[nfbmi-talk] has anyone seen more recent similar reports from auditor general?

joe harcz Comcast joeharcz at comcast.net
Mon Aug 30 23:46:59 UTC 2010


Especially in accessable format...This is converted from pdf...

Joe
2004 MCB Performance Audit from Michigan Auditor General Converted April 19 2010 from pdf

PERFORMANCE AUDIT 

OF THE 

MICHIGAN COMMISSION FOR THE BLIND 

DEPARTMENT OF LABOR AND ECONOMIC GROWTH 

AND 

FAMILY INDEPENDENCE AGENCY 

October 2004 

43-231-03 

“...The auditor general shall conduct post audits of financial 

transactions and accounts of the state and of all branches, 

departments, offices, boards, commissions, agencies, 

authorities and institutions of the state established by this 

constitution or by law, and performance post audits thereof.” 

– Article IV, Section 53 of the Michigan Constitution 

Audit report information may be accessed at: 

http://audgen.michigan.gov 

Michigan Office of the Auditor General 

REPORT SUMMARY 

Performance Audit Report Number: 

43-231-03 

Michigan Commission for the Blind 

Department of Labor and Economic Growth 

Released:

and Family Independence Agency October 2004 

Act 260, P.A. 1978, as amended, created the Michigan Commission for the Blind 

(MCB). MCB consists of five commissioners who are appointed for three-year terms 

by the Governor. MCB is responsible for the implementation of programs to help 

people who are blind to achieve social and economic independence. MCB is the 

vocational rehabilitation service agency for the blind in Michigan. Its mission is to 

provide opportunities to individuals with visual handicaps to achieve employability 

and/or function independently in society. 

Audit Objectives: 

1. To assess MCB's effectiveness and 

efficiency in administering its 

programs and services. 2. To assess the effectiveness of MCB's 

services provided to individuals to 

enable them to overcome their visual 

disability and obtain the maximum 

degree of self-support and self-care. ~~~~~~~~~~ 

Audit Conclusions: 

1. MCB was generally effective and 

efficient in administering its programs 

and services. However, we noted 

reportable conditions related to the 

client tracking system, Social Security 

reimbursement process, procurement 

card purchases, Business Enterprise 

Program equipment inventory record, 

the client equipment inventory record, 

and purchased services (Findings 1 

through 6). 2. MCB was generally effective in 

providing services to individuals to 

enable them to overcome their visual 

disability and obtain the maximum 

degree of self-support and self-care. 

However, we noted a reportable 

condition related to Independent Living 

(IL) Program case management 

procedures (Finding 7). ~~~~~~~~~~ 

Agency Response: 

Our report contains 7 findings and 8 

corresponding recommendations. The 

Department of Labor and Economic 

Growth's preliminary response indicated 

that MCB agrees with all of the 

recommendations and that it has 

implemented or will implement corrective 

action. 

~~~~~~~~~~ 

Background: 

Throughout the period covered by this 

audit, MCB was organizationally within the 

Family Independence Agency. However, 

the Governor, through Executive Order 

No. 2003-18, transferred MCB as a type II 

transfer to the Department of Labor and 

Economic Growth, effective December 7, 

2003. 

~~~~~~~~~~ 

A copy of the full report can be 

obtained by calling 517.334.8050 

or by visiting our Web site at: 

http://audgen.michigan.gov 

Michigan Office of the Auditor General 

201 N. Washington Square 

Lansing, Michigan 48913 

Thomas H. McTavish, C.P.A. 

Auditor General 

Scott M. Strong, C.P.A., C.I.A. 

Deputy Auditor General 

STATE OF MICHIGAN 

OFFICE OF THE AUDITOR GENERAL

201 N. WASHINGTON SQUARE

LANSING, MICHIGAN 48913

(517) 334-8050 THOMAS H. MCTAVISH, C.P.A. 

FAX (517) 334-8079 AUDITOR GENERAL October 7, 2004 

Ms. Jo Ann Pilarski, Chairperson 

Michigan Commission for the Blind 

Victor Center 

Lansing, Michigan 

and 

Mr. David C. Hollister, Director 

Department of Labor and Economic Growth 

Ottawa Building 

Lansing, Michigan 

and 

Marianne Udow, Director 

Family Independence Agency 

Grand Tower 

Lansing, Michigan 

Dear Ms. Pilarski, Mr. Hollister, and Mrs. Udow: 

This is our report on the performance audit of the Michigan Commission for the Blind, 

Department of Labor and Economic Growth (DLEG) and Family Independence Agency. 

This report contains our report summary; description of agency; audit objectives, scope, and 

methodology and agency responses and prior audit follow-up; comments, findings, 

recommendations, and agency preliminary responses; and a glossary of acronyms and terms. 

Our comments, findings, and recommendations are organized by audit objective. The agency 

preliminary responses were taken from DLEG's responses subsequent to our audit fieldwork. 

The Michigan Compiled Laws and administrative procedures require that the audited agency 

develop a formal response within 60 days after release of the audit report. 

We appreciate the courtesy and cooperation extended to us during this audit. 

Stamp comment

Auditor General43-231-03 This page left intentionally blank. 

4 

43-231-03 

TABLE OF CONTENTS 

MICHIGAN COMMISSION FOR THE BLIND 

DEPARTMENT OF LABOR AND ECONOMIC GROWTH AND 

FAMILY INDEPENDENCE AGENCY 

Page 

INTRODUCTION 

Report Summary 1 

Report Letter 3 

Description of Agency 7 

Audit Objectives, Scope, and Methodology and Agency Responses 

and Prior Audit Follow-Up 9 

COMMENTS, FINDINGS, RECOMMENDATIONS, 

AND AGENCY PRELIMINARY RESPONSES 

Effectiveness and Efficiency in Administering Programs and Services 12 

1. Client Tracking System 12 

2. Social Security Reimbursement Process 14 

3. Procurement Card Purchases 18 

4. BEP Equipment Inventory Record 20 

5. Client Equipment Inventory Record 23 

6. Purchased Services 24 

Effectiveness of Services Provided to Overcome Visual Disability and Obtain 

Self-Support and Self-Care 25 

7. IL Program Case Management Procedures 26 

5 

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GLOSSARY 

Glossary of Acronyms and Terms 

6 

43-231-03 

Description of Agency 

Act 260, P.A. 1978, as amended, created the Michigan Commission for the Blind 

(MCB). MCB consists of five commissioners who are appointed for three-year terms by 

the Governor with the advice and consent of the Senate. MCB is responsible for the 

implementation of programs to help people who are blind to achieve social and 

economic independence. 

MCB is the vocational rehabilitation service agency for the blind in Michigan. Its 

mission* is to provide opportunities to individuals with visual handicaps to achieve 

employability and/or function independently in society. Services are provided through 

the following programs: Vocational Rehabilitation Program, Independent Living (IL) 

Program, MCB Training Center, Business Enterprise Program (BEP), Youth Low Vision 

Program, and Deaf-Blind Program: 

a. The Vocational Rehabilitation Program provides vocational rehabilitation training 

for the blind under the federal Rehabilitation Act of 1973. Services provided 

include diagnostic evaluations, personal and vocational counseling, college and 

technical school training, job development and placement, post-employment 

training, and the provision of low vision aids. To be eligible for these services, 

clients must be legally blind and the impairment must result in a substantial 

impediment to employment. b. The IL Program uses State and federal funding to provide services to older blind 

individuals so they can remain independent in their own homes. Services provided 

include information and referral, orientation and mobility, adaptive aids and 

appliances, daily living skills, counseling, and Braille and other communication 

methods. c. The MCB Training Center is a residential training facility located in Kalamazoo. 

The Center serves approximately 400 individuals each year ranging in age from 15 

to 80. The primary focus is to assist individuals in developing more positive 

attitudes toward blindness and to help them acquire the needed skills. Services 

provided include personal adjustment training; skills of blindness training; college 

preparation and technical training; Braille and other communication methods; * See glossary at end of report for definition. 7 

43-231-03 

orientation and mobility; BEP training; and training in adaptive kitchen skills, 

computer skills, and industrial arts and crafts. 

d. BEP is the State licensing agency for blind persons operating vending stands and 

cafeterias in State and federal buildings as well as highway rest stops and visitor 

centers. BEP was established by the federal Randolph-Sheppard Act of 1936, as 

amended, and Act 260, P.A. 1978, as amended. MCB trains vocational 

rehabilitation clients to become BEP operators and purchases equipment and initial 

inventory for their facilities. Promotional agents provide ongoing support and 

oversight to the BEP operators. e. The Youth Low Vision Program is a State-funded program providing low vision 

evaluations and devices to students who are referred by local school districts. 

Services provided include low vision evaluations, telescopic and microscopic lens 

systems, prescriptive and other vision devices, and low vision training. f. The Deaf-Blind Program, in conjunction with other State agencies, provides 

rehabilitation and independent living services to clients with combined hearing and 

visual impairments. These services may be provided in the workplace, at home, 

and in the community. MCB expended $15,609,511 in fiscal year 2001-02 and had 2,675 active clients in all 

program areas and 91 employees as of March 24, 2003. 

Throughout the period covered by this audit, MCB was organizationally within the 

Family Independence Agency. However, the Governor, through Executive Order 

No. 2003-18, transferred MCB as a type II transfer* to the Department of Labor and 

Economic Growth, effective December 7, 2003. 

* See glossary at end of report for definition. 8 

43-231-03 

Audit Objectives, Scope, and Methodology 

and Agency Responses and Prior Audit Follow-Up

Audit Objectives 

Our performance audit* of the Michigan Commission for the Blind (MCB), Department of 

Labor and Economic Growth (DLEG) and Family Independence Agency, had the 

following objectives: 

1. To assess MCB's effectiveness* and efficiency* in administering its programs and 

services. 2. To assess the effectiveness of MCB's services provided to individuals to enable 

them to overcome their visual disability and obtain the maximum degree of self-

support and self-care. Audit Scope 

Our audit scope was to examine the program and other records of the Michigan 

Commission for the Blind. The audit scope included the examination of case files and 

other records at six Michigan Commission for the Blind regional offices. Our audit was 

conducted in accordance with Government Auditing Standards issued by the 

Comptroller General of the United States and, accordingly, included such tests of the 

records and such other auditing procedures as we considered necessary in the 

circumstances. 

Audit Methodology 

Our audit procedures, performed from February through June 2003, included 

examination of MCB records and activities primarily for the period October 1, 2000 

through April 30, 2003. 

To accomplish our objectives, we reviewed federal regulations, State statutes, and MCB 

policies and procedures. In addition, we interviewed MCB central and regional office 

staff and visited the MCB Training Center in Kalamazoo. 

To accomplish our first objective, we reviewed MCB's activities and expenditures and 

tested its controls over purchasing. We assessed MCB's process for submitting Social 

* See glossary at end of report for definition. 9 

43-231-03 

Security reimbursement claims. We appraised MCB's efforts to develop new snack 

bars and cafeterias and evaluated its equipment inventory procedures. 

In connection with our second objective, we reviewed MCB's goals* and objectives*, 

quality assurance processes, and efforts to coordinate services with other State 

agencies. We analyzed program data, including counselor work loads and client 

expenditures. In addition, we examined client case files to determine if MCB provided 

vocational rehabilitation and independent living services in accordance with federal 

regulations, State statutes, and MCB policies and procedures and if desired outcomes 

were achieved. We also analyzed the activities of the Business Enterprise Program, 

including the identification and training of new operators and the system for making new 

vending facility assignments. Further, we reviewed MCB's efforts to provide training, 

ensure compliance with MCB policies and procedures, and monitor profit expectations 

of existing vending facility operators. 

Agency Responses and Prior Audit Follow-Up 

Our report contains 7 findings and 8 corresponding recommendations. DLEG's 

preliminary response indicated that MCB agrees with all of the recommendations and 

that it has implemented or will implement corrective action. 

The agency preliminary response that follows each recommendation in our report was 

taken from DLEG's written comments and oral discussion subsequent to our audit 

fieldwork. Section 18.1462 of the Michigan Compiled Laws and Department of 

Management and Budget Administrative Guide procedure 1280.02 require DLEG to 

develop a formal response to our findings and recommendations within 60 days after 

release of the audit report. 

We released our prior performance audit of the Michigan Commission for the Blind, 

Department of Labor (#6723093), in October 1993. MCB complied with 4 of the 5 prior 

audit recommendations. We repeated the other prior audit recommendation (presented 

in Finding 6) in this report. 

* See glossary at end of report for definition. 10 

43-231-03 

COMMENTS, FINDINGS, RECOMMENDATIONS, 

AND AGENCY PRELIMINARY RESPONSES 

11 

43-231-03 

EFFECTIVENESS AND EFFICIENCY IN 

ADMINISTERING PROGRAMS AND SERVICES 

COMMENT

Audit Objective: To assess the Michigan Commission for the Blind's (MCB's) 

effectiveness and efficiency in administering its programs and services. 

Conclusion: MCB was generally effective and efficient in administering its 

programs and services. However, we noted reportable conditions* related to the 

client tracking system, the Social Security reimbursement process, procurement card* 

purchases, the Business Enterprise Program (BEP) equipment inventory record, the 

client equipment inventory record, and purchased services (Findings 1 through 6). 

FINDING 

1. Client Tracking System MCB did not have policies and procedures or system edits in place to ensure the 

accuracy, timeliness, and completeness of data within its client tracking system. 

As a result, MCB was unable to use the client tracking system as a management 

oversight tool. In addition, because the information in the client tracking system 

was unreliable, MCB was required to use extensive manual procedures to prepare 

required federal reports and requests for federal reimbursement (Finding 2). 

MCB implemented a database system for the purpose of tracking clients in 1994. 

This database was designed to function as a case management tool, administrative 

oversight tool, and a federal reporting record. The system was upgraded in 1997. 

MCB maintains case records for vocational rehabilitation and independent living 

clients on its database system. As of April 2003, MCB's database contained 8,558 

client records. At the time of our audit, 91 MCB employees had access to the 

system at eight different regional offices. 

Our review of MCB's client tracking system disclosed: 

a. MCB had not developed standard policies and procedures and provided timely 

training for the users of its client tracking system. * See glossary at end of report for definition. 12 

43-231-03 

Policies and procedures are necessary to communicate to the users 

expectations for the use of the system as well as establishing standard 

processes for the updating of the system. Training for the users is necessary 

to ensure that the system is appropriately utilized and helps reduce data input 

errors. 

For example, our review disclosed that Independent Living (IL) Program 

instructors were not required to use the client tracking system until late in 

2002. As of May 2003, one regional office informed us that all IL Program 

instructors were still not using the client tracking system. As a result, the 

information for the entire IL Program client population was not available to 

management. 

b. MCB did not have edits in place to help ensure that information entered into 

the client tracking system was complete. System edits are necessary to help ensure the accuracy and completeness of 

the data within the system. Inaccurate and incomplete data can negatively 

impact productivity, increase administrative costs, and affect program results. 

In our review of the 8,558 records on the client tracking system as of April 

2003, we noted: 

(1) A referral date was not included on 1,034 (12%) records. The referral 

date helps determine how long an individual has been a client of MCB. (2) A primary source of support was not indicated on 2,360 (28%) records. 

This information is necessary to identify which clients are potentially 

reimbursable by the federal Social Security Administration (SSA) 

(Finding 2). (3) An indication that an instructor had been assigned was not included on 

223 (3%) records. This information is required to ensure that all clients 

are provided the necessary services. Additionally, it is necessary to 

identify and report client status to individual instructors and supervisors. 13 

43-231-03 

RECOMMENDATION 

We recommend that MCB establish policies and procedures and system edits to 

ensure the accuracy, timeliness, and completeness of data within its client tracking 

system. 

AGENCY PRELIMINARY RESPONSE 

MCB agrees with the recommendation and informed us that it has enhanced its 

client tracking system (System6) edits to ensure the accuracy, timeliness, and 

completeness of data. All of the internal edits have been enabled and several new 

edits have been requested from the developer of System6. 

MCB will also establish policies and procedures to assist the system users and 

standardize the process for updating the system. 

MCB plans to implement additional training based upon staff responses to an inhouse 

training survey to determine training needed to ensure that all individuals 

were able to effectively perform their job duties. 

In an effort to keep staff informed of System6 upgrades and/or changes, liaisons 

are e-mailed system changes when they are received from the vendor or upgraded 

by Department of Information Technology staff. Effective June 1, 2003, all staff, 

including IL staff, were directed to use System6 and have all clients entered in the 

system. 

FINDING 

2. Social Security Reimbursement Process 

MCB had not developed effective procedures to identify eligible clients and costs 

for federal reimbursement. In addition, MCB did not submit claims for federal 

reimbursement on a regular basis. 

Improvement in MCB's process would assist MCB in maximizing its recovery of 

federal revenue. In our review of the claims filed, we identified two claims totaling 

$174,056 that were denied because they were late. We also identified $98,237 in 

reimbursable expenditures that were not claimed because the clients refused to 

participate. 

14 

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The Social Security Act provides for payment to vocational rehabilitation providers 

for the cost of goods and services they furnished to individuals receiving Social 

Security Disability Insurance (SSDI) benefits or Supplemental Security Income 

(SSI) benefits. The SSA vocational rehabilitation payment program was 

established to encourage state vocational rehabilitation agencies to provide training 

to disabled individuals that would allow them to work and become less dependent 

on monthly cash benefits. SSA reimburses state agencies for the cost of 

vocational rehabilitation services that enabled a person's return to work for at least 

nine continuous months at a substantial earnings level. SSA also reimburses state 

agencies for the cost of goods and services provided to individuals who medically 

recovered from their disability and individuals who refused to continue in a 

vocational rehabilitation program without good cause. 

As noted in Finding 1, MCB's client tracking system did not provide all of the client 

status and cost data necessary to identify eligible clients and prepare an accurate 

and complete reimbursement application. MCB is required to manually review 

closed case files to identify eligible clients and costs and prepare the 

reimbursement claims. As a result, the number and amount of claims that MCB 

submitted to SSA for reimbursement have varied widely from year to year and the 

yearly reimbursement rate for the claims submitted has averaged 33%. We 

15 

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summarized the number and amount of claim submissions for the last 8 fiscal 

years: 

SSA Vocational Rehabilitation Payment Program Summary 

Fiscal Year Percentage of 

in Which Number of Amount Requested 

Case Was Claims Requested for Amount Amounts 

Closed Submitted Reimbursement Reimbursed Reimbursed 

1994-95 15 $ 336,123 $ 170,426 51% 

1995-96 62 $ 1,775,387 $ 793,674 45% 

1996-97 135 $ 3,450,274 $ 1,249,398 36% 

1997-98* 30 $ 825,680 $ 173,615 21% 

1998-99 161 $ 5,768,623 $ 1,326,094 23% 

1999-2000* 72 $ 2,286,710 $ 813,610 36% 

2000-01* 24 $ 1,276,921 $ 586,752 46% 

2001-02 2 $ 133,983 $ 88,881 66% 

Average Yearly Reimbursement Rate 33% 

* As of April 30, 2003, MCB records disclosed that SSA had not yet processed all of the 

reimbursement requests from fiscal years 1997-98, 1999-2000, and 2000-01. We reviewed 15 claims submitted for fiscal years 1999-2000 and 2000-01 totaling 

$807,320 and noted: 

a. Of the amount claimed, only $290,661 (36%) was deemed eligible for 

reimbursement by SSA. The reasons for claim denial or reduction included: 

the reimbursement claim was submitted too late for processing ($174,056), the 

client was ineligible because he or she was not an SSI or SSDI recipient 

($118,758), the client earnings were below a substantial earnings level 

($72,778), the client did not work for the required nine-month period ($50,032), 

or insufficient documentation was submitted to support the entire claim 

($5,035). In 4 cases reviewed, the reason for the denial was not clear 

($96,001) from a review of the documentation in the case file. b. MCB did not submit reimbursement requests for clients whose cases were 

closed because of the clients' refusal to cooperate with the program 

requirements. MCB did not determine the total amount of reimbursable 

expenditures from these types of cases. However, we noted in our review of 

vocational rehabilitation case files that reimbursable expenditures for 16 

43-231-03 

12 clients who refused to participate totaled $98,237. MCB did not submit 

reimbursement claims for these clients. 

c. MCB did not have a process in place to prepare and submit claims on a 

regular basis. MCB did not submit any claims to SSA between August 2002 

and May 2003. During our audit, we noted that the MCB vocational rehabilitation counselors must 

contact clients individually to ask them if they are still working in order to determine 

if they meet the nine-month substantial earnings requirement. Generally, case files 

are closed after 90 days. An alternative process could be used which would 

minimize the need to locate and contact each of the clients. The Unemployment 

Insurance Agency receives earnings records from employers. Matching the social 

security number of the client against the earnings records history would provide an 

automated approach to identify the eligible clients. 

RECOMMENDATIONS 

We recommend that MCB develop effective procedures to identify eligible clients 

and costs for federal reimbursement. 

We also recommend that MCB submit claims for federal reimbursement on a 

regular basis. 

AGENCY PRELIMINARY RESPONSE 

MCB agrees with the first recommendation and will implement a new process and 

procedure to address this issue. MCB plans to install a module into its System6 

client tracking system that will automate the Social Security reimbursement 

process. This process will identify clients eligible for reimbursement, accumulate 

the data necessary for reimbursement, and complete the reimbursement form. 

This process will be performed monthly. 

MCB also agrees that there is a need to submit claims for federal reimbursement 

on a regular basis and is exploring ways to improve this process. In 2001, SSA 

rescinded the policy that allowed reimbursement for expenditures for clients who 

refuse to participate unless that individual has worked for nine consecutive months. 

The only way for MCB to determine continued employment would be to match the 

social security number of the client against the earnings records history with the 

Unemployment Insurance Agency earnings records from employers. MCB is in the 

17 

43-231-03 

process of trying to get clearance from the Unemployment Insurance Agency to get 

earnings data for a special project for the federal government. However, MCB is 

still waiting for a ruling from the Department of Attorney General regarding how to 

legally advise and verify that clients have given MCB consent to use social security 

numbers for this purpose. 

FINDING 

3. Procurement Card Purchases 

MCB's internal control did not ensure that the use of procurement cards was in 

compliance with Family Independence Agency (FIA) and Department of 

Management and Budget (DMB) procurement card purchase procedures. 

As a result, we identified $57,564 of unallowable purchases. These purchases 

were for ongoing, recurring services or projects, such as remodeling, equipment 

moving, and consulting services. Also, MCB's noncompliance resulted in a lack of 

oversight of procurement card use. Less oversight increases the risk that the cards 

could be used for inappropriate purposes. 

Procurement cards may be used by authorized individuals for the purchase of 

specific categories of goods and services within strict dollar limits. FIA and DMB 

have issued procedures and guidelines governing the use of State procurement 

cards. 

MCB employees used State procurement cards to make purchases totaling 

approximately $2 million from October 1, 2000 through March 25, 2003. During 

this time, 60 (66%) MCB staff were authorized to use State procurement cards. 

We reviewed 235 separate purchases totaling $109,808 from 41 cardholder billing 

cycles* for 26 different MCB employees during this 2½-year period. Our review 

disclosed: 

a. Seventy-nine (33%) of the 235 purchases, valued at $57,564, were for 

ongoing, recurring services or projects, such as remodeling, equipment 

moving, and consulting services. * See glossary at end of report for definition. 18 

43-231-03 

FIA and DMB procedures prohibit the use of procurement cards to purchase 

services that should be purchased through a State contract. DMB gives 

agencies delegated purchasing authority for goods and services costing less 

than $25,000. However, ongoing services that could exceed the delegated 

purchase limit should be contracted through the appropriate State 

procurement process. 

b. MCB was not providing sufficient oversight of procurement card use. We 

identified: (1) Thirty-six (15%) of the 235 purchases, valued at $47,815, appeared to be 

split to avoid the single purchase limits. FIA and DMB policy prohibits the splitting of purchases to exceed 

procurement card transaction limits. 

(2) Ten (4%) of the 235 purchases, valued at $1,931, did not contain 

supporting documentation for the amount charged. As a result, MCB 

could not ensure and we could not verify the appropriateness of the 

purchases. Cardholders are responsible for obtaining adequate documentation to 

support the purchases made with their cards, including sales receipts or 

vendor invoices. 

(3) Eighteen (44%) of 41 payment cycles, for purchases totaling $58,896, did 

not include verification of the receipt of goods and services by someone 

other than the cardholder or supervisor. FIA policy requires that a third party, other than the cardholder or 

supervisor, verify that the purchased items were received by initialing the 

transaction log. 

(4) Three (7%) of 41 cardholder transaction logs, for purchases totaling 

$6,301, did not document the date that the item or service was received. FIA policy requires that the cardholder document the date that the item or 

service was received by entering the date on the transaction log. 

19 

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(5) MCB supervisors did not always perform detailed reviews of procurement 

card purchases made by staff and did not retain procurement card 

documentation in their possession. For one of our sample billing cycles, 

the cardholder was allowed to retain the supporting documentation but 

was unable to locate it for audit purposes. FIA policy requires that at the end of each two-week billing cycle, all 

receipts should be attached to the corresponding FIA procurement card 

transaction log sheet and then forwarded to the cardholder's supervisor 

for review. 

(6) Seven (12%) of the 60 MCB employees who had active procurement card 

accounts during our audit period did not have a sufficient amount of use 

to justify having a card assigned to them. RECOMMENDATION 

We recommend that MCB improve its internal control to ensure that the use of 

procurement cards is in compliance with FIA and DMB procurement card purchase 

procedures. 

AGENCY PRELIMINARY RESPONSE 

MCB agrees with the recommendation and will comply with Department of Labor 

and Economic Development (DLEG) and DMB procurement card purchase 

procedures. MCB will conduct remedial training for individual staff who use the 

procurement cards inappropriately. MCB and DLEG will monitor all MCB 

procurement card transactions and will take steps to rescind any procurement 

cards from staff who continue to have procedural violations after receiving training. 

FINDING 

4. BEP Equipment Inventory Record 

MCB did not comply with established equipment inventory control procedures for 

Business Enterprise Program (BEP) equipment. As a result, MCB could not 

account for its BEP equipment inventory. This could result in the misappropriation 

of assets. 

DMB issued numerous directives to State agencies pertaining to equipment 

inventory controls and the recording and reporting of acquisition and disposal data 

20 

43-231-03 

for financial reporting purposes. FIA incorporated these directives into its 

Administrative Manual. 

Our review of the BEP equipment inventory records disclosed: 

a. MCB did not tag all applicable BEP equipment or maintain proper equipment 

inventory records. The FIA Administrative Manual (AHM 441) requires that all equipment items 

costing more than $5,000 be tagged and included in the agency's equipment 

inventory records. Additionally, MCB elected to tag equipment below the 

$5,000 threshhold for BEP. 

We reviewed the equipment inventory at six separate BEP locations. We 

noted 15 equipment items that were not tagged and were not included in the 

BEP equipment inventory records. 

b. MCB did not request transfer authorizations and did not report additions and 

transfers of BEP equipment. The FIA Administrative Manual (AHM 442) requires that location units 

transferring equipment must notify FIA's Inventory Control Unit (ICU) of the 

equipment transfer. 

We attempted to verify the existence of 51 equipment inventory items at six 

separate BEP locations. We could not locate 33 (65%) equipment inventory 

items, and MCB could not provide documentation for the disposition of these 

equipment items. 

We also noted 27 tagged equipment items that were not included in the BEP 

equipment inventory records for that location and for which BEP could not 

provide documentation of the transfer of the equipment to these locations. 

c. MCB did not request authorization to dispose of surplus, scrap, and worthless 

BEP equipment items. 21 

43-231-03 

The FIA Administrative Manual (AHM 445) requires that location units 

disposing of equipment provide written notification to ICU. ICU will then 

authorize the disposal by completion of a disposal request form. 

We noted 22 instances in which MCB disposed of BEP equipment without the 

proper authorization or documentation. 

d. MCB did not submit all required annual equipment inventory reports during our 

audit period. The FIA Administrative Manual (AHM 443) requires location units to annually 

conduct a physical inventory of equipment to ensure that all equipment is 

tagged and accounted for. Additionally, the location unit must submit to ICU 

an equipment inventory report documenting the completion of the physical 

inventory. 

In fiscal year 2000-01, MCB did not submit the required reports for two 

separate BEP locations. In fiscal year 2001-02, ICU informed us that MCB did 

not submit the required reports for any of its BEP locations. 

RECOMMENDATION 

We recommend that MCB comply with established equipment inventory control 

procedures for BEP equipment. 

AGENCY PRELIMINARY RESPONSE 

MCB agrees with the recommendation and informed us that it has implemented the 

following procedure for BEP equipment tracking: MCB support staff enter all new 

equipment in the BEP Facility Tracking System's equipment tracking module and 

then issue tags for the equipment. Those tags are then issued to promotional 

agents to be placed on the equipment (since May 2003, approximately 560 tags 

and retags have been generated and sent to promotional agents to be placed on 

equipment). If equipment is being moved or transferred, promotional agents are 

required to complete a transfer authorization prior to moving the equipment. The 

completed transfer authorization is then sent to MCB support staff to update the 

system. All surplus, scrap, and worthless BEP equipment is to be authorized prior 

to disposal. The information is entered in the BEP Facility Tracking System, a copy 

of that authorization is to be stored at MCB, and the information is reported to the 

DLEG Facility Management Division. 

22 

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FINDING 

5. Client Equipment Inventory Record 

MCB did not comply with established procedures to monitor the assignment of 

MCB's equipment to vocational rehabilitation clients. As a result, MCB could not 

ensure that all assigned equipment purchases were being fully utilized by MCB's 

clients. 

MCB vocational rehabilitation counselors may approve the purchase of adaptive 

equipment, such as computers, Braillewriters, closed circuit televisions, and other 

visual aids, for clients who need these items in order to meet established 

vocational goals. 

The Vocational Rehabilitation Division policy manual requires that each regional 

office maintain a list of all equipment currently assigned to clients in the region. At 

the end of each fiscal year, the counselor or other designated staff member is 

responsible for documenting in the client's case file and on the officewide 

equipment record that the equipment is in the possession of the client and is being 

used as planned. If the equipment is no longer being used, the counselor is 

required to reclaim it and update the client's case file and officewide equipment 

inventory record. 

Our review of 70 vocational rehabilitation client case files disclosed equipment 

purchases totaling approximately $58,535. 

During our visits to 6 of the 8 regional offices, MCB staff at each office informed us 

that an officewide equipment inventory record is not used to monitor equipment in 

the possession of clients. Rather, vocational rehabilitation counselors rely on the 

clients to inform MCB if the equipment is no longer necessary. Additionally, 

counselors become aware of equipment that is available for reassignment 

informally from other counselors. 

RECOMMENDATION 

We recommend that MCB comply with established procedures to monitor the 

assignment of MCB's equipment to vocational rehabilitation clients. 

AGENCY PRELIMINARY RESPONSE 

MCB agrees with the recommendation and plans to implement a process that will 

allow MCB to better monitor the assignment of MCB's equipment to vocational 

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rehabilitation clients. Under the new procedure, equipment purchases for MCB 

clients over $500 are recorded on an equipment registration log. These logs will be 

kept in each regional office with the entries recorded by support staff. The logs will 

contain a description of the equipment, date of purchase, date dispensed, client 

name, social security number, counselor, and purchase amount. 

FINDING 

6. Purchased Services 

MCB did not comply with established State purchasing requirements. As a result, 

MCB could not document that its purchasing practices promoted the efficient use of 

resources and that MCB obtained these services at minimum cost. 

FIA policy requires that all professional services exceeding $10,000 be processed 

through the FIA Procurement Section, Business Services Division. The FIA 

Procurement Section determines whether to make the purchases under FIA's 

authority or to transmit it to DMB's Acquisition Services. Following this process 

ensures that purchased services and contracts are competitively bid, properly 

executed, and processed in accordance with State statutes and policies. 

Our review disclosed that MCB purchased IL Program rehabilitation services 

totaling $226,940 and $263,263 for fiscal years 2000-01 and 2001-02, respectively, 

from a private rehabilitation center. We noted: 

a. All rehabilitation services for this grant program have been purchased from the 

same vendor. MCB could not provide documentation to support the purchase 

of these services from a sole source vendor. b. MCB did not enter into a contractual agreement with this rehabilitation center. c. MCB and FIA did not submit a negotiated contract to the State Administrative 

Board for review and approval. We noted this condition in our prior audit. In response to the prior audit, MCB 

indicated that it agreed with the recommendation and that it was taking steps to 

comply. 

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RECOMMENDATION 

TO HELP ENSURE THAT ITS PURCHASING PRACTICES PROMOTE THE 

EFFICIENT USE OF RESOURCES, WE AGAIN RECOMMEND THAT MCB 

COMPLY WITH ESTABLISHED STATE PURCHASING REQUIREMENTS. 

AGENCY PRELIMINARY RESPONSE 

MCB agrees with the recommendation and informed us that it is in the process of 

obtaining a contract to purchase needed professional services from a private 

rehabilitation center. MCB will work with DLEG to ensure that this contract is 

obtained in accordance with established State purchasing requirements. 

EFFECTIVENESS OF SERVICES PROVIDED TO OVERCOME VISUAL 

DISABILITY AND OBTAIN SELF-SUPPORT AND SELF-CARE 

COMMENT 

Audit Objective: To assess the effectiveness of MCB's services provided to individuals 

to enable them to overcome their visual disability and obtain the maximum degree of 

self-support and self-care. 

Conclusion: MCB was generally effective in providing services to individuals to 

enable them to overcome their visual disability and obtain the maximum degree 

of self-support and self-care. However, we noted a reportable condition related to 

Independent Living (IL) Program case management procedures (Finding 7). 

Noteworthy Accomplishments: MCB conducts mini-adjustment programs that 

provide an introduction to blind rehabilitation skills and services. These programs also 

encourage further rehabilitation training. MCB brings this training to the clients by 

conducting the programs in various locations throughout the State. This outreach 

method allows MCB to provide training to a large number of clients in a relatively short 

period of time. During our audit period, MCB held 6 programs annually at various 

locations with total attendance of 211 in fiscal year 2000-01 and 185 in fiscal year 

2001-02. 

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FINDING 

7. IL Program Case Management Procedures 

MCB had not established policies and procedures for the case management of IL 

Program services. 

Consequently, MCB is required to use an inefficient process to prepare required 

federal reports. With consistent policies and procedures, MCB would be better 

able to document the effectiveness of the IL Program. 

MCB uses State and federal funds to provide IL Program services to individuals 

aged 55 or older who are blind, whose severe visual impairments make competitive 

employment extremely difficult to attain, but for whom independent living in their 

own homes or communities is feasible. Federal regulations detail the services that 

may be provided by the IL Program and require an annual reporting of the number 

and type of services provided. 

In fiscal year 2001-02, MCB expended $1,119,327 for services provided to 1,101 IL 

Program clients. 

Our review of MCB case management procedures and 84 IL Program services 

case files noted: 

a. IL Program teachers were not always required to use the client tracking 

system to document services provided to IL Program clients (Finding 1). Our review disclosed that because of the limited use of MCB's client tracking 

system: 

(1) MCB was dependent on extensive manual records for the preparation of 

required federal reports. (2) MCB could not provide a complete list of IL Program clients for two 

regional offices. b. MCB did not document in the case file the services provided for 12 (14%) of 

84 IL Program clients. Case file documentation should be maintained to 

substantiate the reasonableness of the service provided. 26 

43-231-03 

c. MCB did not document in the case file for 14 (17%) of 84 IL Program clients 

that purchases made on behalf of the clients were necessary and reasonable. 

Case file documentation should be maintained to substantiate the purchase 

and the necessity of the purchase. RECOMMENDATION 

We recommend that MCB establish policies and procedures for the case 

management of IL Program services. 

AGENCY PRELIMINARY RESPONSE 

MCB agrees with the recommendation and informed us that it has implemented 

corrective action. Beginning June 1, 2003, all staff, including IL staff, were required 

to enter all clients into the System6 client tracking system. MCB staff run monthly 

caseload reports and verify that counselor caseloads and IL client totals are within 

the projected numbers for expected assigned clients. Now that all clients have 

been entered in the system, MCB will be able to automatically complete the IL 

federal reports. MCB does yearly case reviews. A component of the case review 

is to monitor the reasonableness of services and case file documentation. IL client 

cases will be included in MCB case reviews. 

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GLOSSARY 

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Table with 2 columns and 23 rowsGlossary of Acronyms and Terms BEP Business Enterprise Program. card holder billing Two weeks of transactions covering a period from a State of cycle Michigan payday through the day before the next State 

payday. DLEG Department of Labor and Economic Growth. DMB Department of Management and Budget. effectiveness Program success in achieving mission and goals. efficiency Achieving the most outputs and outcomes practical with the 

minimum amount of resources. FIA Family Independence Agency. goals The agency's intended outcomes or impacts for a program to 

accomplish its mission. ICU Inventory Control Unit. IL Program Independent Living Program. MCB Michigan Commission for the Blind. mission The agency's main purpose or the reason that the agency 

was established. objectives Specific outcomes that a program seeks to achieve its goals. performance audit An economy and efficiency audit or a program audit that is 

designed to provide an independent assessment of the 

29 

43-231-03 Table endTable with 2 columns and 7 rowsperformance of a governmental entity, program, activity, or 

function to improve public accountability and to facilitate 

decision making by parties responsible for overseeing or 

initiating corrective action. procurement card A credit card issued to State employees for purchasing 

commodities and services in accordance with State 

purchasing policies. reportable condition A matter that, in the auditor's judgment, represents either an 

opportunity for improvement or a significant deficiency in 

management's ability to operate a program in an effective 

and efficient manner. SSA federal Social Security Administration. SSDI Social Security Disability Insurance. SSI Supplemental Security Income. type II transfer The transferring of an existing department, board, 

commission, or agency to a principal department established 

by Act 380, P.A. 1965 (Executive Organization Act of 1965). 

Any department, board, commission, or agency assigned to a 

type II transfer under Act 380, P.A. 1965, shall have all its 

statutory authority, powers, duties and functions, records, 

personnel, property, unexpended balances of appropriations, 

allocations or other funds, including the functions of 

budgeting and procurement, transferred to that principal 

department. Table end30 

43-231-03 oag



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