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<DIV><FONT face=Arial size=2>PERFORMANCE AUDIT <BR>OF THE <BR>MICHIGAN
COMMISSION FOR THE BLIND <BR>DEPARTMENT OF LABOR AND ECONOMIC GROWTH <BR>AND
<BR>FAMILY INDEPENDENCE AGENCY <BR>October 2004 <BR>43-231-03 <BR>“...The
auditor general shall conduct post audits of financial <BR>transactions and
accounts of the state and of all branches, <BR>departments, offices, boards,
commissions, agencies, <BR>authorities and institutions of the state established
by this <BR>constitution or by law, and performance post audits thereof.” <BR>–
Article IV, Section 53 of the Michigan Constitution <BR>Audit report information
may be accessed at: <BR><A
href="http://audgen.michigan.gov">http://audgen.michigan.gov</A> <BR>Michigan
Office of the Auditor General <BR>REPORT SUMMARY <BR>Performance Audit Report
Number: <BR>43-231-03 <BR>Michigan Commission for the Blind <BR>Department of
Labor and Economic Growth <BR>Released:<BR>and Family Independence Agency
October 2004 <BR>Act 260, P.A. 1978, as amended, created the Michigan Commission
for the Blind <BR>(MCB). MCB consists of five commissioners who are appointed
for three-year terms <BR>by the Governor. MCB is responsible for the
implementation of programs to help <BR>people who are blind to achieve social
and economic independence. MCB is the <BR>vocational rehabilitation service
agency for the blind in Michigan. Its mission is to <BR>provide opportunities to
individuals with visual handicaps to achieve employability <BR>and/or function
independently in society. <BR>Audit Objectives: <BR>1. To assess MCB's
effectiveness and <BR>efficiency in administering its <BR>programs and services.
2. To assess the effectiveness of MCB's <BR>services provided to individuals to
<BR>enable them to overcome their visual <BR>disability and obtain the maximum
<BR>degree of self-support and self-care. ~~~~~~~~~~ <BR>Audit Conclusions:
<BR>1. MCB was generally effective and <BR>efficient in administering its
programs <BR>and services. However, we noted <BR>reportable conditions related
to the <BR>client tracking system, Social Security <BR>reimbursement process,
procurement <BR>card purchases, Business Enterprise <BR>Program equipment
inventory record, <BR>the client equipment inventory record, <BR>and purchased
services (Findings 1 <BR>through 6). 2. MCB was generally effective in
<BR>providing services to individuals to <BR>enable them to overcome their
visual <BR>disability and obtain the maximum <BR>degree of self-support and
self-care. <BR>However, we noted a reportable <BR>condition related to
Independent Living <BR>(IL) Program case management <BR>procedures (Finding 7).
~~~~~~~~~~ <BR>Agency Response: <BR>Our report contains 7 findings and 8
<BR>corresponding recommendations. The <BR>Department of Labor and Economic
<BR>Growth's preliminary response indicated <BR>that MCB agrees with all of the
<BR>recommendations and that it has <BR>implemented or will implement corrective
<BR>action. <BR>~~~~~~~~~~ <BR>Background: <BR>Throughout the period covered by
this <BR>audit, MCB was organizationally within the <BR>Family Independence
Agency. However, <BR>the Governor, through Executive Order <BR>No. 2003-18,
transferred MCB as a type II <BR>transfer to the Department of Labor and
<BR>Economic Growth, effective December 7, <BR>2003. <BR>~~~~~~~~~~ <BR>A copy
of the full report can be <BR>obtained by calling 517.334.8050 <BR>or by
visiting our Web site at: <BR><A
href="http://audgen.michigan.gov">http://audgen.michigan.gov</A> <BR>Michigan
Office of the Auditor General <BR>201 N. Washington Square <BR>Lansing, Michigan
48913 <BR>Thomas H. McTavish, C.P.A. <BR>Auditor General <BR>Scott M. Strong,
C.P.A., C.I.A. <BR>Deputy Auditor General <BR>STATE OF MICHIGAN <BR>OFFICE OF
THE AUDITOR GENERAL<BR>201 N. WASHINGTON SQUARE<BR>LANSING, MICHIGAN
48913<BR>(517) 334-8050 THOMAS H. MCTAVISH, C.P.A. <BR>FAX (517) 334-8079
AUDITOR GENERAL October 7, 2004 <BR>Ms. Jo Ann Pilarski, Chairperson
<BR>Michigan Commission for the Blind <BR>Victor Center <BR>Lansing, Michigan
<BR>and <BR>Mr. David C. Hollister, Director <BR>Department of Labor and
Economic Growth <BR>Ottawa Building <BR>Lansing, Michigan <BR>and <BR>Marianne
Udow, Director <BR>Family Independence Agency <BR>Grand Tower <BR>Lansing,
Michigan <BR>Dear Ms. Pilarski, Mr. Hollister, and Mrs. Udow: <BR>This is our
report on the performance audit of the Michigan Commission for the Blind,
<BR>Department of Labor and Economic Growth (DLEG) and Family Independence
Agency. <BR>This report contains our report summary; description of agency;
audit objectives, scope, and <BR>methodology and agency responses and prior
audit follow-up; comments, findings, <BR>recommendations, and agency preliminary
responses; and a glossary of acronyms and terms. <BR>Our comments, findings, and
recommendations are organized by audit objective. The agency <BR>preliminary
responses were taken from DLEG's responses subsequent to our audit fieldwork.
<BR>The Michigan Compiled Laws and administrative procedures require that the
audited agency <BR>develop a formal response within 60 days after release of the
audit report. <BR>We appreciate the courtesy and cooperation extended to us
during this audit. <BR>Stamp comment<BR>Auditor General43-231-03 This page left
intentionally blank. <BR>4 <BR>43-231-03 <BR>TABLE OF CONTENTS <BR>MICHIGAN
COMMISSION FOR THE BLIND <BR>DEPARTMENT OF LABOR AND ECONOMIC GROWTH AND
<BR>FAMILY INDEPENDENCE AGENCY <BR>Page <BR>INTRODUCTION <BR>Report Summary 1
<BR>Report Letter 3 <BR>Description of Agency 7 <BR>Audit Objectives, Scope, and
Methodology and Agency Responses <BR>and Prior Audit Follow-Up 9 <BR>COMMENTS,
FINDINGS, RECOMMENDATIONS, <BR>AND AGENCY PRELIMINARY RESPONSES
<BR>Effectiveness and Efficiency in Administering Programs and Services 12
<BR>1. Client Tracking System 12 <BR>2. Social Security Reimbursement Process 14
<BR>3. Procurement Card Purchases 18 <BR>4. BEP Equipment Inventory Record 20
<BR>5. Client Equipment Inventory Record 23 <BR>6. Purchased Services 24
<BR>Effectiveness of Services Provided to Overcome Visual Disability and Obtain
<BR>Self-Support and Self-Care 25 <BR>7. IL Program Case Management Procedures
26 <BR>5 <BR>43-231-03 <BR>GLOSSARY <BR>Glossary of Acronyms and Terms <BR>6
<BR>43-231-03 <BR>Description of Agency <BR>Act 260, P.A. 1978, as amended,
created the Michigan Commission for the Blind <BR>(MCB). MCB consists of five
commissioners who are appointed for three-year terms by <BR>the Governor with
the advice and consent of the Senate. MCB is responsible for the
<BR>implementation of programs to help people who are blind to achieve social
and <BR>economic independence. <BR>MCB is the vocational rehabilitation service
agency for the blind in Michigan. Its <BR>mission* is to provide opportunities
to individuals with visual handicaps to achieve <BR>employability and/or
function independently in society. Services are provided through <BR>the
following programs: Vocational Rehabilitation Program, Independent Living (IL)
<BR>Program, MCB Training Center, Business Enterprise Program (BEP), Youth Low
Vision <BR>Program, and Deaf-Blind Program: <BR>a. The Vocational Rehabilitation
Program provides vocational rehabilitation training <BR>for the blind under the
federal Rehabilitation Act of 1973. Services provided <BR>include diagnostic
evaluations, personal and vocational counseling, college and <BR>technical
school training, job development and placement, post-employment <BR>training,
and the provision of low vision aids. To be eligible for these services,
<BR>clients must be legally blind and the impairment must result in a
substantial <BR>impediment to employment. b. The IL Program uses State and
federal funding to provide services to older blind <BR>individuals so they can
remain independent in their own homes. Services provided <BR>include information
and referral, orientation and mobility, adaptive aids and <BR>appliances, daily
living skills, counseling, and Braille and other communication <BR>methods. c.
The MCB Training Center is a residential training facility located in Kalamazoo.
<BR>The Center serves approximately 400 individuals each year ranging in age
from 15 <BR>to 80. The primary focus is to assist individuals in developing more
positive <BR>attitudes toward blindness and to help them acquire the needed
skills. Services <BR>provided include personal adjustment training; skills of
blindness training; college <BR>preparation and technical training; Braille and
other communication methods; * See glossary at end of report for definition. 7
<BR>43-231-03 <BR>orientation and mobility; BEP training; and training in
adaptive kitchen skills, <BR>computer skills, and industrial arts and crafts.
<BR>d. BEP is the State licensing agency for blind persons operating vending
stands and <BR>cafeterias in State and federal buildings as well as highway rest
stops and visitor <BR>centers. BEP was established by the federal
Randolph-Sheppard Act of 1936, as <BR>amended, and Act 260, P.A. 1978, as
amended. MCB trains vocational <BR>rehabilitation clients to become BEP
operators and purchases equipment and initial <BR>inventory for their
facilities. Promotional agents provide ongoing support and <BR>oversight to the
BEP operators. e. The Youth Low Vision Program is a State-funded program
providing low vision <BR>evaluations and devices to students who are referred by
local school districts. <BR>Services provided include low vision evaluations,
telescopic and microscopic lens <BR>systems, prescriptive and other vision
devices, and low vision training. f. The Deaf-Blind Program, in conjunction with
other State agencies, provides <BR>rehabilitation and independent living
services to clients with combined hearing and <BR>visual impairments. These
services may be provided in the workplace, at home, <BR>and in the community.
MCB expended $15,609,511 in fiscal year 2001-02 and had 2,675 active clients in
all <BR>program areas and 91 employees as of March 24, 2003. <BR>Throughout the
period covered by this audit, MCB was organizationally within the <BR>Family
Independence Agency. However, the Governor, through Executive Order <BR>No.
2003-18, transferred MCB as a type II transfer* to the Department of Labor and
<BR>Economic Growth, effective December 7, 2003. <BR>* See glossary at end of
report for definition. 8 <BR>43-231-03 <BR>Audit Objectives, Scope, and
Methodology <BR>and Agency Responses and Prior Audit Follow-Up<BR>Audit
Objectives <BR>Our performance audit* of the Michigan Commission for the Blind
(MCB), Department of <BR>Labor and Economic Growth (DLEG) and Family
Independence Agency, had the <BR>following objectives: <BR>1. To assess MCB's
effectiveness* and efficiency* in administering its programs and <BR>services.
2. To assess the effectiveness of MCB's services provided to individuals to
enable <BR>them to overcome their visual disability and obtain the maximum
degree of self-<BR>support and self-care. Audit Scope <BR>Our audit scope was to
examine the program and other records of the Michigan <BR>Commission for the
Blind. The audit scope included the examination of case files and <BR>other
records at six Michigan Commission for the Blind regional offices. Our audit was
<BR>conducted in accordance with Government Auditing Standards issued by the
<BR>Comptroller General of the United States and, accordingly, included such
tests of the <BR>records and such other auditing procedures as we considered
necessary in the <BR>circumstances. <BR>Audit Methodology <BR>Our audit
procedures, performed from February through June 2003, included <BR>examination
of MCB records and activities primarily for the period October 1, 2000
<BR>through April 30, 2003. <BR>To accomplish our objectives, we reviewed
federal regulations, State statutes, and MCB <BR>policies and procedures. In
addition, we interviewed MCB central and regional office <BR>staff and visited
the MCB Training Center in Kalamazoo. <BR>To accomplish our first objective, we
reviewed MCB's activities and expenditures and <BR>tested its controls over
purchasing. We assessed MCB's process for submitting Social <BR>* See glossary
at end of report for definition. 9 <BR>43-231-03 <BR>Security reimbursement
claims. We appraised MCB's efforts to develop new snack <BR>bars and cafeterias
and evaluated its equipment inventory procedures. <BR>In connection with our
second objective, we reviewed MCB's goals* and objectives*, <BR>quality
assurance processes, and efforts to coordinate services with other State
<BR>agencies. We analyzed program data, including counselor work loads and
client <BR>expenditures. In addition, we examined client case files to determine
if MCB provided <BR>vocational rehabilitation and independent living services in
accordance with federal <BR>regulations, State statutes, and MCB policies and
procedures and if desired outcomes <BR>were achieved. We also analyzed the
activities of the Business Enterprise Program, <BR>including the identification
and training of new operators and the system for making new <BR>vending facility
assignments. Further, we reviewed MCB's efforts to provide training, <BR>ensure
compliance with MCB policies and procedures, and monitor profit expectations
<BR>of existing vending facility operators. <BR>Agency Responses and Prior Audit
Follow-Up <BR>Our report contains 7 findings and 8 corresponding
recommendations. DLEG's <BR>preliminary response indicated that MCB agrees with
all of the recommendations and <BR>that it has implemented or will implement
corrective action. <BR>The agency preliminary response that follows each
recommendation in our report was <BR>taken from DLEG's written comments and oral
discussion subsequent to our audit <BR>fieldwork. Section 18.1462 of the
Michigan Compiled Laws and Department of <BR>Management and Budget
Administrative Guide procedure 1280.02 require DLEG to <BR>develop a formal
response to our findings and recommendations within 60 days after <BR>release of
the audit report. <BR>We released our prior performance audit of the Michigan
Commission for the Blind, <BR>Department of Labor (#6723093), in October 1993.
MCB complied with 4 of the 5 prior <BR>audit recommendations. We repeated the
other prior audit recommendation (presented <BR>in Finding 6) in this report.
<BR>* See glossary at end of report for definition. 10 <BR>43-231-03
<BR>COMMENTS, FINDINGS, RECOMMENDATIONS, <BR>AND AGENCY PRELIMINARY RESPONSES
<BR>11 <BR>43-231-03 <BR>EFFECTIVENESS AND EFFICIENCY IN <BR>ADMINISTERING
PROGRAMS AND SERVICES <BR>COMMENT<BR>Audit Objective: To assess the Michigan
Commission for the Blind's (MCB's) <BR>effectiveness and efficiency in
administering its programs and services. <BR>Conclusion: MCB was generally
effective and efficient in administering its <BR>programs and services. However,
we noted reportable conditions* related to the <BR>client tracking system, the
Social Security reimbursement process, procurement card* <BR>purchases, the
Business Enterprise Program (BEP) equipment inventory record, the <BR>client
equipment inventory record, and purchased services (Findings 1 through 6).
<BR>FINDING <BR>1. Client Tracking System MCB did not have policies and
procedures or system edits in place to ensure the <BR>accuracy, timeliness, and
completeness of data within its client tracking system. <BR>As a result, MCB was
unable to use the client tracking system as a management <BR>oversight tool. In
addition, because the information in the client tracking system <BR>was
unreliable, MCB was required to use extensive manual procedures to prepare
<BR>required federal reports and requests for federal reimbursement (Finding 2).
<BR>MCB implemented a database system for the purpose of tracking clients in
1994. <BR>This database was designed to function as a case management tool,
administrative <BR>oversight tool, and a federal reporting record. The system
was upgraded in 1997. <BR>MCB maintains case records for vocational
rehabilitation and independent living <BR>clients on its database system. As of
April 2003, MCB's database contained 8,558 <BR>client records. At the time of
our audit, 91 MCB employees had access to the <BR>system at eight different
regional offices. <BR>Our review of MCB's client tracking system disclosed:
<BR>a. MCB had not developed standard policies and procedures and provided
timely <BR>training for the users of its client tracking system. * See glossary
at end of report for definition. 12 <BR>43-231-03 <BR>Policies and procedures
are necessary to communicate to the users <BR>expectations for the use of the
system as well as establishing standard <BR>processes for the updating of the
system. Training for the users is necessary <BR>to ensure that the system is
appropriately utilized and helps reduce data input <BR>errors. <BR>For example,
our review disclosed that Independent Living (IL) Program <BR>instructors were
not required to use the client tracking system until late in <BR>2002. As of May
2003, one regional office informed us that all IL Program <BR>instructors were
still not using the client tracking system. As a result, the <BR>information for
the entire IL Program client population was not available to <BR>management.
<BR>b. MCB did not have edits in place to help ensure that information entered
into <BR>the client tracking system was complete. System edits are necessary to
help ensure the accuracy and completeness of <BR>the data within the system.
Inaccurate and incomplete data can negatively <BR>impact productivity, increase
administrative costs, and affect program results. <BR>In our review of the 8,558
records on the client tracking system as of April <BR>2003, we noted: <BR>(1) A
referral date was not included on 1,034 (12%) records. The referral <BR>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. <BR>This information
is necessary to identify which clients are potentially <BR>reimbursable by the
federal Social Security Administration (SSA) <BR>(Finding 2). (3) An indication
that an instructor had been assigned was not included on <BR>223 (3%) records.
This information is required to ensure that all clients <BR>are provided the
necessary services. Additionally, it is necessary to <BR>identify and report
client status to individual instructors and supervisors. 13 <BR>43-231-03
<BR>RECOMMENDATION <BR>We recommend that MCB establish policies and procedures
and system edits to <BR>ensure the accuracy, timeliness, and completeness of
data within its client tracking <BR>system. <BR>AGENCY PRELIMINARY RESPONSE
<BR>MCB agrees with the recommendation and informed us that it has enhanced its
<BR>client tracking system (System6) edits to ensure the accuracy, timeliness,
and <BR>completeness of data. All of the internal edits have been enabled and
several new <BR>edits have been requested from the developer of System6. <BR>MCB
will also establish policies and procedures to assist the system users and
<BR>standardize the process for updating the system. <BR>MCB plans to implement
additional training based upon staff responses to an inhouse <BR>training survey
to determine training needed to ensure that all individuals <BR>were able to
effectively perform their job duties. <BR>In an effort to keep staff informed of
System6 upgrades and/or changes, liaisons <BR>are e-mailed system changes when
they are received from the vendor or upgraded <BR>by Department of Information
Technology staff. Effective June 1, 2003, all staff, <BR>including IL staff,
were directed to use System6 and have all clients entered in the <BR>system.
<BR>FINDING <BR>2. Social Security Reimbursement Process <BR>MCB had not
developed effective procedures to identify eligible clients and costs <BR>for
federal reimbursement. In addition, MCB did not submit claims for federal
<BR>reimbursement on a regular basis. <BR>Improvement in MCB's process would
assist MCB in maximizing its recovery of <BR>federal revenue. In our review of
the claims filed, we identified two claims totaling <BR>$174,056 that were
denied because they were late. We also identified $98,237 in <BR>reimbursable
expenditures that were not claimed because the clients refused to
<BR>participate. <BR>14 <BR>43-231-03 <BR>The Social Security Act provides for
payment to vocational rehabilitation providers <BR>for the cost of goods and
services they furnished to individuals receiving Social <BR>Security Disability
Insurance (SSDI) benefits or Supplemental Security Income <BR>(SSI) benefits.
The SSA vocational rehabilitation payment program was <BR>established to
encourage state vocational rehabilitation agencies to provide training <BR>to
disabled individuals that would allow them to work and become less dependent
<BR>on monthly cash benefits. SSA reimburses state agencies for the cost of
<BR>vocational rehabilitation services that enabled a person's return to work
for at least <BR>nine continuous months at a substantial earnings level. SSA
also reimburses state <BR>agencies for the cost of goods and services provided
to individuals who medically <BR>recovered from their disability and individuals
who refused to continue in a <BR>vocational rehabilitation program without good
cause. <BR>As noted in Finding 1, MCB's client tracking system did not provide
all of the client <BR>status and cost data necessary to identify eligible
clients and prepare an accurate <BR>and complete reimbursement application. MCB
is required to manually review <BR>closed case files to identify eligible
clients and costs and prepare the <BR>reimbursement claims. As a result, the
number and amount of claims that MCB <BR>submitted to SSA for reimbursement have
varied widely from year to year and the <BR>yearly reimbursement rate for the
claims submitted has averaged 33%. We <BR>15 <BR>43-231-03 <BR>summarized the
number and amount of claim submissions for the last 8 fiscal <BR>years: <BR>SSA
Vocational Rehabilitation Payment Program Summary <BR>Fiscal Year Percentage of
<BR>in Which Number of Amount Requested <BR>Case Was Claims Requested for Amount
Amounts <BR>Closed Submitted Reimbursement Reimbursed Reimbursed <BR>1994-95 15
$ 336,123 $ 170,426 51% <BR>1995-96 62 $ 1,775,387 $ 793,674 45% <BR>1996-97 135
$ 3,450,274 $ 1,249,398 36% <BR>1997-98* 30 $ 825,680 $ 173,615 21% <BR>1998-99
161 $ 5,768,623 $ 1,326,094 23% <BR>1999-2000* 72 $ 2,286,710 $ 813,610 36%
<BR>2000-01* 24 $ 1,276,921 $ 586,752 46% <BR>2001-02 2 $ 133,983 $ 88,881 66%
<BR>Average Yearly Reimbursement Rate 33% <BR>* As of April 30, 2003, MCB
records disclosed that SSA had not yet processed all of the <BR>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 <BR>$807,320
and noted: <BR>a. Of the amount claimed, only $290,661 (36%) was deemed eligible
for <BR>reimbursement by SSA. The reasons for claim denial or reduction
included: <BR>the reimbursement claim was submitted too late for processing
($174,056), the <BR>client was ineligible because he or she was not an SSI or
SSDI recipient <BR>($118,758), the client earnings were below a substantial
earnings level <BR>($72,778), the client did not work for the required
nine-month period ($50,032), <BR>or insufficient documentation was submitted to
support the entire claim <BR>($5,035). In 4 cases reviewed, the reason for the
denial was not clear <BR>($96,001) from a review of the documentation in the
case file. b. MCB did not submit reimbursement requests for clients whose cases
were <BR>closed because of the clients' refusal to cooperate with the program
<BR>requirements. MCB did not determine the total amount of reimbursable
<BR>expenditures from these types of cases. However, we noted in our review of
<BR>vocational rehabilitation case files that reimbursable expenditures for 16
<BR>43-231-03 <BR>12 clients who refused to participate totaled $98,237. MCB did
not submit <BR>reimbursement claims for these clients. <BR>c. MCB did not have a
process in place to prepare and submit claims on a <BR>regular basis. MCB did
not submit any claims to SSA between August 2002 <BR>and May 2003. During our
audit, we noted that the MCB vocational rehabilitation counselors must
<BR>contact clients individually to ask them if they are still working in order
to determine <BR>if they meet the nine-month substantial earnings requirement.
Generally, case files <BR>are closed after 90 days. An alternative process could
be used which would <BR>minimize the need to locate and contact each of the
clients. The Unemployment <BR>Insurance Agency receives earnings records from
employers. Matching the social <BR>security number of the client against the
earnings records history would provide an <BR>automated approach to identify the
eligible clients. <BR>RECOMMENDATIONS <BR>We recommend that MCB develop
effective procedures to identify eligible clients <BR>and costs for federal
reimbursement. <BR>We also recommend that MCB submit claims for federal
reimbursement on a <BR>regular basis. <BR>AGENCY PRELIMINARY RESPONSE <BR>MCB
agrees with the first recommendation and will implement a new process and
<BR>procedure to address this issue. MCB plans to install a module into its
System6 <BR>client tracking system that will automate the Social Security
reimbursement <BR>process. This process will identify clients eligible for
reimbursement, accumulate <BR>the data necessary for reimbursement, and complete
the reimbursement form. <BR>This process will be performed monthly. <BR>MCB also
agrees that there is a need to submit claims for federal reimbursement <BR>on a
regular basis and is exploring ways to improve this process. In 2001, SSA
<BR>rescinded the policy that allowed reimbursement for expenditures for clients
who <BR>refuse to participate unless that individual has worked for nine
consecutive months. <BR>The only way for MCB to determine continued employment
would be to match the <BR>social security number of the client against the
earnings records history with the <BR>Unemployment Insurance Agency earnings
records from employers. MCB is in the <BR>17 <BR>43-231-03 <BR>process of trying
to get clearance from the Unemployment Insurance Agency to get <BR>earnings data
for a special project for the federal government. However, MCB is <BR>still
waiting for a ruling from the Department of Attorney General regarding how to
<BR>legally advise and verify that clients have given MCB consent to use social
security <BR>numbers for this purpose. <BR>FINDING <BR>3. Procurement Card
Purchases <BR>MCB's internal control did not ensure that the use of procurement
cards was in <BR>compliance with Family Independence Agency (FIA) and Department
of <BR>Management and Budget (DMB) procurement card purchase procedures. <BR>As
a result, we identified $57,564 of unallowable purchases. These purchases
<BR>were for ongoing, recurring services or projects, such as remodeling,
equipment <BR>moving, and consulting services. Also, MCB's noncompliance
resulted in a lack of <BR>oversight of procurement card use. Less oversight
increases the risk that the cards <BR>could be used for inappropriate purposes.
<BR>Procurement cards may be used by authorized individuals for the purchase of
<BR>specific categories of goods and services within strict dollar limits. FIA
and DMB <BR>have issued procedures and guidelines governing the use of State
procurement <BR>cards. <BR>MCB employees used State procurement cards to make
purchases totaling <BR>approximately $2 million from October 1, 2000 through
March 25, 2003. During <BR>this time, 60 (66%) MCB staff were authorized to use
State procurement cards. <BR>We reviewed 235 separate purchases totaling
$109,808 from 41 cardholder billing <BR>cycles* for 26 different MCB employees
during this 2½-year period. Our review <BR>disclosed: <BR>a. Seventy-nine (33%)
of the 235 purchases, valued at $57,564, were for <BR>ongoing, recurring
services or projects, such as remodeling, equipment <BR>moving, and consulting
services. * See glossary at end of report for definition. 18 <BR>43-231-03
<BR>FIA and DMB procedures prohibit the use of procurement cards to purchase
<BR>services that should be purchased through a State contract. DMB gives
<BR>agencies delegated purchasing authority for goods and services costing less
<BR>than $25,000. However, ongoing services that could exceed the delegated
<BR>purchase limit should be contracted through the appropriate State
<BR>procurement process. <BR>b. MCB was not providing sufficient oversight of
procurement card use. We <BR>identified: (1) Thirty-six (15%) of the 235
purchases, valued at $47,815, appeared to be <BR>split to avoid the single
purchase limits. FIA and DMB policy prohibits the splitting of purchases to
exceed <BR>procurement card transaction limits. <BR>(2) Ten (4%) of the 235
purchases, valued at $1,931, did not contain <BR>supporting documentation for
the amount charged. As a result, MCB <BR>could not ensure and we could not
verify the appropriateness of the <BR>purchases. Cardholders are responsible for
obtaining adequate documentation to <BR>support the purchases made with their
cards, including sales receipts or <BR>vendor invoices. <BR>(3) Eighteen (44%)
of 41 payment cycles, for purchases totaling $58,896, did <BR>not include
verification of the receipt of goods and services by someone <BR>other than the
cardholder or supervisor. FIA policy requires that a third party, other than the
cardholder or <BR>supervisor, verify that the purchased items were received by
initialing the <BR>transaction log. <BR>(4) Three (7%) of 41 cardholder
transaction logs, for purchases totaling <BR>$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 <BR>service was received by entering the date
on the transaction log. <BR>19 <BR>43-231-03 <BR>(5) MCB supervisors did not
always perform detailed reviews of procurement <BR>card purchases made by staff
and did not retain procurement card <BR>documentation in their possession. For
one of our sample billing cycles, <BR>the cardholder was allowed to retain the
supporting documentation but <BR>was unable to locate it for audit purposes. FIA
policy requires that at the end of each two-week billing cycle, all <BR>receipts
should be attached to the corresponding FIA procurement card <BR>transaction log
sheet and then forwarded to the cardholder's supervisor <BR>for review. <BR>(6)
Seven (12%) of the 60 MCB employees who had active procurement card <BR>accounts
during our audit period did not have a sufficient amount of use <BR>to justify
having a card assigned to them. RECOMMENDATION <BR>We recommend that MCB improve
its internal control to ensure that the use of <BR>procurement cards is in
compliance with FIA and DMB procurement card purchase <BR>procedures. <BR>AGENCY
PRELIMINARY RESPONSE <BR>MCB agrees with the recommendation and will comply with
Department of Labor <BR>and Economic Development (DLEG) and DMB procurement card
purchase <BR>procedures. MCB will conduct remedial training for individual staff
who use the <BR>procurement cards inappropriately. MCB and DLEG will monitor all
MCB <BR>procurement card transactions and will take steps to rescind any
procurement <BR>cards from staff who continue to have procedural violations
after receiving training. <BR>FINDING <BR>4. BEP Equipment Inventory Record
<BR>MCB did not comply with established equipment inventory control procedures
for <BR>Business Enterprise Program (BEP) equipment. As a result, MCB could not
<BR>account for its BEP equipment inventory. This could result in the
misappropriation <BR>of assets. <BR>DMB issued numerous directives to State
agencies pertaining to equipment <BR>inventory controls and the recording and
reporting of acquisition and disposal data <BR>20 <BR>43-231-03 <BR>for
financial reporting purposes. FIA incorporated these directives into its
<BR>Administrative Manual. <BR>Our review of the BEP equipment inventory records
disclosed: <BR>a. MCB did not tag all applicable BEP equipment or maintain
proper equipment <BR>inventory records. The FIA Administrative Manual (AHM 441)
requires that all equipment items <BR>costing more than $5,000 be tagged and
included in the agency's equipment <BR>inventory records. Additionally, MCB
elected to tag equipment below the <BR>$5,000 threshhold for BEP. <BR>We
reviewed the equipment inventory at six separate BEP locations. We <BR>noted 15
equipment items that were not tagged and were not included in the <BR>BEP
equipment inventory records. <BR>b. MCB did not request transfer authorizations
and did not report additions and <BR>transfers of BEP equipment. The FIA
Administrative Manual (AHM 442) requires that location units <BR>transferring
equipment must notify FIA's Inventory Control Unit (ICU) of the <BR>equipment
transfer. <BR>We attempted to verify the existence of 51 equipment inventory
items at six <BR>separate BEP locations. We could not locate 33 (65%) equipment
inventory <BR>items, and MCB could not provide documentation for the disposition
of these <BR>equipment items. <BR>We also noted 27 tagged equipment items that
were not included in the BEP <BR>equipment inventory records for that location
and for which BEP could not <BR>provide documentation of the transfer of the
equipment to these locations. <BR>c. MCB did not request authorization to
dispose of surplus, scrap, and worthless <BR>BEP equipment items. 21
<BR>43-231-03 <BR>The FIA Administrative Manual (AHM 445) requires that location
units <BR>disposing of equipment provide written notification to ICU. ICU will
then <BR>authorize the disposal by completion of a disposal request form. <BR>We
noted 22 instances in which MCB disposed of BEP equipment without the <BR>proper
authorization or documentation. <BR>d. MCB did not submit all required annual
equipment inventory reports during our <BR>audit period. The FIA Administrative
Manual (AHM 443) requires location units to annually <BR>conduct a physical
inventory of equipment to ensure that all equipment is <BR>tagged and accounted
for. Additionally, the location unit must submit to ICU <BR>an equipment
inventory report documenting the completion of the physical <BR>inventory.
<BR>In fiscal year 2000-01, MCB did not submit the required reports for two
<BR>separate BEP locations. In fiscal year 2001-02, ICU informed us that MCB did
<BR>not submit the required reports for any of its BEP locations.
<BR>RECOMMENDATION <BR>We recommend that MCB comply with established equipment
inventory control <BR>procedures for BEP equipment. <BR>AGENCY PRELIMINARY
RESPONSE <BR>MCB agrees with the recommendation and informed us that it has
implemented the <BR>following procedure for BEP equipment tracking: MCB support
staff enter all new <BR>equipment in the BEP Facility Tracking System's
equipment tracking module and <BR>then issue tags for the equipment. Those tags
are then issued to promotional <BR>agents to be placed on the equipment (since
May 2003, approximately 560 tags <BR>and retags have been generated and sent to
promotional agents to be placed on <BR>equipment). If equipment is being moved
or transferred, promotional agents are <BR>required to complete a transfer
authorization prior to moving the equipment. The <BR>completed transfer
authorization is then sent to MCB support staff to update the <BR>system. All
surplus, scrap, and worthless BEP equipment is to be authorized prior <BR>to
disposal. The information is entered in the BEP Facility Tracking System, a copy
<BR>of that authorization is to be stored at MCB, and the information is
reported to the <BR>DLEG Facility Management Division. <BR>22 <BR>43-231-03
<BR>FINDING <BR>5. Client Equipment Inventory Record <BR>MCB did not comply with
established procedures to monitor the assignment of <BR>MCB's equipment to
vocational rehabilitation clients. As a result, MCB could not <BR>ensure that
all assigned equipment purchases were being fully utilized by MCB's <BR>clients.
<BR>MCB vocational rehabilitation counselors may approve the purchase of
adaptive <BR>equipment, such as computers, Braillewriters, closed circuit
televisions, and other <BR>visual aids, for clients who need these items in
order to meet established <BR>vocational goals. <BR>The Vocational
Rehabilitation Division policy manual requires that each regional <BR>office
maintain a list of all equipment currently assigned to clients in the region. At
<BR>the end of each fiscal year, the counselor or other designated staff member
is <BR>responsible for documenting in the client's case file and on the
officewide <BR>equipment record that the equipment is in the possession of the
client and is being <BR>used as planned. If the equipment is no longer being
used, the counselor is <BR>required to reclaim it and update the client's case
file and officewide equipment <BR>inventory record. <BR>Our review of 70
vocational rehabilitation client case files disclosed equipment <BR>purchases
totaling approximately $58,535. <BR>During our visits to 6 of the 8 regional
offices, MCB staff at each office informed us <BR>that an officewide equipment
inventory record is not used to monitor equipment in <BR>the possession of
clients. Rather, vocational rehabilitation counselors rely on the <BR>clients to
inform MCB if the equipment is no longer necessary. Additionally, <BR>counselors
become aware of equipment that is available for reassignment <BR>informally from
other counselors. <BR>RECOMMENDATION <BR>We recommend that MCB comply with
established procedures to monitor the <BR>assignment of MCB's equipment to
vocational rehabilitation clients. <BR>AGENCY PRELIMINARY RESPONSE <BR>MCB
agrees with the recommendation and plans to implement a process that will
<BR>allow MCB to better monitor the assignment of MCB's equipment to vocational
<BR>23 <BR>43-231-03 <BR>rehabilitation clients. Under the new procedure,
equipment purchases for MCB <BR>clients over $500 are recorded on an equipment
registration log. These logs will be <BR>kept in each regional office with the
entries recorded by support staff. The logs will <BR>contain a description of
the equipment, date of purchase, date dispensed, client <BR>name, social
security number, counselor, and purchase amount. <BR>FINDING <BR>6. Purchased
Services <BR>MCB did not comply with established State purchasing requirements.
As a result, <BR>MCB could not document that its purchasing practices promoted
the efficient use of <BR>resources and that MCB obtained these services at
minimum cost. <BR>FIA policy requires that all professional services exceeding
$10,000 be processed <BR>through the FIA Procurement Section, Business Services
Division. The FIA <BR>Procurement Section determines whether to make the
purchases under FIA's <BR>authority or to transmit it to DMB's Acquisition
Services. Following this process <BR>ensures that purchased services and
contracts are competitively bid, properly <BR>executed, and processed in
accordance with State statutes and policies. <BR>Our review disclosed that MCB
purchased IL Program rehabilitation services <BR>totaling $226,940 and $263,263
for fiscal years 2000-01 and 2001-02, respectively, <BR>from a private
rehabilitation center. We noted: <BR>a. All rehabilitation services for this
grant program have been purchased from the <BR>same vendor. MCB could not
provide documentation to support the purchase <BR>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 <BR>Board for review and approval. We noted this
condition in our prior audit. In response to the prior audit, MCB <BR>indicated
that it agreed with the recommendation and that it was taking steps to
<BR>comply. <BR>24 <BR>43-231-03 <BR>RECOMMENDATION <BR>TO HELP ENSURE THAT ITS
PURCHASING PRACTICES PROMOTE THE <BR>EFFICIENT USE OF RESOURCES, WE AGAIN
RECOMMEND THAT MCB <BR>COMPLY WITH ESTABLISHED STATE PURCHASING REQUIREMENTS.
<BR>AGENCY PRELIMINARY RESPONSE <BR>MCB agrees with the recommendation and
informed us that it is in the process of <BR>obtaining a contract to purchase
needed professional services from a private <BR>rehabilitation center. MCB will
work with DLEG to ensure that this contract is <BR>obtained in accordance with
established State purchasing requirements. <BR>EFFECTIVENESS OF SERVICES
PROVIDED TO OVERCOME VISUAL <BR>DISABILITY AND OBTAIN SELF-SUPPORT AND SELF-CARE
<BR>COMMENT <BR>Audit Objective: To assess the effectiveness of MCB's services
provided to individuals <BR>to enable them to overcome their visual disability
and obtain the maximum degree of <BR>self-support and self-care. <BR>Conclusion:
MCB was generally effective in providing services to individuals to <BR>enable
them to overcome their visual disability and obtain the maximum degree <BR>of
self-support and self-care. However, we noted a reportable condition related to
<BR>Independent Living (IL) Program case management procedures (Finding 7).
<BR>Noteworthy Accomplishments: MCB conducts mini-adjustment programs that
<BR>provide an introduction to blind rehabilitation skills and services. These
programs also <BR>encourage further rehabilitation training. MCB brings this
training to the clients by <BR>conducting the programs in various locations
throughout the State. This outreach <BR>method allows MCB to provide training to
a large number of clients in a relatively short <BR>period of time. During our
audit period, MCB held 6 programs annually at various <BR>locations with total
attendance of 211 in fiscal year 2000-01 and 185 in fiscal year <BR>2001-02.
<BR>25 <BR>43-231-03 <BR>FINDING <BR>7. IL Program Case Management Procedures
<BR>MCB had not established policies and procedures for the case management of
IL <BR>Program services. <BR>Consequently, MCB is required to use an inefficient
process to prepare required <BR>federal reports. With consistent policies and
procedures, MCB would be better <BR>able to document the effectiveness of the IL
Program. <BR>MCB uses State and federal funds to provide IL Program services to
individuals <BR>aged 55 or older who are blind, whose severe visual impairments
make competitive <BR>employment extremely difficult to attain, but for whom
independent living in their <BR>own homes or communities is feasible. Federal
regulations detail the services that <BR>may be provided by the IL Program and
require an annual reporting of the number <BR>and type of services provided.
<BR>In fiscal year 2001-02, MCB expended $1,119,327 for services provided to
1,101 IL <BR>Program clients. <BR>Our review of MCB case management procedures
and 84 IL Program services <BR>case files noted: <BR>a. IL Program teachers were
not always required to use the client tracking <BR>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 <BR>system: <BR>(1) MCB was dependent
on extensive manual records for the preparation of <BR>required federal reports.
(2) MCB could not provide a complete list of IL Program clients for two
<BR>regional offices. b. MCB did not document in the case file the services
provided for 12 (14%) of <BR>84 IL Program clients. Case file documentation
should be maintained to <BR>substantiate the reasonableness of the service
provided. 26 <BR>43-231-03 <BR>c. MCB did not document in the case file for 14
(17%) of 84 IL Program clients <BR>that purchases made on behalf of the clients
were necessary and reasonable. <BR>Case file documentation should be maintained
to substantiate the purchase <BR>and the necessity of the purchase.
RECOMMENDATION <BR>We recommend that MCB establish policies and procedures for
the case <BR>management of IL Program services. <BR>AGENCY PRELIMINARY RESPONSE
<BR>MCB agrees with the recommendation and informed us that it has implemented
<BR>corrective action. Beginning June 1, 2003, all staff, including IL staff,
were required <BR>to enter all clients into the System6 client tracking system.
MCB staff run monthly <BR>caseload reports and verify that counselor caseloads
and IL client totals are within <BR>the projected numbers for expected assigned
clients. Now that all clients have <BR>been entered in the system, MCB will be
able to automatically complete the IL <BR>federal reports. MCB does yearly case
reviews. A component of the case review <BR>is to monitor the reasonableness of
services and case file documentation. IL client <BR>cases will be included in
MCB case reviews. <BR>27 <BR>43-231-03 <BR>GLOSSARY <BR>28 <BR>43-231-03
<BR>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 <BR>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
<BR>minimum amount of resources. FIA Family Independence Agency. goals The
agency's intended outcomes or impacts for a program to <BR>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 <BR>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 <BR>designed to provide an independent
assessment of the <BR>29 <BR>43-231-03 Table endTable with 2 columns and 7
rowsperformance of a governmental entity, program, activity, or <BR>function to
improve public accountability and to facilitate <BR>decision making by parties
responsible for overseeing or <BR>initiating corrective action. procurement card
A credit card issued to State employees for purchasing <BR>commodities and
services in accordance with State <BR>purchasing policies. reportable condition
A matter that, in the auditor's judgment, represents either an <BR>opportunity
for improvement or a significant deficiency in <BR>management's ability to
operate a program in an effective <BR>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, <BR>commission, or agency to a principal department
established <BR>by Act 380, P.A. 1965 (Executive Organization Act of 1965).
<BR>Any department, board, commission, or agency assigned to a <BR>type II
transfer under Act 380, P.A. 1965, shall have all its <BR>statutory authority,
powers, duties and functions, records, <BR>personnel, property, unexpended
balances of appropriations, <BR>allocations or other funds, including the
functions of <BR>budgeting and procurement, transferred to that principal
<BR>department. Table end30 <BR>43-231-03 oag <BR></FONT></DIV></BODY></HTML>