An Audit Report on The Department of Health's Monitoring of Program Service Contractors' Financial Operations
April 2004
Report Number 04-029
Overall Conclusion
As of the beginning of our audit, the Department of Health (Department) still had not corrected long-standing deficiencies in its monitoring of program service contractors' financial operations. Although audits conducted during each of the last four years have identified the Department's failure to adequately conduct required monitoring of program service contractors' financial operations, the Department still had not addressed this issue.
The contractors we reviewed were providing program services. However, because of its poor record keeping, one contractor could not determine whether it had collected all registration fees for its Tobacco Prevention and Control program and did not report $62,082 of program income to the Department. As a result, the Department's payments to the contractor should have been reduced by $62,082, or the Department should have allowed the contractor to provide additional program services with an equivalent value.
We identified financial control weaknesses that resulted in another contractor's violating federal and state requirements by incorrectly allocating program income among its Tuberculosis Prevention and Control, Immunization, Family Planning, and Maternal and Child Health programs. This is significant because its contract required that program income generated in a particular program must be allocated only to that program. This contractor also incorrectly reported $12,013 in total program income for all of these programs, when it should have reported $18,101 in total program income.
The lack of financial controls at another contractor led it to make at least $19,694 in disallowed and questionable administrative expenditures (as identified by the Department during a desk review), which also was a violation of federal and state requirements. In addition, during the fiscal year 2003 single audit, an independent auditor reported that the Department had not conducted financial monitoring at 104 (80 percent) of the 130 program service contractors tested.
It is critical that the Department monitor contractors' financial operations so that it can identify improper use of program funds and noncompliance with certain federal and state requirements. Monitoring specifically identifies waste, misuse, or misappropriation of program funds, which ultimately diminish the level of services clients receive.
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