MINUTES
Legislative Post Audit Committee
May 15, 2006
The meeting was called to order by Chairman Donovan at 10:05 a.m. in Room 423-S of the Statehouse. Committee members present:
| Senator Les Donovan, Chair Senator Nick Jordan Senator Derek Schmidt |
Representative John Edmonds,
Vice-Chair Representative Tom Burroughs Representative Bill McCreary Representative Tom Sawyer |
Approval of Minutes
Representative Edmonds moved to approve the minutes of the March 8, 2006, meeting. Senator Jordan seconded the motion; motion carried.
Completed Performance Audits
Medicaid Waivers: Reviewing Differences in Rates and Hours Of Service for Clients Receiving Self-Directed And Agency-Directed Care Part II: The Department of Social and Rehabilitation Services’ Physical Disability Waiver. This audit was presented by Chris Clarke, Principal Auditor. Physically disabled clients with self-directed care cost about $82 per month more (7%) than their counterparts with agency-directed care. That difference is significantly less than the $272 per month difference (41%) we saw in Part I between frail elderly clients with self-directed care and those with agency-directed care. Physically disabled clients who self-direct their care tend to be slightly more disabled and poorer, and to use more of the services (81%) they are authorized than clients with agency-directed service (77%). However, the differences between these two groups aren’t great, and likely aren’t anything the State can control. Clients with self-directed care received only about 1 hour less per month in volunteer services than clients with agency-directed care. Had they received the same number of volunteer hours, we estimate the State would have saved about $128,000 in Medicaid costs. In this audit, we saw the same variability in authorized hours of care for physically-disabled clients with the same assessed need for service as we did in Part I for frail elderly clients. For example, clients with the same assessed level of need for ‘hygiene and grooming’ were authorized anywhere from 2.5 hours to 35 hours per month of assistance. Finally, some existing data are inaccurate and incomplete.
Margaret Zillinger, Director, SRS Community Supports and Services, was available for questions. Others present to answer questions were: Mary Hoover, SRS Chief Auditor; Luke Thompson, Legislative Liaison, Division of Health Care Policy and Finance; and Kim Sage, External Audit Coordinator, Division of Health Care Policy and Finance.
Representative Edmonds moved the report be accepted. Representative McCreary
seconded the motion; motion passed. The report will be distributed to the
Senate Ways & Means and House Appropriations Committee, the House Social
Services Budget Committee, and the Senate Public Health and Welfare and House
Health and Human Services Committees.
Regulation of Credit Unions: Reviewing the Department of Credit Unions’ Procedures for Ensuring Institutions’ Safety, Soundness, And Compliance With the Law. This audit was presented by Joe Lawhon, Principal Auditor. Since 1995, financial institutions operating in Kansas have dropped by 20% – from 648 to 517. Credit unions were about one-fourth of those institutions. These credit unions’ assets, deposits, and loans have remained at about 5%-6% of the total held by all Kansas-based financial institutions. Over the years, more credit unions have begun offering more of the services they historically have been authorized to provide, including checking accounts, mortgage loans, and credit cards. Some smaller credit unions have accomplished this by merging with larger credit unions. The Department of Credit Unions also has allowed some credit unions to expand their fields of membership beyond what Kansas law appears to allow.
For the most part, the Department has and follows adequate procedures to ensure credit unions’ safety and soundness. However, improvements are needed to strengthen its monitoring efforts and the follow-up procedures it takes to ensure that credit unions comply with laws and regulations. Between 1998 and 2005, eight Kansas-chartered credit unions merged with six out-of-State credit unions; the surviving credit unions are regulated by either the regulatory agency of the chartering state or the National Credit Union Association. We didn’t identify a significant competitive advantage for out-of-State credit unions that operate in Kansas, and 97% of credit union officials responding to a Post Audit survey agreed the Department does enough to ensure that they don’t operate at a competitive disadvantage.
Mr. Lawhon answered members’ questions. John Smith, Department of Credit Unions Administrator, and Jack Hohman, Financial Examiner Administrator, were available for questions.
Representative Edmonds moved the report be accepted. Senator Schmidt seconded the motion; motion passed. The report will be distributed to the Senate Financial Institutions & Insurance and House Financial Institutions Committees.
Office of the Attorney General: Reviewing Its Role in Overseeing Enforcement
of State Architectural Accessibility Laws (limited-scope audit). The
audit was presented by Amy Thompson, Auditor. The State aligned its accessibility
law with the Americans with Disabilities Act in 1994. Various State and local
agencies are assigned to enforce the Act; the role of the Attorney General’s
Office is to oversee enforcement. Audit work focused on the Attorney General’s
handling of written complaints, which are referred to State and local enforcement
agencies for investigation. A review of the 12 written accessibility complaints
the Office received from July 2004 to December 2005 found that the Office’s
actions weren’t always timely or thorough. Three-fourths of the complaints
weren’t referred to the enforcement agency for more than 30 days after they
were received. For three complaints, the Office didn’t take appropriate action
when the enforcement agency failed to report back to it. Most complaints reportedly
resulted in some changes to facilities’ accessibility, but the Attorney General’s
Office couldn’t always tell from the information the enforcement agencies
send back whether complaints were resolved in accordance with State law.
Ms. Thompson answered members’ questions. Julene Miller, Deputy Attorney General, distributed a handout, made brief remarks, and answered questions. Anthony Fadale, State ADA Coordinator, also answered members’ questions.
Senator Schmidt moved the report be accepted. Representative Edmonds seconded the motion; motion passed. The report will be distributed to the Senate Ways and Means and House Appropriations Committees.
Completed Compliance and Control Audit
El Dorado Correctional Facility Benefit Fund. This audit was conducted as part of the regular 3-year cycle of compliance and control audits. Presenting the audit was Randy Tongier, Financial-Compliance Audit Manager. Compliance and control audit work at the El Dorado Correctional Facility focused on the Facility’s Benefit Fund. More than $200,000 flowed through the Fund during fiscal year 2005. These moneys aren’t covered by all the State’s central financial management controls because they’re in a locally administered fund. In addition, a letter sent to Legislative Post Audit raised concerns about Benefit Fund activity. The Facility used its Benefit Fund for appropriate purposes, but needs to improve controls over certain moneys in the Fund. Improving cash-handling procedures for token sales and product-handling procedures would reduce the risk of loss or misuse.
Mr. Tongier answered members’ questions. Dennis Williams, Department of Corrections Fiscal Officer, and Judy Curtis, Internal Auditor, were available for questions.
The audit will be distributed to the Senate Ways and Means Subcommittee on Corrections and the House Public Safety Budget Committee.
KPERS Performance Audit Topic
Randy Tongier reminded the Committee
that State law calls for an annual financial-compliance audit of KPERS, which
is contracted out. The law also calls for inclusion of a performance audit
topic related to KPERS at least once every 3 years. KPERS pays for this audit
work. To meet this requirement, the Committee will have to authorize a performance
audit topic to be added to the financial-compliance audit of KPERS. Two topics
have been proposed:
• One topic would look at the reasonableness of the System’s assumptions and
methodologies related to historical trends and future projections for benefit
payments and employer contributions, and the impact of certain proposals on
those payments and contributions.
• Another topic would look at State employees’ use of the lump sum withdrawal provision when they retire to determine how widely it’s being used, assess whether it has been (and will continue to be) revenue neutral as promised, and consider the long-term impact of this provision on the System.
Representative Edmonds moved that the KPERS performance audit topic address the issue of active vs. passive investment management and how KPERS' investments would have performed given a passive investment style compared to how they actually performed. Senator Jordan seconded the motion; motion carried. Senator Donovan asked that the performance audit topic also cover the State's experience with the pension obligation bonds authorized by the Legislature.
Legislative Post Audit Operations
Status of follow-up items. Rick Riggs, Administrative Auditor, brought the Committee up to date on the status of follow-up items related to previous audit reports or recommendations.
Budget Update. Ms. Hinton discussed the standard table showing the Division’s expenditures to date for FY2006.
Out-of-State travel requests. Ms. Hinton asked the Committee to approve out-of-State travel for the first half of the coming fiscal year:
• National State Auditors Association Annual Meeting, June 6-10, Salt Lake City, UT The Committee has already approved Ms. Hinton’s travel for this meeting. This request was to approve Audit Manager Scott Frank’s attendance. The Education Cost Study will be presented at this meeting.
• National Conference of State Legislatures Annual Meeting, August 15-18, Nashville, TN (Barb Hinton and Leo Hafner).
• National Association of State Auditors, Comptrollers, and Treasurers, Annual Meeting, August 19-23, Omaha, NE. Ms. Hinton will be joining the NASACT Executive Committee in fiscal year 2008, and will become National President of NASACT in 2012.
• NSAA Annual Information Technology Workshop and Conferences, September 26-30, Nashville, TN (Allan Foster).
• National Legislative Program Evaluation Society Executive Committee Meeting, September 26-29, Park City, UT (4 staff members).
Representative Edmonds moved to approve the travel request. Representative Burroughs seconded the motion; motion carried.
Service Pin Awards. Ms. Hinton presented service pins to the following:
Chris Clarke and Laurel Murdie, 10 years; Allan Foster and Cindy Lash, 20
years; and Rick Riggs and Randy Tongier, 30 years. The Committee expressed
their appreciation for their years of service.
Old/New Business
None.
Date of Next Meeting
The Chair said that the next Committee meeting likely will be in late June, but no firm meeting date was set.
The meeting adjourned at 12:35 p.m.
(All handouts and other documents referred to in these minutes are on file
with Legislative Post Audit.)