ST A T E O F L O U ISIA N A L E G ISL A T IV E A U D IT O R

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1 ST A T E O F L O U ISIA N A L E G ISL A T IV E A U D IT O R C apitala rea H um an Services D istrict Departm entof Health and Hospitals State of Louisiana Baton Rouge,Louisiana M arch Financialand C om pliance A uditd ivision D anielg.k yle,p h.d.,c PA, C FE Leg islative A uditor

2 LEG ISLATIVE AUDIT ADVISO RY CO UNCIL M EM B ER S Representative Edw in R.M urray,c hairm an Senator J."Tom " Schedler,Vice C hairm an Senator Robed J.Barham SenatorFosterL.Cam pbell,jr. SenatorLynn B.Dean Senator W illie L,M ount Representative Rick Farrar Representative VictorT.Stelly Representative T.Taylor Tow nsend Representative W arren J.Triche,Jr. E D anielg.kyle,ph.d.,c PA,C FE A lbert J,Robinson,Jr.,C PA This docum entis produced by the Legislative Auditor,State oflouisiana,post O fice Box 94397, Baton Rouge, Louisiana in accordanr:e with Louisiana R evised Statute 24:513. Thirty-one copies of this public docum ent were produced atan approxim ate costof$42. This m aterialwas produced in accordance w ith the standards forstate agencies established pursuantto R.S. 43:31. A copy ofthis docum entis available on the Legislative Auditor's W eb site atww w.la.state.la.us. tn com pliance with the Am ericans W ith Disabilities Act, if you need special assistance relative to this docum ent,orany docum ents ofthe Legislative Auditor, please contactw ayne "Skip"Irwin,DirectorofAdm inistration,at

3 CAPITA L A REA HUM A N SERVICES D ISTRICT DEPA RTM ENT O F H EA LTH A ND HO SPITA LS STATE O F LO U ISIA NA Baton Rouge,Louisiana ProceduralReport Dated M arch 16,2001 Underthe provisions ofstate law,this reportjs a public docum ent,a copy ofthis reporthas been subm itted to the G overnor,to the Attorney G eneral,and to other public oficials as required by state law. A copy ofthis report has been m ade available for public inspection at the Baton Rouge ofice of the Legislative Auditor. M arch 28,2001

4 )AN IEL G.KYLE,PH.D.,CPA,CFI! LEGISLATIVE AUDITOR OFFICE OF L EG ISLA TIV E A U D ITO R STATE OF LOU ISIAN A BATON ROUGE,LOUISIANA M arch N ORTH THIRD STRIiE'I POST O FFICE BO X "IELEPHONE:I225) FACSIM ILE: (225) CAPITAL AREA HUM AN SERVICES DISTRICT DEPARTM ENT O F HEALTH AND HO SPITALS STATE O F LO UISIANA Baton Rouge,Louisiana As required by Louisiana Revised Statute 24:513,we conducted certain proce dures at the CapilalArea Human Services District. Ourprocedures included (1)a review ofthe district's internalcontrol;(2)tests offinancialtransactions forthe years ended June 30,2000,and June 30,2001;(3)tests ofadherence to applicable laws,regulations,policies,and procedures governing financialactivities forthe years ended June 30,2000,and June 30,2001;and (4)a review ofco m pliance w ith the prioryearreport recom m endation. O urprocedures were m ore lim ited than would be necessary to give an opinion on internalcontroland on com pliance w ith law s,regulations,policies,and procedures governing financialactivities. Specifica ly, we interviewed m anagem ent personnel and selected district personnel and evaluated selected docum ents, files, reports, system s, proce dures, and policies, as we considered nece ssary. After analyzing the data, w e developed recom m endations for im provem ent. W e then discussed our findings and recom m endations w ith appropriate m anagem entpersonnelbefore subm itting this w ritten report. The AnnualFiscalReports of the CapitalArea Hum an Serv ices Districtw ere notaudited or reviewed by us,and,accordingly,we do notexpress an opinion on these reports. The district's acco unts are an integralpart ofthe State oflouisiana's financialstatem ents,upon which the Louisiana Legislative A uditorexpresses an opinion. In ourpriorreport on the CapitalAre a Hum an Services District,dated January 24,1999,we reported a finding relating to noncom pliance w ith m ovable property regulations. Thatfinding has been resolved by m anagem ent. Based on the applica tion ofthe proce dures referred to previously,a lsignificantfindings are included in this report form anagem ent's consideration. M ovable Property Item s NotAccounted forand Safeguarded The CapitalArea Hum an Service s Districtdid notadequately accountforand safeguard certain m ovable property as prescribed by state regulations. Louisiana Adm inistrative Code 34:V I.305(G)requires thatthe agency property m anagersubmitto the Louisiana Property Assistance Agency a requestfordisposition (BF-11 form)foreach idle or surplus item w ithin the agency w ithin the w eek it becom es know n or identified. Furtherm ore,good internalcontrolrequires thatadequate procedures be in place to ensure thatm ovable property is properly safeguarded againstloss ortheft.

5 LEGISLATIVE AUDITOR CAPITAL A REA HUM AN SERVICES DISTRICT D EPA RTM ENT O F H EA LTH A N D H O SPITA LS STATE O F LO UISIANA ProceduralReport,Dated M arch 16,2001 Page 2 A review ofthe CapitalArea Hum an Services District-Adm inistration O fi ce's Certification ofannualproperty Inventory disclosed thatmovable property item s totaling $20,435 could notbe loca ted during the annualinventory conducted in July These item s included seven com puters with acquisition costs totaling $17,752 thatwere placed in a storage room on an unknow n date w ithoutthe districtcom pleting the required BF-11 form s. "[he loss w as notdiscovered untilthe annualinventory w as conducted,and the districtdid notinvestigate to determ ine how orw hen the loss occurred. District em ployees did notfo low established procedures for reporting idle or surplus property to the Louisiana Property Assistance Agency. Failure to establish adequate co ntrols to safeguard m ovable property and to com ply with state property regulations increases the risk thatitem s could be lostorstolen. M anagem entshould establish procedures to ensure thatm ovable property regulations are fo low ed and that property is adequately safeguarded against loss or theft. M anagem entconcurred w ith the finding and recom m endation and outlined a co rrective action plan (see Appendix A,page 1). N oncom pliance W ith Cash M anagem ent Im provem enta ctagreem ent The C apitalarea Hum an Services Districtdid notco m ply w ith the Cash M anagem ent ImprovementActTreasury-State Agreement(CMIA-TSA). The CMIA prescribes rules and procedures fortim ing the transferoffederalfunds to states so thatthe am ountof federalfunds on hand is reduced to a m inim um. Atthe sam e tim e,the tim ely transferof federal funds a low s states to m inim ize the use of state funds to finance federal expenditures before the federalfunds are received. The districtadm inisters a program financed through the federalprogram titled "Block Grants for Prevention and Treatment of Substance Abuse" (SAPT,CFDA ). Requests for reim bursem ent are m ade to the Louisiana Departm ent of Health and Hospitals (DHH),which is responsible fordrawing federalfunds forthe district.a review of the C M IA-TSA revealed that the district,through DHH,should have drawn federa l funds using the actual clearance funding technique. This technique requires the districb'dhh to requestfederalfunds so thatthe federalagency deposits the funds in a state accounton the sam e day as requested. The requestam ountsha lbe the am ount offunds thatclearthe state's accounton thatday. How ever,neitherthe districtnordhh realized thatthe districtwas subjectto the CMIA-TSA,so draws were usualy performed on a m onthly basis.

6 LEGISLATIVE AUDITOR CAPITAL AREA HUM AN SERVICES DISTRICT D EPA RTM ENT O F H EALTH A N D HO SPITA LS STATE O F LO UISIANA ProceduralReport,D ated M arch 16,2001 Page 3 Failure to com ply w ith the CM IA-TSA caused the state to needlessly use state funds to finance SAPT expenses. Federalfunds were available and could have been drawn to finance those expenses,leaving the state's funds free to earn interestorto be used for otherpurposes. The Capital Area Hum an Services District should consult w ith DHH to establish procedures to ensure com pliance with the CM IA-TSA. M anagem entco ncurred with the finding and reco m m endation and outlined a co rrective action plan. How ever, m anagem entindicated that DHH experienced delays in receiving federalfunds when federalgrantawards were delayed atvarious times during the year(see Appendix A, page 2). The recom m endations in this report represent, beneficial im provem ents to the operations of the district. The varying nature of the reco m m endations,theirim plem entation costs and their potentialim pacton the operations of the districtshould be Considered in reaching decisions on co urses ofaction. Findings relating to the district's com pliance with applicable laws and regulations should be addressed im m ediately by m anagem ent. in ourjudgment,those mostlikely to bring about This report is intended forthe inform ation and use ofthe districtand its m anagem ent. By provisions of state law, this report is a public docum ent, and it has been distributed to appropriate public oficials. SC :EFS:DSP:ss Legislative A uditor

7 A ppendix A M anagem ent's C orrective A ction P lans and R esponses to the Findings and R ecom m endations

8 BOARD M EM BERS ASCENStON M arvin Gros Chris M etasse EAST BATO N ROUGE Dana Carpenter,Ph.D. Judy Day Patrick Seiter,Chairm an Larry D.Sm ith M argaretw om ack IBERVILLE Louis C.Askins James Evans POINTE COUPEE GailHurst Eloise W els V~ ST BATON ROUGE Kyle Ardoin W.Douglas W ilkinson Jan M.Kasofsky,PhD,Executive Dire ctor February 12,2001 Dr.D anielg.kyle,cpa,cfe Legislative A uditor 1600 N orth Third Street P.O.Box Baton Rouge,LA D eardr.kyle: W e have reviewed yourfinding on the CapitalArea Hum an ServicesDistrict'sM ovable Property Items Not Accounted forand Safeguarded forouradministrative Ofi ce'scertification and concurwith thefinding. The em ployee responsible forthe perform ance of th e A dm inistrative Ofi ce'scertification of A nnualinventory has received a w riten reprim and w ith regard to hertim ely and properperform ance of property controlm anagem ent,has been trained in the properperform ance of an annualinventory and hasbeen m ade aware of the seriousnessw ith which the D istrictregardsthe properperform ance of thisassignm ent.thisemployee'sperform ance shallbe m onitored closely overfuture yearsto ensure com pliance. The D istrictcurrently hastwo policiesin place to assistin safeguarding m ovable property. The Bonds and Crimes LossPrevention Procedure which isapartofthedistrict'ssafety Plan and DistrictPolicy #204-98M oveable Property Control,The Bondsand Crim espolicy hasbeen updated to include th e responsibility of each employee in the use and safeguarding of state owned property.th e M oveable Property Controlpolicy dictatesrequirementan d assignm entof functionsand w illbe furtherupdated to establish clearlinesof responsibility and to coincide with th e Bondsand Crim eslossprevention Procedure.Allemployeeswillbe issued copiesof th ese policiesw ith specific instruction to read and fam iliarthem selvesw ith theirresponsibilitiesas em ployeesof the D istrict. Each Property ControlM anagerw illbe trained on the properinterpretation of these tw o policiesand the Louisiana State Property ControlRegulations priorto M arch 30,2001. AllDistrictemployeesshallbeexpected to adhereto theabovepoliciesand appropriateactions(asoutlined in policy)shallbetaken fornon-compliance. The Adm inistrative ServicesDirector,CarolGross,shallbe the contactperson responsible forensuring thatth e above corrective action plan isenforced.the anticipated com pletion date forthe above ism arch 30,2001w ith ongoing staf training an d com pliance m onitoring asrequired G overnm entstreet,building 2 ~Baton Rouge,Louisiana Telephone (504) ~Fax (504) "An EqualOpportunity Em ployer"

9 STATE O F LO UISIA NA D EPA RTM ENT O F H EA LTH A N D HO SPITA LS L O U IS IA N A GOVERNOR D ep artm ent o f IqlE A L T I~I ~ n d ItO S P IT A L S David W.Hood SECRETARY February 12,2001 Dr.Daniel0.Kyle,CPA,CFE Legislative A uditor 1600 N orth Third Street P.O.Box Baton Rouge,LA D eardr.kyle W e have reviewed yourfinding on the CapitalArea Hum an ServicesD istrictn on Com pliance w ith Cash M anagementimprovementact(cm IA)Agreementand concurwith thefinding to theextentthatweshould have drawn down federalfundsin accordance w ith the Treasury State Agreem ent.h owever,w e do notbelieve thatthe state needlessly used state fundsto fin ance the SAPT expenses. The intentof the CM IA am endm enton the use actualclearance funding w asto allow usto draw SA PT grantfunds to bedeposited in thestateaccounton thesameday thattheoficeofaddictive Disorders(OAD)transferred the fundsto the district. W e did notrealize thatthe am endm entactually approved w ould treatthe districtasa subrecipientand require them to requestfundsfrom OA D usin g thism ethodology. Federalfundswere notalwaysavailable to OAD due to delaysin obtaining grantawards.oad experienced cash flow problem sthroughoutthe year,and had to requesta seed of $3,000,000 in orderto m ake paym entsatthe end of the year. W e have subm itted an am endm entto the Ofi ce of Statewide Reporting and Accounting Policy to change thedraw down methodology forthedistrict,lfthisamendmentisapproved,wewilusetheactualand Adjusted Estimate C learance Pattern foradm inistrative costsand tile A verage C learance forpayroll. W e w illcontinue to use A ctual Clearance forthe transfersfrom OAD. Should you have any questionsconcerning thiscorrectiveaction,please contactken Corkem at Sincerely, Stan M ead D irector c: Jan K asofsky,executive D irector CapitalA rea H um an ServicesD istrict OFFICE Of:M ANAGEM ENT AND FINANCE ~ DIVISION OF FISCAL M ANAGEM ENT 1201 CAPITOL ACCESS ROAD ~ P.O,BOX 3797 ~ BATON ROUGE,LOUISIANA 7082% 3797 PHONE #: ~ FAX #: "AN EQUAL O PPORTUNITY EM PLOYER"

The,recommendation in this report represents,in ourjudgment,thatmostlikely to bring about

The,recommendation in this report represents,in ourjudgment,thatmostlikely to bring about LEGISLATIVE A UDITOR LO UISIA NA SYSTEM IC INITIATIVES PRO G RA M C O U NC IL STATE O F LO UISIA NA M anagem entletter,dated February 19,1997 Page 2 M anagem entattributes the noncom pliance to insta lation