Legislature(1999 - 2000)
01/24/2000 09:00 AM Senate FIN
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SENATE FINANCE COMMITTEE LOG NOTES 01/24/00 GENERAL SUBJECT(S): Overview: Division of Legislative Audit Pat Davidson, Legislative Auditor The following overview was taken in log note format. Tapes and handouts will be on file with the Senate Finance Committee through the 21st Legislative Session, contact 465-4935. After the 21st Legislative session they will be available through the Legislative Library at 465-3808. Time Meeting Convened: 9:00 AM Tape(s): SFC-00 # 9 Side A PRESENT: NOT PRESENT: Senator Parnell Senator P. Kelly Senator Torgerson Senator Green Senator Leman Senator Phillips Senator Wilken Senator Donley Senator Adams ALSO PRESENT: PAT DAVIDSON, DIRECTOR, DIVISION OF LEGISLATIVE AUDIT JIM KELLY, DIVISION OF LEGISLATIVE AUDIT LOG SPEAKER DISCUSSION 0 CO-CHAIR PARNELL Introduction 8 PAT DAVIDSON, DIRECTOR, DIVISION OF LEGISLATIVE AUDIT Handout: Senate Finance Committee Overviews, January 24,2000 This is brief synopsis of most of the audits we've completed this past year. I'll hit the highlights of these audits as they relate to the topics of financial compliance, performance measures and operational efficiencies and effectiveness. Page 2: Department of Administration, State Of Alaska, Statewide Single Audit for FY98 This is a review of the state's financial statements. This report contains 37 recommendations, of which 12 were carried over from the prior year. A major concern involves an overexpenditure of almost $1 million by the Department of Transportation and Public Utilities from their maintenance and operations appropriation. Rather than reduce actual spending, the department chose not to pay its State Equipment Fleet bills. This is a serious problem. 46 CO-CHAIR PARNELL Did the Department of Transportation and Public Utilities submit a written explanation as part of the audit? 50 MS. DAVIDSON Yes. Page 20: Department of Corrections, Internal Controls over the Offender Financial Accounting (HOFA) System A prior 1996 audit made recommendations for improving the internal controls over the HOFA system. Since that time there has been an individual convicted of embezzlement of HOFA funds. This audit was requested to again review internal controls. We found the internal control system remains weak and we made eight recommendations. The department has responded in a positive and proactive manner. The recommendations are being implemented. 73 As the legislature discusses missions and measures for agencies, the following report highlights some issues that might become common as agencies develop outcome measures. Page 12: Department of Health and Social Services, Division of Alcoholism and Drug Abuse The purpose of this audit was to review several aspects of the state's substance abuse and treatment programs. At the time of our review, outcome measures had been identified but complete information on program results based on these outcome measures was not yet available. From what was available, we found that the Agency was not monitoring the information provided nor was the Agency doing follow- up. Some examples of the breakdown in the process to collect consistent information from the primary service providers were (1) minimum outcomes established in the request for proposal; (2) either did not completely address or provide alternative measures in the providers' response. When the providers did provide outcome measures, the information was typically incomplete or addressed different measures. We believe that as the state progresses in incorporating missions and measures into the budgetary process, the agencies must also incorporate these into their grant process. 99 Page 11:Department of Health and Social Services, Division Of Family And Youth Services Follow-Up Over the last few years we have done several audits on this division focusing on child protection issues. These reviews have taken both a macro view of analyzing agency operations and resource utilization, and a micro view looking at individual cases. Recommendations were made to address problems of social worker training, the development and implementation of work measurement tools, a clear and consistent policy of ranking investigative efforts for reports of harm, utilization of personal services funding and improvements and enhancements needed to the management information system. We are working on another follow-up audit and expect this will provide an update to issues raised in previous audits. 122 Page 17: Department of Fish and Game, Use Of Sport Fish Revenues Overall we found development projects that were funded by sport fish revenues did provide at least some, if not extensive benefit to the recreational angler. However, because measurements for sport and commercial fishing differ, it is impossible to determine the extent of benefit received by each competing industry. We recommended the department develop a benefit measurement approach with greater commonality in order to better identify and segregate which user groups are benefiting from a given project, and in the case of sport fishers, the source of the revenues being used to fund the projects. 148 The remaining audits relate to operational efficiencies and effectiveness. Page 16: Department of Natural Resources, Matanuska Maid Dairy The report found that state ownership could no longer be justified for the purposes of (1) its current operational and financial viability; (2) its corporate operating practices; (3) its future role as state- owned asset; and, (4) its future role in the development of Alaska agriculture. The Division of Agriculture disagrees. The division has no plans to sell although various parties have approached division with an interest to buy. The division strongly discourages those inquiring by stating that any sale of Mat Maid will be conditioned upon the purchaser's commitment to continue the facility's operation and purchase all available Alaskan milk. 169 Page 24: Department of Transportation and Public Utilities, Art In Public Places This report finds that the program is not working, as most people believe, primarily due to operational inefficiencies, miscommunication between agencies, and a morass of often-conflicting legal opinions generated over the years. 178 Page 5: Department of Administration, Division of Longevity Programs, Alaska Pioneers' Homes This report found that staffing levels in the homes are adequate, staff turnover is below the national average and resident turnover is low. One of the more critical recommendations addressed concerns regarding the backgrounds, particularly felony convictions, of certain employees working at the homes. The report also recommends contracting out the pharmacy. 189 The Division of Legislative Audit also wrote two audits addressing the former Department of Community and Regional Affairs. Page 21: Department of Community and Regional Affairs, For the Fiscal Year Ended June 30, 1998 And Page 22: Department of Community and Regional Affairs, Pedro Bay Electrification Project Both of these audits focus recommendations to the Division of Energy, which is now part of the Department of Community and Economic Development. The report identified weaknesses in the construction management areas as they manifested in individual projects, including the Pedro Bay Electrification Project. The problems included (1) the project selection process was not adequately documented, (2) failure to ensure proper right-of-way easements and delays were created as a result, (3) an absence of comprehensive financial records resulting in a lack of budgetary control. The Pedro Bay project was intended to resolve the community's lime-loss problems. However, the improvements made by this project have been slight and the community continues at a 35 percent lime-loss. The division has hired a contractor to review and make recommendations regarding contracting, purchasing and accounting policies and procedures. They expect the new policies and procedures to be implemented by June 2000. 216 Page 25: Department of Transportation and Public Utilities, Homer Gravel Roads Project This report addressed whether the department reasonably managed these projects in accordance with statutes, regulations, contract provisions and internal policies and procedures. The report also addressed a complaint made by a department employee. We concluded that many of these complaints had merit. However, just because it was found that some of the material was out of specification and the geotextile fabric was torn, it did not mean that the roads would prematurely fail. In fact, four years after completion, the roads are holding up well. We identified the following weaknesses in the management of the construction process, (1) out-of-specification material accepted by the department; (2) change orders were frequently issued after completion of the work; and, (3) some contractors were given too much control over the projects. With regard to the Homer Gravel Roads project in particular, we found the following. (1) Haul of out-of-specification material was not effectively halted until the Federal Highway Administration threatened funding. (2) The hiring process used to hire a consultant to review this project was flawed, making independence questionable. (3) The Department of Law may have violated the State Personnel Act by releasing consultant's report. (4) The extended administrative leave given to the employee who filed the complaint was reasonable under the circumstances. 244 CO-CHAIR PARNELL Of the issues you raised, which two or three should the Committee pay most attention to regarding follow-up? 251 Ms. Davidson Because this is a finance committee, the statewide single audit issues should receive the most attention. Your attention should improve the agencies efforts in following the recommendations. Also, the Committee should watch the alcohol and drug abuse program because of the "missions and measures" issue. Important for department to follow-up with providers. 268 CO-CHAIR PARNELL Expect the budget subcommittees will review past audits for oversight and compliance. 274 SENATOR LEMAN Are efforts made to hold responsible parties accountable? Do we fire employees or seek recovery from contractors? 282 Ms. Davidson It depends on the circumstance and the agency's willingness to accept responsibility. With regard to the Homer project, if the department finds large dollar amounts involved with the below-spec materials, they probably will seek reimbursement from the contractors. In situations involving smaller dollar amounts, the agencies often don't press the issue. 297 SENATOR LEMAN Having done similar work to that of the Homer project, I've learned that some local pits just cannot produce materials that meet the specifications, but are still acceptable. Depending on the details, the problem may or may not be significant. I'm concerned with significant allegations like the Pedro Bay project where deals were cut and the work simply didn't get done. I'm concerned that responsibility has not been taken in a situation like this where there is mismanagement. 314 MS. DAVIDSON The problems with the Division of Energy are significant. Addressing individual problems is difficult and it is necessary to implement systematic change. 319 SENATOR LEMAN I agree. 321 CO-CHAIR TORGERSON Page 10: Department of Education, Lower Yukon School District, Selected Issues This audit addressed training sessions held in San Diego, CA. Do you know what a "Formula 3" reading program covers, who was invited to the training session, how and if the Department of Education and Early Development approved the training and how much did it cost? 330 MS. DAVIDSON Formula 3 was a federal grant that the school district applied for. The grant proposal identified that the training was going to be held out of state. The teachers some administrators in the school district attended the training. 337 JIM GRIFFIN, AUDIT MANAGER, DIVISION OF LEGISLATIVE AUDIT [speaking out of microphone range) 338 MS. DAVIDSON And school board members. 340 CO-CHAIR TORGERSON Do you remember the cost? 344 MS. DAVIDSON I'll have to get back to you on the exact cost. 345 CO-CHAIR TORGERSON As I understand the situation, the Administration put together a grant proposal to take existing teachers, staff and school board members of the Lower Yukon School District and train them in San Diego and the state board of education approved that grant. Request more detailed information on the exact cost. 347 SENATOR ADAMS Would this be similar to legislators traveling to San Francisco next weekend for a meeting with Callan Associates? Is it also similar to a legislature traveling to Maui to see how another legislature operates? 351 MS. DAVIDSON This training took place in the summer when many of the teachers were not actually in Mountain Village and it was determined San Diego was a location readily available for much of the staff. 356 SENATOR ADAMS Was this paid for with federal funding and did the teachers attend training on their own time? 358 MS. DAVIDSON 359 MR. GRIFFIN The school district received a federal grant to train teachers and implement the Formula 3 program, which they applied for directly to the federal government. In order to provide training to go along with the program, they got separate grants under the Migrant Education Program through the Department of Education and Early Development that was also federal funds. Yes, the Department of Education and Early Development knew about the training because it was in the grant proposal submitted to the department. The funds used were the districts. 375 CO-CHAIR TORGERSON Disagreed with the comparison to anyone attending a pre-determined, pre-called meeting. Was this meeting only for teachers in the Lower Yukon School District or was it a national meeting held for all school districts and open to anyone to study Formula 3? Were other districts involved in going to San Diego? 382 MR. GRIFFIN No, it was just the school district personal that attended. The previous year's training was originally scheduled in Vancouver British Columbia. However, the new superintendent cancelled that meeting and held training in Mountain Village prior to the beginning of school. 389 CO-CHAIR TORGERSON That is how I interpreted it rather than comparing it to a national meeting attended by those with similar interest in a subject. Most of these meetings are held in resort towns because of expense. Did I hear you say that a determination was made that San Diego was a central location for school district employees? 399 MS. DAVIDSON Clarify. Many of the teachers were not living in Mountain Village during the summer while school was in recess. Several were in the Lower 48. 403 CO-CHAIR TORGERSON Is this standard practice for the Department of Education and Early Development to review out of state training? 407 MS. DAVIDSON 409 SENATOR WILKEN Page 18: Department of Environmental Conservation, Division of Facility Construction and Operation Village Safe Water Program I've found that there is a lot of money spent on this program. We cannot tell what has been done, what work is planned and how money is to be spent. This report's recommendation for a statewide inventory is similar to an oversight I found last year. What happens now to push compliance with the audit's recommendations? Do we do that or does someone else? 424 CO-CHAIR PARNELL It starts in this Committee. We address the matter using two avenues: the capital budget appropriation and the operating budget subcommittee. 427 SENATOR WILKEN So this Committee decides which recommendations to work on and which not to work on? 428 CO-CHAIR PARNELL No, according to the recommendation, the agency should create a statewide inventory. Our role is to ensure that happens through appropriations. 432 SENATOR ADAMS I Agree. We should have the Department of Environmental Conservation present us with a report. A spicket in the middle of town does not constitute plumbing for the entire community. 439 CO-CHAIR PARNELL Conclusion. 440 Adjourn 9:31 AM SENATE FINANCE COMMITTEE LOG NOTES01/24/00 Page 9
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