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KPMG
2001 M Street, N.W.
Washington, D.C. 20036
Independent Auditors' Report on Compliance and on Internal Control
Over Financial Reporting Based on an Audit of Financial Statements
Performed in Accordance With Government Auditing Standards
Honorable Mayor and Council of the Government of the District of
Columbia
Inspector General of the Government of the District of Columbia
We have audited the general purpose financial
statements of the Government of the District of Columbia (the District) as
of and for the year ended September 30, 2001, and have issued our report
thereon dated January 22, 2002, which referred to the adoption of
Governmental Accounting Standards Board Statement No. 33 and to changes in
the District's reporting entity. We conducted our audit in accordance with
auditing standards generally accepted in the United States of America and
the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United
States. The financial statements of the Tobacco Settlement Financing
Corporation, the District of Columbia Water and Sewer Authority and the
District of Columbia Housing Finance Agency were audited separately;
accordingly, this report does not extend to those entities.
Compliance
As part of obtaining reasonable assurance about whether
the District's general purpose financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions
of laws, regulations, contracts, and grants, noncompliance with which
could have a direct and material effect on the determination of financial
statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not
express such an opinion. The results of our tests disclosed an instance of
noncompliance related to expenditures in excess of budgetary authorization
that is required to be reported under Government Auditing Standards and is
described in greater detail in Appendix A.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the
District's internal control over financial reporting in order to determine
our auditing procedures for the purpose of expressing our opinion on the
general purpose financial statements and not to provide assurance on
internal control over financial reporting. However, we noted certain
matters involving internal control over financial reporting and its
operation that we consider to be reportable conditions. Reportable
conditions involve matters coming to our attention relating to significant
deficiencies in the design or operation of internal control over financial
reporting that, in our judgment, could adversely affect the District's
ability to record, process, summarize, and report financial data
consistent with the assertions of management in the general purpose
financial statements.
-
District of Columbia Public Schools accounting and
financial reporting
- University of the District of Columbia accounting and financial
reporting
- Accounting and financial reporting for the District medicaid program
- Reconciliation of bank accounts and cash management
- Payroll process management
- Accounting for non-routine transactions
- Monitor of expenditures against open procurements
- Reporting of budgetary revisions
- Disability compensation claims management
A material weakness is a reportable condition in which
the design or operation of one or more internal control components does
not reduce to a relatively low level the risk that misstatements in
amounts that would be material in relation to the general purpose
financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. Our consideration of internal control over financial
reporting would not necessarily disclose all matters in internal control
that might be reportable conditions and, accordingly, would not
necessarily disclose all reportable conditions that are also considered to
be material weaknesses. However, we consider items I through III,
identified above, to be material weaknesses.
We also noted other immaterial instances of
noncompliance with laws, regulations, contracts and grants, and other
matters involving internal control over financial reporting, that are not
considered to be reportable conditions, that we will report to District
management in a separate letter. The status of prior year material
noncompliance and reportable conditions are presented in Appendix C.
This report is intended solely for the information and
use of the Mayor, Council, the Inspector General of the District, District
management, the U.S. General Accounting Office, and the U.S. Congress and
is not intended to be and should not be used by anyone other than these
specified parties.
January 22, 2002
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Appendix A
MATERIAL NONCOMPLIANCE WITH LAWS AND REGULATIONS
Expenditures in Excess of Budgetary Authorization
The Anti-Deficiency Act states, in part, the following:
An officer or employee of the United States Government or of the
District of Columbia government may not (A) make or authorize an
expenditure or obligation exceeding an amount available in an
appropriation or fund for the expenditure or obligation...
The Home Rule Act states, in part, the following:
No amount may be obligated or expended by any officer
or employee of the District of Columbia government unless such amount
has been approved by Act of Congress, and then only according to such
Act.
Section 101 of the DC Appropriations Act 2001, enacted
November 22, 2000, states, in part, the following:
Whenever in this Act, an amount is specified within
an appropriation for particular purposes or objects of expenditure, such
amount, unless otherwise specified, shall be considered as the maximum
amount that may be expended for said purpose or object rather than an
amount set apart exclusively therefore...
The District's general purpose financial statements
state in note 1, "Appropriated actual expenditures and uses may not
legally exceed appropriated budget expenditures and uses at the function
level. An unfavorable balance in the budgetary statement for an
expenditure or other financing use is a violation of the Anti-Deficiency
Act. Also, a violation of the Anti-Deficiency Act exists if there is an
unfavorable expenditure variance for a particular purpose or object of
expenditure within an appropriation." We have confirmed this
interpretation with the District's Office of Corporation Counsel.
By allowing expenditures in excess of appropriations
within the Public Education and Receivership function levels, the District
may have violated the Anti-Deficiency and Home Rule Acts.
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Appendix B
REPORTABLE CONDITIONS IN INTERNAL CONTROL OVER FINANCIAL REPORTING
I. District of Columbia Public Schools Accounting and Financial
Reporting
The District of Columbia Public Schools (DCPS) expends
over $700 million annually in operating and capital expenditures. These
expenditures are reported as a component of the District's public
education function in the District's general fund and-capital projects
fund, respectively. During fiscal year 2001, we observed the following
areas of weakness within the DCPS accounting and financial reporting
processes:
- Monitoring of expenditures - The detailed break out of original
budget approved by Council was not loaded into the' accounting system
by DCPS personnel timely to allow for appropriate monitoring of
-expenditures by DCPS management. Further, budget modifications were
not loaded into the system timely and there were numerous instances of
expenditures being incurred by program offices that were not submitted
to the budget and finance offices for timely processing. During the
fiscal year 2001 closing process, approximately $7 million in amounts
owed to vendors for goods and services received during 2001 and prior
years, but not previously identified for timely payment, were required
to be accrued for financial reporting purposes.
- Accounting for medicaid expenditures - DCPS incurs medicaid
reimbursable expenditures primarily related to services provided to
special education students at private schools by third party
contractors. However, because the private schools and other vendors do
not always provide sufficient or timely encounter data to the DCPS
medicaid program office, many of these costs are considered ineligible
for reimbursement by the US Department of Health and Human Services.
At September 30, 2001, a significant adjustment was required to reduce
previously recorded medicaid revenues and receivables that were no
longer considered collectible. Further, the medicaid program office
appears to have no established process to follow up with vendors to
obtain necessary encounter data to improve DCPS's ability to receive
medicaid reimbursement for special education student services
provided. Finally, there is no process in place to provide for timely
communication between the medicaid program office and the DCPS office
of financial operations.
- Capital projects expenditures - The DCPS capital projects
expenditures are processed by purchase orders issued directly by the
DCPS CFO's office rather than through the DCPS's procurement office.
The procedures for issuing purchase orders are not documented and
subsequent invoice processing against the purchase orders do not
include the controls for approval that are required for other DCPS
procurements. For fiscal year 2001, the majority of the expenditures
for capital improvements were provided through service agreements with
the Army Corps of Engineers. These agreements define the scope of work
to be performed and the source of funding. Various purchase orders are
issued against the service agreements; however, there is no process to
reconcile goods and services obtained to the provisions of the service
agreements. Further, the account coding of expenditures between
capital and local funding is not adequately monitored.
- Payroll processing - DCPS failed to appropriately pay approximately
1,700 DCPS employees compensation for pay increases that were due, but
not timely processed by the human resources and payroll departments,
amounting to approximately $2.4 million. We also observed numerous
instances of employee payroll time sheets, which often provide DCPS's
primary basis for obtaining federal reimbursement of eligible payroll
costs, that could not be located. Finally, we observed that the
payroll reports generated by the CAPPS system are not reconciled
timely to the DCPS payroll posted to the general ledger.
Each of these items contributes to the risk that the
financial reports relied upon by DCPS management may not be accurate.
Accurate and timely management information is essential to DCPS
management's ability to identify and respond to significant financial
changes (e.g., revenues shortfalls and expenditures in excess of budget).
To improve DCPS internal control over financial accounting and reporting,
we recommend the following:
- Ensure that DCPS personnel load the annual operating and capital
budgets into the accounting system timely and in sufficient detail to
allow management to monitor expenditures versus budget more closely.
Such information, along with an analysis of significant variances,
should be provided to the DCPS School Board on a monthly basis.
- Require medicaid service providers to provide relevant encounter
data to permit DCPS to bill the Medical Assistance Administration
(MAA) timely and in sufficient detail to ensure claims for
reimbursements are not denied. We understand that requiring such
information from the service providers may not be possible under
existing contracts. Because the special education program, and the
required payments to service providers, are under various court
orders, it may be necessary to petition the Court to require service
providers to provide such information in a timely manner.
- Monitor contractors hired to administer DCPS capital projects
programs more closely. Further, each month DCPS management should
review capital expenditures accounts to ensure that there are no
significant budget variances and to identify and correct potential
improper coding of expenditures between local and capital.
- Monitor the timing of pay increases more closely to ensure that all
pay rate changes are processed timely. DCPS management should
reemphasize to its timekeepers that adequate maintenance of payroll
time sheets is critical to maximizing federal reimbursement under
federal grant programs.
We further believe that DCPS has a unique opportunity
to evaluate the adequacy of its existing financial accounting and
reporting processes due to the anticipated implementation of the
PeopleSoft system. We recommend that DCPS conduct a comprehensive review
of its payroll, procurement, budget, capital expenditures and medicaid
program accounting and financial reporting processes in conjunction with
this system implementation.
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II. University of the District of Columbia Accounting and Financial
Reporting
The University of the District of Columbia (UDC)
expends approximately $80 million each year. UDC maintains separate bank
accounts in addition to participating in the District pooled cash
management program. It also maintains several detail subsidiary ledgers to
account for its student tuition and grants receivable. UDC uses the
District's System of Accounting and Reporting (SOAR) as its general ledger
and is required to post and reconcile its separate bank accounts and
receivable subledger activity to the amounts recorded in the general
ledger. Based on the information derived from these ledgers, the
University produces stand-alone financial statements, and the University's
financial position is summarized in the District-wide CAFR.
During fiscal year 2001, UDC experienced significant
turnover in its financial management personnel. With the assistance of a
task force deployed to UDC by the District's CFO and subsequently the
leadership of a new financial management team, including a new Chief
Financial Officer, the University has made progress towards addressing
several key issues affecting financial management that were noted in prior
years. Specifically, during the last eight months of the fiscal year, the
University has made improvements in the effectiveness of its financial
management, some of which include the following:
- cash reconciliations completed on a monthly basis;
- reclassification of payroll default balances performed on a timely
basis;
- quarterly transfers from the postsecondary account to the District's
pooled cash maintained by the DC Treasurer;
- quarterly billings performed for intradistrict activities; and
- financial review process (FRP) reports submitted to Office of Budget
and Planning (OBP) on a monthly basis.
In spite of the task force's efforts, the financial
position and results of operations of UDC were not readily determinable
during a substantial part of the year, and UDC management again required
outside contractor assistance in order to close its books for fiscal year
2001 and complete the closing packages required by OFOS on a timely basis.
We recommend that the University undertake a
comprehensive review of its financial management systems, addressing such
issues as:
- Internal staffing levels, roles and responsibilities and relevant
training issues;
- Communication between financial and operational personnel at UDC and
between UDC and District financial management to ensure appropriate
guidance in the performance of duties is available, and all relevant
information is considered in making financial decisions and preparing
financial reports;
- Extent and nature of involvement of external consultants throughout
the year and in the year-end closing process; and
- Effectiveness of training efforts on existing IT systems, including
SOAR and SIS Plus, and the extent to which the implementation of these
systems meet the needs of University senior management.
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III. Accounting and Financial Reporting for the District Medicaid
Program
Various District agencies, including the DCPS, Child
and Family Services, the Department of Mental Health (DMH), Fire and
Emergency Services, Mental Retardation and Developmental Disabilities
Administration, and the former Public Benefit Corporation, provide
medicaid services to eligible District residents. The costs incurred by
these agencies are summarized in a cost report that is submitted to the
MAA, part of the District's Department of Health, for approval before
those claims are submitted to the federal government for reimbursement.
We observed that the agencies record a receivable and
revenue in SOAR for the federal share of their medicaid claims incurred,
and MAA records a payable and an expense to the agencies for the claims
submitted. However, these amounts were not eliminated for financial
reporting purposes during the year, but rather through an audit adjustment
at year-end. We also observed that the agencies and MAA also budget
medicaid revenues and expenditures in the same manner.
We also observed that, once the cost reports submitted
by the agencies are audited, MAA has disallowed a significant portion of
the medicaid costs submitted for reimbursement by these District agencies.
Reasons for the disallowances are generally a failure to file medicaid
claims timely as well as to provide sufficient support for the claims that
are incurred. We further observed that disallowed costs are generally
appealed by the agencies and revised cost reports are resubmitted with
additional documentation after a significant period of time. The
difference between costs submitted for reimbursement and the costs
actually reimbursed result in the use of local, rather than federal,
dollars to fund these expenditures.
Finally, we observed that agencies are not recording reserves for
disallowed costs as a result of cost report audits. As a consequence,
aggregate audit adjustments exceeding $100 million were required to be
posted as part of the year-end closing process.
To improve the accounting and financial reporting for
the medicaid program, we recommend the following:
- Modify the financial reporting process to ensure that transactions
between MAA and the agencies are properly eliminated to ensure that
medicaid revenues and expenditures are not double counted for
budgetary and financial reporting purposes.
-
Require all agencies that prepare and submit
medicaid cost reports to MAA to record reserves for disallowances
included in their audited cost reports timely.
-
Create a working group between MAA and the provider
agencies to improve communication and better coordinate the submission
of claims by agencies in a form that is acceptable to MAA. This will
allow the District to reduce the time between the medicaid
expenditures being incurred and the ultimate reimbursement from the
federal government.
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IV. Reconciliation of Bank Accounts and Cash Management
The District uses a pooled cash arrangement to manage
cash collected by the Office of Tax and Revenue and other District
agencies. As of September 30, 2001, there were approximately 50 pooled
cash bank accounts. In order to ensure all bank accounts were properly
reconciled and related adjustments were posted to the general ledger, the
Office of Financial Operations and Systems (OFOS) established a cash
management reconciliation unit (CRU). At various times throughout the
year, the CRU was staffed by over 20 District employees and contractors
whose sole responsibility was to reconcile pooled cash bank accounts.
However, in spite of these efforts, reconciliations of the pooled cash
accounts were not always completed timely. We did, however, observe
improvement in the timeliness of reconciliations by CRU during the last
half of the fiscal year.
Although reconciling items were identified, they were
not always resolved timely, and were often carried forward on
reconciliations for several months. We observed the following reasons for
significant reconciling items:
- Once reconciling items are matched, there is confusion among CRU and
the District agencies as to whose responsibility it is for recording
the journal entry to resolve the reconciling item.
- Deposits made by agencies into pooled cash accounts through the
Office of Finance and Treasury (OFT) are recorded by OFT in such a
manner that does not facilitate matching of transactions by CMRU. For
instance, a single bank deposit may be summarized into several SOAR
journal entries. Matching by CRU occurs at the individual bank deposit
to SOAR journal entry level.
- OFT obtains a daily listing of all deposits made into District
pooled cash accounts from the various banks. OFT records journal
entries for those deposits that it is responsible for recording.
However, if a deposit was made on behalf of an agency and the agency
is unaware of it, OFT does not routinely attempt to identify where
this deposit should be recorded in SOAR. Therefore, amounts have been
recorded in the bank statement but no entry has been recorded in SOAR.
The reconciliation of bank accounts to amounts recorded
in the general ledger is an essential control to ensure cash receipts and
disbursements are completely and accurately processed, and that cash
balances are safeguarded from potential misappropriation. We recommend
that CRU provide detailed guidance to OFT as to the journal entry format
that is needed by CRU to facilitate matching of bank transactions. We
further recommend that OFT establish a process to communicate with all
agency CFOs to determine proper ownership of deposits made to bank
accounts for which adequate information is not available. Once identified,
the deposit should be properly recorded at both the agency and OFT level.
Finally, we recommend that the CRU continue to devote substantial
attention to reconciling all pooled cash accounts within 45 days of month
end.
Numerous District agencies also maintain bank accounts
that are not part of the pooled cash arrangement. These agencies are
responsible for reconciling these agency controlled bank accounts to the
general ledger timely and resolving all reconciling items for these
accounts. We obtained a listing of all agency controlled bank accounts
from OFT, noting that there are over 650 bank accounts maintained at
various District of Columbia financial institutions under the District's
taxpayer identification number. Although the number of such accounts has
been significantly reduced since the prior year, some of these bank
accounts continue not to be recorded in the general ledger. During fiscal
year 2001, OFT and OFOS worked with the agencies controlling these
accounts to verify that all agency controlled bank accounts were
reconciled and recorded in the general ledger. However, we continue to
observe that District agencies establish bank accounts without notifying
OFT as required by District policy. We believe the number of bank accounts
maintained by the District (both pooled cash and agency controlled) has
contributed to untimely bank reconciliations. We recommend that OFT and
OFOS continue to analyze the number of bank accounts necessary to
facilitate cash management. A further reduction of the number of bank
accounts will help to improve the timeliness of bank reconciliations,
enhance monitoring of collateral requirements, and 'provide improved
opportunities for investment earnings on the cash balances. Additionally,
we recommend that OFT again notify all agencies of the requirement to
report all bank accounts separately maintained under Agency control.
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V. Payroll Process Management
Over 40% of the District's annual operating expenditures are for employee
compensation and benefits. The maintenance of employee personnel
information such as personnel action forms and withholding authorizations
is a critical component of internal control over the payroll process. Time
sheets documenting (1) the hours worked by employees, (2) related grants
or other projects charged and (3) review and approval must also be
maintained. We observed the following:
-
Twenty-nine of 170 employee timesheets, primarily
at the Fire Department, the Department of Human Services, and the
Department of Public Works, could not be located or lacked evidence of
appropriate management authorization, review and approval of hours
worked. We were able to identify other sources of information, such as
daily work logs maintained at the fire houses and at the various
District agencies, to substantiate the hours worked.
- Inadequate maintenance of personnel files as evidenced by (1) a
number of missing files, (2) files that contained information for more
than one employee, (3) incomplete files where appropriate
authorization forms were missing, and (4) inadequate physical
safeguards over files at storage locations.
- Terminated employees were not always removed from the payroll
systems timely.
- Changes to the CAPPS payroll database were not always made timely,
and because of CAPPS system limitations, certain employees who were
due annual step increases were not awarded those increases when due,
requiring retroactive payroll adjustments. These pay adjustments
amounted to approximately $12.8 million during fiscal year 2001, of
which approximately $4 million was payable at September 30, 2001.
To improve internal control over the payroll process we recommend that the
District:
- Train agency timekeepers on better methods of ensuring proper
documentation is on file for all timesheets, annual leave, and sick
leave forms.
- Establish a methodology for employee file maintenance and related
physical safeguards at each file room and assign responsibility for
these matters to a single employee at each location.
- Develop a standard checklist to ensure that all personnel files
contain appropriate supporting documentation. Consider a periodic
unannounced review of existing files to determine the completeness and
accuracy of file data.
- Reinforce established procedures for employee terminations to ensure
that they are processed timely.
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VI. Accounting for Non-Routine Transactions
Each year, the District enters into various
transactions that do not occur on a routine basis in the normal course of
business. Often, these transactions are material to the general purpose
financial statements, particularly the general fund. During fiscal year
2001, such non-routine transactions included the sale of the DOES building
to the Freedom Forum, the issuance of tax increment financing notes, the
cessation of the Public Benefit Corporation (PBC) and subsequent
outsourcing of services previously provided by PBC to the DC Healthcare
Alliance, the establishment of the Tobacco Asset Securitization
Corporation (TASC), and the subsequent issuance of debt by the TASC, and
the acceptance of the Casey Foundation gift of a mayoral mansion.
Although these transactions occurred throughout fiscal
year 2001, the journal entries to record many of these transactions did
not occur until after year-end. For instance, when the cash proceeds for
the sale of the DOES building were deposited into the District's escrow
account, no corresponding accounting entries to record the transaction
were recorded in the general ledger until after year-end. We recommend
that OFOS establish procedures to obtain timely information about these
transactions, research the appropriate accounting and financial reporting
treatment, and prepare journal entries to record non-routine accounting
transactions timely. The source of information for such entries should be
review of Council minutes, bank reconciliations, minutes of CFO Council
meetings, and other communications between District financial and
operational management, whether written or oral.
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VII. Monitoring of Expenditures Against Open Procurements
Agency finance personnel must approve each contract
award to indicate that there is available budget for the goods or services
being procured. Based upon this approval, the procurement staff finalizes
the contract documents. It is the responsibility of the agency finance
personnel to properly, and timely, encumber the funds. However, we
observed that such encumbrances are not always recorded timely.
Encumbrance monitoring is further complicated by the
fact that there is no linkage between the contract files and SOAR. SOAR,
through ADPICS, is a purchase order number driven system. In order to
process vendor invoices, ADPICS assigns a purchase order number; however,
this number bears no relationship to the contract number. Because there is
not a one-for-one relationship between the actual contract and the
purchase order recognized by SOAR, and because encumbrance information is
not readily available, it is possible for payments against purchase orders
to exceed the contract value.
While the finance officer should continue to authorize
the available funds, we recommend that policies be established to assign
the contracting officer the responsibility for recording the encumbrance
prior to finalizing the contract. This would ensure that the encumbered
funds are in agreement with the final contract value and provide a
stronger segregation of duties since the contracting officer has no role
in approving or paying invoices. Further, we recommend the District
develop a monitoring and reporting mechanism that will relate the
contracts to the purchase orders and help ensure that payments in excess
of contract values are not made.
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VII. Monitoring of Expenditures Against Open Procurements
Agency finance personnel must approve each contract
award to indicate that there is available budget for the goods or services
being procured. Based upon this approval, the procurement staff finalizes
the contract documents. It is the responsibility of the agency finance
personnel to properly, and timely, encumber the funds. However, we
observed that such encumbrances are not always recorded timely.
Encumbrance monitoring is further complicated by the
fact that there is no linkage between the contract files and SOAR. SOAR,
through ADPICS, is a purchase order number driven system. In order to
process vendor invoices, ADPICS assigns a purchase order number; however,
this number bears no relationship to the contract number. Because there is
not a one-for-one relationship between the actual contract and the
purchase order recognized by SOAR, and because encumbrance information is
not readily available, it is possible for payments against purchase orders
to exceed the contract value.
While the finance officer should continue to authorize
the available funds, we recommend that policies be established to assign
the contracting officer the responsibility for recording the encumbrance
prior to finalizing the contract. This would ensure that the encumbered
funds are in agreement with the final contract value and provide a
stronger segregation of duties since the contracting officer has no role
in approving or paying invoices. Further, we recommend the District
develop a monitoring and reporting mechanism that will relate the
contracts to the purchase orders and help ensure that payments in excess
of contract values are not made.
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VIII. Reporting of Budgetary Revisions
The District of Columbia Appropriations Act
(Appropriations Act) serves as the original appropriated annual budget.
The Appropriations Act authorizes expenditures at the functional level.
Generally, all revisions that alter total appropriations of an individual
function must be approved by an act of Congress. The District then
allocates the revised appropriations at the functional level to various
agencies within the function. The District may reallocate budget amounts
among agencies within a functional level in accordance with District
policies contained in the Reprogramming Policy Act. The Office of Budget
and Planning (OBP) is responsible for tracking all local budget authorized
reprogrammings, while the Office of Research and Analysis is responsible
for all nonlocal budget authorized reprogrammings.
We observed that approved local budget reprogrammings
are posted to a manual tracking sheet maintained by OBP personnel. OBP
personnel then use these manual tracking sheets to compare the revised
budget amounts to SOAR balances to ensure that agencies have not
overexpended their revised appropriated budgets. Most reprogrammings are
not loaded into SOAR to facilitate agency review of total expenditures
versus the revised appropriated budget, and as a result agencies must
contact OBP to obtain a current status of reprogramming requests and the
total revised appropriated budget. As designed, this control serves only
to detect, not to prevent, possible budget overexpenditures.
We recommend that OBP assure all budgetary
reprogrammings are recorded in SOAR upon approval and notify the
requesting agency of such approval. This will enhance the agencies'
ability to monitor the status of their reprogramming request and will
provide them with accurate budgetary information against which to monitor
expenditures.
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IX. Disability Compensation Claims Management
The Department of Employment Services (DOES) was
responsible for administering the District's disability compensation
program through September 30, 2001. When a District employee becomes
disabled due to an on-the-job illness or injury, the responsibility for
that employee's compensation is transferred from the agency for which they
work to the Office of Benefits Payments of DOES. The Office of Benefits
Payments paid over $32 million in disability compensation benefits during
fiscal year 2001 and has recorded an actuarially computed liability of
over $200 million for benefits that it expects to pay in the future for
workers currently eligible to collect disability compensation. On June 29,
2001, Council enacted legislation that, effective October 1, 2001, removed
the responsibility for disability compensation claims management from DOES
and assigned it to the Office of Personnel.
We examined a sample of claim files for participants
receiving benefits under the program to ensure data provided to the
actuary was complete and accurate. In our sample of 61 recipients (out of
897 recipients), we identified 10 recipients whose claims data contained
errors. Additionally, we identified 7 beneficiaries who were incorrectly
classified in the temporary total disability category instead of the
scheduled award category in fiscal year 2001. Although these errors were
ultimately corrected upon auditor request when reconciled to data
maintained by the third party administrators after year-end, we recommend
that benefit data be reconciled to the data maintained by third party
administrators on a more timely basis so that accurate disability
compensation records are maintained and the liability can be accurately
determined at any point in time.
We observed that employees returning to work from
disability are not required to notify DOES of this event. The agency to
which the employee has returned is required to process the payroll change
information. However, we continued to observe that this paperwork is not
always prepared by the agency and provided to DOES timely. Therefore, a
formerly disabled employee could receive both a disability compensation
check and a regular payroll check until DOES is notified that the employee
has returned to work. We identified 2 beneficiaries who were being paid on
a temporary total disability award basis and continued to collect regular
payroll checks, one beneficiary who was determined to be ineligible by
court order and continued to receive disability compensation, and another
beneficiary who did not return to work after his release from medical
treatment, but who continued to receive disability compensation. These and
similar situations resulted in overpayments of approximately $930,000 to
formerly eligible recipients of disability compensation in fiscal year
2001.
The District is attempting to collect approximately
$2.7 million in cumulative overpayments as of September 30, 2001. We
observed that the Office of Personnel established a procedure, effective
October 1, 2001, to identify beneficiaries receiving a disability
compensation payment as well as a regular payroll payment, for subsequent
determination of the propriety of receiving both types of payments and for
eliminating duplicate payments. We recommend that OFOS monitor whether
continuing follow up is being made to collect amounts owed to the District
due to overpayments. We also recommend that OFOS determine whether the
Office of Personnel is following their newly established procedure.
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STATUS OF PRIOR YEAR MATERIAL NONCOMPLIANCE AND REPORTABLE CONDITIONS
Nature of Comment |
Type of Comment |
Current Year Status |
Expenditures in excess of budgetary
authorization |
Material Noncompliance |
Repeated as an instance of material
noncompliance, but for different agencies of the District government |
Failure to obtain timely Single Audits |
Material Noncompliance |
Resolved. Comment not repeated |
Reconciliations of bank accounts and cash
management |
Material Weakness |
Upgraded from material weakness to
reportable condition |
Accounting for payroll transactions |
Material Weakness |
Upgraded from material weakness to
reportable condition |
Disability compensation claims management |
Material Weakness |
Upgraded from material weakness to
reportable condition |
University of the District of Columbia
transaction processing |
Material Weakness |
Repeated as a material weakness |
Public Benefit Corporation transaction
processing |
Material Weakness |
Operations were discontinued. Comment not
repeated |
Lack of timely entry of transactions into
SOAR |
Reportable Condition |
Resolved. Comment not repeated. |
Accounting and reporting for
intra-District transactions |
Reportable Condition |
Resolved. Comment not repeated |
Failure to monitor expenditures against
open procurements |
Reportable Condition |
Repeated as a reportable condition |
Inadequate access controls over District
information systems |
Reportable Condition |
Resolved. Comment not repeated |
Timely reporting of budgetary revision |
Reportable Condition |
Repeated as a reportable condition |
|