STATE OF ARIZONA

DEBRA K. DAVENPORT, CPA

AUDITOR GENERAL

OFFICE OF THE

MELANIE M. CHESNEY
DEPUTY AUDITOR GENERAL

AUDITOR GENERAL

December 19, 2011

The Honorable Rick Murphy, Chair Joint Legislative Audit Committee The Honorable Carl Seel, Vice Chair Joint Legislative Audit Committee Dear Senator Murphy and Representative Seel: Our Office has recently completed an initial followup of the Department of Economic Security, Division of Children, Youth and FamiliesChild Protective ServicesContractor Payments regarding the implementation status of the 12 audit recommendations (including sub-parts of the recommendations) presented in the performance audit report released in March 2011 (Auditor General Report No. CPS-1101). As the attached grid indicates: 9 have been implemented, and 3 are in the process of being implemented. Our Office will conduct an 18-month followup with the Department on the status of those recommendations that have not yet been fully implemented. Sincerely,

Dale Chapman, Director Performance Audit Division DC:ss Attachment cc: Clarence Carter, Director Department of Economic Security

2910 NORTH 44

th

STREET SUITE 410 PHOENIX, ARIZONA

85018 (602) 553-0333 FAX (602) 553-0051

Department of Economic Security, Division of Children, Youth and FamiliesChild Protective Services Contractor Payments
Auditor General Report No. CPS-1101 Initial Follow-Up Report
Recommendation Finding 1:
1.1

Status/Additional Explanation

Division spent some monies inappropriately and should improve contractor payment oversight

The Division should use its newly allocated internal auditors to: a. Conduct ongoing reviews of contractor and nonrecurring payments, including targeted reviews of contractor payments made between July 2004 and February 2010, identify and recover overpayments, and develop recommendations for operational improvements; b. Analyze and investigate, as appropriate, the potential duplicate payments auditors identified but did not review and recover any monies paid in error; and c. Conduct ongoing monitoring of division automated payment data, including producing and reviewing a quarterly report listing potential duplicate payments. Implemented at 6 months

Implemented at 6 months

Implemented at 6 months

1.2

The Division should take steps to recover the more than $51,500 paid to contractors in error if it determines that it is cost-effective to do so. The Division should finalize implementation of written policies and procedures and processing staff are trained procedures. its development and payment-processing ensure all paymenton the policies and

Implemented at 6 months

1.3

Implemented at 6 months

1.4 The Division should complete consolidating its payment-processing operations and hire additional supervisory personnel to ensure paymentprocessing staff are properly supervised. 1.5 The Division should establish unique service authorization codes in the CHILDS system for all new client-specific invoiced services to improve the Divisions ability to better detect duplicate payments. The Department and the Division should ensure that division contracts clearly identify the types of costs that the Division will reimburse.

Implemented at 6 months

Implemented at 6 months

1.6

Implemented at 6 months

Recommendation Finding 2:

Status/Additional Explanation

Department paid nearly $1.4 million in late claims without following required procedures, but has taken action to help ensure it appropriately processes these claims in the future
Implemented at 6 months

2.1

The Department should ensure that its staff comply with its policy and procedures on processing prior year claims, including obtaining Department of Administration and/or legislative approval, as needed.

2.2 The Division should develop and implement policies and procedures to ensure payment-processing staff monitor contractors adherence with contractual time frames for submitting payment claims and alert their supervisors when a pattern of noncompliance occurs so that corrective action can be taken.

Implementation in process The Division finalized its payment-processing procedures, which include a log to track late payment claims. The Division reported that claims supervisors will review the logs monthly, and corrective action will be taken for contractors that show a pattern of noncompliance with contractual time frames for submitting payment claims.

Finding 3:
3.1

Division more consistently managing and safeguarding bus passes

Implementation in process A division internal review conducted in the fall of 2011 found that staff are not fully complying with the bus pass policy and procedures. For example, supervisors are not always documenting bus pass distribution to their staff in a timely manner or securing their bus pass inventory. Additionally, staff are not consistently completing affidavits that verify a bus pass has been issued to a client. Auditors will follow up at 18 months to determine if division staff are complying with the policy and procedures. Implementation in process A division internal review conducted in the fall of 2011 found that a lack of staff compliance with the bus pass policy and procedures and deficits in the policy prevented the Division from ensuring that the number of bus passes purchased is reconciled to the number of distributed and undistributed passes. For example, in addition to staff inconsistently completing the affidavit form verifying a bus pass was issued to a client, the Divisions bus pass policy does not include an inventory reconciliation requirement. Auditors will follow up at 18 months to determine if the Division has further revised its bus pass policy and procedures and whether staff are complying with the policy and procedures.

The Division should ensure that its staff comply with its policy and procedures on securing and issuing bus passes.

3.2

The Division should periodically reconcile bus pass logs and supporting documents to ensure that the number of passes purchased is reconciled to the number of distributed and undistributed passes.

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