Audit Division
Audit Summary
Department Of Human Resources
Report LA00-03
Despite statutory requirements to establish effective internal controls, the Division of Child and Family Services (DCFS) has not done so. The need for controls has been communicated in prior audits and through training provided by the Department of Administration. However, the Division has not made developing internal controls a priority. Key areas where internal controls need strengthening include supervision and monitoring, computer access, and separation of duties.
Poor supervision and monitoring of the length of time children spend in emergency shelters and transitional care has contributed to delays in placing children in long-term care. Timely placement in long-term care is beneficial because it provides a more stable environment for children and is usually provided at a lower cost. If stronger controls had been in place to shorten the length of stay for children in emergency shelters and transitional care during fiscal year 1998, costs could have been reduced by over $1 million.
The lack of controls has also resulted in incorrect payments to foster parents. We noted instances where foster parents were underpaid by the Division for more than 2 years before receiving the rate they were entitled. In addition, access to the computer system used to generate checks to foster parents is not limited to authorized personnel acting within the scope of their duties. Consequently, the system is vulnerable to the unauthorized generation of checks and the improper modification of information. Furthermore, although reports currently used by the Division to monitor expenditures are an improvement over the limited information that previously existed, the reports are not always timely or accurate.
·
The Division has an
inadequate internal control system related to foster care payments. The last audit of the Division in 1993
reported the same problem. However, little
progress has been made. Payments
related to foster care totaled $38 million in fiscal year 1998. (page 10)
· The Division insufficiently monitored the length of time children spent in emergency shelter care. Children spent an average of 33 days in emergency shelter care before the Division placed them in a foster home. If the average stay in fiscal year 1998 had been 10 days, we estimate the Division could have reduced costs by $870,000. Moreover, it is better for the children to be placed in a long-term foster home as quickly as possible. (page 11)
· The Division had insufficient controls to monitor the time that foster parents were paid transitional care in fiscal year 1998. Transitional care is more expensive than regular foster care. Transitional care rates were paid an average of 344 days, though it was intended to be limited to 30 to 90 days. By reducing the average time to 90 days on cases that are subsequently paid the regular foster care rate, we estimate the Division could reduce costs by about $300,000 annually. (page 13)
· Prior to October 1997, DCFS paid Washoe County $40 per day for emergency shelter care provided by family foster homes, which was the amount paid by the county to the homes. However, beginning in October 1997, DCFS began paying the county $95 per day on these cases, the rate for care in the county’s emergency shelter care facility. It is not clear why the billing change occurred. By paying $40 per day for emergency shelter care provided by family foster homes, DCFS would have spent about $180,000 less in fiscal year 1998. (page 17)
· The Division has weak controls over payments to therapeutic foster homes, which receive a much higher rate than regular foster care. The lack of controls increases the risk of inappropriate payments. For example, two foster parents providing therapeutic foster care were underpaid for several years before the errors were corrected. One parent was underpaid $8,200 and the other $6,600. (page 18)
· In August 1997 the Division paid all group foster homes the incorrect amount for clothing allowances for children in their care. About 600 cases were paid incorrectly. Group foster homes were either underpaid up to $14 per child or overpaid $84 per child, depending on the child’s age. (page 19)
· DCFS has not ensured that access to its computer system is limited. Over 50 individuals have input capabilities to the system. As a result, the system is vulnerable to the unauthorized generation of checks. Security controls over the system are critical because it generated over 30,000 checks totaling $9 million in fiscal year 1998. In addition, this system generates cards authorizing medical services. The Division paid medical expenses for children totaling $6 million in fiscal year 1998 through the use of the medical authorization cards. (page 19)
· The Division did not always have evidence of supervisory approval for children to be placed with contractors providing higher levels of care than regular family foster care. For about 10% of the placements tested, DCFS did not have any evidence of supervisory approval. In fiscal year 1998, DCFS spent $20 million for these contractors. The contractors provide various levels of care at a cost from about $40 per day to $420 per day. (page 21)
· Upon gaining access to the Division’s computer system, an individual can generate payments to any person or company. The system should limit the issuance of checks to parties that have been approved as legitimate vendors. Furthermore, the Division has inadequate security over checks generated from its computer system. Division accounting personnel unnecessarily take physical custody of checks after they are printed and signed, increasing the risk checks will be lost or stolen. (page 22)
· The Division’s reports used to monitor foster care expenditures with budgeted amounts were not always prepared timely. Some reports were not issued for up to 4 months after month-end. In addition, no reports were prepared for two of the months. The less time that is available to take corrective action, when necessary, the more difficult it becomes to comply with the budget. (page 24)
· Reports used to monitor foster care expenditures with budgeted amounts contained errors. For example, actual expenditures for emergency shelter care in the Northern Region were $519,568 in fiscal year 1998. However, the June 1998 budget report showed $987,139 – a $467,571 error. In addition, forms used to record expenses in the budget reports were not prepared in about 20% of the cases tested. When information used to monitor the budget has errors or is incomplete, there is an increased risk of improper decisions related to meeting budgeted expenditures. (page 25)
Department Of Human Resources
to Audit Recommendations
|
Recommendation Number |
|
Accepted |
Rejected |
|
1 |
Develop written procedures to carry out an internal control system as required by NRS 353A.020, and perform periodic reviews of internal controls required by NRS 353A.025 |
X |
|
|
2 |
Develop and implement written policies and procedures to ensure the time children spend in emergency shelter care is monitored, including guidelines on length of stays and the preparation of timely reports for supervisors to review |
X |
|
|
3 |
Develop and implement written policies and procedures to monitor the payment of transitional care rates, including documentation of supervisory approvals, justification for extensions beyond pre-established limits, and reports to enable appropriate monitoring |
X |
|
|
4 |
Clarify terms of the interlocal contract with Washoe County regarding emergency shelter care rates charged when children are placed with the county’s subcontractors. If a lower rate cannot be obtained from the county, consider contracting directly with family foster homes providing emergency shelter care services |
X |
|
|
5 |
Enter into written agreements with parties providing services to the Division before services are actually provided |
X |
|
|
6 |
Strengthen controls over payments to therapeutic foster homes by developing written guidelines on when the rate is appropriate, supervisory approvals needed, how often it needs to be reviewed, and documentation submitted to workers responsible for making payments |
X |
|
|
7 |
Review payments to ensure changes to rated and allowances are properly implemented |
X |
|
|
8 |
Reduce the number of employees capable of generating checks and medical cards to as few as practicable, and establish policies and procedures over authorizing access to computer systems |
X |
|
|
9 |
Establish written procedures on the process for placing children with contractors to ensure supervisory approvals are obtained and applicable documentation is retained with payment records |
X |
|
|
10 |
Separate duties of approving vendors and generating disbursements to ensure checks can only be issued to authorized vendors |
X |
|
|
Recommendation Number |
|
Accepted |
Rejected |
|
11 |
Discontinue picking up checks from the State Treasurer’s Office |
X |
|
|
12 |
Ensure reports used to monitor the agency’s budget are prepared timely and accurately |
X |
|
|
Total |
|
12 |
0 |