LOUISIANA BOARD OF DRUG AND DEVICE DISTRIBUTORS STATE OF LOUISIANA

Transcription

1 LOUISIANA BOARD OF DRUG AND DEVICE DISTRIBUTORS STATE OF LOUISIANA FINANCIAL AUDIT SERVICES PROCEDURAL REPORT ISSUED AUGUST 31, 2016

2 LOUISIANA LEGISLATIVE AUDITOR 1600 NORTH THIRD STREET POST OFFICE BOX BATON ROUGE, LOUISIANA LEGISLATIVE AUDITOR DARYL G. PURPERA, CPA, CFE ASSISTANT LEGISLATIVE AUDITOR FOR STATE AUDIT SERVICES NICOLE B. EDMONSON, CIA, CGAP, MPA DIRECTOR OF FINANCIAL AUDIT ERNEST F. SUMMERVILLE, JR., CPA Under the provisions of state law, this report is a public document. A copy of this report has been submitted to the Governor, to the Attorney General, and to other public officials as required by state law. A copy of this report is available for public inspection at the Baton Rouge office of the Louisiana Legislative Auditor and at the office of the parish clerk of Board. This document is produced by the Louisiana Legislative Auditor, State of Louisiana, Post Office Box 94397, Baton Rouge, Louisiana in accordance with Louisiana Revised Statute 24:513. One copy of this public document was produced at an approximate cost of $0.50. This material was produced in accordance with the standards for state agencies established pursuant to R.S. 43:31. This report is available on the Legislative Auditor s website at When contacting the office, you may refer to Agency ID No or Report ID No for additional information. In compliance with the Americans With Disabilities Act, if you need special assistance relative to this document, or any documents of the Legislative Auditor, please contact Elizabeth Coxe, Chief Administrative Officer, at

3 Louisiana Legislative Auditor Daryl G. Purpera, CPA, CFE Louisiana Board of Drug and Device Distributors August 2016 Audit Control # Introduction The primary purpose of our procedures at the Louisiana Board of Drug and Device Distributors (Board) was to evaluate certain controls that the Board uses to ensure accurate financial reporting, compliance with applicable laws and regulations, and overall accountability over public funds. The Board was created within the Louisiana Department of Health as provided by Louisiana Revised Statute (R.S.) 37:3463. The Board is responsible for licensing all suppliers of legend drugs and devices that ship into or within Louisiana; inspecting all wholesalers and distributors domiciled in Louisiana; and certifying that out-of-state suppliers who ship into Louisiana are properly licensed in their respective states. Licenses are renewed by December 31 each year. Results of Our Procedures We evaluated the Board s operations and system of internal control through inquiry, observation, and review of its policies and procedures, including a review of the applicable laws and regulations. Based on the documentation of the Board s controls and our understanding of related laws and regulations, we performed procedures on selected controls and transactions relating to cash, licensing fees, credit cards, travel expenses, contracts, payroll and personnel, budget, and ethics. Follow-up on Prior-year Finding We reviewed the status of the prior-year finding reported in the procedural report dated October 7, We determined that management has resolved the prior-year finding related to segregation of duties regarding cash collections and accounts receivables by implementing a procedure for reconciling license renewals. 1

4 Louisiana Board of Drug and Device Distributors Procedural Report Current-year Finding Required Ethics Training not Completed The Board s employees did not complete the annual requirement of one hour of ethics education and training. By not completing the required ethics training, the employees are in violation of R.S. 42:1170(3)(a)(i). R.S. 42:1170(3)(a)(i) requires that all public servants receive a minimum of one hour of education and training on the Code of Governmental Ethics during each year of public employment or term of office. Management should ensure that all employees complete the required ethics training annually. Management concurred with the finding and provided a plan of corrective action (see Appendix A). Other Results of Our Procedures Cash The Board maintains an operating account and certificates of deposits that are used for general operations. The executive assistant participates in cash collection and disbursement, while the executive director participates in reconciliation activities. Cash balances totaled $1,819,780 at April 30, We performed procedures to reconcile cash transactions to the Board s general ledger, evaluated the segregation of duties between Board staff, and confirmed the timely preparation of bank account reconciliations. No exceptions were noted. Licensing Fees Approximately 98% of the Board s revenue collections are annual licensing fees. We traced selected licenses that were granted to supporting documentation to ensure the appropriate fees were collected in accordance with the fee schedule established by the Board. No exceptions were noted. Credit Cards The Board has two credit cards that are used by the executive director and executive assistant for travel and small purchases. We traced selected credit card purchases to supporting documentation and evaluated compliance with laws and regulations. We further confirmed the timely review of credit card statements. No exceptions were noted. Travel Expenses Travel expenses include travel for the Board s director while performing inspections, as well as reimbursement of travel expenses for Board members to attend meetings. Fiscal year 2016 travel 2

5 Louisiana Board of Drug and Device Distributors Procedural Report expenses totaled $10,961 through April 30, We traced selected travel expense reimbursements to supporting documentation and evaluated compliance with laws and regulations. No exceptions were noted. Contracts The Board contracted with Ouida Nugent; Danny Andrus; Shows, Cali, & Walsh LLP; Celia R Cangelosi; and SSA Consultants to perform accounting, inspection, legal, and consulting services, respectively. Fiscal year 2016 contract expenditures totaled $45,100 through April 30, We traced selected contract payments to contract terms and evaluated compliance with laws and regulations. No exceptions were noted. Payroll and Personnel Approximately 56% of the Board s expenditures relate to payroll costs as of April 30, Board personnel include the executive director, executive assistant, and one part-time employee. We traced selected employees salaries to contract terms or pay structure, evaluated controls over time and attendance records, and evaluated termination payments. No exceptions were noted. Budget The Board annually adopts a budget by majority vote of its board of directors. The budget through April 30, 2016, was approximately 3% higher for expenditures than the previous year to compensate for discretionary merit increases during fiscal year We confirmed the adoption of the Board s budget and evaluated variances between budgeted amounts and actual revenues and expenditures for reasonableness. No exceptions were noted. Ethics We evaluated evidence to support required annual ethics training was completed for certain Board members and employees, and that the Board took appropriate action on any ethics violations reported to the Board. We determined that the Board employees did not complete the required annual ethics training (see Current-year Finding section). We also determined that there were no ethics violations reported to the Board during fiscal year Comparison of Activity between Years We compared the most current and prior-year financial activity using the Board s general ledger and other system generated reports to identify trends and obtained explanations from management for any significant variances that could potentially indicate areas of risk. Management provided reasonable explanations for all significant variances. The following charts show the Board s fiscal year 2016 cash basis revenues and expenditures through April 30,

6 Louisiana Board of Drug and Device Distributors Procedural Report Fiscal Year 2016 Revenues, as of April 30, 2016 $12,383 2% $746,260 98% License Collections Other Revenues Source: Board's General Ledger Fiscal Year 2016 Expenditures, as of April 30, 2016 $148,067 44% $187,772 56% Payroll and Related Other Operating Expenses Source: Board's General Ledger Under Louisiana Revised Statute 24:513, this report is a public document, and it has been distributed to appropriate public officials. Respectfully submitted, AEB:JPT:BH:EFS:aa Daryl G. Purpera, CPA, CFE Legislative Auditor LBDDD

7 APPENDIX A: MANAGEMENT S RESPONSE

8

9 July 14, 2016 LOUISIANA BOARD OF DRUG AND D VIC DISTRIBUTORS Bricksome Avenue, Suite 8 Baton Rouge, LA (225) Fax (225) Lsbwdd@Lsbwdd.org Daryl G. Purpera, CPA, CFE Louisiana Legislative Auditor 1600 North Third Street Baton Rouge, LA Mr. Daryl G. Purpera: Please accept this letter as our official response to the reportable finding of our recent Financial Attestation for FY 2016 as provided in Mr. John Thiebaud's letter dated July 11, The Louisiana Board of Drug and Device Distributors (Board) maintains the highest level of commitment to the Louisiana Code of Ethics and Standards of Professional Conduct in the day to day affairs of the Board. Evidence of the Board's commitment to Ethics can be seen over the 26-year history of the Board. During this time, there has never been a claim, finding, or notice of "any kind" related to the ethics of the Board's Members or Employees. In fact, our Board Members, who are the "governing" body of our agency, consistently demonstrate a commitment to ethics and have never missed the required annual Ethics Training since the inception of the program in The benchmark for all Board Members and its Employees, regardless of title, background, or position, is to always put the public first in its effort to safeguard life and health and to promote the public welfare of the citizens of Louisiana. All Board governmental functions as well as office staff administration are completed with integrity, competence, and respect; with the greater good of public welfare at the core of every action. Formatted Reply 1.) Response to the finding. Ethics training for Board members has been completed annually per the requirements of Louisiana Revised Statue (R.S.) 42:1170(3)(a)(i) as public servants described in La. R.S. 42:1102(18){a)(ii) and (iii). Board staff, which consists of two full-time, unclassified employees and one part-time, temporary clerk, had not completed the annual training during FY 2016 because of the ambiguity of the requirement and our prior understanding of "governmental function" as related to the Board's laws and rulemaking. As only the Board's Members have authority to approve recommendations for laws or rules, not the employees. 2.) A reference to the finding by title. The findings reference Ethics Training for Board Employees. Bob Broadus Michael Davis Randall Brooks Kenneth Dugas Chad Gielen Chairman Vice-Chairman Secretary ft reas urer Board Member Board Member Jacob Dickson James Delatte Trion Horgan Kimberly B. Barbier George Lovecchio Board Member Board Member Board Member Executive Assistant Executive Director A. 1

10 July 15, 2016 Page2 3.) Concurrence Statement We agree with the finding: Board employees did not take the Ethics Training during FY 2016 covering the period of July 1, 2015 through June 30, ) Corrective Action. The Board's administrative Executive Director, George Lovecchio, completed the Ethics Training and obtained the required documentation I certificate. The training was completed on June 30, 2016 prior to the end of FY Contact Person: George Lovecchio, Executive Director, Board's Administrative Office Corrective Action Planned: In addition to George Lovecchio, Executive Director, voluntarily completing the ethics training, a proposed policy and procedure for ethics training requirement for Board employees will be presented to the Board at the next scheduled Board meeting for review and approval. The policy/procedure will propose requirement for Board Employees to complete Ethics Training per calendar year. 5.) Anticipated Completion Date. Upon approval of the proposed Policy and Procedure, referenced in the Corrective Action Plan in item 4) above, the anticipated policy/procedure should go into effect for the upcoming calendar year. In conclusion, the Board's mandate to protect the public welfare, above all else, has always been followed and has never been questioned or challenged by anyone in the history of the Board. The Board and its administrative office staff remain vigilant in this respect and we constantly strive to improve the professionalism of the Board through its Members and Employees at every level of public contact. We appreciate the hard work of the auditors utilized during this process and we welcome this opportunity for improvement. Sincerely, George Lovecchio Executive Director LOUISIANA BOARD OF DRUG AND DEVICE DISTRIBUTORS Bricksome Avenue, Suite B Baton Rouge, LA (225) fax (225) Lsbwdd@Lsbwdd.org A. 2

11 APPENDIX B: SCOPE AND METHODOLOGY We conducted certain procedures at the Louisiana Board of Drug and Device Distributors (Board) for the period from July 1, 2015, through June 30, Our objective was to evaluate certain internal controls the Board uses to ensure accurate financial reporting, compliance with applicable laws and regulations, and overall accountability over public funds. The scope of our procedures, which are summarized below, was significantly less than an audit conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States. We did not audit or review the Board s Annual Fiscal Report, and, accordingly, we do not express an opinion on that report. The Board s accounts are an integral part of the state of Louisiana s financial statements, upon which the Louisiana Legislative Auditor expresses opinions. We evaluated the Board s operations and system of internal control through inquiry, observation, and review of its policies and procedures, including a review of the laws and regulations applicable to the Board. Based on the documentation of the Board s controls and our understanding of related laws and regulations, we performed procedures on selected controls and transactions relating to cash, licensing fees, credit cards, travel expenses, contracts, payroll and personnel, budget, and ethics. We compared the most current and prior-year financial activity using the Board s general ledger and other system generated reports and obtained explanations from the Board s management for any significant variances. The purpose of this report is solely to describe the scope of our work at the Board and not to provide an opinion on the effectiveness of the Board s internal control over financial reporting or on compliance. Accordingly, this report is not intended to be and should not be used for any other purpose. B.1