The Division has significant internal control weaknesses over cash receipts. These weaknesses include a poor process for recording money received, untimely deposits, inadequate separation of duties, and improper use of cash receipt forms. An effective internal control system is important because more than $37 million in group insurance premiums was paid to the Division by check or cash during fiscal year 1997. Without proper safeguards, fraud and abuse could occur and go undetected.

• The Division has not established adequate regulations, policies, and procedures over the group insurance billing process. For example, regulations do not identify cut-off dates for sending insurance forms to RMD, and internal procedures do not specify when information must be processed. In addition, performance standards do not measure the timeliness and accuracy of processing insurance information. (page 13)

• Several practices prevent the Division from processing insurance forms timely. These include: not allowing sufficient time to make insurance changes before monthly bills are prepared, not processing retiree change forms when received, and delaying the termi- nation of health benefits for deceased individuals. (page 14)

• The Division lacks an effective system for managing participant insurance forms. Completed forms were kept in 11 separate locations, and forms processed since January 1996 had not been filed. As a result, some insurance forms are lost or misplaced. For example, we found a folder with 33 insurance forms that had not been processed for retirees. The forms ranged in age from several months to more than two years. One employee retired in June 1995; however, staff had not processed the form as of August 1997. (page 15)

 
• The Division did not reconcile monthly billings to payments for large pay centers. Although 31 of 44 pay center bills were reconciled as of April 1997, the monthly bills for these pay centers represented only 1% of the total amount billed. The difference between the Division's bills and pay centers' payments has grown rapidly and exceed $3 million. (page 16)

 
• Because payments are not always reconciled with the amounts billed, data entry errors go undetected for long periods. For example, one error for $150,000 went uncorrected for more than two years. (page 18)

• RMD's failure to process forms timely and reconcile payments to billings has created additional work for the Division's Accounting and Eligibility sections and large pay centers. Although the Division spent $2 million on a new computer system and added five new positions in fiscal year 1996, it is unable to process forms timely and generate accurate bills for large pay centers. Unless RMD improves its procedures for processing insurance forms and settling billing differences, addi- The Division lacks an effective system for managing participant insurance forms. Completed forms were kept in 11 separate locations, and forms processed since January 1996 had not been filed. As a result, some insurance forms are lost or misplaced. For example, we found a folder with 33 insurance forms that had not been processed for retirees. The forms ranged in age from several months to more than two years. One employee retired in June 1995; however, staff had not processed the form as of August 1997. (page 15)

 
• The Division did not reconcile monthly billings to payments for large pay centers. Although 31 of 44 pay center bills were reconciled as of April 1997, the monthly bills for these pay centers represented only 1% of the total amount billed. The difference between the Division's bills and pay centers' payments has grown rapidly and exceed $3 million. (page 16)

 
• Because payments are not always reconciled with the amounts billed, data entry errors go undetected for long periods. For example, one error for $150,000 went uncorrected for more than two years. (page 18)

 
• RMD's failure to process forms timely and reconcile payments to billings has created additional work for the Division's Accounting and Eligibility sections and large pay centers. Although the Division spent $2 million on a new computer system and added five new positions in fiscal year 1996, it is unable to process forms timely and generate accurate bills for large pay centers. Unless RMD improves its procedures for processing insurance forms and settling billing differences, addi-tional staff and other resources are unlikely to resolve billing problems. (page 18)

• The Division improperly transferred more than $600,000 from the retired employee group insurance account between January 1995 and June 1997. This occurred because the Division's records had about 150 more retirees than reported by PERS. Although no losses occurred, the group benefits fund reserves are overstated by the amount of proper transfers. (page 19)

• The state lost at least $63,000 in overpayments to one health maintenance organization (HMO) over three years. The problem occurred because the Division continued to pay insurance premiums for 31 individuals no longer covered. Although the Division contended the pay centers were at fault because they failed to provide timely notification for the terminations, we found documents indicating a shared responsibility for the problem. (page 19)

• The Division has significant internal control weaknesses over cash receipts. An effective internal control system is important because the Division received more than $37 million in checks and cash during fiscal year 1997. These weaknesses occurred because the Division has yet to develop a comprehensive system of internal accounting and administrative controls. (page 21)

1     Establish written policies, procedures, regulations
        and performance measures for administering the
        group insurance program.......................................         X

2     Ensure sufficient time to process insurance forms by
        preparing monthly bills after the end of the month
        and notifying pay centers of billing cut-off dates.....          X

3     Process insurance change forms for retirees and
        deceased individuals when the forms are received.          X

4     Establish a file management system ........................         X

5     Reconcile pay center payments to BISON billings on
        a monthly basis......................................................        X

6     Ensure billing discrepancies are resolved timely........        X

7     Develop written procedures to ensure all cash
        receipts are deposited and properly recorded in
        the state's accounting system.................................         X

8     Deposit cash receipts in accordance with statutory
        requirements..........................................................        X

9     Separate key duties over the revenue collection and
        recording process...................................................       X

10   Comply with state requirements for the use of cash
        receipt forms..........................................................       X

TOTALS                                                                             10                                 0