[Vendorsmi] is mcb more accountable or less since this?

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PERFORMANCE AUDIT 
OF THE 
MICHIGAN COMMISSION FOR THE BLIND 
DEPARTMENT OF LABOR AND ECONOMIC GROWTH 
AND 
FAMILY INDEPENDENCE AGENCY 
October 2004 
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“...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. 
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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 
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GLOSSARY 
Glossary of Acronyms and Terms 
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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 
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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 
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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 
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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 
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COMMENTS, FINDINGS, RECOMMENDATIONS, 
AND AGENCY PRELIMINARY RESPONSES 
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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 
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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 
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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. 
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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 
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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 
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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 
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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. 
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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 
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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 
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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. 
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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 
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