October 31, Dear Senator Currie and Delegate Conway:

Transcription

1 State of Maryland Department of Human Resources Maryland s Human Services Agency Robert L. Ehrlich, Jr. Governor October 31, 2006 The Honorable Ulysses Currie Chair, Senate Budget and Taxation Committee Miller Senate Office Building 11 Bladen Street, 3 West Wing Annapolis, MD Michael S. Steele Lt. Governor Christopher J. McCabe Secretary The Honorable Norman H. Conway Chair, House Committee on Appropriations House Office Building 12 Bladen Street, Room 121 Annapolis, MD Dear Senator Currie and Delegate Conway: Enclosed is the Department of Human Resources' Report on the status of the Child Support Enforcement Administration s Legislative Audit. This report is submitted in response to the 2006 JCR, p 126, which states that "The Committees request that the Department of Human Resources (DHR) provide a status report detailing the implementation of the recommendations from the audit of the Child Support Enforcement Administration (CSEA) released May The department should submit a report detailing the status of implementing the audit recommendations. The committees are particularly concerned with CSEA's ability to reconcile the $2.1 million unreconciled difference and would like the department to specifically report on the disposition of funds." We appreciate this opportunity to provide information on the status of the corrective actions taken to resolve the legislative audit findings. This report shows that the Department has made substantial progress in addressing the many issues identified by the auditors. Please feel free to contact me at if you have any questions. Thank you. Sincerely, Christopher J. McCabe Secretary Enclosure

2 Department of Human Resources 311 West Saratoga Street, Baltimore, MD Report dated November 1, 2006: Status of the Legislative Audit of the Child Support Enforcement Administration Prepared for: Chairmen of the Senate Budget and Taxation Committee and House Committee on Appropriations As required by: 2006 Joint Chairmen s Report, Page 126

3 TABLE OF CONTENTS Page Overview... 1 Attachment A Current Status of Findings... 6 Attachment B Corrective Action Plan... 11

4 OVERVIEW The Legislative Auditors conducted a review of the Department of Human Resources Child Support Enforcement Administration (CSEA) for the period beginning December 12, 2000 and ending March 9, The Report issued by the Auditors dated May 17, 2005, contained 21 recommendations. Of the recommendations contained in the report, twelve (12) were repeat findings. Due to the serious nature of the audit findings and the number of repeat findings, CSEA received an unsatisfactory rating on the Audit. The Auditors conducted a follow-up review beginning in December 2005, and issued a report dated February 22, In this report, the Auditors selected eleven (11) of the twentyone findings and reported the progress of CSEA in resolving the findings reviewed. Based on this report, CSEA corrected one (1) finding and achieved substantial progress for one (1) finding. Of the remaining findings, eight (8) were in progress and one (1) showed minimal progress. The Legislative Auditors noted in this report the following: CSEA had initiated at least some corrective action on all 11 findings reviewed. Nevertheless most of the actions were still in progress as they related to complex issues that require extensive time and effort to resolve. If CSEA continues on this course and, if other areas do not deteriorate, our next audit should result in an improved accountability and compliance rating. The follow-up report was shared with the Legislature during the 2006 Legislative Session and CSEA provided its status update to the Committees during the hearings. Our report that follows is in response to the 2006 JCR, p 126, which states that: The Committees request that the Department of Human Resources (DHR) provide a status report detailing the implementation of the recommendations from the audit of the Child Support Enforcement Administration released May The department should submit a report detailing the status of implementing the audit recommendations. The committees are particularly concerned with CSEA's ability to reconcile the $2.1 million unreconciled difference and would like the department to specifically report on the disposition of funds. The Department has made substantial progress in addressing the 21 audit recommendations. To date, corrective actions are completed for 12 of the 21 findings and the 1

5 remaining nine (9) are in progress. Of the eleven (11) repeat findings, CSEA has completed corrective action on six and the remaining five are in progress. Several findings identified for the department are either resolved or in progress: FEDERAL INCENTIVES Finding: CSEA failed the federal Data Reliability Audit (DRA) for paternity establishment in Federal Fiscal Years 2003 and As a result, the Department was not eligible to receive federal incentive payments for that category. Response: Corrective actions were implemented to correct the deficiencies cited in the audit. The Federal Fiscal Year 2005, DRA found that CSEA passed the audit in all performance categories (paternity establishment, court order establishment, current support collected, cases paying arrears and cost effectiveness) and is eligible to earn incentives for each. UNDISBURSED FUNDS Finding: CSEA did not accumulate data on the extent of undisbursed funds on hand and outstanding checks, including those maintained by local offices; and did not promptly identify and resolve all amounts outstanding and forward funds representing abandoned property to the Comptroller of the Treasury. It was recommended that CSEA consider closing the bank accounts maintained by the local child support offices. Response: CSEA has made substantial progress in disbursing undistributed collections from the three bank accounts identified in the audit report. Over 82% of the $5,325, has been disbursed. In its continuing efforts to return these funds to the rightful owners, CSEA anticipates closing these three bank accounts in the near future. SOCIAL SECURITY NUMBERS Finding: CSEA is to continue its efforts to ensure that valid social security numbers are obtained and recorded for obligors, and that all investigative efforts be documented. Additionally, CSEA shall monitor the local child support offices to ensure that the manual case files are reviewed for all cases lacking social security numbers in CSES to ensure that all social security numbers reported to CSEA have been recorded 2

6 Response: CSEA implemented a standard process for case review that includes ensuring that identified social security numbers are placed in the case record. DRIVER S LICENSE SUSPENSION Finding: CSEA, in conjunction with the Motor Vehicle Administration (MVA), is to resolve referral problems and initiate timely follow-up for cases returned by the MVA due to system edits. Response: CSEA identified and resolved the automated system problem that prevented the reporting of possible match cases. Possible matches are now being available for use by local child support offices for identifying cases that should be referred for license suspension. BANK ACCOUNT RECONCILIATION Finding: Immediately CSEA must properly complete the January 2004 account reconciliation as well as all subsequent reconciliations to date; and perform proper reconciliation for all bank accounts and that these reconciliations be thoroughly reviewed and approved by supervisory personnel. Any differences identified as a result of these reconciliations must be investigated and resolved. Response: CSEA implemented procedures to complete monthly reconciliation of the bank account. In addition, CSEA was able to identify and resolve the causes of the $2.1 million variance. By conducting an exhaustive review of CSEA identified and resolved the reconciling items amounting to $2.1 million by correcting incorrect entries in the General Ledger. As a result, the entries in the General Ledger were restated based on the corrected amounts. These incorrect entries were in several categories to include Stop Payment Adjustments,Sweeps of Local Bank Accounts Not Recorded in Ledger, Other Transactions Not Recorded in the General Ledger (return of direct deposits, debit or credit memos issued by the bank and stop payment orders, etc.), local Automated Clearing House (ACH)/Direct Deposit Credit, Checks Issued, Differences in General Ledger Balances. Procedures are implemented to ensure that appropriate entries are made in the General Ledger and reconciliation is occurring as required. 3

7 CASH RECEIPTS Finding: CSEA is required to perform documented monitoring to ensure that procedures and controls required by the contract are implemented, and ensure that periodic independent audits of the contractor s operations are performed. Response: CSEA has implemented procedures to monitor the centralized collections contract. Along with daily reports of activities, CSEA will begin issuing quarterly reports of monitoring activity beginning October In addition, Statement on Auditing Standards (SAS-70) reviews of the contractor s system will be conducted on an annual basis. UNDELIVERABLE CHECKS Finding: All undeliverable checks must be recorded on a control log promptly upon receipt and that an employee independent of the returned check processing and record keeping functions verify the proper disposition of all returned checks. All undeliverable checks are to be adequately secured until proper disposition. CSEA must implement procedures to ensure that CSES is updated with correct address information. Response: CSEA implemented procedures and is maintaining a log of undelivered checks, which is available for review by the auditors. In addition, CSEA is processing address changes to local child support offices for update in the automated system. ACCOUNTS RECEIVABLE Finding: An accounts receivable must be established when funds disbursed are subsequently returned to taxing authorities. CSEA must review its records to ensure that an accounts receivable was established in all instances where disbursed funds were returned to the taxing authority. Delinquent tax recoupment accounts must be forwarded to the State Central Collection Unit, as required. Response: CSEA is establishing accounts receivables to recoup current collections that were issued erroneously. In addition, procedures are being developed for addressing the backlog. In addition to the issues highlighted above, CSEA has processes in place to address all twenty-one audit recommendations. Attachment A provides a summary of the status of 4

8 CSEA s progress in completing corrective actions on each of the recommendations. Attachment B provides CSEA s detailed corrective action plan and the current status of corrective actions taken or in progress. This Status Report clearly shows that CSEA is dedicated to improving the child support program s accountability and to delivering effective services to our customers. 5

9 ATTACHMENT A LEGISLATIVE AUDIT CURRENT STATUS OF FINDINGS 6

10 Findings 1. Federal Incentive Funds We recommend that the Child Support Enforcement Administration (CSEA) ensure that performance data submitted to the federal government is accurate in order to be eligible for federal incentive funds. 2. Undisbursed Funds We again recommend that CSEA accumulate data on the extent of undisbursed funds on hand and outstanding checks, including those maintained by local offices. We also recommend that CSEA promptly identify and resolve all amounts outstanding and forward funds representing abandoned property (that is, that have been outstanding for more than three years) to the Comptroller of the Treasury. Finally, we recommend that CSEA consider closing the bank accounts maintained by the local child support offices. 3. Contracts We recommend that CSEA, in conjunction with the Office of the Attorney General, ensure that all significant contract terms are clear to both parties before contracts begin. We also recommend that CSEA pay vendors in accordance with the terms of contracts. 4. Contractor Quality Assurance and Internal Audit Report We recommend that CSEA ensure that the contractor provides the periodic quality assurance and internal audit reports, as required. We also recommend that CSEA ensure that the contractor corrects deficiencies identified in the internal audit and quality assurance reports provided as well as deficiencies identified during CSEA s reviews. 5. Contracts We recommend that CSEA obtain documentation to verify, at least on a test basis, the propriety of the contractors expenditures billed to and paid by CSEA for cost-reimbursement contracts. 6. Federal Tax Offset We recommend that CSEA perform a comprehensive review of all accounts which were removed from the federal tax offset program to ensure that all accounts meeting participation criteria are now included. We also recommend that CSEA ensure that the necessary modifications have been made to CSES to prevent improper removal of accounts from the program. Current Status Completed August 14, 2006 In-progress December 2006 (In-process and ongoing) Completed January 26, 2006 Completed November 2005 In-progress December 2006 (In-process and ongoing) Completed January

11 Findings 7. Follow-up Notices for Wage Withholding We recommend that CSEA take immediate action to ensure that the aforementioned system error is corrected. We further again recommend that follow-up notices be sent to all employers who have not remitted child support payments in a timely manner. 8. Financial Institution Data Match (FIDM) Collection We recommend that CSEA ensure that the local offices seize delinquent obligor s bank accounts to the extent possible. 9. Social Security Numbers We again recommend that CSEA continue its efforts to ensure that valid social security numbers are obtained and recorded for obligors, and that all investigative efforts be documented. We also recommend that CSEA monitor the local child support offices to ensure that the manual case files are reviewed for all cases lacking social security numbers in CSES to ensure that all social security numbers reported to CSEA have been recorded. 10. Credit Bureaus/Debt Collections We recommend that CSEA perform periodic reviews of the contractor s collection activities to determine if all appropriate collection techniques were used on accounts assigned to the contractor. We also recommend that CSEA document the cost-effectiveness of using the services of credit bureaus. 11. Drivers License Suspension Referral Rejection by Motor Vehicle Administration (MVA) We again recommend that CSEA, in conjunction with the MVA, resolve referral problems and initiate timely follow-up for cases returned by the MVA due to system edits. 12. Drivers License Suspension Policy We recommend that CSEA, in conjunction with the MVA, request a formal legal opinion to determine if work-restricted licenses can be revoked under the current law and regulations. We also recommend that CSEA take appropriate action based on the legal opinion, such as revising State regulations or fostering legislation to allow the revocation of work-restricted licenses as a collection tool when deemed appropriate. 13. Oversight of Local Offices We again recommend that CSEA ensure that local offices comply with the regulations requiring timely follow-up with delinquent obligors. Current Status Completed April 2005 In-progress Fiscal Year 2008 (In-process and ongoing) Completed August 2006 In-progress Fiscal Year 2008 (In-process and ongoing) In-progress June 2007 (In-process and ongoing) Completed July 2006 Completed August

12 Findings 14. CRA Performance Goal We again recommend that CSEA ensure that performance goals are established for each entity that represent an appropriate level of effort, that the rationale for fluctuations from year to year is adequately documented, and that the performance of these entities is monitored. We also again recommend that CSEA verify actual performance data reported by the entities and compare the data to the performance goals. Furthermore, we again recommend for performance goals not met, that CSEA request corrective action plans, conduct appropriate follow-up, and impose financial penalties when warranted. Finally, we recommend that CSEA verify expenditure data submitted by contract agencies for reimbursement. 15. Cost Effectiveness for Local Offices To ensure that resources are used efficiently and to maximize incentive funds, we recommend that CSEA calculate the cost-effectiveness of individual local offices. In addition, we again recommend that CSEA establish cost-effectiveness goals for the local offices and require any local offices that do not meet the established goals to submit corrective action plans. 16. Bank Accounts We recommend that CSEA immediately properly complete the January 2004 account reconciliation as well as all subsequent reconciliations to date. We also again recommend that CSEA perform proper reconciliations for all bank accounts and that these reconciliations be thoroughly reviewed and approved by supervisory personnel. Furthermore, we again recommend that CSEA investigate and resolve any differences identified as a result of these reconciliations. 17. Bank Accounts We again recommend that the same employee not have the capability to both initiate and process manual refunds. Additionally, we again recommend that all refund transactions be subject to a supervisory review and approval process. We also recommend that the ability to process refunds be restricted to those employees who need this capability to perform their job responsibilities. We advised CSEA on accomplishing the necessary separation of duties using existing personnel. 18. Security Access to CSES CSEA had not established adequate controls to prevent or detect unauthorized changes to critical data in CSES. Current Status Completed August 2006 In-progress January 2007 (In-process and ongoing) In-progress June 2007 (In-process and ongoing) In-progress June 2007 (In-process and ongoing) In-progress January 2007 (In-process and ongoing) 9

13 Findings 19. Cash Receipts We again recommend that CSEA perform documented monitoring to ensure that procedures and controls required by the contract are implemented. We also again recommend that CSEA ensure that periodic independent audits of the contractor s operations are performed. 20. Undeliverable Checks We again recommend that all undeliverable checks be recorded on a control log promptly upon receipt and that an employee independent of the returned check processing and record keeping functions verify the proper disposition of all returned checks. In addition, we recommend that all undeliverable checks be adequately secured until proper disposition. Furthermore, we again recommend that CSEA implement procedures to ensure that CSES is updated with correct address information. 21. Accounts Receivable We recommend that an accounts receivable be established when funds disbursed are subsequently returned to taxing authorities. We also recommend that CSEA review its records to ensure that an accounts receivable was established in all instances where disbursed funds were returned to the taxing authority. We also recommend that delinquent tax recoupment accounts be forwarded to the State Central Collection Unit, as required. Current Status Completed August 2005 Completed December 2005 Completed July

14 ATTACHMENT B LEGISLATIVE AUDIT CORRECTIVE ACTION PLAN 11

15 Issue: Federal Incentive Funds Recommendation 1 We recommend that the Child Support Enforcement Administration (CSEA) ensure that performance data submitted to the federal government is accurate in order to be eligible for federal incentive funds. In FFY 2003 CSEA successfully resolved the Data Reliability Audit (DRA) paternity establishment error conditions that related to duplicate cases and the inclusion of cases outside the review period. However, the FFY 2004 DRA uncovered new error categories. To be proactive for future DRA reviews, the following activities have been completed: (Completed) (1) A statewide case review and case clean-up project was conducted in Summer of 2005 for FFY 2005 DRA. (2) In the Fall of 2005, refresher training was conducted for all local staff on paternity establishment policy and protocols for entering data into the child support automated system. (3) In September 2006, CSEA established a Quality Control Review for use by local child support offices in reviewing cases and implementing corrective actions. Orientation sessions on the Quality Control Review instrument are being held in July (4) CSEA is in the process of reorganizing the Internal Review Division to better address future audit concerns. In addition to its current functions, the office now conducts DRA type reviews to identify and resolve errors prior to submitting cases for the federal review. By proactively getting in front of corrective action process, CSEA increases the chance of passing the DRA and earning incentives. (5) On August 14, 2006, the Federal Auditor from the Office of Child Support Enforcement (OCSE) conducted the DRA Exit Conference and informed the Department of Human Resources that CSEA passed the Data Reliability Audit. 12

16 Issue: Undisbursed Funds Recommendation 2 We again recommend that CSEA accumulate data on the extent of undisbursed funds on hand and outstanding checks, including those maintained by local offices. We also recommend that CSEA promptly identify and resolve all amounts outstanding and forward funds representing abandoned property (that is, that have been outstanding for more than three years) to the Comptroller of the Treasury. Finally, we recommend that CSEA consider closing the bank accounts maintained by the local child support offices. CSEA is resolving all amounts outstanding for more than three years and to track undistributed collections by jurisdiction. CSEA is using all available resources to research and distribute all identifiable funds and move any undistributed funds to Abandoned Property. To date, the following activities have been completed. (In Progress) 1) In Baltimore City, the total amount for disbursement in the Baltimore Office of Support Enforcement (BOSE) Interest Checking Account #8906 was $704, As of June 30, 2006, $693, (98.45%) has been disbursed. The balance to be disbursed is $10, (1.55%.) A total of 2,189 checks have been issued since November 30, ) In Baltimore City, the total amount for disbursement in the BOSE Depository/Trust Account #0767 was $2,713, As of June 30, 2006, $2,659, (98.01%) has been disbursed. The balance to be disbursed is $54, (1.99%.). 3) In Prince George's County, as of August 18, 2006, $1,035, (54.29%) been disbursed to payees by issuing 1,514 checks. The balance of $871, is in undistributed funds. 4) CSEA staff continues to process funds that remained in the three bank accounts through identification of current addresses, issuing checks to rightful owners. Issue: Contracts Recommendation 3 We recommend that CSEA, in conjunction with the Office of the Attorney General, ensure that all significant contract terms are clear to both parties before contracts begin. We also recommend that CSEA pay vendors in accordance with the terms of contracts. CSEA agrees that the contract for processing child support collections centrally was ambiguous and led to differing interpretations about the meaning. To minimize any issues related to the development of Requests for Proposal (RFP), the following activities have been completed. 13

17 Issue: Contracts (Cont.) Recommendation 3 (Cont) (Completed) (1) In October 2005, CSEA developed internal procedures for contract development that include requirements for coordination with the Department of Human Resources (DHR) Procurement Division, Office of Attorney General, Department of Budget and Management (DBM) and other offices that may be needed in the process. (2) In November 2005, CSEA developed internal contract management procedures, which includes requirements for contract monitoring and reporting. These procedures describe the post award orientation meeting requirements. (3) To ensure that payments under the contract are made in accordance with the terms of the contract, CSEA developed a sample invoice that mirrored the cost form and issued with the RFP in April (4) On January 26, 2006, CSEA completed staff training on the internal contract development and management procedures. Issue: Contractor Quality Assurance and Internal Audit Report Recommendation 4 We recommend that CSEA ensure that the contractor provides the periodic quality assurance and internal audit reports, as required. We also recommend that CSEA ensure that the contractor corrects deficiencies identified in the internal audit and quality assurance reports provided as well as deficiencies identified during CSEA s reviews. CSEA agrees that the contractor should provide the periodic quality assurance and internal audit reports, as required by the RFP. CSEA will ensure that the contractor corrects deficiencies identified in the internal audit and quality assurance reports provided as well as deficiencies identified during CSEA s reviews. To date, the following activities have been completed. (Completed ) (1) As of October 2005, the contractor provided all overdue quality assurance and internal audit reviews and continues to provide the quality assurance and internal audit reviews for both Baltimore City and Queen Anne s County. (2) As of February 2005, the contractor corrected all case deficiencies identified in the CSEA enforcement review dated November (3) CSEA continues to review and track the cases identified with deficiencies in the contractor quality assurance and internal audit reviews reports, as required. The contractor continues to be responsive in making corrections to the cases. 14

18 Issue: Contracts Recommendation 5 We recommend that CSEA obtain documentation to verify, at least on a test basis, the propriety of the contractors expenditures billed to and paid by CSEA for cost-reimbursement contracts. CSEA agrees to obtain the documentation to verify, the propriety of the contractors expenditures billed to and paid by CSEA for cost reimbursement contracts. CSEA will ensure, in the future, that documentation is obtained from vendors to support costs identified in invoices. To date, the following activities have been completed. (In Progress) 1) In October 2005, CSEA developed and implemented internal procedures for contract development that include requirements for coordination with the Department of Human Resources (DHR) Procurement Division, Office of Attorney General, Department of Budget and Management (DBM) and other offices that may be needed in the process. 2) In November 2005, CSEA developed internal contract management procedures, which includes requirements for contract monitoring and reporting. These procedures describe the post award orientation meeting requirements. 3) Effective January 26, 2006, all new contracts and intergovernmental agreements will include these requirements. 4) On May 4, 2006, a letter was sent to Maximus Inc. for verification of cost reimbursement. 5) On July 19, 2006, CSEA received supporting document of the invoices paid by CSEA to Maximus Inc. On August 2006, CSEA determined that the material provided by Maximus was inadequate. 6) On September 20, 2006, CSEA notified Maximus Inc. that the material submitted are not sufficient to satisfy CSEA s Audit. CSEA established a deadline of the end of October for Maximus Inc. to provide the Administration with the appropriate supporting documents. 15

19 Issue: Federal Tax Offset Recommendation 6 We recommend that CSEA perform a comprehensive review of all accounts which were removed from the federal tax offset program to ensure that all accounts meeting participation criteria are now included. We also recommend that CSEA ensure that the necessary modification have been made to CSES to prevent improper removal of accounts from the program. CSEA agrees to review cases from the federal tax refund offset program. CSEA will ensure that the necessary modifications will be made to the automated Child Support Enforcement System (CSES) to prevent improper removal of accounts. CSEA will also conduct a comprehensive review of accounts that were decertified. To date the following activities have been completed. 1) In December 2005, The child support automated system was modified to prevent the improper removal of accounts. 2) In January 2006, the cases were reviewed after the migration to determine how many were certified in the current year, how many were decertified and were those decertification compliant a result of the rules, regulations and policies rather than a system problem. 3) The tax file is updated and sent monthly to the federal office; therefore, all cases that should have been certified are picked up. Issue: Follow-up Notices for Wage Withholding Recommendation 7 We recommend that CSEA take immediate action to ensure that the aforementioned system error is corrected. We further again recommend that follow-up notices be sent to all employers who have not remitted child support payments in a timely manner. The child support computer system has been enhanced to automatically generate the Employer Delinquency notices. To date the following activities have been completed. (Completed) 1) The child support automated system was modified in April 2005 to automatically generate the Employer Delinquency notices. 16

20 Issue: Financial Institution Data Match (FIDM) Collection Recommendation 8 We recommend that CSEA ensure that the local offices seize delinquent obligor s bank accounts to the extent possible. CSEA agrees that obligors bank accounts should be seized to the greatest extent possible. To do so, full automation is required. Until such time that CSEA can fully automate the seizure of bank accounts, local staff will manually select a limited number of cases for enforcement. To date the following activities have been completed.. (In Progress) 1) In October 2005, CSEA sent surveys to the local offices to evaluate use of administrative garnishment. 2) In November 2005, the local offices began receiving reports from CSEA that identify cases for administrative garnishment. 3) CSEA participates in a consortium of 15 states that enter into a contract with a vendor to match our child support cases with financial institutions. CSEA's is negotiating a contract for these services. 4) CSEA has established a workgroup to develop the program design for Administration garnishment; first meeting is scheduled for October Full project implementation is projected for Fiscal Year

21 Issue: Social Security Numbers Recommendation 9 We again recommend that CSEA continue its efforts to ensure that valid social security numbers (SSN) are obtained and recorded for obligors, and that all investigative efforts be documented. We also recommend that CSEA monitor the local child support offices to ensure that the manual case files are reviewed for all cases lacking SSNs in CSES to ensure that all SSNs reported to CSEA have been recorded. CSEA agrees to re-establish the practice of monitoring all cases without social security numbers (SSNs) for the obligor and mail to the local offices for follow-up. CSEA agrees to implement a Quality Control Review (QCR) for local offices. The QCR will include requirements for ensuring that SSNs are entered into the child support enforcement system (CSES) when they are identified or that actions taken to locate SSNs are documented in the CSES case action logs. (Completed) (1) In November 2005, CSEA re-established the practice of monitoring all cases without social security numbers (SSNs). (2) In September 2006, CSEA implemented a Quality Control Review (QCR) for local offices. The Quality Control Review tool is designed to ensure that cases are processed properly and in a timely manner. Orientation sessions were conducted in July A statewide implementation was conducted in September (3) The monitoring of the SSNs will be an ongoing process. 18

22 Issue: Credit Bureaus/Debt Collections Recommendation 10 We recommend that CSEA perform periodic reviews of the contractor s collection activities to determine if all appropriate collection techniques were used on accounts assigned to the contractor. We also recommend that CSEA document the costeffectiveness of using the services of credit bureaus. (In Progress) (Debt Collection GC Services) Substantial Progress 1) CSEA implemented procedures for monitoring the debt collections case closing contract to determine contract compliance. 2) This contract was allowed to expire in order to use funds in other priority areas, CSEA is determining the cost effectiveness of this service. 3) In the Fiscal Year 2007 budget, CSEA obtained additional funds for debt collections services. CSEA has established a workgroup to begin drafting an RFP. Credit Bureaus 1) CSEA advised local offices of vendors who provide location information over the Internet. 2) Local offices that use these services document the cost effectiveness of their activities. 19

23 Issue: Drivers License Suspension Referral Rejection by Motor Vehicle Administration (MVA) Recommendation 11 We again recommend that CSEA, in conjunction with the Motor Vehicle Administration (MVA), resolve referral problems and initiate timely followup for cases returned by the MVA due to system edits. CSEA is working with MVA to develop a more efficient system interface (possibly using social security numbers) for identifying potential matches. The following activities have been completed to date. (In Progress) 1) Completed analysis in November 2005 that identified the issues preventing system processing of the possible matches report. 2) Completed corrections to system coding and testing in December ) In December 2005, issued report to local offices on possible matches, and in appropriate cases licenses were suspended. 4) In March 2006, CSEA completed an evaluation report on matching criteria with MVA, to include SSNs. 5) By December 2006 CSEA will initiate meetings with the MVA to share the Administration s matching proposal to develop a more efficient system interface. 6) June 2007, full project implementation is projected. 20

24 Issue: Drivers License Suspension Policy Recommendation 12 We recommend that CSEA, in conjunction with the MVA, request a formal legal opinion to determine if work-restricted licenses can be revoked under the current law and regulations. We also recommend that CSEA take appropriate action based on the legal opinion, such as revising State regulations or fostering legislation to allow the revocation of workrestricted licenses as a collection tool when deemed appropriate Issue: Drivers License Suspension Policy CSEA pursued a formal opinion from the Attorney General to determine if the current law allows CSEA to request MVA to suspend a work-restricted license. The following activities have been completed. (Completed) (1) In September 9, 2005, a request for legal opinion was submitted to the Office of Attorney General regarding CSEA s authority to seek suspension of a workrestricted driver's license for non-payment of child support. (2) In March 31, 2006, the legal opinion was submitted by the Office of Attorney General. The response was that relevant statutes do not authorize CSEA to seek revocation of a work-restricted license. (3) CSEA worked with local offices to use current policy that permits a pay agreement in lieu of a suspension referral or request for a work-restricted license. The pay agreement establishes a schedule and a specified amount for payment of past due child support. This policy promotes work activities instead of suspending the parent s ability to drive to work and potentially reducing the parent s capability of paying support for the child. Regulatory and/or legislative changes are not required. 21

25 Issue: Oversight of Local Offices Recommendation 13 We again recommend that CSEA ensure that local offices comply with the regulations requiring timely follow-up with delinquent obligors. A corrective action plan has been developed that involves implementation of the Quality Control Review (QCR). The QCR is designed to ensure that cases are processed properly. The QCR will require the random selection of a statistically valid sample of cases on a quarterly basis. The supervisor will be required to review cases, document the review results, indicate what, if any, action needs to be taken, and follow-up to determine that the required action was completed by the caseworker. Action Plan (Completed) 1) CSEA developed a corrective action plan that involves the implementation of the Quality Control Review (QCR). 2) The Quality Control Review is designed to ensure that cases are processed properly and in a timely manner. 3) Orientation sessions were conducted in July A statewide implementation started in September

26 Issue: CRA Performance Goal Recommendation 14 We again recommend that CSEA ensure that performance goals are established for each entity that represent an appropriate level of effort, that the rationale for fluctuations from year to year is adequately documented, and that the performance of these entities is monitored. We also again recommend that CSEA verify actual performance data reported by the entities and compare the data to the performance goals. Furthermore, we again recommend for performance goals not met, that CSEA request corrective action plans, conduct appropriate follow-up, and impose financial penalties when warranted. Finally, we recommend that CSEA verify expenditure data submitted by contract agencies for reimbursement. CSEA agrees to review, the performance goal criteria and established a base year for service providers to use for meeting performance goals. CSEA is taking appropriate steps to monitor service providers performance. CSEA agrees with the recommendation to verify expenditure data. CSEA has developed a process to support this activity. To date the following activities have been completed. (Completed) 1) In December 2005, CSEA developed procedures for establishing performance goals that represent an appropriate level of effort. 2) In October 2005, CSEA developed internal contract monitoring procedures that will include the requirement for verifying contract expenditures. 3) In July 2005, CSEA re-instituted the monitoring of CRA Agreement performance. Monitoring includes comparing data reported by the entities to performance goals and requiring Corrective Action Plan from CRA whose performance is below contract goals. 23

27 Issue: Cost Effectiveness for Local Offices Recommendation 15 To ensure that resources are used efficiently and to maximize incentive funds, we recommend that CSEA calculate the costeffectiveness of individual local offices. In addition, we again recommend that CSEA establish costeffectiveness goals for the local offices and require any local offices that do not meet the established goals to submit corrective action plans. CSEA agrees that it would be a useful tool to be able to measure cost effectiveness for each local jurisdiction. CSEA will determine the feasibility of developing such a monitoring tool. To date the following activities have been completed. (In Progress) 1) In July 2006, CSEA developed a plan for measuring the cost effectiveness of each local office. 2) Plan includes determining cost components for each office, gathering FFY 04 expenditure and collection data for each office, establishing baselines for each office using FFY 04 data, establishing cost effectiveness goals for each office beginning in October 2006, implementing monitoring and corrective action procedures by October ) In October 2006, full project implementation is projected. 4) In January 2007, CSEA will establish corrective action procedures, if appropriate. Issue: Bank Accounts Recommendation 16 We recommend that CSEA immediately properly complete the January 2004 account reconciliation as well as all subsequent reconciliation to date. We also again recommend that CSEA perform proper reconciliation for all bank accounts and that these reconciliation be thoroughly reviewed and approved by supervisory personnel. CSEA agrees with the recommendation to take immediate action to complete the January 2004 bank reconciliation as well as all subsequent reconciliation to date. To date the following activities have been completed. (In Progress) 1) In September 2005, CSEA set-up a reconciliation process and trained personnel. 2) The bank account reconciliation is completed for the months of April 2003 August ) Bank reconciliation will be an on going monthly process. 24

28 Issue: Bank Accounts Recommendation 16 (Cont.) Furthermore, we again recommend that CSEA investigate and resolve any differences identified as a result of these reconciliation. (Cont.) 4) CSEA identified and resolved the reconciling items amounting to $2.1 million by correcting incorrect entries in the General Ledger. As a result, the entries in the General Ledger were restated based on the corrected amounts. These incorrect entries were in several categories to include Stop Payment Adjustments, Sweeps of local Bank Accounts Not Recorded in Ledger, Other Transactions Not Recorded in the General Ledger (return of direct deposits, debit or credit memos issued by the bank and stop payment orders, etc.), local Automated Clearing House (ACH)/Direct Deposit Credit, Checks Issued, and Differences in General Ledger Balances. Procedures are implemented to ensure that appropriate entries are made in the General Ledger and reconciliation is occurring as required. Issue: Bank Accounts Recommendation 17 We again recommend that the same employee not have the capability to both initiate and process manual refunds. Additionally, we again recommend that all refund transactions be subject to a supervisory review and approval process. We also recommend that the ability to process refunds be restricted to those employees who need this capability to perform their job responsibilities. We advised CSEA on accomplishing the necessary separation of duties using existing personnel. CSEA agrees to define separation of duties so that no one employee is authorized to create and approve a batch. CSEA will initiate a request for system change to create a payment review and batch approval queue that prevents the employee who creates a batch from approving the same batch. To date the following action has been taken. (In Progress) 1) In December 2005, CSEA has in place policy and procedures that require supervisory approval of batches. 2) In November 2005, CSEA had submitted a work request to modify the system to allow for the separation of duties. 3) CSEA is currently reviewing its staff resources in order to determine the feasibility of restricting system access, so that there is a separation of duties between persons who create batches and those who approve them. 4) In June 2007, full project implementation is projected. 25

29 Issue: Security Access to CSES Recommendation 18 CSEA had not established adequate controls to prevent or detect unauthorized changes to critical data in CSES. CSEA agrees to re-establish procedures to conduct periodic reviews of employee system access to ensure that their level of access is limited by their job duties. CSEA will ensure that the system access capabilities of former employees are promptly terminated. (In Progress) 1) By December 2006, CSEA will re-establish procedures for performing annual security audits of all user roles to detect and eliminate conflicts. 2) Also in March 2007, CSEA will request a modification to the automated system to allow for supervisory review and approval. Issue: Cash Receipts Recommendation 19 We again recommend that CSEA perform documented monitoring to ensure that procedures and controls required by the contract are implemented. We also again recommend that CSEA ensure that periodic independent audits of the contractor s operations are performed. CSEA agrees that a periodic independent audit of the vendor s operation should be performed and has issued a bid solicitation for a Statement on Auditing Standards -70 (SAS-70) audit. The SAS 70 audit should be completed by the end of the state fiscal year To date the following activities have been completed. (Completed) 1) As of August 2005, CSEA is conducting documented monitoring of the State Disbursement Unit (SDU) contractor to include Agenda and minutes of bi-weekly meetings. 2) The SAS 70 audit was completed and submitted to CSEA in July The auditor found no deficiencies. 3) Annual SAS-70 reviews will be conducted under the new (SDU) contract. 26

30 Issue: Undeliverable Checks Recommendation 20 We again recommend that all undeliverable checks be recorded on a control log promptly upon receipt and that an employee independent of the returned check processing and record keeping functions verify the proper disposition of all returned checks. In addition, we recommend that all undeliverable checks be adequately secured until proper disposition. Furthermore, we again recommend that CSEA implement procedures to ensure that CSES is updated with correct address information.. CSEA agrees that adequate control were not established over undeliverable checks. CSEA will ensure that CSES is updated with correct address information. CSEA will to re-establish procedures to provide local offices with information necessary to verify changed addresses and update CSES. To date the following activities have been completed. (Completed) 1) In June 2005, procedures for undeliverable checks were established and implemented, 2) The returned check daily logs are maintained and accessible for audit review. 3) In December 2005, procedures were implemented and address changes are being processed to local offices for input into the child support automated system. 27

31 Issue: Accounts Receivable Recommendation 21 We recommend that an accounts receivable be established when funds disbursed are subsequently returned to taxing authorities. We also recommend that CSEA review its records to ensure that an accounts receivable was established in all instances where disbursed funds were returned to the taxing authority. We also recommend that delinquent tax recoupment accounts be forwarded to the State Central Collection Unit, as required.. Current Status Of Corrective Or In Process CSEA agrees that account receivables, tax recoupment (TR) accounts were not established when funds disbursed were subsequently returned to taxing authorities. CSEA will re-establish procedures by issuing 30-, 60- and 90-day notices to obligors and submitting to the Central Collection Unit for collection, cases in which there were no payments or no contact with the obligor. The following activities have been completed. (Completed) 1) In July 2005, Accounts receivables for tax recoupment were established. 2) Letters are issued to recoup tax refunds that are returned due to injured spouse claims. 3) Currently, cases are being referred to the Central Collections Unit if there is no responses from the debtor after the third notice. 28