to balance their business needs against security risks. Implementing security controls takes time and may require additional IT assets. Additional controls often can reduce speed or limit functionality, creating a tradeoff between business needs and security risks. Agencies must evaluate and understand their security risks to be able to make informed decisions. Many agencies did not conduct security awareness training, and our social engineering tests demonstrated a lack of understanding for security protocols. State standards require new users to receive such training within their first 90 days, and for all users to receive annual refresher training. About half of the agencies did not provide systematic security awareness training, resulting in significant risks. SUMMARY OF RECOMMENDATIONS We made recommendations to each agency to address the specific security risks found during their audits. HOW DO I REQUEST AN AUDIT? By law, individual legislators, legislative committees, or the Governor may request an audit, but any audit work conducted by the division must be directed by the Legislative Post Audit Committee. Any legislator who would like to request an audit should contact the division directly at (785) Legislative Division of Post Audit 800 SW Jackson Street Suite 1200 Topeka, Kansas Telephone (785) Fax: (785) Website: Scott Frank Legislative Post Auditor For more information on this audit report, please contact Alex Gard (785) alex.gard@lpa.ks.gov ANNUAL REPORT TO THE 2017 LEGISLATURE 62 Legislative Division of Post Audit

69 C. Follow-Up on Audit Recommendations State law, Legislative Post Audit Committee rules, and government auditing standards require that LPA re-visit previous audits and follow up on agencies progress in implementing our recommendations. To develop this information, we contact each audited agency on a quarterly basis and ask officials of those agencies to update the committee on their progress in implementing the recommendations, including whether each should be counted as fully implemented, in progress, not yet started, or refused. Then the audit supervisor reviews the agencies responses, seeks clarifi cation as needed, and makes the fi nal determination on each recommendation s implementation status. This process only covers performance audits, which are not followed-up by other means; some audits, such as fi nancial and computer-security audits, have their own built-in follow-up mechanisms. The following pages list all recommendations made in performance audits issued in the last two years, and the status of those recommendations. These audits made a total of 193 recommendations to the audited agencies; of those, 106 (54.9%) have been fully implemented. Legislative Division of Post Audit 63 ANNUAL REPORT TO THE 2017 LEGISLATURE

70 Status of All Performance Audit Recommendations Issued in the Last Two Years as of the Fourth Quarter, CY 2016 Attica School District K-12 Education: Efficiency Audit of the Attica School District (R ) Date Issued: 10/1/ District officials should post a copy of the completed performance audit on the Implemented district s website. 2 Develop a strategy to bring its IT support costs in line with its peers. In Progress 3 3a 3b Improve the efficiency of the food service program by taking the following actions: eliminate 0.9 FTE food service staff to align current staffing levels with peers. competitively shop or solicit bids from multiple food vendors. Implemented In Progress 3c 3d evaluate whether purchasing a dishwasher, rather than renting one, is more cost effective. discuss the food service budget with the food service director each year to set clear expenditure and revenue goals In Progress Implemented 4 Reduce the district s building insurance costs by taking the following actions: 4a 4b 4c develop policies and procedures that require the district to periodically solicit bids or competitively shop for insurance services. consult with the Kansas Association of School Board s (KASB) property and casualty insurance program for assistance in finding insurance companies that specialize in educational organizations. develop a process that evaluates and compares the long-term financial consequences of insurance rate increases against the district s ability to pay for repairs out-of-pocket. In Progress Implemented In Progress 5 Generate revenue through use of cash-back procurement cards and strengthen the control over such cards by taking the following actions: 5a obtain a cash-back procurement card and develop a strategy to maximize its use. In Progress 5b develop written policies and procedures for procurement cards that include a description of what types of items district staff can purchase with the district s procurements cards, how staff can request the use of the card, and who will maintain each card. Implemented 6 Consider incorporating the district s sixth grade students into the junior high Implemented school and eliminate one teacher position. 7 Seek assistance from KASB or KSDE to assess the training needs of new Implemented administrative staff and provide training to address any issues identified. ANNUAL REPORT TO THE 2017 LEGISLATURE 64 Legislative Division of Post Audit

71 8 The superintendent should provide oversight of the district s expenditure reports Implemented by reviewing them on a periodic basis. 9 Contact KASB to identify the board s model policies and to solicit any guidance the district needs to create written policies and procedures that include the following: 9a 9b 9c 9d the procedures by which the board clerk processes financial transactions and maintains the district s accounting data. the role and responsibility for each person involved in cash handling activities, including how responsibilities will be split among multiple individuals. the process by which the district s physical assets will be inventoried including what items should be included, whose responsibility it is to compile the inventory, and a process for periodically verifying its accuracy. the process by which the district will purchase items or services, including the dollar amount at which bids must be solicited, what services or items the district will bid out for on a periodic basis, and how often those items or services should be put to bid. Auburn-Washburn School District In Progress In Progress In Progress In Progress K-12 Education: Efficiency Audit of the Auburn-Washburn School District (R ) Date Issued: 7/29/ District officials should post a copy of the completed performance audit on the Implemented district s website. 2 Reduce custodial costs by eliminating 5.0 to 8.5 custodial positions to align Implemented current staffing levels with peers or national benchmarks (page 10). 3 Develop a strategy to align supplemental pay with league peers (page 12). Implemented 4 Develop a strategy to maximize procurement card use (page 14). Because of the Implemented potential for impact on students or the community the district should consider implementing the following cost savings options: 5 Replace four school nurses with health aides (page 15). Implemented 6 Change the district s current busing policies for students who live less than 2.5 miles from school by (page 18): 6a 6b eliminating transportation services for regular education students who live less than 2.5 miles from school, or charging parents an annual fee to provide transportation services to students who lives less than 2.5 miles from school. Implemented Implemented Legislative Division of Post Audit 65 ANNUAL REPORT TO THE 2017 LEGISLATURE

72 Coffeyville Police Department Seized and Forfeited Property: Evaluating Compliance with State Law and How Proceeds Are Tracked, Used, and Reported (R ) Date Issued: 7/27/ a To address the problems with its safeguarding controls, Coffeyville should: Send a notice of seizure as required by state law. In Progress 1b 1c Conduct a periodic review of its inventory to ensure it can account for all the seized property that should be in its possession. Increase the security around their storage locations or try to find more suitable locations to store seized property. In Progress In Progress 2 To address the problem with its liquidating controls, Coffeyville should develop a In Progress written policy prohibiting employees from purchasing forfeited property. 3 To address the problems with its tracking controls, Coffeyville should: 3a 3b Develop a process, policy, and training to periodically reconcile the agency s inventory of forfeited property to the agency s forfeiture fund and to ensure that all deposits in the forfeiture fund are associated with a state forfeiture. Deposit drug-tax stamp proceeds in a different fund or assign them a unique account number so they can be tracked separately from state forfeiture proceeds. In Progress Implemented 4 To address the problem with its annual reports, Coffeyville should submit an In Progress annual report to their budget authority with the information required by state law. 5 To address the problem with its financial policies and procedures, Coffeyville In Progress should create policies and procedures that clearly address all aspects of the seizure and forfeiture process. Department of Corrections Department of Corrections: Evaluating Safety Issues at the Kansas Juvenile Correctional Complex (R ) Date Issued: 9/4/ To address issues related to supervision of juvenile offenders, KJCC officials Implemented should develop and implement a formal and documented process to verify that officers perform visual checks on juvenile offenders as required (pages 18 through 20). 2 To address the issues related to some prohibited items not being submitted to the Implemented investigator, KJCC officials should consider establishing clear guidance on officials expectations for how officers should report and document questionable items (pages 16 through 17). 3 To address inadequate tool destruction and inventory of repurposed tools, KJCC Implemented officials should develop and implement a process to ensure the master inventory is updated to reflect any final action taken on repurposed tools (page 14). ANNUAL REPORT TO THE 2017 LEGISLATURE 66 Legislative Division of Post Audit

73 4 To address the issues concerning an inadequate process to track disciplinary actions over time, KJCC officials should (pages 21 through 23): 4a Continue to develop and implement a disciplinary database that is complete, accurate, and provides sufficient detail on violations. Implemented 4b Develop a process for periodically reviewing the information in that database. Implemented 5 To address the issues with policies and procedures, KJCC officials should Implemented continue to review and amend policies that are ambiguous, cumbersome or outdated and need to be properly aligned with Department of Corrections practices (page 21). Department of Health and Environment The Kansas Eligibility Enforcement System: Evaluating Delays in the System s Implementation (R ) Date Issued: 12/1/ To address issues regarding inaccurate cost savings estimates, KDHE officials should take the following steps: 1a 1b No longer report these inaccurate cost savings estimates to the executive branch chief information technology officer. Revaluate KEES current functionality and other relevant factors when updating KEES savings in the future. In Progress In Progress Department of Wildlife, Parks and Tourism Kansas Department of Wildlife, Parks and Tourism: Evaluating a Jefferson County Land Purchase (R ) Date Issued: 3/9/ To address the issue concerning the 14-acre tract of land KDWPT paid for but In Progress never acquired, KDWPT should work with the landowner to resolve the discrepancy between the number of acres listed and the tract descriptions in the purchasing agreement. 2 To address the issue concerning inadequate guidance, the agency should strengthen its land acquisition procedures to include the following guidance and procedures: 2a 2b 2c Include all state requirements that must be met for land acquisitions. Specify who is responsible for completing each of the states requirements. Specify when each of the state requirements should be completed. Implemented Implemented Implemented 2d 2e Specify which forms or other documents should be completed and provide guidance on what they should contain. Develop a final review process to ensure all requirements have been satisfied, all closing documents are in order, and that the agency acquired the legal rights to all the land purchased. Implemented Implemented Legislative Division of Post Audit 67 ANNUAL REPORT TO THE 2017 LEGISLATURE

74 Department on Aging and Disability Services Larned State Hospital: Reviewing the Operations of the Sexual Predator Treatment Program (R ) Date Issued: 4/28/ To better align the program with research-based recommendations practices, KDADS and program officials should: 1a 1b 1c 1d 1e 1f 1g Implement appropriate assessment tools that identify the residents risk of reoffending, as well as the presence of other factors that could affect treatment such as intellectual and development disabilities, addiction, trauma, and mental health issues. Develop individualized treatment plans based on the results of the various assessment tools. Conduct periodic reviews to assess the residents progress, reassess specific risk factors, and modify the treatment appropriately. Modify the annual mental exams to assess whether resident s mental condition continues to meet commitment criteria, and have the exam conducted by impartial staff. Establish treatment criteria that is tailored for residents with intellectual or developmental disabilities. Reevaluate the need for, and the extent of, non-clinical criteria for residents to advance to the next phase of treatment. Develop a plan for implementing these and other changes deemed appropriate. Identify the need for any additional resources and develop a strategy for obtaining those resources. Implemented Implemented Implemented Implemented In Progress In Progress In Progress 2 To address issues related to management of the program, KDADS and program officials should: 2a 2b Implement a process to review the program s services to ensure residents have the necessary skills to progress successfully to reintegration facilities and eventually transition back into the community. Develop and implement a process to ensure appropriate program data are maintained to track treatment services, cancellation of services, phase progression and participation data In Progress Implemented 2c Utilize this program data to continually evaluate staffing and program services. Implemented 2d Establish and implement a process to periodically review policies and procedures as well as resident documents to ensure accuracy and proper implementation. Implemented 3 To address the population growth KDADS and program officials should: 3a Develop a strategic plan for addressing the programs population growth. As part of that plan, consider the options presented as part of this audit. In Progress ANNUAL REPORT TO THE 2017 LEGISLATURE 68 Legislative Division of Post Audit

75 3b Examine the feasibility of relocating some or all of the Sexual Predator Treatment Program to an area of the state with a larger labor market that will increase the number of potential job applicants. In Progress 4 During the Legislative Post Audit Committees consideration of the audit, the committee recommended that an action plan be developed by KDADS and the Department of Corrections for dealing with the population-growth issue identified in the report. In Progress Department on Children and Families Foster Care and Adoption in Kansas: Reviewing Various Issues Related to the State s Foster Care and Adoption System, Part 1 (R ) Date Issued: 7/27/ To address the issues with the Kansas Protection Report Center DCF should: 1a 1b 1c Review the findings and recommendations from the 2013 assessment and complete those that are in progress. Review policies to determine if they are adequate and appropriate to ensure that reasonable efforts are made to assess the safety and welfare of a child. Develop and implement procedures to ensure that a child s safety is assessed within the time assigned following a hotline call. In Progress In Progress In Progress 2 To address the issues with background checks DCF should: 2a 2b 2c 2d Revise policies and processes to ensure that name-based background checks and child abuse and neglect registry checks are completed annually instead of every three years as current policy requires. Review and reconcile regulatory and the state statutory requirement for fingerprintbased checks of all individuals residing, working or volunteering in a foster home. Review and reconcile regulatory and state statutory requirements to ensure that foster home license renewals and background checks are completed annually. Revise policies and processes to ensure that individuals in a foster care home who become ten years of age have KBI background checks and child abuse and neglect registry checks annually as required by law. In Progress In Progress In Progress In Progress 2e Train staff on the revised policies. Implemented 2f 2g Consider whether to require annual background checks for individuals in relative foster homes, including homes used for temporary placement. For relative foster homes, revise the process to ensure annual name-based KBI background checks and DCF child abuse and neglect registry checks are completed on all individuals over the age of ten in the home. In Progress In Progress 3 To address the issues related to monthly face-to-face visits for children in foster care, for children in adoptive placements, and for children returning home, DCF should: Legislative Division of Post Audit 69 ANNUAL REPORT TO THE 2017 LEGISLATURE

76 3a 3b 3c Review and clarify the inconsistencies between policies and contractual obligations of contractors to ensure the safety of children regardless of the placement. Regularly monitor a sample of cases to ensure that case-management staff are conducting the required monthly face-to-face visits and considering implementing penalties for non-compliance. Regularly monitor a sample of cases to ensure that child placing agencies are conducting required monthly visits with foster homes and consider implementing penalties for non-compliance. In Progress In Progress In Progress 4 To address the issue with DCF approving nearly all exceptions to exceed capacity In Progress or to allow insufficient sleeping space, DCF should develop and implement a system that ensures exceptions are thoroughly reviewed and only granted when in the best interest of the child. 5 To address the issue concerning the regulatory requirement for foster homes to have sufficient financial resources, DCF should: 5a Clarify the regulations to clearly state that financial resources of the foster family are sufficient before the foster child is placed in the home. Implemented 5b Clearly define what the term sufficient means in regulatory requirements. In Progress 5c Develop policies and a process to ensure that initial and renewal license applications provide detailed financial information, and that DCF staff verify the information, at least on a sample basis. Implemented Frontenac School District K-12 Education: Efficiency Audit of the Frontenac School District (R ) Date Issued: 7/27/ District officials should post a copy of the completed performance audit on the Implemented district s website. 2 Implement a process to evaluate how much the district needs to transfer each In Progress year to its food service program, if any, and transfer only that amount. 3 In conjunction with the transfer assessment mentioned above, comprehensively Implemented assess each year how much revenue the district needs to generate for its food service program to be self-sufficient, and to the degree it is feasible, increase meal prices to generate that target revenue. 4 Consider switching to a traditional eight-period schedule at the middle school and In Progress high school. 5 Consider implementing policies that set the optimal number of students for each In Progress class at the high school and then consolidate classes not filled to capacity. 6 Consider eliminating transportation services for students who live less than 2.5 Refused miles from school or, alternatively, consider charging students who ride the bus and live less than 2.5 miles from school to help offset the district s costs. ANNUAL REPORT TO THE 2017 LEGISLATURE 70 Legislative Division of Post Audit

77 7 Contact KASB to identify the board s model policies and to solicit any guidance the district needs to create written policies and procedures that include the following: 7a 7b the role and responsibility for each person involved in cash handling including how responsibilities will be split among multiple individuals. the process by which the district s physical assets will be inventoried including what items should be included, what information should be collected about each item, who is responsible to compile the inventory, and a process for periodically verifying it Health Care Commission In Progress In Progress Kansas State Employee Health Plan: Evaluating the State's Pharmacy Benefits Management System (R ) Date Issued: 2/18/ To address the issues with the state s monitoring of spread pricing, the Kansas Implemented State Employees Health Care Commission and KDHE should include terms in its contract with the pharmacy benefit manager that would allow KDHE to periodically request data directly from pharmacies and test for spread pricing (pages 13-14). 2 To address the issues with the state s monitoring of drug manufacturer rebates, the Kansas State Employees Health Care Commission and KDHE should (pages 14-15): 2a 2b 2c Develop benchmarks to assess whether the total rebate amount received from its pharmacy benefit manager is generally reasonable. Develop a process to verify whether the claims figures used by the pharmacy benefit manager to calculate the state s point-of-sale rebates is correct. Contract with a third-party to periodically audit rebate amounts that the pharmacy benefit manager receives from drug manufacturers to ensure that the state receives the total amount of drug rebates to which it is entitled. Implemented Implemented Implemented 3 To address the issues regarding the state employee prescription drug formulary, Implemented the Kansas State Employees Health Care Commission and KDHE should regularly have a third-party conduct independent reviews of the pharmacy benefit manager s formulary recommendations to determine whether they are cost effective and in the best interest of the state and its employees (page 16). 4 To address the issues regarding mail-order prescriptions, the Kansas State Implemented Employees Health Care Commission and KDHE should monitor the number of mail-order prescription drug claims. If the share of these claims increases significantly, they should consider auditing the cost of mail-order prescription drug claims to ensure they cost less than prescriptions filled at walk-in pharmacies (page 18). 5 To address the issues regarding specialty drugs, the Kansas State Employees Health Care Commission and KDHE should (page 18-19): 5a Periodically monitor how much the state spends on specialty drugs. Implemented Legislative Division of Post Audit 71 ANNUAL REPORT TO THE 2017 LEGISLATURE

78 5b 5c Include specialty prescription drugs in the drug rebate audit planned for calendar year Periodically take steps to monitor and ensure that pricing is accurate for specialty drug claims. Information Technology Executive Council Implemented Implemented The Kansas Eligibility Enforcement System: Evaluating Delays in the System s Implementation (R ) Date Issued: 12/1/ To address the issue with limited oversight of large IT projects discussed on Implemented pages 17 through 19, the Information Technology Executive Council should consider amending current policy to clarify which costs associated with an IT project should be included in the quarterly reports to KITO. Iola Police Department Seized and Forfeited Property: Evaluating Compliance with State Law and How Proceeds Are Tracked, Used, and Reported (R ) Date Issued: 7/27/ a To address the problems with its safeguarding controls, Iola should: Send a notice of seizure as required by state law. Implemented 6b 6c Conduct a periodic review of its inventory to ensure it can account for all the seized property that should be in its possession. Increase the security around its vehicle storage lot or try to find a more suitable location to store its seized vehicles. Implemented Implemented 7 To address the problem with its liquidating controls, Iola should develop a written Implemented policy prohibiting employees from purchasing forfeited property. 8 To address the problems with its tracking controls, Iola should: Implemented 8a 8b Develop a process, policy, and training to periodically reconcile the agency s inventory of forfeited property to the agency s forfeiture fund and to ensure that all deposits in the forfeiture fund are associated with a state forfeiture. Deposit drug-tax stamp proceeds in a different fund or assign them a unique account number so they can be tracked separately from state forfeiture proceeds. Implemented Implemented 9 To address the problem with its annual reports, Iola should submit an annual In Progress report to their budget authority with the information required by state law. 10 To address the problem with its policies and procedures, Iola should create Implemented policies and procedures that clearly address all aspects of the seizure and forfeiture process. 11 To address the problem with how it counts seized cash, Iola should have two Implemented people present when seized cash is counted to ensure the count is accurate. ANNUAL REPORT TO THE 2017 LEGISLATURE 72 Legislative Division of Post Audit

79 Kansas Bureau of Investigation Seized and Forfeited Property: Evaluating Compliance with State Law and How Proceeds Are Tracked, Used, and Reported (R ) Date Issued: 7/27/ To address the problem with its tracking controls, KBI should develop a process, Implemented policy, and training to periodically reconcile the agency s inventory of forfeited property to the agency s forfeiture fund and to ensure that all deposits in the forfeiture 13 To address the problem with its expenditure approval process, KBI should Implemented develop a stronger process to request and approve expenditures from the forfeiture fund to limit the number of changes made to the requests after the associate directors approval. 14 To address the problem with its financial policies and procedures, KBI should In Progress create policies and procedures that clearly address all aspects of the seizure and forfeiture process. Kansas Corporation Commission Kansas Corporation Commission: Evaluating Savings Achieved through the Facility Conservation Improvement Program (R ) Date Issued: 4/26/ To address the issue with measurement and verification reports not being required at the conclusion of a FCIP project, the Kansas Corporation Commission should: 1a 1b 1c 1d 1e Require an independent third-party complete a measurement and verification report for all projects. Require the measurement and verification reports to be completed within a set period of time after a project s completion to ensure the savings are being achieved. Reconsider whether one measurement and verification report is sufficient during the life of a project or whether these reports should be ongoing, especially in projects where it is projected it will take close to 30 years for project savings to equal project costs. Require a copy of all measurement and verification reports be provided to KCC officials. Develop a standardized process involving KCC, the public entity, and the energy service company to ensure the measurement and verification reports submitted by the energy service company are consistent and accurate. Implemented Implemented In Progress Implemented Implemented 2 To address the issue of not factoring in variables that can affect payoff schedules over a long period of time, such as borrowing costs, into the project s payoff timeline, the Kansas Corporation Commission should: 2a Establish standards for incorporating proper discounting of all future savings when reviewing FCIP projects. In Progress Legislative Division of Post Audit 73 ANNUAL REPORT TO THE 2017 LEGISLATURE

80 2b Require all analyses of FCIP projects to adhere to these standards for discounting to help determine a project s projected payoff timeline. Refused Kansas Department of Education K-12 Education: Reviewing Virtual Schools Costs and Student Performance (R ) Date Issued: 1/28/ To fully implement the recommendations from our 2007 audit (question 3), the Kansas Department of Education should require districts applying for a virtual school to describe how the district plans to address the following risks: 1a 1b 1c that middle school and elementary school students do not do school work themselves or earn credit without learning the material (page 35). that students under 18 may not attend school in accordance with state law (page 36). that a technology failure will prevent students from doing their school work (page 36). Refused Refused Refused 2 To address the other issues with virtual school oversight, the Kansas Department of Education should (question 3): 2a 2b require that districts be in compliance with all virtual school requirements before issuing approval to a district (page 36). provide guidance to school districts regarding how and when virtual school teacher training reports need to be submitted to KSDE (page 37). Implemented Implemented 3 To address the issues with how districts report virtual school expenditures Implemented (question 2), the Kansas Department of Education should issue guidance to school districts explaining what expenditures must be accounted for in the virtual school fund (page 34). Kansas Highway Patrol Seized and Forfeited Property: Evaluating Compliance with State Law and How Proceeds Are Tracked, Used, and Reported (R ) Date Issued: 7/27/ To address the problem with its liquidation controls, KHP should work with Implemented Department of Administration officials to determine how best to track money not yet forfeited to the agency separately from money that has been legally forfeited to the agency. 16 To address the problems with its tracking controls, KHP should: 16a 16b Develop a process, policy, and training to periodically reconcile the agency s inventory of forfeited property to the agency s forfeiture fund and to ensure that all deposits in the forfeiture fund are associated with a state forfeiture. Deposit drug-tax stamp proceeds in a different fund or assign them a unique account number so they can be tracked separately from state forfeiture proceeds. Implemented In Progress ANNUAL REPORT TO THE 2017 LEGISLATURE 74 Legislative Division of Post Audit

81 17 To address the problem with its financial policies and procedures, KHP should Implemented create policies and procedures that clearly address all aspects of the seizure and forfeiture process. Kansas Insurance Department Kansas Insurance Department: Evaluating the State s Workers Compensation Insurance Plan Contract (L ) Date Issued: 4/28/ To address the issue with inconsistent cost proposals (page 4), the Kansas Implemented Workers Compensation Insurance Plan Board should consider whether a plan contract is necessary after the current contract expires and explore other options the state has for maintaining oversight of the plan that do not involve a contract. If the plan board determines that a plan contract is necessary, it should determine the costs the contract needs to include and exclude and clarify those costs in the next request for proposal and any subsequent contracts. Maize School District K-12 Education: Efficiency Audit of the Maize School District (R ) Date Issued: 7/27/ District officials should post a copy of the completed performance audit on the Implemented district s website. 2 Reduce the district s IT staff by 9.0 FTE to be in alignment with its peers. Refused 3 Propose to end the district s policy of buying back leave during the next period of In Progress teacher negotiations. 4 Pay for lunch room supervisor salaries and meals with food service funds rather In Progress than general fund money. 5 Provide district-owned cell phones to those individuals who require them or In Progress reduce the amount of the stipend the district currently pays. 6 Consider reducing two or three assistant/associate superintendents to bring the Refused district in line with peer districts. 7 Consider eliminating four assistant principal positions at the district s four smaller Refused elementary schools to bring the district in line with peer districts. 8 Consider a switching to an eight-period schedule at the district s two traditional Refused high schools. 9 Consider establishing school boundaries and develop a strategy for creating more In Progress efficient bus routes. 10 Contact KASB to identify the board s model policies and to solicit any guidance Implemented the district needs to create written policies and procedures that include the process by which the district s physical assets will be received and inventoried, including what items should be included, what information should be collected about each item, whose responsibility it is to compile the inventory, and a process for periodically verifying its accuracy. Legislative Division of Post Audit 75 ANNUAL REPORT TO THE 2017 LEGISLATURE

82 11 Implement a process by which expensive IT purchases are evaluated for necessity and cost. Options to consider might include: 11a hiring a consultant to help assess the necessity of large IT purchases. Implemented 11b creating a five-year IT plan and checking large purchases against that plan. Marais des Cygnes School District In Progress K-12 Education: Efficiency Audit of the Marais des Cygnes Valley School District (R ) Date Issued: 4/28/ The district should post a copy of the completed performance audit on their Implemented website pursuant to K.S.A Switch to a cash-back procurement card and develop a strategy to maximize the Refused cash-back potential of district purchases. 3 Consider replacing a certified elementary teaching position with a non-certified Implemented paraprofessional. 4 Eliminate free meals for staff and increase meal prices to the peer average to Implemented reduce the transfer of general fund revenue to food service operations. 5 Develop and implement appropriate procurement card policies that address Implemented separating the duties of approving, purchasing, receiving, and reconciling purchases between at least two employees. Additionally, all procurement card purchases made by the superintendent should receive prior approval and review by the district board. 6 Develop and implement appropriate cash handling policies and procedures for Implemented meal and enrollment payments to include separating the duties of receiving, receipting, depositing, and reconciling payments. 7 Develop written policies and procedures to reflect the established process for In Progress handling payroll, purchasing, inventory, and overtime. Prairie Hills School District K-12 Education: Efficiency Audit of the Prairie Hills School District (R ) Date Issued: 3/18/ The district should post a copy of the completed performance audit on their Implemented website pursuant to K.S.A Assess the current food service program to determine where it is inefficient and how best to get expenditures in line with peer districts in areas including: 2a 2b Exploring the option of purchasing primarily through one vendor to leverage buying power. Improving the accuracy of meal counts to reduce waste by developing written policies and procedures, and training staff. Implemented Implemented 2c Eliminate free meals for all staff. Refused ANNUAL REPORT TO THE 2017 LEGISLATURE 76 Legislative Division of Post Audit

83 2d Increase meal prices to the peer average. Implemented 2e Work with districts that have low supply costs and zero transfers into their food service program to determine other processes and procedures to improve. Implemented 3 Consider consolidating classes that are offered multiple times but not filled to capacity and consider: 3a 3b Reducing the teaching positions to part-time staff. Sharing teachers across district buildings or with a neighboring school district. Refused Refused 4 Consider eliminating transportation services for students who live less than 2.5 Refused miles from school and reduce the district fleet by one bus and one driver. 5 Consider closing the Wetmore Public School and moving the students to Sabetha Implemented schools. 6 Consider eliminating low enrollment programs and the associated teaching positions including: 6a 6b Axtell s agriculture program Sabetha-Wetmore s family and consumer science program. Implemented Implemented 7 Consider reducing the four kindergarten classes at Sabetha Elementary to three Implemented classes and eliminate one teaching position. 8 Develop and implement appropriate payroll processing policies and procedures to Implemented include separating the duties of preparing, approving, paying, and reconciling payroll between at least two employees. 9 Develop and implement appropriate credit card policies and procedures to include Implemented separating the duties of approving, purchasing, receiving, and reconciling purchases between at least two employees. Additionally, all purchases should receive prior approval by a superior and credit card limits should be kept as low as possible while facilitating business operations. 10 Develop and implement appropriate cash handling policies and procedures for In Progress meal and enrollment payments to include separating the duties of receiving, receipting, depositing, and reconciling payments. 11 Develop written policies for the already established cash handling practices for In Progress gate receipts. 12 Assign a staff member to manage the district s inventory according to its written Implemented policy. Legislative Division of Post Audit 77 ANNUAL REPORT TO THE 2017 LEGISLATURE

84 Public Employees Retirement System Kansas Public Employees Retirement System: Evaluating Controls to Detect and Prevent Fraud and Abuse (R ) Date Issued: 9/4/ To address the issues with the field audits not being conducted, KPERS fiscal Implemented services division should follow through with its current plan to reinstitute those audits. 2 To address the concern with individuals eligibility for disability benefits, KPERS Implemented should work to establish inter-agency data-sharing agreements with the Kansas Department of Revenue and the Kansas Department of Labor for the purpose of identifying members who are no longer eligible. 3 To address the issues related to inaccurate service credit records, KPERS should: 3a 3b incorporate a check of members service records into its field audit function and then correct any inaccuracies as they are discovered. for the seven teachers we identified, make any corrections to records and contributions as required by law. Implemented In Progress Racing and Gaming Commission The Kansas Racing and Gaming Commission: Evaluating Selected Regulatory Processes and Standards (R ) Date Issued: 7/29/ To address issues related to the timeliness of approving slot machine project In Progress requests submitted by casino managers, the Kansas Racing and Gaming Commission should develop a slot machine project request policy that clearly details the responsibilities of the gaming facility manager and Racing and Gaming officials. 2 To address issues related to the timeliness of approving internal control change requests submitted by casino managers, the Kansas Racing and Gaming Commission should: 2a 2b Develop an internal control change review process that is risk-based. For example, requests related to gaming revenue or security could be reviewed before other requests such as those related to organizational changes. Establish a timeframe for when internal control change requests should be resolved. Refused Implemented 3 To address issues with payouts, the Kansas Racing and Gaming Commission Refused should consider using theoretical payout instead of actual payout when determining whether a slot machine is eligible to be replaced on the casino floor. 4 To address issues related to approving marketing and promotional materials, the Kansas Racing and Gaming Commission should: 4a Consider whether it is necessary for staff to review and approve all of these materials. Implemented ANNUAL REPORT TO THE 2017 LEGISLATURE 78 Legislative Division of Post Audit

85 4b 4c If it is necessary to review and approve the marketing and promotional materials, consider whether they could be reviewed on a sample basis. Develop a policy allowing Racing and Gaming officials who work onsite at the casino to do this review instead of central office staff. Other Other 5 To address issues related to using outdated electronic gaming standards, the In Progress Kansas Racing and Gaming Commission should continue to identify and update its regulations to align with current gaming standards, including the most recent Gaming Laboratories I Salina Police Department Seized and Forfeited Property: Evaluating Compliance with State Law and How Proceeds Are Tracked, Used, and Reported (R ) Date Issued: 7/27/ To address the problem with its safeguarding controls, Salina should incorporate Implemented vehicles seized for forfeiture into its existing evidence inventory system or create a separate mechanism to inventory these vehicles. 23 To address the problems with its liquidating controls, Salina should: 23a Deposit all forfeiture proceeds into its forfeiture fund. Salina should then go through its normal approval process to withdraw money for its drug-buy funds and working funds (e.g. vehicle repairs, training, and other expenses). Salina should not keep its working funds in a department safe. In Progress 23b 24 Develop a written policy prohibiting employees from purchasing forfeited property. To address the problems with its tracking controls, Salina should: Implemented 24a 24b Develop a process, policy, and training to periodically reconcile the agency s inventory of forfeited property to the agency s forfeiture fund and to ensure that all deposits in the forfeiture fund are associated with a state forfeiture. Deposit drug-tax stamp proceeds in a different fund or assign them a unique account number so they can be tracked separately from state forfeiture proceeds. In Progress Implemented 25 To address the problem with its expenditure approval process, Salina should Implemented require the chief or sheriff to document their approval of all expenditures made with forfeiture funds. 26 To address the problem with its annual reports, Salina should submit an annual In Progress report to their budget authority with the information required by state law. 27 To address the problem with its policies and procedures, Salina should create Implemented policies and procedures that clearly address all aspects of the seizure and forfeiture process. 28 To strengthen its controls surrounding its use of drug-buy money, Salina should: 28a Withdraw money for drug buys from its forfeiture fund (which may still involve keeping this cash in a department safe). Implemented 28b Set a limit on the amount that is allowed to be checked out to an officer. Implemented Legislative Division of Post Audit 79 ANNUAL REPORT TO THE 2017 LEGISLATURE

86 28c Require officers to return unused money within a short timeframe. Sedgwick County Sheriff's Office Implemented Seized and Forfeited Property: Evaluating Compliance with State Law and How Proceeds Are Tracked, Used, and Reported (R ) Date Issued: 7/27/ To address the problem with its liquidation controls, Sedgwick County should reimplement their written policy prohibiting employees from purchasing forfeited In Progress property. 19 To address the problems with its tracking controls, Sedgwick County should: 19a 19b Develop a process, policy, and training to periodically reconcile the agency s inventory of forfeited property to the agency s forfeiture fund and to ensure that all deposits in the forfeiture fund are associated with a state forfeiture. Deposit drug-tax stamp proceeds in a different fund or assign them a unique account number so they can be tracked separately from state forfeiture proceeds. In Progress Implemented 20 To address the problem with its annual reports, Sedgwick County should submit In Progress an annual report to their budget authority with the information required by state law. 21 To address the problem with its financial policies and procedures, Sedgwick In Progress County should create policies and procedures that clearly address all aspects of the seizure and forfeiture process. Smokey Hill Service Center K-12 Education: Evaluating the Costs and Benefits of Smoky Hill Education Service Center Membership (R ) Date Issued: 2/3/ The four member districts we reviewed that paid more in membership fees than Implemented they received in savings should evaluate whether continued membership in the service center is cost effective. ANNUAL REPORT TO THE 2017 LEGISLATURE 80 Legislative Division of Post Audit

87 IV. Reference Legislative Division of Post Audit 81 ANNUAL REPORT TO THE 2017 LEGISLATURE

88 ANNUAL REPORT TO THE 2017 LEGISLATURE 82 Legislative Division of Post Audit

89 Management Staff A. Staff Photo Directory Scott Frank Legislative Post Auditor (785) Scott became the state s Legislative Post Auditor in September Prior to that, he managed the division s education, IT security, and data mining functions. Scott joined the division in He holds a B.S. in management information systems from Kansas State University, a M.S. in business administration from the University of Kansas, an M.A. in economics at the University of Missouri-Kansas City (UMKC), and is currently working on a PhD in economics and public administration at UMKC. Justin Stowe Deputy Post Auditor (785) justin.stowe@lpa.ks.gov Justin fi rst joined Post Audit in He received a bachelor s degree in political science, and a master s degree in public administration, from Kansas State University. Justin left the division for a brief period to work in his family business, and returned to the division in October Justin is a certifi ed government audit professional (CGAP) and a project management professional (PMP). Chris Clarke Performance Audit Manager (785) chris.clarke@lpa.ks.gov Chris joined the division in She received her bachelor s degree in business administration from the University of Kansas in 1988 and a law degree from St. Louis University Law School in Julie Pennington Financial-Compliance Audit Manager (785) julie.pennington@lpa.ks.gov Julie joined Legislative Post Audit in November Before coming to Post Audit, Julie audited the overseas fi eld offi ces and operations of Catholic Relief Services. Julie has a bachelor s degree in business administration from Benedictine College in Atchison, and is a Certifi ed Public Accountant and Certifi ed Fraud Examiner. Legislative Division of Post Audit 83 ANNUAL REPORT TO THE 2017 LEGISLATURE

90 Rick Riggs Administrative Auditor (785) Rick has been with the division since Before that, he worked as a correctional offi cer and parole officer for the Kansas Department of Corrections, and as a management analyst for the Kansas Corporation Commission. A Topeka native, Rick graduated from Washburn University, and has a master s degree in public administration from the University of Kansas. Katrin Osterhaus IT Audit Manager (785) katrin.osterhaus@lpa.ks.gov Katrin joined Legislative Post Audit in Originally from Germany, she holds bachelor s and master s degrees in business administration, as well as a bachelor s degree in psychology, from Washburn University. Katrin is a Certifi ed Internal Auditor and Certifi ed Governmental Auditing Professional. She earned her Project Management Professional certifi cation in Audit Staff Andy Brienzo Auditor (785) andy.brienzo@lpa.ks.gov Andy joined Post Audit in He received his bachelor s degree in political science from the University of Nebraska and his master s degree in international studies from the University of Denver. Prior to joining Post Audit, he worked for the Colorado Office of the State Auditor. Matt Etzel Senior Auditor (785) matt.etzel@lpa.ks.gov Matt joined the division in July He has a bachelor s degree in sociology from the University of Kansas, and worked as a student employee in the Dean s Office at KU. He was the division s secretary before joining the audit staff in Meghan Flanders Auditor (785) meghan.flanders@lpa.ks.gov Meghan joined Post Audit in She graduated with a bachelor s degree in sociology and religious studies in 2006, and a law degree in 2010, both from the University of Kansas. Before coming to Legislative Post Audit, Meghan worked as an attorney in family and criminal law. ANNUAL REPORT TO THE 2017 LEGISLATURE 84 Legislative Division of Post Audit

91 Alex Gard Principal IT Auditor (785) Alex joined Legislative Post Audit in He graduated with a bachelor s degree from Kansas State University in English in 2003, and received a law degree from the University of Kansas in Before coming to Legislative Post Audit, Alex worked with the Douglas County District Court in Lawrence. Alex is a Certifi ed Information Systems Auditor and Project Management Professional. Brad Hoff Senior Auditor (785) brad.hoff@lpa.ks.gov Brad joined the division in 2004 after completing a bachelor s degree in political science from the University of South Dakota and a master s degree in public administration from the University of Kansas. Before joining Post Audit, Brad worked in the Lawrence City Manager s Office. Joshua Luthi Associate Auditor (785) josh.luthi@lpa.ks.gov Josh joined Post Audit in June He has a bachelor s degree in political science from the University of Kansas. Prior to joining Post Audit, he was a teaching assistant at the University of Kansas. Daniel McCarville Auditor (785) daniel.mccarville@lpa.ks.gov Daniel joined Post Audit in 2014, after working for a private fi rm in Lawrence. He holds a master s degree in political science from the University of Kansas with a specialization in quantitative research methods. Clyde-Emmanuel Meador IT Auditor (785) clyde-emmanuel.meador@lpa.ks.gov Clyde-Emmanuel has a master s degree in mathematics from Marshall University in Huntington, West Virginia. Before coming to the division in 2014, he worked at the Kansas Algebra Program at the University of Kansas. He is a Systems Security Certifi ed Practitioner (SSCP). Legislative Division of Post Audit 85 ANNUAL REPORT TO THE 2017 LEGISLATURE

92 Daria Milakhina Associate Auditor (785) Daria joined Legislative Post Audit in She received her bachelor s degree in business analytics in Russia. She also has an MA and PhD in economics from the University of Kansas. She worked as a research assistant at KU s Institute for Policy and Social Research and before that worked in IT consulting. Michael Nixon Senior IT Auditor (785) michael.nixon@lpa.ks.gov Mike came to Legislative Post Audit in 2011 from the Kansas Highway Patrol and is a Certifi ed Information Systems Security Professional (CIPSSP). He has been working in the IT fi eld since Mike has an extensive background in system and network administration and was selected as one of the 2015 (ISC)² U.S.A. Cyber Warrior Scholarship recipients. Mike retired from the active duty Air Force in 2004 and has been with the state ever since. Kristen Rottinghaus Principal Auditor (785) kristen.rottinghaus@lpa.ks.gov Kristen came to Post Audit in 2012, after spending three years with the Department of Labor as a research analyst. She has degrees in economics and public administration from Kansas State University, and received a Governor s Fellowship in She s a former LPA intern. Amanda Schlumpberger Associate Auditor (785) amanda.schlumpberger@lpa.ks.gov Amanda joined Legislative Post Audit in She holds an MA and PhD in U.S. History from the University of Kansas. Josh Rueschhoff Associate Auditor (785) josh.rueschhoff@lpa.ks.gov Josh joined Post Audit in December He holds a bachelor s degree in philosophy and a master s degree in public administration, both from Wichita State University. Before coming to Post Audit, Josh worked with Kansas Big Brothers Big Sisters. ANNUAL REPORT TO THE 2017 LEGISLATURE 86 Legislative Division of Post Audit

93 Heidi Zimmerman Principal Auditor (785) Heidi started with Post Audit in 2005 after working as a research analyst for the Kansas Sentencing Commission. She holds a bachelor s degree in political science and a master s degree in history from Fort Hays State University. She is a Certifi ed Government Auditing Professional. Support Staff Nicole Blanchett Office Manager (785) nicole.blanchett@lpa.ks.gov Nicole started with Legislative Post Audit in 2013 as a temporary receptionist. She attended Washburn University and Allen County Community College. In addition to her duties as Office Manager, she serves as Secretary to the Legislative Post Audit Committee. Chris Dolezilek Information Systems Technician (785) chris.dolezilek@lpa.ks.gov Chris joined LPA in November He currently is studying for his A+ certifi cation. He received his Associates Degree in computer science from Cloud County Community College and holds a BA in electronic media from Washburn University. Legislative Division of Post Audit 87 ANNUAL REPORT TO THE 2017 LEGISLATURE